915866--3/16/2006--NMS_COMMUNICATIONS

related topics

{customer, product, revenue}

{product, market, service}

{property, intellectual, protect}

{system, service, information}

{product, liability, claim}

{acquisition, growth, future}

{control, financial, internal}

{personnel, key, retain}

{operation, international, foreign}

{condition, economic, financial}

{provision, law, control}

{stock, price, operating}

{cost, regulation, environmental}

We have experienced modest profitability in 2005 and 2004 after experiencing operating losses in several prior years. We are not assured of continued profitability. Our operating results fluctuate and are difficult to predict, which could cause our stock price to decline. The telecommunications industry is experiencing a modest turnaround from the slowdown of the preceding three years, but a reversal of this trend could impact our ability to achieve anticipated revenue levels. The markets we target may not develop in the manner or at the growth rate that we anticipate, which could limit our future revenues. We have launched significant initiatives involving new markets, products and sales and marketing strategies. We may not be successful with these initiatives, which could result in reduced revenues and/or increased expenses. We are dependent on channel partners to sell a substantial portion of our revenues and on other third parties to perform other functions important to our business. Our revenue growth depends significantly on the timely development and launch of new products and product enhancements, and we cannot be sure that our new products will gain wide market acceptance. The markets we serve are highly competitive, and we may be unable to compete effectively, which could adversely affect demand for our products. Internal development efforts by our customers may adversely affect demand for our products. Offering to sell system-level products that compete with the products manufactured by our customers could negatively affect our business. Our products typically have long sales cycles, causing us to expend significant resources before achieving agreements, design wins or successful trials and ultimately recognizing revenue. Our supply agreement with Lucent ends on March 31, 2006 and we may not be able to compensate for revenue from that source. We recently acquired a business and may acquire other businesses or technologies in the future; we may be unable to integrate our new business, or businesses we acquire in the future, with our business. We rely on third parties to assemble, and in certain cases, to ship, distribute and install our products. Failures or delays by such parties in executing their responsibilities could subject us to product shortages or quality assurance problems, which, in turn, could lead to an increase in the cost of manufacturing or assembling our products. We depend on sole source suppliers for certain components used in our products; any interruption in our supplies could affect our ability to deliver products to our customers and record associated revenue. We do not obtain binding purchase commitments from our customers and rely on projections prepared by our customers and channel partners in assessing future demand for our products. We may be unable to attract and retain management or key personnel we need to succeed. We may not be able to adequately protect our intellectual property, which may facilitate the development of competing products by others. Our products may infringe on the intellectual property rights of third parties, which may result in lawsuits and prohibit us from selling our products. Defects in our products or problems arising from the use of our products together with other vendors products may result in lost revenues or customer relationships and could be detrimental to our reputation. Because we derive a significant portion of our revenues from international sales, our business could be adversely affected by downturns in economic conditions in countries outside the United States and other risks associated with international operations. Future regulation or legislation could restrict our business or increase our costs. Anti-takeover provisions in Delaware law and our corporate documents may affect the value of our common stock.

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915866--3/16/2006--NMS_COMMUNICATIONS_CORP