1140486--3/1/2007--ATHEROS_COMMUNICATIONS

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Fluctuations in our operating results on a quarterly and annual basis could cause the market price of our common stock to decline. If demand for our chipsets declines or does not grow, we will be unable to increase or sustain our revenue and our business will be severely harmed. Since we have limited visibility as to the volume of sales of our products by our customers and inventory levels of our products held by our customers, our ability to forecast accurately future demand for and sales of our products is limited. Any future downturns in the semiconductor industry may reduce our revenue and result in excess inventory. Our products typically have lengthy sales cycles. A customer may decide to cancel or change its product plans, which could cause us to lose anticipated sales. In addition, our average product life cycles tend to be short and, as a result, we may hold excess or obsolete inventory that could adversely affect our operating results. The average selling prices of products in our markets have historically decreased rapidly and will likely do so in the future, which could harm our revenue and gross profits. We may not be able to compete effectively and increase or maintain revenue and market share. If we fail to appropriately scale our operations in response to changes in demand for our existing products or for new products, our business could be materially and adversely affected. We may not be able to sustain our recent growth rate, and we may not be able to manage our future growth effectively. We depend on key personnel to operate our business, and if we are unable to retain our current personnel and hire additional personnel, our ability to develop and successfully market our products could be harmed. If we fail to develop and introduce new products and enhancements for wireless and Ethernet applications or if our proprietary features do not achieve market acceptance on a timely basis, our ability to attract and retain customers could be impaired, and our competitive position may be harmed. We will continue to expend substantial resources developing products for new applications or markets and may never achieve the sales volume that we anticipate for these products, which may limit our future growth and harm our results of operations. We derive revenue from the sale of our PAS products in Asia and if this market does not grow or we do not expand our customer base, our future results may be harmed. Our primary PAS customer has trial licenses for PAS handsets in China. We recently entered the Gigabit and Fast Ethernet semiconductor market through our acquisition of Attansic, and if we are not successful in this market and if this market does not grow or we do not expand our customer base, our future results may be harmed. We face business, political, regulatory, operational, financial and economic risks because most of our operations and sales activities take place outside of the United States. We rely on a limited number of independent foundries and subcontractors for the manufacture, assembly and testing of our chipsets and on a third party logistics provider to ship products to our customers. The failure of any of these third-party vendors to deliver products or otherwise perform as requested could damage our relationships with our customers, decrease our sales and limit our growth. We face risks associated with relying on third-party vendors for the manufacture, assembly and testing of our chipsets. We do not have long-term supply contracts with our third-party manufacturing vendors and they may allocate capacity to other customers and may not allocate sufficient capacity to us to meet future demands for our products. If our third-party foundries or suppliers do not achieve satisfactory yields or quality, our relationships with our customers and our reputation will be harmed. We depend on a small number of customers for a significant portion of our revenue. If we fail to retain or expand customer relationships, our revenue could decline. We will have difficulty selling our products if customers do not design our products into their product offerings or if our customers product offerings are not commercially successful. We may experience difficulties in transitioning to smaller geometry process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses. The complexity of our products could result in unforeseen delays or expenses from undetected defects, errors or bugs in hardware or software, which could reduce the market acceptance for our new products, damage our reputation with current or prospective customers and adversely affect our operating costs. Because we do not have long-term commitments from our customers, we must estimate customer demand, and errors in our estimates can have negative effects on our inventory levels, sales and operating results. Although we achieved profitability in the last three fiscal years, we may not sustain or increase profitability in the future. Changes to financial accounting standards may affect our results of operations and could cause us to change our business practices. Unanticipated changes in our tax rates could affect our future results. We intend to evaluate acquisitions of or investments in businesses, and we may not realize the anticipated benefits of these acquisitions or investments. If we fail to secure or protect our intellectual property rights, competitors may be able to use our technologies, which could weaken our competitive position, reduce our revenue or increase our costs. Because we license some of our software source code directly to customers, we face increased risks that our trade secrets will be exposed through inadvertent or intentional disclosure, which could harm our competitive position or increase our costs. Intellectual property litigation, which is common in our industry, could be costly, harm our reputation, limit our ability to license or sell our proprietary technologies or products and divert the attention of management and technical personnel. Any potential dispute involving our patents or other intellectual property could also include our industry partners and customers, which could trigger our indemnification obligations to them and result in substantial expense to us. Our headquarters are located in California, and we have sales offices in Japan and elsewhere in Asia, and research and development facilities in India, Taiwan and China. Our third-party foundries and subcontractors are concentrated in Asia and elsewhere in the Pacific Rim. These areas are subject to significant weather and earthquake-related risks. Any disruption to the operations of these offices, foundries and subcontractors resulting from typhoons, earthquakes or other natural disasters could cause significant delays in the production, shipment and sales of our products. We rely upon third parties for technology that is integrated into some of our products, and if we are unable to continue to use this technology and future technology or the technology fails to operate, our ability to sell technologically advanced products would be limited. If our internal control over financial reporting does not comply with the requirements of the Sarbanes-Oxley Act, investor perceptions of our company may be adversely affected and could cause a decline in the market price of our stock. Changes in current laws or regulations or the imposition of new laws or regulations could impede the sale of our products or otherwise harm our business. Rapidly changing standards could make our products obsolete, which would cause our operating results to suffer. If our customers or the industries using wireless technology prefer to integrate wireless capability into other products, we may not be able to compete effectively, we will lose customers, our revenue will decline and our business will be harmed. The proliferation of wireless devices may expand beyond the capacity of the channels available in the 2.4GHz or 5 GHz bands, which may overload the networks and result in decreased market demand for our products. We may experience a decrease in market demand or a supply disruption due to uncertain economic conditions in the United States and in international market, including as a result of the concerns of terrorism, war and social and political instability. Because the NASDAQ Global Select Market is likely to continue to experience extreme price and volume fluctuations, the price of our stock may decline. Our ability to raise capital in the future may be limited and our failure to raise capital when needed could prevent us from executing our growth strategy. Delaware law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts that stockholders may consider favorable.

Full 10-K form ▸

1140486--3/1/2007--ATHEROS_COMMUNICATIONS_INC