1078271--8/30/2007--EXTREME_NETWORKS

related topics

{product, market, service}

{financial, litigation, operation}

{control, financial, internal}

{customer, product, revenue}

{property, intellectual, protect}

{regulation, change, law}

{acquisition, growth, future}

{stock, price, operating}

{operation, international, foreign}

{personnel, key, retain}

{investment, property, distribution}

{operation, natural, condition}

{provision, law, control}

{condition, economic, financial}

{system, service, information}

We were not in compliance with SEC reporting requirements during fiscal year 2007, and Nasdaq listing requirements during portions of fiscal years 2007 and 2008, and we may continue to face compliance issues with both. If we are unable to remain in compliance with SEC reporting requirements and Nasdaq listing requirements, there may be a material adverse effect on the Company and our stockholders. We have been named as a party to shareholder derivative lawsuits relating to our historical stock option practices, and we may be named in additional lawsuits in the future. This litigation could become time consuming and expensive and could result in the payment of significant judgments and settlements, which could have a material adverse effect on our financial condition and results of operations. The Special Committee investigation of our historical stock option practices and resulting restatements has been time consuming and expensive, and may have a material adverse effect on us. The discovery that we had not accounted correctly for historical stock option grants has had, and may continue to have, a material adverse effect on our financial results. Any government inquiry relating to our historical stock option practices may be time consuming and expensive and could result in injunctions, fines and penalties that may have a material adverse effect on our financial condition and results of operations. It may be difficult or costly to obtain director and officer insurance coverage as a result of our stock option related issues. We Cannot Assure You That We Will Be Profitable in the Future. Failure to maintain effective internal control over financial reporting may cause us to delay filing our periodic reports with the SEC, affect our Nasdaq listing, and adversely affect our stock price. A Number of Factors Could Cause Our Quarterly Financial Results to Be Worse Than Expected, Resulting in a Decline in Our Stock Price. Intense Competition in the Market for Networking Equipment Could Prevent Us from Increasing Revenue and Achieving Profitability. When Our Products Contain Undetected Errors, We May Incur Significant Unexpected Expenses and Could Lose Sales. Our Future Success Will Depend in Part Upon Increasing Our Revenue in the U.S. Market. We Depend Upon International Sales for a Significant Portion of Our Revenue and Our Ability to Grow Our International Sales Depends on Successfully Expanding Our International Operations. Conducting our Business on a Global Basis Requires Us to Comply with Various Foreign and Domestic Regulatory Requirements. We Expect the Average Selling Prices of Our Products to Decrease, Which May Reduce Gross Margin and/or Revenue. Some of Our Customers May Not Have the Resources to Pay for Our Products as a Result of the Current Economic Environment. If We Lose Key Personnel or are Unable to Hire Additional Qualified Personnel as Necessary, We May Not Be Able to Successfully Manage Our Business or Achieve Our Goals. The Market in Which We Compete is Subject to Rapid Technological Progress and to Compete We Must Continually Introduce New Products that Achieve Broad Market Acceptance. Our Limited Ability to Protect Our Intellectual Property May Adversely Affect Our Ability to Compete. Claims of Infringement by Others May Increase and the Resolution of such Claims May Adversely Affect our Ability to Compete and Our Operating Results. We Are Engaged in Litigation Regarding Intellectual Property Rights, and an Adverse Outcome Could Harm Our Business and Require Us to Incur Significant Costs. We Must Continue to Develop and Increase the Productivity of Our Indirect Distribution Channels to Increase Net Revenues and Improve Our Operating Results. Most of Our Revenue is Derived From Sales of Three Product Families, So We are Dependent on Widespread Market Acceptance of These Products. Our Reliance on Industry Standards, Technological Change in the Marketplace and New Product Initiatives May Cause our Sales to Fluctuate or Decline. If a Key Reseller, Distributor, or Other Significant Customer Cancels or Delays a Large Purchase, Our Net Revenues May Decline and the Price of Our Stock May Fall. The Sales Cycle for Our Products is Long and We May Incur Substantial Non-Recoverable Expenses or Devote Significant Resources to Sales that Do Not Occur When Anticipated. We Purchase Several Key Components for Products From Single or Limited Sources and Could Lose Sales if These Suppliers Fail to Meet Our Needs. Our Dependence on Two Contract Manufacturers for All of Our Manufacturing Requirements Could Harm Our Operating Results. If We Do Not Adequately Manage and Evolve Our Financial Reporting and Managerial Systems and Processes, Our Ability to Manage and Grow Our Business May Be Harmed. We May Be Unable to Reasonably Anticipate Whether a Change in Our Process Will Have a Material Affect on Our Internal Control Over Financial Reporting. Changes in Financial Accounting Standards May Cause Adverse Unexpected Revenue Fluctuations and Affect Our Reported Results of Operations. Compliance with Changing Regulation of Corporate Governance and Public Disclosure May Result in Additional Expenses. We Have Been Named as a Defendant in a Shareholder Class Action Lawsuit Arising Out of Our Public Offerings of Securities in 1999 and May be Involved in Additional Litigation in the Future. Our Headquarters and Some Significant Supporting Businesses Are Located in Northern California and Other Areas Subject to Natural Disasters That Could Disrupt Our Operations and Harm Our Business. Failure of Our Products to Comply With Evolving Industry Standards and Complex Government Regulations May Cause Our Products to Not Be Widely Accepted, Which May Prevent Us From Growing Our Net Revenues or Achieving Profitability on a Fiscal Year Basis. Failure to Successfully Expand Our Sales and Support Teams or Educate Them In Regard to Technologies and Our Product Families May Harm Our Operating Results. We May Engage in Future Acquisitions that Dilute the Ownership Interests of Our Stockholders, Cause Us to Incur Debt and Assume Contingent Liabilities. We May Need Additional Capital to Fund Our Future Operations and, If It Is Not Available When Needed, We May Need to Reduce Our Planned Development and Marketing Efforts, Which May Reduce Our Net Revenues and Prevent Us From Achieving Profitability on a Fiscal Year Basis. We Have Entered into Long-Term Lease Agreements for Several Facilities that are Currently Vacant and May be Difficult to Sublease due to Current Real Estate Market Conditions. Our Stock Price Has Been Volatile In the Past and Our Stock Price May Significantly Fluctuate in the Future. Provisions in Our Charter Documents and Delaware Law and Our Adoption of a Stockholder Rights Plan May Delay or Prevent an Acquisition of Extreme, Which Could Decrease the Value of Our Common Stock.

Full 10-K form ▸

1078271--8/30/2007--EXTREME_NETWORKS_INC