1081290--3/27/2006--REDBACK_NETWORKS

related topics

{customer, product, revenue}

{product, market, service}

{property, intellectual, protect}

{control, financial, internal}

{personnel, key, retain}

{operation, natural, condition}

{operation, international, foreign}

{stock, price, operating}

{system, service, information}

{regulation, change, law}

{cost, contract, operation}

{provision, law, control}

{loss, insurance, financial}

{regulation, government, change}

Interested persons should carefully consider the risks described below in evaluating our company. Additional risks and uncertainties not presently known to us, or that we currently consider immaterial, may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. In that case, the trading price of our common stock could decline. Our operating plan is based on assumptions concerning our realization of a certain level of revenue and the control of our costs, which are difficult to predict and there is no guarantee that our goals are achievable. Our quarterly operating results are inherently unpredictable and could continue to fluctuate significantly, which may result in volatility in the price of our securities. There are a limited number of customers that accounted for a disproportionate amount of our revenue, and the loss of any of these key customers would likely reduce our revenue significantly and have a negative impact on our cash position. If our products do not anticipate and meet specific customer requirements and demands, our revenue and operating results would be adversely affected. If we experience difficulties in developing and delivering new products, our revenue and earnings may be adversely affected. If we fail to match production with product demand, we may need to incur additional costs and liabilities to meet such demand or we may lose customers to our competitors and our revenue may be harmed. Our gross margin may continue to fluctuate over time, which could harm our results of operations. We have incurred losses in the past and we may incur net losses in the near future. We are dependent on sole source and limited source suppliers for several key components, and any interruptions or delay of supply could adversely affect our sales and business prospects. We currently depend on a single contract manufacturer, Jabil Circuit Inc., with whom we do not have a long-term supply contract, and the loss of any manufacturing capacity could materially and adversely affect our operating results. If we fail to attract and retain skilled employees, we may not be able to timely develop, sell or support our products. A number of our customers are evaluating our next generation products, which may lead to an extended evaluation period or a decision to use a competitor s products, and this may have a material adverse effect on our business. Recent rulemaking by the Financial Accounting Standards Board will require us to expense equity compensation given to our employees and will significantly impact our operating results and may reduce our ability to effectively utilize equity compensation to attract and retain employees. While we believe that we currently have adequate internal control over financial reporting, changes in our business and increasing complexity may cause risks to ongoing compliance. Future changes in financial accounting standards or practices may cause adverse unexpected fluctuations to our reported results of operations. Our products are highly technical, and any undetected software or hardware errors in our products could have a material adverse effect on our operating results. Our future success depends on sales to companies in the telecommunications sector. Our business substantially depends upon the continued growth of the Internet and the use of IP-based networks to deliver Triple Play services. We rely, in part, on value-added resellers and distribution partners to sell our products, and disruptions to or our failure to effectively develop and manage our distribution channel and the processes and procedures that support it could adversely affect our ability to generate revenue from the sale of our products. Our operating results will suffer if we do not successfully commercialize our product lines. If we fail to adequately evolve our financial and managerial control and reporting systems and processes to meet the changing needs of our business, our ability to manage and grow our business will be negatively affected. We rely on sales in international markets for a substantial portion of our revenue, which exposes us to additional risks that may affect our revenue levels. We are exposed to fluctuations in currency exchange rates which could negatively affect our financial results and cash flows. Intense competition in our industry could result in the loss of customers or an inability to attract new customers. We are exposed to the credit risk of some of our customers and to credit exposures in weakened markets, which could result in material losses. Our business will be adversely affected if we are unable to protect our intellectual property rights. We could become subject to litigation regarding intellectual property rights that could subject us to significant liability or force us to redesign our products. We may be at risk of additional litigation, which could be costly and time consuming to defend. If necessary licenses of third-party technology are not available to us or are unreasonably expensive to obtain, our results of operations could be adversely affected. Our business may suffer slower or less growth due to further government regulation of the communications industry. We have adopted anti-takeover measures that could prevent a change in our control. Our business and operations are especially subject to the risks of earthquakes and other natural catastrophic events.

Full 10-K form ▸

1081290--3/27/2006--REDBACK_NETWORKS_INC