800460--6/14/2006--CALIFORNIA_MICRO_DEVICES

related topics

{customer, product, revenue}

{product, market, service}

{control, financial, internal}

{property, intellectual, protect}

{regulation, change, law}

{gas, price, oil}

{operation, natural, condition}

{operation, international, foreign}

{cost, operation, labor}

{stock, price, operating}

{product, liability, claim}

{acquisition, growth, future}

{personnel, key, retain}

{provision, law, control}

{stock, price, share}

{cost, regulation, environmental}

{condition, economic, financial}

{financial, litigation, operation}

{product, candidate, development}

Our operating results may fluctuate significantly because of a number of factors, many of which are beyond our control and are difficult to predict. These fluctuations may cause our stock price to decline. We incurred quarterly losses for ten consecutive quarters beginning with the quarter ended March 31, 2001 and ending with the quarter ended June 30, 2003, and in the quarter ended March 31, 2005, and we may be unable to sustain the profitability we have achieved in our four most recent quarters. We currently rely heavily upon a few customers for a large percentage of our net sales. Our revenue would suffer materially were we to lose any one of these customers. We currently rely heavily upon a few core markets for the bulk of our sales. If we are unable to further penetrate the mobile handset, personal computer and digital consumer electronics markets, our revenues could stop growing and might decline leading us to reduce our investment in research and development and marketing. The fastest growing market for our products has been the mobile handset market. A slowdown in the adoption of ASIPs by mobile handset manufacturers would reduce our future growth in that market. The markets in which we participate are intensely competitive and our products are not sold pursuant to long term contracts, enabling our customers to replace us with our competitors if they choose. One of our competitive advantages for our mobile ASIP products may be lessening as some of our customers choose to use plastic packages rather than chip scale packaging. This could lead to our customers purchasing products from our competitors rather than us or to our having to reduce prices, thereby decreasing our revenues. We determined that we had material weaknesses in our internal control over financial reporting as of March 31, 2005, one of which was still continuing as of December 31, 2005. As a result, we had to implement supplemental compensating procedures to determine that our financial statements are reliable. These material weaknesses, and any future adjustment to our financial statements which may result from them, could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price. Deficiencies in our internal controls could cause us to have material errors in our financial statements, which could require us to restate them. Such restatement could have adverse consequences on our stock price, potentially limiting our access to financial markets. Our competitors have in the past and may in the future reverse engineer our most successful products and become second sources for our customers, which could decrease our revenues and gross margins. In the future our revenues will become increasingly subject to macroeconomic cycles and more likely to decline if there is an economic downturn. Our reliance on foreign customers could cause fluctuations in our operating results. If our distributors experience financial difficulty and become unable to pay us or choose not to promote our products, our business could be harmed. Our dependence on a limited number of foundry partners and CSP ball drop contractors, and the limited capacity for plastic assembly and test subcontractors, exposes us to a risk of manufacturing disruption or uncontrolled price changes. We have outsourced our wafer fabrication, and assembly and test operations and may encounter difficulties in expanding our capacity. Our reliance upon foreign suppliers exposes us to risks associated with international operations. Our markets are subject to rapid technological change. Therefore, our success depends on our ability to develop and introduce new products. It is possible that a significant portion our research and development expenditures will not yield products with meaningful future revenue. We may be unable to reduce the costs associated with our products quickly enough for us to meet our margin targets. Our future success depends in part on the continued service of our key engineering and management personnel and our ability to identify, hire and retain additional personnel. We are dependent upon retaining key employee of recently acquired Arques Technology in order to realize many of the hoped-for benefits of the acquisition. Loss of such employees could cause us to record a significant amount of expenses due to the loss of the goodwill asset associated with the acquisition. Due to the volatility of demand for our products, our inventory may from time to time be in excess of our needs, which could cause write downs of our inventory or of inventory held by our distributors. Our design wins may not result in customer products utilizing our devices and our backlog may not result in future shipments of our devices. During a typical quarter, a substantial portion of our shipments are not in our backlog at the start of the quarter, which limits our ability to forecast in the near term. The majority of our operating expenses cannot be reduced quickly in response to revenue shortfalls without impairing our ability to effectively conduct business. We may not be able to protect our intellectual property rights adequately. We could be harmed by litigation involving patents and other intellectual property rights. By supplying parts in the past which were used in medical devices that help sustain human life, we are vulnerable to product liability claims. Our failure to comply with environmental regulations could result in substantial liability to us. Earthquakes, other natural disasters and shortages may damage our business. Future terrorist activity, or threat of such activity, could adversely impact our business. Implementation of the new FASB rules for the accounting of employee equity and the issuance of new laws or other accounting regulations, or reinterpretation of existing laws or regulations, could materially impact our business or stated results. Our stock price may continue to be volatile, and our trading volume may continue to be relatively low and limit liquidity and market efficiency. Should significant shareholders desire to sell their shares within a short period of time, our stock price could decline. Our shareholder rights plan, together with the anti-takeover provisions of our certificate of incorporation and of the California General Corporation Law, may delay, defer or prevent a change of control. We will incur increased costs as a result of recently enacted and proposed changes in laws and regulations relating to corporate governance matters and public disclosure. Acquisitions and strategic alliances may harm our operating results or cause us to incur debt or assume contingent liabilities. A decline in our stock price could result in securities class action litigation against us which could divert management attention and harm our business.

Full 10-K form ▸

800460--6/14/2006--CALIFORNIA_MICRO_DEVICES_CORP