1100389--7/25/2008--PALM

related topics

{product, market, service}

{system, service, information}

{customer, product, revenue}

{property, intellectual, protect}

{debt, indebtedness, cash}

{stock, price, operating}

{financial, litigation, operation}

{stock, price, share}

{tax, income, asset}

{acquisition, growth, future}

{operation, natural, condition}

{personnel, key, retain}

{operation, international, foreign}

{interest, director, officer}

{investment, property, distribution}

{provision, law, control}

{product, liability, claim}

{cost, regulation, environmental}

{regulation, change, law}

Risks Related to Our Business Our operating results are subject to fluctuations, and if we fail to meet the expectations of securities analysts or investors, our stock price may decrease significantly. If we fail to develop and introduce new products and services successfully and in a cost-effective and timely manner, we will not be able to compete effectively and our ability to generate revenues will suffer. Our products may contain errors or defects, which could result in the rejection or return of our products, damage to our reputation, lost revenues, diverted development resources and increased service costs, warranty claims and litigation. If we are unable to compete effectively with existing or new competitors, we could experience price reductions, reduced demand for our products and services, reduced margins and loss of market share, and our business, results of operations and financial condition would be adversely affected. We are highly dependent on wireless carriers for the success of our smartphone products. We could be exposed to significant fluctuations in revenue for our smartphone products based on our strategic relationships with wireless carriers. We are dependent on a concentrated number of significant customers and the loss or credit failure of any of those customers could have an adverse effect on our business, results of operations and financial condition. If our products do not meet wireless carrier and governmental or regulatory certification or other requirements, we will not be able to compete effectively and our ability to generate revenues will suffer. If we do not correctly forecast demand for our products, we could have costly excess production or inventories or we may not be able to secure sufficient or cost-effective quantities of our products or production materials and our revenues, gross profit and financial condition could be adversely impacted. We depend on our suppliers, some of which are the sole source and some of which are our competitors, for certain components, software applications and elements of our technology, and our production or reputation could be harmed if these suppliers were unable or unwilling to meet our demand or technical requirements on a timely and/or a cost-effective basis. Our product strategy is substantially dependent on the operating systems that we include in our devices and those operating systems face significant competition and may not be preferred by our wireless carrier partners or end users. Our business is substantially dependent on our ability to develop our new operating system. If we are unable to obtain key technologies from third parties on a timely basis and free from errors or defects, we may have to delay or cancel the release of certain products or features in our products or incur increased costs. The order issued by the International Trade Commission, or ITC, banning import of future models of 3G mobile broadband handsets containing chips, chipsets and software of Qualcomm Incorporated or other litigation between Qualcomm and Broadcom Corporation could hinder our ability to provide certain models of our smartphone products to our customers and to compete effectively, and could adversely affect our customer relationships, revenues, results of operations and financial condition. We rely on third parties, some of which are our competitors, to design, manufacture, distribute, warehouse and support our products, and our reputation, revenues and results of operations could be adversely affected if these third parties fail to meet their performance obligations. As a result of the credit agreement we entered into, we have a significant amount of debt. We may not be able to generate sufficient cash to service or repay all of our indebtedness, including the term loan, and we may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful. Our substantial indebtedness could adversely affect our business, results of operations and financial condition. Restrictive covenants may adversely affect our operations. Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. Third parties have claimed, and may claim in the future, that we are infringing their intellectual property, and we could suffer significant litigation or licensing expenses or be prevented from selling products regardless of whether these claims are successful. We are subject to general commercial litigation and other litigation claims as part of our operations, and we could suffer significant litigation expenses in defending these claims and could be subject to significant damage awards or other remedies. Our success largely depends on our ability to hire, retain, integrate and motivate sufficient numbers of qualified personnel, including senior management. Our strategy and our ability to innovate, design and produce new products, sell products, maintain operating margins and control expenses depend on key personnel that may be difficult to replace. We rely on third parties to sell and distribute our products, and we rely on their information to manage our business. Disruption of our relationship with these channel partners, changes in their business practices, their failure to provide timely and accurate information or conflicts among our channels of distribution could adversely affect our business, results of operations and financial condition. We rely on third parties to manage and operate our e-commerce web store and related telesales call center and disruption to these sales channels could adversely affect our revenues and results of operations. We use third parties to provide significant operational and administrative services, and our ability to satisfy our customers and operate our business could suffer if the level of services is interrupted or does not meet our requirements. The market for our products is volatile, and changing market conditions, or failure to adjust to changing market conditions, may adversely affect our revenues, results of operations and financial condition, particularly given our size, limited resources and lack of diversification. Our products are subject to increasingly stringent laws, standards and other regulatory requirements, and the costs of compliance or failure to comply may adversely impact our business, results of operations and financial condition. Allegations of health risks associated with electromagnetic fields and wireless communications devices, and the lawsuits and publicity relating to them, regardless of merit, could adversely impact our business, results of operations and financial condition. If third parties infringe our intellectual property or if we are unable to secure and protect our intellectual property, we may expend significant resources enforcing our rights or suffer competitive injury. We have an international presence in countries whose laws may not provide protection of our intellectual property rights to the same extent as the laws of the United States, which may make it more difficult for us to protect our intellectual property. Our future results could be harmed by economic, political, regulatory and other risks associated with international sales and operations. We may be required to record impairment charges in future quarters as a result of the decline in value of our investments in auction rate securities. Our ability to utilize our net operating losses may be limited if we engage in transactions which bring cumulative change in ownership for Palm to 50% or more. If we continue to experience net losses over an extended period of time, we may need to establish a valuation allowance on our deferred tax asset relating to our net operating loss carryforwards, which could adversely affect our results of operations. We are subject to audit by the Internal Revenue Service and other taxing authorities. Any assessment arising from an audit and the cost of any related dispute could adversely affect our results of operations and financial condition. We may need or find it advisable to seek additional funding which may not be available or which may result in substantial dilution of the value of our common stock. We may pursue strategic acquisitions and investments which could have an adverse impact on our business if they are unsuccessful. Business interruptions could adversely affect our business. Wars, terrorist attacks or other threats beyond our control could negatively impact consumer confidence, which could harm our operating results. Risks Related to the Securities Markets and Ownership of Our Common and Preferred Stock Our common stock price may be subject to significant fluctuations and volatility. Elevation Partners may exercise significant influence over Palm. Certain elements of our relationship with Elevation Partners and our executive officers may discourage other parties from trying to acquire Palm. We may not have the ability to finance the mandatory repurchase offer pursuant to the terms of the Series B Preferred Stock. Provisions in our charter documents and Delaware law and our adoption of a stockholder rights plan may delay or prevent acquisition of us, which could decrease the value of shares of our common stock.

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1100389--7/25/2008--PALM_INC