1111721--7/28/2006--STRATOS_INTERNATIONAL

related topics

{product, market, service}

{customer, product, revenue}

{regulation, government, change}

{stock, price, operating}

{operation, international, foreign}

{product, liability, claim}

{property, intellectual, protect}

{acquisition, growth, future}

{personnel, key, retain}

{cost, regulation, environmental}

{financial, litigation, operation}

{stock, price, share}

We must develop new products and technologies as well as enhancements to existing products and technologies in order to remain competitive. If we fail to do so, our products will no longer be competitive and our net sales will decline. Our products are incorporated into larger systems, which must comply with various domestic and international government regulations. If the performance of our products adversely affects our customers ability to comply with these requirements, we may lose these customers and our net sales will decline. If our products fail to comply with evolving industry standards or alternative technologies in our markets, we may be required to make significant expenditures to redesign our products. We are also dependent on sales to the military/aerospace industry, including U.S. and foreign government entities. Our sales cycle runs from our customers initial design to production for commercial sale. This cycle is long and unpredictable and may cause our net sales to decline or our operating expenses to increase. Our customers may cease purchasing our products at any time and may cancel or defer purchases on short notice, which may cause our net sales to decline or increase our operating expenses. If we do not decrease our manufacturing costs or increase sales of higher margin products as the average unit price of our existing products decreases, our gross margins will decline. The market for our products is highly competitive, which may result in lost sales or lower gross margins. We depend on suppliers for several key components. If we underestimate or overestimate our requirements for these components, our business could be significantly harmed. Our success depends on our ability to hire and retain qualified personnel, and if we are unable to do so, our product development efforts and customer relations will suffer. Our products may contain defects, which may cause us to incur significant costs, divert our attention from product development efforts and result in a loss of customers. We are subject to environmental laws and other legal requirements that have the potential to subject us to substantial liability and increase our costs of doing business. Economic, political and regulatory risks associated with international operations may limit our sales and increase our costs of doing business abroad. We may pursue additional acquisitions. If we are unable to successfully integrate any businesses or technologies that we acquire in the future or are unable to realize the intended benefits of any future acquisitions, our business will be harmed. Our inability to protect our intellectual property rights would significantly impair their value and our competitive position. Various litigation matters, in which we are defendants, could result in significant monetary damages and expenses or restrictions on our ability to sell our products. Risks Relating to the Securities Markets and Ownership of our Common Stock: The market prices for securities of technology related companies have been volatile in recent years and our stock price could fluctuate significantly.

Full 10-K form ▸

1111721--7/28/2006--STRATOS_INTERNATIONAL_INC