1009626--1/19/2006--BROCADE_COMMUNICATIONS_SYSTEMS

related topics

{customer, product, revenue}

{product, market, service}

{property, intellectual, protect}

{regulation, change, law}

{financial, litigation, operation}

{acquisition, growth, future}

{stock, price, operating}

{system, service, information}

{operation, international, foreign}

{condition, economic, financial}

{cost, regulation, environmental}

{personnel, key, retain}

{provision, law, control}

{regulation, government, change}

{loss, insurance, financial}

We are currently diversifying our product and service offerings to include software applications and support services, and our operating results will suffer if these initiatives are not successful. Increased market competition may lead to reduced sales, margins, profits and market share. If our assumptions regarding our revenues and margins do not materialize, our future profitability could be adversely affected. The prices of our products have declined in the past, and we expect the price of our products to continue to decline, which could reduce our revenues, gross margins and profitability. Our failure to successfully manage the transition between our new products and our older products may adversely affect our financial results. We depend on OEM partners for a majority of our revenues, and the loss of any of these OEM partners or a decrease in their purchases could significantly reduce our revenues and negatively affect our financial results. Our quarterly and annual revenues and operating results may fluctuate in future periods due to a number of factors, which could adversely affect the trading price of our stock. If we lose key personnel or are unable to hire additional qualified personnel, our business may be harmed. The loss of our third-party contract manufacturer would adversely affect our ability to manufacture and sell our products. The failure to accurately forecast demand for our products or the failure to successfully manage the production of our products could negatively affect the supply of key components for our products and our ability to manufacture and sell our products. Our business is subject to cyclical fluctuations and uneven sales patterns. We are dependent on sole source and limited source suppliers for certain key components. We have been named as a party to several class action and derivative action lawsuits arising from our recent internal reviews and related restatements of our financial statements, and we may be named in additional litigation, all of which could require significant management time and attention and result in significant legal expenses and may result in an unfavorable outcome which could have a material adverse effect on our business, financial condition, results of operations and cash flows. As a result of our recent internal reviews and related restatements, we are subject to investigation by the SEC and DOJ, which may not be resolved favorably and has required, and may continue to require, a significant amount of management time and attention and accounting and legal resources, which could adversely affect our business, results of operations and cash flows. We may engage in future acquisitions and strategic investments that dilute the ownership percentage of our stockholders and require the use of cash, incur debt or assume contingent liabilities. We may not realize the anticipated benefits of past or future acquisitions and strategic investments, and integration of acquisitions may disrupt our business and management. Our revenues will be affected by changes in domestic and international information technology spending and overall demand for storage area network solutions. Our business is subject to increasingly complex corporate governance, public disclosure, accounting, and tax requirements that has increased both our costs and the risk of noncompliance. Recent changes in accounting rules, including the expensing of stock options granted to our employees, could have a material impact on our reported business and financial results. Our future operating expenses may be adversely affected by changes in our stock price. International political instability and concerns about other international crises may increase our cost of doing business and disrupt our business. We have extensive international operations, which subjects us to additional business risks. Undetected software or hardware errors could increase our costs, reduce our revenues and delay market acceptance of our products. We rely on licenses from third parties and the loss or inability to obtain any such license could harm our business. If we fail to carefully manage the use of open source software in our products, we may be required to license key portions of our products on a royalty free basis or expose key parts of source code. We may be unable to protect our intellectual property, which could negatively affect our ability to compete. Third-parties may bring infringement claims against us, which could be time-consuming and expensive to defend. Our failure, or the failure of our customers, to comply with evolving industry standards and government regulations could harm our business. We are subject to environmental regulations that could have a material adverse effect on our business. Business interruptions could adversely affect our business. Provisions in our charter documents, customer agreements, Delaware law, and our stockholder rights plan could prevent or delay a change in control of Brocade, which could hinder stockholders ability to receive a premium for our stock.

Full 10-K form ▸

1009626--1/19/2006--BROCADE_COMMUNICATIONS_SYSTEMS_INC