845072--3/30/2007--PECO_II

related topics

{product, market, service}

{stock, price, operating}

{customer, product, revenue}

{control, financial, internal}

{condition, economic, financial}

{competitive, industry, competition}

{gas, price, oil}

{cost, operation, labor}

{acquisition, growth, future}

{personnel, key, retain}

{cost, regulation, environmental}

{property, intellectual, protect}

{stock, price, share}

The communications market fluctuates and is impacted by many factors, including decisions by service providers regarding capital expenditures and their timing of purchases as well as demand and spending for communications services by businesses and consumers. A small number of customers account for a high percentage of our net sales; there are only a small number of potential major customers in our primary market, and the loss of a key customer could have a negative impact on our operating results and cause our stock price to decline. If we are unable to meet our additional capital needs in the future, we may miss expansion opportunities or find ourselves unable to respond to actions by our competitors, which could impair our competitive position and hurt sales and earnings. We may fail to meet market expectations because of fluctuations in our quarterly operating results, which could cause our stock price to decline. If we engage in acquisitions, we may experience difficulty assimilating the operations or personnel of the acquired companies, which could threaten the benefits we seek to achieve through acquisitions and our future growth. Equipment problems may seriously harm our credibility and have a significant impact on our revenues, earnings and growth prospects. We will not remain competitive if we cannot keep up with a rapidly changing market. The need for our products to obtain certification and the high demand for lab time could reduce our revenue and earnings by impairing our ability to bring new products to markets. We will lose revenue opportunities if we do not decrease the time it takes us to fill our customers orders. The market for supplying equipment and services to communications service providers is highly competitive, and, if we cannot compete effectively, our ability to grow our business or even to maintain revenues and earnings at current levels, will be impaired. A significant downturn in the general economy could adversely affect our revenue, gross margin, and earnings. Our products are dependent in part upon our proprietary technology. Failure to attract and retain qualified personnel may result in difficulties in managing our business effectively and meeting revenue growth objectives. There is a limited market for trading in our common stock and our stock price has been volatile. Ownership of our common stock is concentrated among a few shareholders, who may be able to exert substantial influence over our Company. Our acquisition of the assets related to Delta s Telecom Power Division may not result in additional sales from the business supply agreements that we acquired. We may be subject to certain environmental and other regulations. There are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected. If we are unable to complete our assessment of the adequacy of our internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our common stock.

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845072--3/30/2007--PECO_II_INC