907410--3/16/2006--ESS_TECHNOLOGY

related topics

{customer, product, revenue}

{product, market, service}

{acquisition, growth, future}

{regulation, change, law}

{condition, economic, financial}

{property, intellectual, protect}

{stock, price, operating}

{operation, international, foreign}

{personnel, key, retain}

{control, financial, internal}

{product, liability, claim}

{stock, price, share}

Our quarterly operating results are subject to fluctuations that may cause volatility or a decline in the price of our stock. We often purchase inventories based on sales forecasts and if anticipated sales do not materialize, we may continue to experience significant inventory charges. We may need to acquire other companies or technologies to successfully compete in our industry and we may not be successful acquiring key targets or integrating our acquisitions into our business. Our research and development investments may fail to enhance our competitive position. Our sales may fluctuate due to seasonality and changes in customer demand. Our success within the semiconductor industry depends upon our ability to develop new products in response to rapid technological changes and evolving industry standards. Our products are subject to increasing pricing pressures. We may lose business to competitors who have significant competitive advantages. Our business is dependent upon retaining key personnel and attracting new employees. We rely on a single distributor for a significant portion of our revenues and if this relationship deteriorates our financial results could be adversely affected. Our customer base is highly concentrated, so the loss of a major customer could adversely affect our business. We may continue to expand into new businesses and product lines in which there may be a concentrated customer base and for which we may be required to purchase custom inventories to meet our customers needs. Because we are dependent upon a limited number of suppliers, we could experience delivery disruptions or unexpected product cost increases. We may not be able to adequately protect our intellectual property rights from unauthorized use and we may be subject to claims of infringement of third-party intellectual property rights. We have significant international sales and operations that are subject to the special risks of doing business outside the United States. Our products are manufactured by independent third parties. We have extended sales cycles, which increase our costs in obtaining orders and reduce the predictability of our earnings. Our products are subject to recall risks. The semiconductor industry is subject to cyclical variations in product supply and demand. We may need additional funds to execute our business plan, and if we are unable to obtain such funds, we may not be able to expand our business, and if we do raise such funds, your ownership in ESS may be subject to dilution. The value of our common stock may be adversely affected by market volatility. We are incurring additional costs and devoting more management resources to comply with increasing regulation of corporate governance and disclosure. Failure to maintain effective internal controls could have a material adverse effect on our business, operating results and stock price. Changes in stock option accounting rules may adversely impact our reported operating results prepared in accordance with generally accepted accounting principles, our stock price and our competitiveness in the employee marketplace.

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907410--3/16/2006--ESS_TECHNOLOGY_INC