833640--3/10/2008--POWER_INTEGRATIONS

related topics

{customer, product, revenue}

{property, intellectual, protect}

{product, market, service}

{regulation, change, law}

{operation, international, foreign}

{financial, litigation, operation}

{stock, price, operating}

{system, service, information}

{operation, natural, condition}

{interest, director, officer}

{personnel, key, retain}

{cost, regulation, environmental}

{provision, law, control}

{control, financial, internal}

In addition to the other information in this report, the following factors should be considered carefully in evaluating our business before purchasing shares of our stock. Our quarterly operating results are volatile and difficult to predict. If we fail to meet the expectations of public market analysts or investors, the market price of our common stock may decrease significantly We do not have long-term contracts with any of our customers and if they fail to place, or if they cancel or reschedule orders for our products, our operating results and our business may suffer. Intense competition in the high-voltage power supply industry may lead to a decrease in our average selling price and reduced sales volume of our products. If demand for our products declines in our major end markets, our net revenues will decrease. If we are unable to adequately protect or enforce our intellectual property rights, we could lose market share, incur costly litigation expenses, suffer incremental price erosion or lose valuable assets, any of which could harm our operations and negatively impact our profitability. We depend on third-party suppliers to provide us with wafers for our products and if they fail to provide us sufficient wafers, our business may suffer We are subject to stockholder litigation related to our internal investigation of our past practices related to stock option grants and the related restatement of our consolidated financial statements Securities laws and regulations, including potential risk resulting from our evaluation of internal controls under the Sarbanes-Oxley Act of 2002, will continue to impact our results. Changes in assumptions used for our Statement of Financial Accounting Standards No. 123R, Share-Based Payment (SFAS 123R), calculation may increase our stock-based compensation expense. If we do not prevail in our litigation against Fairchild Semiconductor, System General, and BCD we will have expended significant financial resources, potentially without any benefit, and may also suffer the loss of proprietary rights. We are being audited by the Internal Revenue Service which is asserting that we owe additional taxes relating to a number of items, and if we are not successful in defending our position we may be obligated to pay additional taxes, as well as penalties and interest, and may also have a higher effective income tax rate in the future Fluctuations in exchange rates, particularly the exchange rate between the U.S. dollar and the Japanese yen, may impact our gross margin Matsushita has licenses to our technology, which it may use to our detriment. Because the sales cycle for our products can be lengthy, we may incur substantial expenses before we generate significant revenues, if any. Our products must meet exacting specifications, and undetected defects and failures may occur which may cause customers to return or stop buying our products. Our international sales activities account for a substantial portion of our net revenues, which subjects us to substantial risks. If our efforts to enhance existing products and introduce new products are not successful, we may not be able to generate demand for our products If our products do not penetrate additional markets, our business will not grow as we expect. We must attract and retain qualified personnel to be successful and competition for qualified personnel is intense in our market. Changes in environmental laws and regulations may increase our costs related to obsolete products in our existing inventory In the event of an earthquake, terrorist act or other disaster, our operations may be interrupted and our business would be harmed. We have adopted anti-takeover measures which may make it more difficult for a third party to acquire us.

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833640--3/10/2008--POWER_INTEGRATIONS_INC