1042783--3/16/2007--DOT_HILL_SYSTEMS

related topics

{customer, product, revenue}

{product, market, service}

{stock, price, operating}

{stock, price, share}

{personnel, key, retain}

{provision, law, control}

{property, intellectual, protect}

{control, financial, internal}

{acquisition, growth, future}

{system, service, information}

We may continue to experience losses in the future, and may require additional capital. Our inability to successfully transition manufacturing of our 2730 and successor products from Solectron to MiTAC and SYNNEX could significantly impact our operating results. Our inability to lower product costs or changes in the mix of products we sell may significantly impact our gross margins and operating results. The market for our products is subject to substantial pricing pressure that may harm our net revenues, gross margins and operating results. Our operating results are subject to substantial quarterly and annual fluctuations, our period to period comparisons are not necessarily meaningful and we may not meet the expectations of public market analysts and investors. We may have difficulty predicting future operating results due to both internal and external factors affecting our business and operations, which could cause our stock price to decline. Our sales cycle varies substantially and future net revenue in any period may be lower than our historical revenues or forecasts. Our business and operating results may suffer if we encounter significant product defects due to the introduction of our new storage systems. The loss of one or more suppliers could slow or interrupt the production and sales of our products. Manufacturing and supplier disruptions could harm our business. Any shortage of disk drives, memory or other components could increase our costs or harm our ability to manufacture and deliver our storage products to our customers in a timely manner. The market for storage systems is intensely competitive and our results of operations, pricing and business could be harmed if we fail to maintain or expand our market position. The open systems storage market is rapidly changing and we may be unable to keep pace with or properly prepare for the effects of those changes. Our success depends significantly upon our ability to protect our intellectual property and to avoid infringing the intellectual property of third parties, which has already resulted in costly, time-consuming litigation and could result in the inability to offer certain products. A significant percentage of our expenses are fixed, and if we fail to generate revenues in associated periods, our operating results will be harmed. Our success depends on our ability to attract and retain key personnel. Our executive officers and directors and their affiliates own a significant percentage of our outstanding shares, which could prevent us from being acquired and adversely affect our stock price. Protective provisions in our charter and bylaws and the existence of our stockholder rights plan could prevent a takeover which could harm our stockholders. The exercise of outstanding warrants may result in dilution to our stockholders. Our stock price may be highly volatile and could decline substantially and unexpectedly, which has resulted in litigation.

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1042783--3/16/2007--DOT_HILL_SYSTEMS_CORP