1104042--3/8/2006--ADVANCED_ANALOGIC_TECHNOLOGIES

related topics

{customer, product, revenue}

{control, financial, internal}

{product, market, service}

{system, service, information}

{property, intellectual, protect}

{acquisition, growth, future}

{operation, international, foreign}

{operation, natural, condition}

{stock, price, operating}

{condition, economic, financial}

{personnel, key, retain}

{product, candidate, development}

{tax, income, asset}

{regulation, change, law}

Risks Related To Our Business Our customers may cancel their orders, change production quantities or delay production, and if we fail to forecast demand for our products accurately, we may incur product shortages, delays in product shipments or excess or insufficient product inventory. We receive a substantial portion of our revenues from one customer and most of our revenues from a small number of customers, and the loss of, or a significant reduction in, orders from that customer or our other largest customers would adversely affect our operations and financial condition. Our operating results have fluctuated in the past and we expect our operating results to continue to fluctuate. We may be unsuccessful in developing and selling new products or in penetrating new markets. Our products must meet exacting specifications, and defects and failures may occur, which may cause customers to return or stop buying our products and may expose us to product liability claims. The nature of the design process requires us to incur expenses prior to earning revenues associated with those expenses, and we will have difficulty selling our products if system designers do not design our products into their electronic systems. Because we receive a substantial portion of our revenues through distributors, their financial viability and ability to access the capital markets could impact our ability to continue to do business with them and could result in lower revenues, which could adversely affect our operating results and our customer relationships. Our distributor arrangements often require us to accept product returns and to provide price protection, which could harm our operating results or, if we fail to take these steps, could harm our relationship with these distributors and lead to a loss of revenues. We have a limited operating history, and we may have difficulty accurately predicting our future revenues for the purpose of appropriately budgeting and adjusting our expenses. As of December 31, 2005, we had a material weakness and significant deficiencies in our internal controls over financial reporting. If we fail to maintain an effective system of internal control, we may not be able to report our financial results accurately, which may cause investors to lose confidence in our reported financial information and have an adverse effect on the trading price of our common stock. Our current backlog may not be indicative of future sales. If consumer demand for mobile consumer electronic devices declines, our revenues will decrease. The average selling price of our products may decline, or a change in the mix of product orders may occur, either of which could reduce our gross margins. Substantially all of our customers and operations are located in Asia, which subjects us to additional risks, including regionalized economic influences, logistical complexity, political instability and currency fluctuations. Any increase in the manufacturing cost of our products could reduce our gross margins and operating profit. We outsource our wafer fabrication, testing, packaging, warehousing and shipping operations to third parties, and rely on these parties to produce and deliver our products according to requested demands in specification, quantity, cost and time. The loss of any of our key personnel could seriously harm our business, and our failure to attract or retain specialized technical and management talent could impair our ability to grow our business. We compete against companies with substantially greater financial and other resources, and our market share or gross margins may be reduced if we are unable to respond to competitive challenges effectively. Assertions by third parties of infringement by us of their intellectual property rights could result in significant costs and cause our operating results to suffer. Our failure to protect our intellectual property rights adequately could impair our ability to compete effectively or to defend ourselves from litigation, which could harm our business, financial condition and results of operations. We do not expect to sustain our recent growth rate, and we may not be able to manage any future growth effectively. Any acquisitions we make could disrupt our business and harm our financial condition. The cyclical nature of the semiconductor industry, which has historically demonstrated significant and prolonged downturns, could impact our operating results, financial condition and cash flows. Our business may be adversely impacted if our end customers cannot obtain sufficient supplies of other components in their products to meet their production projections and target quantities. We, our manufacturing suppliers and our end customers operate facilities located in regions subject to earthquakes and other natural disasters. A failure of our information systems would adversely impact our ability to process orders for and manufacture products. A failure to maintain our international structure may adversely affect our tax rate, financial condition and operating results. The requirement that we expense employee stock options will significantly reduce our net income in future periods. We have incurred and will continue to incur increased costs as a result of being a public company. Compliance with Section 404 of the Sarbanes-Oxley Act of 2002 is uncertain, and if we fail to comply with these standards in a timely manner, our business could be harmed and our stock price could decline.

Full 10-K form ▸

1104042--3/8/2006--ADVANCED_ANALOGIC_TECHNOLOGIES_INC