1002663--12/14/2006--PHOTON_DYNAMICS

related topics

{customer, product, revenue}

{product, market, service}

{operation, international, foreign}

{stock, price, share}

{property, intellectual, protect}

{operation, natural, condition}

{acquisition, growth, future}

{stock, price, operating}

{control, financial, internal}

{personnel, key, retain}

{system, service, information}

{provision, law, control}

{competitive, industry, competition}

If our products experience performance, reliability or quality problems, our customers may reduce their orders. Capital investment by manufacturers of flat panel display products can be highly cyclical and may decline in the future. We depend on sales to a few large customers in the flat panel display industry, and if we lose any of our large customers our revenue could decrease significantly. We rely upon sales of a limited range of products, and if demand for one product decreases for any reason it could cause our revenue to decline significantly. We may not be able to develop and introduce new products that respond to evolving industry requirements in a timely manner, which could reduce our ability to compete effectively. If we are not able to obtain critical components from our single or limited source suppliers, we may experience significant delays in producing our products, which could decrease our revenue for an extended period of time. All of our revenue is derived from sales to companies located outside the United States, which exposes us to risks that we would not experience with domestic sales. Our ability to efficiently and effectively implement our strategy of using both domestic and offshore manufacturing may impact our profitability. Any failure of, or other problems at or with, our third party manufacturers could delay shipments of our flat panel display products, harm our relationships with our customers or otherwise negatively impact our business. If we do not compete effectively in our target markets, we will lose market share. Our success depends in large part on the strength of the active matrix liquid crystal display in the flat panel display industry. We may have difficulty integrating the businesses or assets we have acquired and may acquire in the future, and we may not realize the benefits that we expect from these acquisitions. Compliance with new reporting requirements may strain our resources and we may be unable to implement in a timely manner additional finance and accounting systems, procedures and controls in the future to satisfy new reporting requirements, which could cause our stock price to fall. Our business could be harmed if we fail to properly protect our intellectual property. Litigation may be necessary to enforce or defend against claims of intellectual property infringement, which could be expensive and, if we lose, could prevent us from selling our products. We must attract and retain key employees and our management team and employees must work effectively together to maintain and grow our business. Terrorism and international political instability may negatively affect our operations. Our manufacturing facilities and our customers manufacturing facilities may be subject to disruption from natural disasters. We have exposure to various risks related to the regulatory environment. Computer viruses may disrupt our operations. Additional Risks in Owning our Common Stock Our stock price may fluctuate significantly. Some anti-takeover provisions may affect the price of our common stock. We do not anticipate paying cash dividends.

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1002663--12/14/2006--PHOTON_DYNAMICS_INC