Cube's 10-Q from Q2......................................
sec.gov
International revenues accounted for 63% of net revenues for the second
quarter, compared to 82% for the same period last year. The decline in
international sales as a percentage of total sales is primarily due to
increased encoder revenue in the U.S. market and decreased sales of
decoders into China. The Company expects that international revenues will
continue to represent a significant portion of net revenues. The Company's
success will depend in part upon its ability to manage international
marketing and sales operations and manufacturing relationships. In
addition, C-Cube purchases a substantial portion of its assembly services
from foreign suppliers. C-Cube's international manufacturing and sales are
subject to changes in foreign political and economic conditions and to
other risks including currency or export/import controls, changes in tax
laws, tariffs and freight rates and changes in the ownership and/or
leadership of international customers that may result in delayed or
canceled orders. For example, China and Taiwan comprise substantial markets
for consumer electronics products utilizing the Company's MPEG 1 decoder
products, such as VideoCD players. As a consequence, any political or
economic instability in such countries could significantly reduce demand
for products from certain of the Company's major customers. The Company has
made a significant investment in additional foundry capacity in Taiwan and
is subject to the risk of political instability in Taiwan, including but
not limited to the potential for conflict between Taiwan and the People's
Republic of China. The Company manufactures and sells product to customers
in Korea and is subject to the risk of political instability in Korea,
including the potential for conflict between North and South Korea. In
addition, the Company sells certain of its products in international
markets and buys certain products from its foundries in currencies other
than the U.S. dollar and as a result, currency fluctuations could have a
material adverse effect on the Company's business and results of
operations. With respect to international sales that are denominated in
U.S. dollars, increases in the value of the U.S. dollar relative to foreign
currencies can increase the effective price of and reduce demand for the
Company's products relative to competitive products priced in the local
currency. The United States has considered trade sanctions against Japan
and has had disputes with China relating to trade and human rights issues.
If trade sanctions were imposed, Japan or China could enact trade sanctions
in response. Because a number of the Company's current and prospective
customers and suppliers are located in Japan and China, trade sanctions, if
imposed, could have a material adverse effect on C-Cube's business and
results of operations. Similarly, protectionist trade legislation in either
the United States or foreign countries could have a material adverse effect
on the Company's ability to manufacture or to sell its products in foreign
markets. |
