859475--9/12/2008--TRIDENT_MICROSYSTEMS

related topics

{customer, product, revenue}

{financial, litigation, operation}

{product, market, service}

{property, intellectual, protect}

{personnel, key, retain}

{regulation, change, law}

{stock, price, operating}

{operation, international, foreign}

{condition, economic, financial}

{system, service, information}

{stock, price, share}

{product, candidate, development}

As a result of our investigation into our historical stock option granting practices and the restatement of our previously-filed financial statements, we are subject to civil litigation claims and regulatory investigations that could have a material adverse effect on our business, customer relationships, results of operations and financial condition. We face risks related to SEC, Department of Justice, or DOJ, and other investigations into our historical stock option grant practices and related accounting, which could require significant management time and attention, and could require us to pay fines or other penalties. We have been named as a party to derivative action lawsuits, and we may be named in additional litigation, all of which will require significant management time and attention and result in significant legal expenses and may result in an unfavorable outcome which could have a material adverse effect on our business, financial condition, results of operations and cash flows. We are subject to the risks of additional lawsuits in connection with our historical stock option grant practices and related issues, the resulting restatements, and the remedial measures we have taken. The operation of our business could be adversely affected by the transition of key personnel as we rebuild our executive leadership team and make additional organizational changes. Intense competition exists in the market for digital media products. Our success depends upon the digital media market and we must continue to develop new products and to enhance our existing products. We depend on a small number of large customers for a significant portion of our sales. The loss of, or a significant reduction or cancellation in sales to, any key customer would significantly reduce our revenues. If we do not achieve additional design wins in the future, our ability to sell additional products could be adversely affected. The average selling prices of our products may decline over relatively short periods. We may face risks resulting from the failure to allow former employees to exercise stock options. We do not have long-term commitments from our customers, and plan purchases based upon our estimates of customer demand, which may require us to contract for the manufacture of our products based on inaccurate estimates. Our dependence on sales to distributors increases the risks of managing our supply chain and may result in excess inventory or inventory shortages. Product supply and demand in the semiconductor industry is subject to cyclical variations. The process of restating our financial statements, making the associated disclosures, and complying with SEC requirements are subject to uncertainty. We have had fluctuations in quarterly results in the past and may continue to experience such fluctuations in the future. We are vulnerable to undetected product problems. Our reliance upon one independent foundry could make it difficult to maintain product flow and affect our sales. If we have to qualify a new contract manufacturer or foundry for any of our products, we may experience delays that result in lost revenues and damaged customer relationships. Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates. Our success depends to a significant degree on the continued employment of key personnel, some of whom have only worked together for a short period of time. Changes in our business and product strategy will affect our operations. The market price of our common stock has been, and may continue to be volatile. We currently rely on certain international customers for a substantial portion of our revenue and are subject to risks inherent in conducting business outside of the United States. Our success depends in part on our ability to protect our intellectual property rights, which may be difficult. We have been involved in intellectual property infringement claims, and may be involved in others in the future, which can be costly. If necessary licenses of third-party technology are not available to us or are very expensive, our products could become obsolete.

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859475--9/12/2008--TRIDENT_MICROSYSTEMS_INC