1120914--3/16/2010--PDF_SOLUTIONS

related topics

{customer, product, revenue}

{acquisition, growth, future}

{control, financial, internal}

{system, service, information}

{property, intellectual, protect}

{product, market, service}

{tax, income, asset}

{condition, economic, financial}

{operation, international, foreign}

{personnel, key, retain}

{stock, price, share}

{cost, operation, labor}

The semiconductor market is volatile and unpredictable, which limits our ability to forecast our business and could negatively impact our results of operations. We generate a large percentage of our revenues from a limited number of customers, so decreased volumes at any one of these customers, or the loss of any one of these customers could significantly reduce our revenue and results of operations below expectations. If semiconductor designers and manufacturers do not continue to adopt, or they significantly delay adoption of, our Design-to-Silicon-Yield solutions, our revenues will suffer. Our business is subject to risks associated with the ongoing financial crisis and weak global economy. Revenues from our gainshare performance incentives is dependent on factors outside of our control, including the volume of ICs that our customers are able to sell to their customers. We may not be able to effectively implement our restructuring plans, and our restructuring plans may not result in the expected benefits on our planned schedule, or at all, which could negatively impact our future results of operations. If we do not effectively manage, support, and safeguard our worldwide information systems, and integrate recent and planned growth, our business strategy may fail. It typically takes us a long time to sell our unique solutions to new customers and into new markets, and that can result in uncertainty and delays in generating revenues. Our stock price may be volatile, and our common stock could decline in value, increasing potential dilution to our stockholders, or we may be delisted from the NASDAQ Global Market. If we fail to protect our intellectual property ("IP") rights, customers or potential competitors may be able to use our technologies to develop their own solutions which could weaken our competitive position, reduce our revenue, or increase our costs. Our solution implementations may take longer than we anticipate, which could cause us to lose customers and may result in adjustments to our operating results. If we are not able to attract, retain, motivate, and strategically locate talented employees, including some key executives, our business may suffer. Competition in the market for yield improvement solutions and increased integration between IC design and manufacturing may intensify in the future, which could impede our ability to grow or execute our strategy. We face operational and financial risks associated with international operations that could negatively impact our revenue. Our earnings per share and other key operating results may be unusually high in a given quarter, thereby raising investors' expectations, and then unusually low in the next quarter, thereby disappointing investors, which could cause our stock price to drop. Measurement of our gainshare performance incentives requires data collection and is subject to customer agreement, which can result in uncertainty and cause quarterly results to fluctuate. Changes in the structure of our customer contracts, including the mix between fixed and variable revenue and the mix of elements, including perpetual and term-based licenses, can adversely affect the amount and timing of our total revenues. We have a history of losses, we may incur losses in the future and we may be unable to reach, or thereafter maintain, profitability. We intend to pursue additional strategic relationships, which are necessary to maximize our growth, but could substantially divert management attention and resources. Inadvertent disclosure of our customers' confidential information could result in costly litigation and cause us to lose existing and potential customers. Our technologies could infringe the IP rights of others, causing costly litigation and the loss of significant rights. Defects in our proprietary technologies, hardware and software tools, and the cost of support to remedy any such defects could decrease our revenue and our competitive market share. Failing to maintain the effectiveness of our internal controls over financial reporting could impede our ability to provide accurate and timely financial information, which could cause our investors to lose confidence in the accuracy and completeness of our financial reports and could cause our stock price to decline. We may not be able to raise necessary funds to support our growth or execute our strategy. Recent or potential acquisitions may adversely affect our business by diverting management's attention, increasing our expenses or by being more difficult to integrate than expected. Changes in effective tax rates could negatively affect our operating results. The uncertainty in the credit markets might impact the value of certain auction-rate securities we have and we might have to record impairment charges in the future.

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1120914--3/16/2010--PDF_SOLUTIONS_INC