738076--7/27/2009--3COM

related topics

{product, market, service}

{operation, international, foreign}

{customer, product, revenue}

{property, intellectual, protect}

{cost, operation, labor}

{debt, indebtedness, cash}

{capital, credit, financial}

{competitive, industry, competition}

{stock, price, operating}

{personnel, key, retain}

{stock, price, share}

{system, service, information}

{gas, price, oil}

{tax, income, asset}

{control, financial, internal}

{acquisition, growth, future}

Our indebtedness could adversely affect our financial condition and ability to grow our business. Risks Related to China-based Sales region and Dependence Thereon We are significantly dependent on our China-based segment; if it is not successful we will likely experience a material adverse impact to our business, business prospects and operating results. We are dependent on Huawei Technologies, or Huawei, as a significant customer; if, as expected, Huawei significantly reduces its business with us, it will likely materially adversely affect our business results. Risk Related to Core Business Strategy If we cannot increase our enterprise account business outside of China, leveraging China as our home market, we likely will not reach our growth and profitability goals. Our success is dependent on continuing to hire and retain qualified managers and other personnel and reducing senior management turnover; if we are not successful in attracting and retaining key personnel, our business will suffer. Intense competition in the market for networking solutions and new or developing product markets could prevent us from increasing revenue and profitability. Our competition with Huawei in the enterprise networking market could have a material adverse effect on our sales and our results of operations, particularly if Huawei increases its level of competition against us. Risks Related to Business and Technology Strategy Our industry is characterized by a short product life cycle, and we may not be successful at identifying and responding to new and emerging market, technology and product opportunities, or at responding quickly enough to technologies or markets that are in decline. Risks Related to Operations and Distribution Channels If we are not successful at partnering with system integrators and expanding our base of enterprise channel partners, reaching our growth and profitability goals will be more challenging and we will likely not reach our full potential. A significant portion of our sales is derived from a small number of distributors. If any of these channel partners reduces its business with us, our business could be adversely affected. We may be unable to manage our supply chain successfully, which would adversely impact our sales, gross margin and profitability. If we fail to adequately evolve our financial and managerial control and reporting systems and processes, our ability to manage and grow our business may be negatively affected. Risks Related to our Operations in the People s Republic of China China s legal and regulatory regime and changing political and economic environment may impact our business in China. Uncertainties with respect to the Chinese legal and regulatory system may adversely affect us. If PRC tax benefits available to us are reduced or repealed, our profitability or cash flow could suffer. If the Chinese VAT Authorities discontinue, reduce, or defer the VAT Software Subsidy Program, our results will likely be adversely affected. H3C is subject to restrictions on paying dividends and making other payments to us. We are subject to risks relating to currency rate fluctuations and exchange controls and we do not hedge this risk in China. Risks Related to Intellectual Property If our products contain undetected software or hardware errors, we could incur significant unexpected expenses and could lose sales. We may need to engage in complex and costly litigation in order to protect, maintain or enforce our intellectual property rights; in some jurisdictions, such as China, our rights may not be as strong as the rights we enjoy in the U.S. We may not be able to defend ourselves successfully against claims that we are infringing the intellectual property rights of others. Risks Related to the Trading Market Fluctuations in our operating results and other factors may contribute to volatility in the market price of our stock.

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738076--7/27/2009--3COM_CORP