Warnings. They have a different flavor this time. They are issued to protect the company in a shareholder law suit...................
freeedgar.com
The Company's quarterly and annual operating results have been, and
will continue to be, affected by a wide variety of factors that could have
a material adverse effect on revenues and profitability during any
particular period, including the level of orders which are received and can
be shipped in a quarter, the rescheduling or cancellation of orders by its
customers, competitive pressures on selling prices, changes in product or
customer mix, availability and cost of foundry capacity and raw materials,
fluctuations in yield, loss of any strategic relationships, C-Cube's
ability to introduce new products and technologies on a timely basis,
unanticipated problems in the performance of the Company's next generation
or cost-reduced products, the ability to successfully introduce products in
accordance with OEM design requirements and design cycles, new product
introductions by the Company's competitors, market acceptance of products
of both C-Cube and its customers, compatibility of new products with
emerging digital video standards, supply constraints for other components
incorporated into its customers' products, fluctuations in foreign currency
exchange rates to the U.S. dollar, and the level of expenditures in
manufacturing, research and development, and sales, general and
administrative functions.
In addition, C-Cube's operating results are subject to fluctuations in
the markets for its customers' products, particularly the consumer
electronics and personal computer markets, which have been extremely
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volatile in the past, and the satellite broadcast and wireless cable
markets, which are in an early stage, creating uncertainty with respect to
product volume and timing. The Company has devoted a substantial portion of
its research and development efforts in recent quarters to developing chips
used in Digital Video Disk (DVD) systems. The Company's DVD products are
subject to the new product risks described in the preceding paragraph,
including in particular C-Cube's ability to timely introduce these products
and the market's acceptance of them, which could have a materially adverse
affect on its operating results. Furthermore, to the extent the Company is
unable to fulfill its customers' purchase orders on a timely basis, these
orders may be canceled due to changes in demand in the markets for its
customers' products. Historically, the Company has shipped a substantial
portion of its product in the last month of a given quarter. A significant
portion of C-Cube's expenses are fixed in the short term, and the timing of
increases in expenses is based in large part on the Company's forecast of
future revenues. As a result, if revenues do not meet the Company's
expectations, it may be unable to quickly adjust expenses to levels
appropriate to actual revenues, which could have a material adverse effect
on the Company's business and results of operations.
Due to the Company's dependence on the consumer electronics market, the
substantial seasonality of sales in that market could impact the Company's
revenues and net income. In particular, C-Cube believes that there may be
seasonality in the Asia-Pacific region related to the Chinese New Year,
which falls within the first calendar quarter, which could result in
relatively lower product demand during the second and third quarters of
each year.* If in the future the geographic mix of the Company's sales
shifts towards the U.S. and Europe, C-Cube would anticipate higher revenues
and net income in the third and fourth calendar quarters as system
manufacturers in these regions make purchases in preparation for the
holiday season, and comparatively less revenues and net income in the first
and second calendar quarters.*
As a result of the foregoing, the Company's operating results and stock
price may be subject to significant volatility, particularly on a quarterly
basis. Any shortfall in net revenues or net income from levels expected by
securities analysts could have an immediate and significant adverse effect
on the trading price of the Company's common stock.
The market price of C-Cube's common stock has fluctuated significantly
since its initial public offering in April 1994. The market price of the
common stock could be subject to significant fluctuations in the future
based on factors such as announcements of new products by C-Cube or its
competitors, quarterly fluctuations in C-Cube's financial results or other
semiconductor or digital video networking companies' financial results,
changes in analysts' estimates of C-Cube's financial performance, general
conditions in the semiconductor and digital video networking industries,
conditions in the financial markets and general conditions in the global
economy which might adversely affect consumer purchasing. In addition, the
stock market in general has experienced extreme price and volume
fluctuations, which have particularly affected the market prices for many
high technology companies and which have often been unrelated to the
operating performance of the specific companies. The market price of
C-Cube's common stock has declined substantially from its historic highs,
and may continue to experience significant fluctuations in the future.
Year 2000
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (Year 2000) approaches. The
Year 2000 problem is pervasive and complex, as virtually every computer
operation will be affected by the rollover of the two digit year value to
00. The issue is whether computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause
a system to fail. C-Cube has initiated a Year 2000 project designed to
identify and assess the risks associated with its information systems,
products, operations and infrastructure, suppliers and customers that are
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not Year 2000 compliant, and to develop, implement and test remediation and
contingency plans to mitigate these risks. C-Cube is replacing or upgrading
systems, equipment and facilities that are known to be Year 2000 non-
compliant. For the Year 2000 non-compliance issues identified to date, the
cost of upgrade or remediation is not expected to be material to the
Company's operating results.* If implementation of replacement systems is
delayed, or if significant new non-compliance issues are identified, the
Company's results of operations or financial condition could be materially
adversely affected.
INFORMATION SYSTEMS. A review of the Company's information systems has
been completed and the Company has initiated the work necessary for the
existing systems to become Year 2000 compliant. Testing of all information
systems will be conducted over the next year. The Company is also actively
reviewing its hardware and systems infrastructure, such as networks, in
order to ensure that they are Year 2000 compliant. Based on the current
status of the assessments and remediation plans made to date, the Company
does not expect total Year 2000 related costs pertaining to its information
systems and hardware and systems infrastructure to be material.*
PRODUCTS. The Company has assessed the capabilities of its products
sold to customers and has not identified any problems related to Year 2000
compliance. The Company is in the process of identifying and assessing the
risks related to integrated systems that include third party products sold
by its DiviCom subsidiary. The Company believes its current products are
Year 2000 compliant; however, since all customer situations cannot be
anticipated, particularly those involving third party products, C-Cube may
see an increase in warranty and other claims as a result of the Year 2000
transition. In addition, litigation against the Company regarding Year 2000
compliance issues may occur in the future. For these reasons, the impact of
customer claims could have a material adverse impact on the Company's
results of operations or financial condition.
OPERATIONS AND INFRASTRUCTURE. Machinery and equipment and other items
used in the operations and facilities of the Company have been inventoried
and are currently being assessed for Year 2000 compliance. The assessment
to date has not uncovered any material issues.
SUPPLIERS. C-Cube is in the process of contacting its critical
suppliers to determine whether their operations, products and services are
Year 2000 compliant. Where practicable, C-Cube will attempt to mitigate its
risks with respect to the failure of suppliers to be Year 2000 compliant.
In the event that suppliers are not Year 2000 compliant, the Company will
seek alternative sources of supplies. However, such failures remain a
possibility and could have an adverse impact on the Company's results of
operations or financial condition.
CUSTOMERS. The Company is actively responding to all customer requests
for compliance, surveys and other general information related to its
Year 2000 programs. The Company will also request assurance from its key
customers that they, and their products which incorporate C-Cube's
products, are Year 2000 compliant.
GENERAL. The Company does not currently expect its costs associated
with the Year 2000 problem to be material, and expects to be able to fund
these costs through operating cash flows.* However, the Company has not yet
completed its assessments, developed remediation plans for all problems,
developed contingency plans, or completely implemented or tested any of its
remediation plans. The risks associated with the Year 2000 problem can be
difficult to identify and to address, and could result in material adverse
consequences to the Company. Even if the Company, in a timely manner,
completes all of its assessments, identifies and tests remediation plans
believed to be adequate, and develops contingency plans believed to be
adequate, some problems may not be identified or corrected in time to
prevent material adverse consequences to the Company.
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As the Year 2000 project continues, the Company may discover additional
Year 2000 problems, may not be able to develop, implement, or test
remediation or contingency plans in a timely manner, or may find that the
costs of these activities exceed current expectations and become material.
In many cases, the Company is relying on assurances from suppliers and
customers that new and upgraded information systems and other products will
be Year 2000 compliant. The Company plans to test certain third-party
products, but cannot be sure that its tests will be adequate or that, if
problems are identified, they will be addressed by the supplier in a timely
and satisfactory way.
Because the Company uses a variety of information systems and has
additional systems embedded in its operations and infrastructure, the
Company cannot be sure that all of its systems will work together in a
Year 2000-compliant fashion. Furthermore, the Company cannot be sure that
it will not suffer business interruptions, either because of its own
Year 2000 problems or those of its customers or suppliers whose Year 2000
problems may make it difficult or impossible for them to fulfill their
commitments to the Company. If the Company fails to satisfactorily resolve
Year 2000 issues related to its products in a timely manner, it could be
exposed to liability to third parties.
The Company has not developed a "worst case" scenario with respect to
Year 2000 issues, but instead has focused its resources on identifying
material, remediable problems and reducing uncertainties generally, through
the Year 2000 project described above.
If the Company or the third parties with which it has relationships
were to cease or not successfully complete its or their Year 2000
remediation efforts, the Company would encounter disruptions to its
business that could have a material adverse effect on its business,
financial position and results of operations. The Company could be
materially and adversely impacted by widespread economic or financial
market disruption or by Year 2000 computer system failures at third parties
with which it has relationships. |
