1118941--3/24/2010--ENDWAVE

related topics

{customer, product, revenue}

{stock, price, operating}

{product, market, service}

{property, intellectual, protect}

{competitive, industry, competition}

{cost, regulation, environmental}

{loan, real, estate}

{cost, contract, operation}

{personnel, key, retain}

{acquisition, growth, future}

{gas, price, oil}

Because of the shortages of some components and our dependence on single source suppliers and custom components, we may be unable to obtain an adequate supply of components of sufficient quality in a timely fashion, or we may be required to pay higher prices or to purchase components of lesser quality. We depend on a small number of key customers in the mobile communication industry for a significant portion of our revenues. If we lose any of our major customers or there is any material reduction in orders for our products from any of these customers, our business, financial condition and results of operations would be adversely affected. Our operating results may be adversely affected by substantial quarterly and annual fluctuations and market downturns. Implementing our acquisition strategy could result in dilution to our stockholders and operating difficulties leading to a decline in revenues and operating profit. We rely on the semiconductor foundry operations of third-party semiconductor foundries to manufacture the integrated circuits sold directly to our customers or contained in our products. The loss of our relationship with any of these foundries without adequate notice would adversely impact our ability to fill customer orders and could damage our customer relationships. Competitive conditions often require us to reduce prices and, as a result, we need to reduce our costs in order to be profitable. We rely heavily on a Thailand facility of HANA, a contract manufacturer, to produce our RF modules and to package our microwave and millimeter wave integrated circuits. If HANA is unable to produce these modules in sufficient quantities or with adequate quality, or it chooses to terminate our manufacturing arrangement, we will be forced to find an alternative manufacturer and may not be able to fulfill our production commitments to our customers, which could cause sales to be delayed or lost and could harm our reputation. Our products may contain component, manufacturing or design defects or may not meet our customers performance criteria, which could cause us to incur significant repair expenses, harm our customer relationships and industry reputation, and reduce our revenues and profitability. We may not be able to design our products as quickly as our customers require, which could cause us to lose sales and may harm our reputation. We depend on our key personnel. Skilled personnel in our industry can be in short supply. If we are unable to retain our current personnel or hire additional qualified personnel, our ability to develop and successfully market our products would be harmed. The length of our sales cycle requires us to invest substantial financial and technical resources in a potential sale before we know whether the sale will occur. There is no guarantee that the sale will ever occur and if we are unsuccessful in designing integrated circuits and module products for a particular generation of a customer s products, we may need to wait until the next generation of that product to sell our products to that particular customer. We may not be able to manufacture and deliver our products as quickly as our customers require, which could cause us to lose sales and would harm our reputation. Although we do have long-term commitments from many of our customers, they are not for fixed quantities of product. As a result, we must estimate customer demand, and errors in our estimates could have negative effects on our cash, inventory levels, revenues and results of operations. Any failure to protect our intellectual property appropriately could reduce or eliminate any competitive advantage we have. We are exposed to fluctuations in the market values of our investment portfolio. Risks Relating to Our Industry Our failure to compete effectively could reduce our revenues and margins. Our failure to comply with any applicable environmental regulations could result in a range of consequences, including fines, suspension of production, excess inventory, sales limitations and criminal and civil liabilities. Government regulation of the communications industry could limit the growth of the markets that we serve or could require costly alterations of our current or future products. Our failure to continue to develop new or improved semiconductor process technologies could impair our competitive position. The segment of the semiconductor industry in which we participate is intensely competitive, and our inability to compete effectively would harm our business. Risks Relating to Ownership of Our Stock The market price of our common stock has fluctuated historically and is likely to fluctuate in the future.

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1118941--3/24/2010--ENDWAVE_CORP