1090071--6/14/2007--FOUNDRY_NETWORKS

related topics

{customer, product, revenue}

{product, market, service}

{control, financial, internal}

{financial, litigation, operation}

{property, intellectual, protect}

{personnel, key, retain}

{system, service, information}

{regulation, government, change}

{acquisition, growth, future}

{regulation, change, law}

{stock, price, operating}

{stock, price, share}

{provision, law, control}

{condition, economic, financial}

{loss, insurance, financial}

{operation, international, foreign}

The process of restating our financial statements, making the associated disclosures, and complying with SEC requirements are subject to uncertainty and evolving requirements. A number of our current and former executive officers and directors have been named as parties to several derivative action lawsuits arising from our internal option review, and there is a possibility of additional lawsuits, all of which could require significant management time and attention and result in significant legal expenses. Ongoing government inquiries relating to our past 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. Intense competition in the market for networking solutions could prevent us from maintaining or increasing revenue and sustaining profitability. We must continue to introduce new products with superior performance and features in a timely manner in order to sustain and increase our revenue, and if we fail to predict and respond to emerging technological trends and customers changing needs, our operating results may suffer. We depend on large, recurring purchases from certain significant customers, and a loss, cancellation or delay in purchases by these customers could negatively affect our revenue. The United States government is a significant customer and has been one key to our financial success. However, government demand is unpredictable and there is no guarantee of future contract awards. We may be subject to litigation risks and intellectual property infringement claims that are costly to defend and could limit our ability to use certain technologies in the future. Additionally, we may be found to infringe on intellectual property rights of others. If we fail to protect our intellectual property, our business and ability to compete could suffer. Our ability to increase our revenue depends on expanding our direct sales operations and reseller distribution channels and providing excellent customer support. We are required to expense equity compensation given to our employees, which has reduced our reported earnings, will significantly impact our operating results in future periods and may reduce our stock price and our ability to effectively utilize equity compensation to attract and retain employees. Because our financial results are difficult to predict and may fluctuate significantly, we may not meet quarterly financial expectations, which could cause our stock price to decline. We purchase several key components for our products from sole sources; if these components are not available, our revenue may be adversely affected. Our reliance on third-party manufacturing vendors to manufacture our products may cause a delay in our ability to fill orders. Our gross margins and average selling prices of our products have decreased in the past and may continue to decrease as a result of competitive pressures and other factors. Weak economic and market conditions or geopolitical turmoil may adversely affect our revenue, gross margins and expenses. We need additional qualified personnel to maintain and expand our business. If we are unable to promptly attract and retain qualified personnel, our business may be harmed. Our operations in international markets involve inherent risks that we may not be able to control. As a result, our business may be harmed if we are unable to successfully address these risks. Due to the lengthy sales cycles of some of our products, the timing of our revenue is difficult to predict and may cause us to fail to meet our revenue expectations. As a result of our delayed filing of our periodic SEC reports, our inability to maintain our Form S-3 eligibility may adversely affect our ability to raise future capital or complete acquisitions. 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 had a material weakness in internal control over financial reporting in the past and cannot assure you that additional material weaknesses will not be identified in the future. If our internal control over financial reporting or disclosure controls and procedures are not effective, there may be errors in our financial statements that could require a restatement or our filings may not be timely and investors may lose confidence in our reported financial information, which could lead to a decline in our stock price. The timing of the adoption of industry standards may negatively affect widespread market acceptance of our products. If our products do not interoperate with our customers networks, installations will be delayed or cancelled and could harm our business. If our products contain undetected software or hardware errors, we could incur significant unexpected expenses and lost sales and be subject to product liability claims. We may incur liabilities that are not subject to maximum loss clauses. Our products may not continue to comply with the regulations governing their sale, which may harm our business. We may engage in acquisitions that could result in the dilution of our stockholders, disrupt our operations, cause us to incur substantial expenses and harm our business if we cannot successfully integrate the acquired business, products, technologies or personnel. Our stock price has been volatile historically, which may make it more difficult to sell shares when needed at attractive prices. Anti-takeover provisions could make it more difficult for a third party to acquire us.

Full 10-K form ▸

1090071--6/14/2007--FOUNDRY_NETWORKS_INC