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• rapid technological developments and product evolution;
• rapid changes in customer requirements;
• frequent new product introductions and enhancements;
• demand for higher levels of integration, decreased size and decreased power consumption;
• short product life cycles with declining prices over the life cycle of the
product; and
• evolving industry standards. |
These changes in our markets may
contribute to the obsolescence of our products. Our products could become obsolete or less
competitive sooner than anticipated because of a faster than anticipated change in one or
more of the above-noted factors.
The ability to attract and retain
qualified personnel to contribute to the design, development, manufacture and sale of our
products is critical to our success.
As the source of our technological
and product innovations, our key technical personnel represent a significant asset. Our
success depends on our ability to continue to attract, retain and motivate qualified
personnel, including executive officers and other key management and technical personnel.
The competition for management and technical personnel is intense in the semiconductor
industry, and therefore we cannot assure you that we will be able to attract and retain
qualified management and other personnel necessary for the design, development,
manufacture and sale of our products. We may have particular difficulty attracting and
retaining key personnel during periods of poor operating performance, given, among other
things, the use of equity-based compensation by us and our competitors. The loss of the
services of one or more of our key employees or our inability to attract, retain and
motivate qualified personnel, could have a material adverse effect on our ability to
operate our business.
If OEMs and ODMs of communications
electronics products do not design our products into their equipment, we will have
difficulty selling those products. Moreover, a “design win” from a customer does
not guarantee future sales to that customer.
Our products are not sold directly to
the end-user, but are components or subsystems of other products. As a result, we rely on
OEMs and ODMs of wireless communications electronics products to select our products from
among alternative offerings to be designed into their equipment. Without these
“design wins,” we would have difficulty selling our products. If a manufacturer
designs another supplier’s product into one of its product platforms, it is more
difficult for us to achieve future design wins with that platform because changing
suppliers involves significant cost, time, effort and risk on the part of that
manufacturer. Also, achieving a design win with a customer does not ensure that we will
receive significant revenues from that customer. Even after a design win, the customer is
not obligated to purchase our products and can choose at any time to reduce or cease use
of our products, for example, if its own products are not commercially successful, or for
any other reason. We cannot assure you that we will continue to achieve design wins or to
convert design wins into actual sales, and any failure to do so could materially and
adversely affect our operating results.
Lengthy product development and
sales cycles associated with many of our products may result in significant expenditures
before generating any revenues related to those products.
After our product has been developed,
tested and manufactured, our customers may need three to six months or longer to
integrate, test and evaluate our product and an additional three to six months or more to
begin volume production of equipment that incorporates the product. This lengthy cycle
time increases the possibility that a customer may decide to cancel or change product
plans, which could reduce or eliminate our sales to that customer. As a result of this
lengthy sales cycle, we may incur significant research and development expenses, and
selling, general and administrative expenses, before we generate the related revenues for
these products. Furthermore, we may never generate the anticipated revenues from a product
after incurring such expenses if our customer cancels or changes its product plans.
Uncertainties involving the
ordering and shipment of our products could adversely affect our business.
Our sales are typically made pursuant
to individual purchase orders and not under long-term supply arrangements with our
customers. Our customers may cancel orders before shipment. Additionally, we sell a
portion of our products through distributors, some of whom have rights to return unsold
products. We may purchase and manufacture inventory based on estimates of customer demand
for our products, which is difficult to predict. This difficulty may be compounded when we
sell to OEMs indirectly through distributors or contract manufacturers, or both, as our
forecasts of demand will then be based on estimates provided by multiple parties. In
addition, our customers may change their inventory practices on short notice for any
reason. The cancellation or deferral of product orders, the return of previously sold
products, or overproduction due to a change in anticipated order volumes could result in
us holding excess or obsolete inventory, which could result in inventory write-downs and,
in turn, could have a material adverse effect on our financial condition.
Our reliance on a small number of
customers for a large portion of our sales could have a material adverse effect on the
results of our operations.
A significant portion of our sales
are concentrated among a limited number of customers. If we lost one or more of these
major customers, or if one or more major customers significantly decreased its orders of
our products, our business would be materially and adversely affected. Sales to Motorola,
Inc. and to Samsung Electronics Co. represented approximately 14% and 12%, respectively,
of net revenues for fiscal 2004. Our future operating results will depend on the success
of these customers and other customers and our success in selling products to them.
Average product life cycles in the
semiconductor industry tend to be very short.
In the semiconductor industry,
product life cycles tend to be short relative to the sales and development cycles.
Therefore, the resources devoted to product sales and marketing may not result in material
revenue, and from time to time we may need to write off excess or obsolete inventory. If
we were to incur significant marketing expenses and investments in inventory that we are
not able to recover, and we are not able to compensate for those expenses, our operating
results would be materially and adversely affected. In addition, if we sell our products
at reduced prices in anticipation of cost reductions but still hold higher cost products
in inventory, our operating results would be harmed.
Our leverage and our debt service
obligations may adversely affect our cash flow.
On December 31, 2004, we had total
indebtedness of approximately $280 million, which represented approximately 28% of our
total capitalization.
As long as our 4.75 percent
convertible subordinated notes remain outstanding, we will have debt service obligations
on such notes of approximately $10,925,000 per year in interest payments. If we issue
other debt securities in the future, our debt service obligations will increase. If we are
unable to generate sufficient cash to meet these obligations and must instead use our
existing cash or investments, we may have to reduce or curtail other activities of our
business.
We intend to fulfill our debt service
obligations from cash generated by our operations, if any, and from our existing cash and
investments. If necessary, among other alternatives, we may add lease lines of credit to
finance capital expenditures and we may obtain other long-term debt, lines of credit and
other financing.
Our indebtedness could have
significant negative consequences, including:
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• increasing our vulnerability to general adverse economic and industry
conditions;
• limiting our ability to obtain additional financing;
• requiring the dedication of a substantial portion of any cash flow from
operations to service our indebtedness, thereby reducing the amount of cash flow available
for other purposes, including capital expenditures;
• limiting our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete; and
• placing us at a
possible competitive disadvantage to less leveraged competitors and competitors that have
better access to capital
resources. |
Despite our current debt levels, we
are able to incur substantially more debt, which would increase the risks described above.
We face a risk that capital needed
for our business will not be available when we need it.
We may need to obtain sources of
financing in the future. We expect our existing sources of liquidity, together with cash
expected to be generated from operations, will be sufficient to fund our research and
development, capital expenditures, debt obligations, purchase obligations, working capital
and other cash requirements for at least the next twelve months. However, we cannot assure
you that the capital required to fund these expenses will be available in the future. To
the extent that existing cash and securities and cash from operations are insufficient to
fund our future activities, we may need to raise additional funds through public or
private equity or debt financing. Conditions existing in the U.S. capital markets if and
when we seek additional financing as well as the then current condition of the Company
will affect our ability to raise capital, as well as the terms of any such financing. We
may not be able to raise enough capital to meet our capital needs on a timely basis or at
all. Failure to obtain capital when required would have a material adverse effect on the
Company.
In addition, any strategic
investments and acquisitions that we may make to help us grow our business may require
additional capital resources. We cannot assure you that the capital required to fund these
investments and acquisitions will be available in the future.
Our manufacturing
processes are extremely complex and specialized.
Our manufacturing operations are
complex and subject to disruption, including for causes beyond our control. The
fabrication of integrated circuits is an extremely complex and precise process consisting
of hundreds of separate steps. It requires production in a highly controlled, clean
environment. Minor impurities, contamination of the clean room environment, errors in any
step of the fabrication process, defects in the masks used to print circuits on a wafer,
defects in equipment or materials, human error, or a number of other factors can cause a
substantial percentage of wafers to be rejected or numerous die on each wafer to
malfunction. Because our operating results are highly dependent upon our ability to
produce integrated circuits at acceptable manufacturing yields, these factors present
could have a material adverse affect on our business. In addition, we may discover from
time to time defects in our products after they have been shipped, which may require us to
replace such products.
Additionally, our operations may be
affected by lengthy or recurring disruptions of operations at any of our production
facilities or those of our subcontractors. These disruptions may include electrical power
outages, fire, earthquake, flooding, war, acts of terrorism, or other natural or man-made
disasters. Disruptions of our manufacturing operations could cause significant delays in
shipments until we are able to shift the products from an affected facility or
subcontractor to another facility or subcontractor. In the event of such delays, we cannot
assure you that the required alternative capacity, particularly wafer production capacity,
would be available on a timely basis or at all. Even if alternative wafer production or
assembly and test capacity is available, we may not be able to obtain it on favorable
terms, which could result in higher costs and/or a loss of customers. We may be unable to
obtain sufficient manufacturing capacity to meet demand, either at our own facilities or
through external manufacturing or similar arrangements with others.
Due to the highly specialized nature
of the gallium arsenide integrated circuit manufacturing process, in the event of a
disruption at the Newbury Park, California or Woburn, Massachusetts semiconductor wafer
fabrication facilities, alternative gallium arsenide production capacity would not be
immediately available from third-party sources. These disruptions could have a material
adverse effect on our business, financial condition and results of operations.
We may not be able to maintain and
improve manufacturing yields that contribute positively to our gross margin and
profitability.
Minor deviations or perturbations in
the manufacturing process can cause substantial manufacturing yield loss, and in some
cases, cause production to be suspended. Manufacturing yields for new products initially
tend to be lower as we complete product development and commence volume manufacturing, and
typically increase as we bring the product to full production. Our forward product pricing
includes this assumption of improving manufacturing yields and, as a result, material
variances between projected and actual manufacturing yields will have a direct effect on
our gross margin and profitability. The difficulty of accurately forecasting manufacturing
yields and maintaining cost competitiveness through improving manufacturing yields will
continue to be magnified by the increasing process complexity of manufacturing
semiconductor products. Our manufacturing operations will also face pressures arising from
the compression of product life cycles, which will require us to manufacture new products
faster and for shorter periods while maintaining acceptable manufacturing yields and
quality without, in many cases, reaching the longer-term, high-volume manufacturing
conducive to higher manufacturing yields and declining costs.
We are dependent upon third
parties for the manufacture, assembly and test of our products.
We rely upon independent wafer fabrication
facilities, called foundries, to provide silicon-based products and to supplement our
gallium arsenide wafer manufacturing capacity. We also utilize subcontractors to package,
assemble and test our products. There are significant risks associated with reliance on
third-party foundries, including:
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• the lack of ensured wafer supply, potential wafer shortages and higher wafer
prices;
• limited control over delivery schedules, manufacturing yields, production
costs and quality assurance; and
• the inaccessibility of, or delays in
obtaining access to, key process technologies. |
Although we have long-term supply
arrangements to obtain additional external manufacturing capacity, the third-party
foundries we use may allocate their limited capacity to the production requirements of
other customers. If we choose to use a new foundry, it will typically take an extended
period of time to complete the qualification process before we can begin shipping products
from the new foundry. The foundries may experience financial difficulties, be unable to
deliver products to us in a timely manner or suffer damage or destruction to their
facilities, particularly since some of them are located in earthquake zones. If any
disruption of manufacturing capacity occurs, we may not have alternative manufacturing
sources immediately available. We may therefore experience difficulties or delays in
securing an adequate supply of our products, which could impair our ability to meet our
customers’ needs and have a material adverse effect on our operating results.
We are dependent upon third
parties for the supply of raw materials and components.
Our manufacturing operations depend
on obtaining adequate supplies of raw materials and the components used in our
manufacturing processes. We believe we have adequate sources for the supply of raw
materials and components for our manufacturing needs with suppliers located around the
world. While we do not typically rely on a single source of supply for our raw materials,
we are currently dependent on a sole-source supplier for epitaxial wafers used in the
gallium arsenide semiconductor manufacturing processes at our manufacturing facilities. We
cannot assure you that we will not lose a significant or sole supplier or that a supplier
will be able to meet performance and quality specifications or delivery schedules. If we
lost a supplier or a supplier were unable to meet performance or quality specifications or
delivery schedules, our ability to satisfy customer obligations could be materially and
adversely affected. In addition, we review our relationships with suppliers of raw
materials and components for our manufacturing needs on an ongoing basis. In connection
with our ongoing review, we may modify or terminate our relationship with one or more
suppliers. We may also enter into other sole supplier arrangements to meet certain of our
raw material or component needs. If we were to enter into additional sole supplier
arrangements for any of our raw materials or components, the risks associated with our
supply arrangements would be exacerbated.
Remaining competitive in the
semiconductor industry requires transitioning to smaller geometry process technologies and
achieving higher levels of design integration.
In order to remain competitive, we
expect to continue to transition our semiconductor products to increasingly smaller line
width geometries. This transition requires us to modify the manufacturing processes for
our products, design new products to more stringent standards, and to redesign some
existing products. In the past, we have experienced some difficulties migrating to smaller
geometry process technologies or new manufacturing processes, which resulted in
sub-optimal manufacturing yields, delays in product deliveries and increased expenses. We
may face similar difficulties, delays and expenses as we continue to transition our
products to smaller geometry processes in the future. In some instances, we depend on our
relationships with our foundries to transition to smaller geometry processes successfully.
We cannot assure you that our foundries will be able to effectively manage the transition
or that we will be able to maintain our foundry relationships. If our foundries or we
experience significant delays in this transition or fail to efficiently implement this
transition, our business, financial condition and results of operations could be
materially and adversely affected. As smaller geometry processes become more prevalent, we
expect to continue to integrate greater levels of functionality, as well as customer and
third party intellectual property, into our products. However, we may not be able to
achieve higher levels of design integration or deliver new integrated products on a timely
basis, or at all.
We are subject to the
risks of doing business internationally.
A substantial majority of our net
revenues are derived from customers located outside the United States, primarily countries
located in the Asia-Pacific region and Europe. In addition, we have design centers and
suppliers located outside the United States, and third-party packaging, assembly and test
facilities and foundries located in the Asia-Pacific region. Finally, we have our own
packaging, assembly and test facility in Mexicali, Mexico. Our international sales and
operations are subject to a number of risks inherent in selling and operating abroad.
These include, but are not limited to, risks regarding:
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• currency exchange rate fluctuations;
• local economic and political conditions, including social, economic and
political instability;
• disruptions of capital and trading markets;
• restrictive governmental actions (such as restrictions on transfer of
funds and trade protection measures, including export duties,
quotas, customs duties, import or export controls and tariffs);
• changes in legal or regulatory requirements;
• natural disasters, acts of terrorism, widespread illness and war;
• limitations on the repatriation of funds;
• difficulty in obtaining distribution and support;
• cultural differences in the conduct of
business;
• the laws and policies of the United States and other countries affecting
trade, foreign investment and loans, and import or export
• licensing requirements;
• tax laws;
• the possibility of being exposed to legal proceedings in a foreign
jurisdiction; and
• limitations on our ability under local laws to protect or enforce our
intellectual property rights in a particular foreign jurisdiction. |
Additionally, we are subject to risks
in certain global markets in which wireless operators provide subsidies on handset sales
to their customers. Increases in handset prices that negatively impact handset sales can
result from changes in regulatory policies or other factors, which could impact the demand
for our products. Limitations or changes in policy on phone subsidies in South Korea,
Japan, China and other countries may have additional negative impacts on our revenues.
Our operating results may be
adversely affected by substantial quarterly and annual fluctuations and market downturns.
Our revenues, earnings and other
operating results have fluctuated in the past and our revenues, earnings and other
operating results may fluctuate in the future. These fluctuations are due to a number of
factors, many of which are beyond our control.
These factors include, among others:
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• changes in end-user demand for the products (principally digital cellular
handsets) manufactured and sold by our customers;
• the effects of competitive pricing pressures, including decreases in average selling prices of our
products;
• production capacity levels and fluctuations in manufacturing
yields;
• availability and cost of products from our suppliers;
• the gain or loss of significant customers;
• our ability to develop, introduce and market new products and technologies on a timely basis;
• new product and technology introductions by competitors;
• changes in the mix of products produced and sold;
• market acceptance of our products and our customers;
• intellectual property disputes;
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The foregoing factors are difficult
to forecast, and these, as well as other factors, could materially and adversely affect
our quarterly or annual operating results. If our operating results fail to meet the
expectations of analysts or investors, it could materially and adversely affect the price
of our common stock.
Global economic conditions that
impact the wireless communications industry could negatively affect our revenues and
operating results.
Global economic weakness can have
wide-ranging effects on markets that we serve, particularly wireless communications
equipment manufacturers and network operators. The wireless communications industry
appears to be recovering from an industry-wide recession. We cannot predict whether a
recovery will continue, the rate of any such recovery, or what effects negative events,
such as war, may have on the economy or the wireless communications industry. The
continued threat of terrorism and heightened security and military action in response to
this threat, or any future acts of terrorism, may cause further disruptions to the global
economy and to the wireless communications industry and create further uncertainties.
Further, an economic recovery may not benefit us in the near term. If it does not, our
ability to increase or maintain our revenues and operating results may be impaired.
Our gallium arsenide
semiconductors may cease to be competitive with silicon alternatives.
Among our product portfolio, we
manufacture and sell gallium arsenide semiconductor devices and components, principally
power amplifiers and switches. The production of gallium arsenide integrated circuits is
more costly than the production of silicon circuits. The cost differential is due to
higher costs of raw materials for gallium arsenide and higher unit costs associated with
smaller sized wafers and lower production volumes. Therefore, to remain competitive, we
must offer gallium arsenide products that provide superior performance over their
silicon-based counterparts. If we do not continue to offer products that provide
sufficiently superior performance to justify the cost differential, our operating results
may be materially and adversely affected. We expect the costs of producing gallium
arsenide devices will continue to exceed the costs of producing their silicon
counterparts. Silicon semiconductor technologies are widely-used process technologies for
certain integrated circuits and these technologies continue to improve in performance. We
cannot assure you that we will continue to identify products and markets that require
performance attributes of gallium arsenide solutions.
We may be subject to claims of
infringement of third-party intellectual property rights, or demands that we license
third-party technology, which could result in significant expense and prevent us from
using our technology.
The semiconductor industry is
characterized by vigorous protection and pursuit of intellectual property rights. From
time to time, third parties have asserted and may in the future assert patent, copyright,
trademark and other intellectual property rights to technologies that are important to our
business and have demanded and may in the future demand that we license their technology
or refrain from using it. At the present time, we are in litigation with Qualcomm
Incorporated regarding claims each of us have filed and served against the other asserting
violations of certain of our respective intellectual property rights. Although we believe
their claims are without merit and we are vigorously defending against their claims and
fully prosecuting our claims against them, we cannot assure you that we will be successful
in defending ourselves from their claims or prosecuting our claims.
Any litigation to determine the
validity of claims that our products infringe or may infringe intellectual property rights
of another, including claims arising from our contractual indemnification of our
customers, regardless of their merit or resolution, could be costly and divert the efforts
and attention of our management and technical personnel. Regardless of the merits of any
specific claim, we cannot assure you that we would prevail in litigation because of the
complex technical issues and inherent uncertainties in intellectual property litigation.
If litigation were to result in an adverse ruling, we could be required to:
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• pay substantial damages;
• cease the manufacture, import, use, sale or offer for sale of infringing
products or processes;
• discontinue the use of infringing technology;
• expend significant resources to develop non-infringing technology; and
• license technology from the third party claiming infringement, which
license may not be available on commercially reasonable terms. |
We cannot assure you that our
operating results or financial condition will not be materially adversely affected if we
were required to do any one or more of the foregoing items.
Many of our products incorporate
technology licensed or acquired from third parties.
We sell products in markets that are
characterized by rapid technological changes, evolving industry standards, frequent new
product introductions, short product life cycles and increasing levels of integration. Our
ability to keep pace with this market depends on our ability to obtain technology from
third parties on commercially reasonable terms to allow our products to remain in a
competitive posture. If licenses to such technology are not available on commercially
reasonable terms and conditions, and we cannot otherwise integrate such technology, our
products or our customers’ products could become unmarketable or obsolete, and we
could lose market share. In such instances, we could also incur substantial unanticipated
costs or scheduling delays to develop substitute technology to deliver competitive
products.
If we are not successful in
protecting our intellectual property rights, it may harm our ability to compete.
We rely on patent, copyright,
trademark, trade secret and other intellectual property laws, as well as nondisclosure and
confidentiality agreements and other methods, to protect our proprietary technologies,
information, data, devices, algorithms and processes. In addition, we often incorporate
the intellectual property of our customers, suppliers or other third parties into our
designs, and we have obligations with respect to the non-use and non-disclosure of such
third-party intellectual property. In the future, it may be necessary to engage in
litigation or like activities to enforce our intellectual property rights, to protect our
trade secrets or to determine the validity and scope of proprietary rights of others,
including our customers. This could require us to expend significant resources and to
divert the efforts and attention of our management and technical personnel from our
business operations. We cannot assure you that:
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• the steps we take to prevent misappropriation, infringement, dilution or other
violation of our intellectual property or the intellectual property of our customers,
suppliers or other third parties will be successful;
• any existing or future patents, copyrights, trademarks, trade secrets or other
intellectual property rights or ours will not be challenged, invalidated or circumvented;
or
• any of the measures described above would provide meaningful protection. |
Despite
these precautions, it may be possible for a third party to copy or otherwise obtain and
use our technology without authorization, develop similar technology independently or
design around our patents. If any of our intellectual property protection mechanisms fails
to protect our technology, it would make it easier for our competitors to offer similar
products, potentially resulting in loss of market share and price erosion. In addition,
effective patent, copyright, trademark and trade secret protection may be unavailable or
limited for certain technologies and in certain foreign countries.
Our success depends, in part, on
our ability to effect suitable investments, alliances and acquisitions, and to integrate
companies we acquire.
Although we have in the past and
intend to continue to invest significant resources in internal research and development
activities, the complexity and rapidity of technological changes and the significant
expense of internal research and development make it impractical for us to pursue
development of all technological solutions on our own. On an ongoing basis, we intend to
review investment, alliance and acquisition prospects that would complement our product
offerings, augment our market coverage or enhance our technological capabilities. However,
we cannot assure you that we will be able to identify and consummate suitable investment,
alliance or acquisition transactions in the future. Moreover, if we consummate such
transactions, they could result in:
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• issuances of equity securities dilutive to our stockholders;
• large one-time write-offs;
• the incurrence of substantial debt and assumption of unknown liabilities;
• the potential loss of key employees from the acquired company;
• amortization expenses related to intangible assets; and
• the diversion of management’s attention
from other business concerns. |
Moreover, integrating acquired
organizations and their products and services may be difficult, expensive, time-consuming
and a strain on our resources and our relationship with employees and customers and
ultimately may not be successful. Additionally, in periods following an acquisition, we
will be required to evaluate goodwill and acquisition-related intangible assets for
impairment. When such assets are found to be impaired, they will be written down to
estimated fair value, with a charge against earnings. For instance, we recorded a
cumulative effect of a change in accounting principle in fiscal 2003 in the amount of
$397.1 million as a result of the goodwill obtained in connection with the Merger.
Certain provisions in our
organizational documents and Delaware law may make it difficult for someone to acquire
control of us.
We have certain anti-takeover
measures that may affect our common stock. Our certificate of incorporation, our by-laws
and the Delaware General Corporation Law contain several provisions that would make more
difficult an acquisition of control of us in a transaction not approved by our Board of
Directors. Our certificate of incorporation and by-laws include provisions such as:
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• the division of our board of directors into three classes to be elected on a
staggered basis, one class each year;
• the ability of our board of
directors to issue shares of preferred stock in one or more series without further
authorization of stockholders;
• a prohibition on stockholder action by written consent;
• elimination
of the right of stockholders to call a special meeting of stockholders;
• a requirement that stockholders provide advance notice of any stockholder
nominations of directors or any proposal of new business to be considered at any meeting
of stockholders;
• a requirement that the affirmative vote of at least 66 2/3 percent
of our shares be obtained to amend or repeal any provision of our by-laws or the provision
of our certificate of incorporation relating to amendments to our by-laws;
• a requirement that the affirmative vote of at least 80 percent of our
shares be obtained to amend or repeal the provisions of our certificate of incorporation
relating to the election and removal of directors, the classified board or the right to
act by written consent;
• a requirement that the affirmative vote of at least 80 percent of our
shares be obtained for business combinations unless approved by a majority of the members
of the board of directors and, in the event that the other party to the business
combination is the beneficial owner of 5 percent or more of our shares, a majority of
the members of board of directors in office prior to the time such other party became the
beneficial owner of 5 percent or more of our shares;
• a fair price provision; and
• a requirement that the affirmative vote of at least 90 percent of our
shares be obtained to amend or repeal the fair price provision. |
In addition to the provisions in our
certificate of incorporation and by-laws, Section 203 of the Delaware General
Corporation Law generally provides that a corporation shall not engage in any business
combination with any interested stockholder during the three-year period following the
time that such stockholder becomes an interested stockholder, unless a majority of the
directors then in office approves either the business combination or the transaction that
results in the stockholder becoming an interested stockholder or specified stockholder
approval requirements are met.
We may be liable for penalties
under environmental laws, rules and regulations, which could adversely impact our
business.
We have used, and will continue to
use, a variety of chemicals and compounds in manufacturing operations and have been and
will continue to be subject to a wide range of environmental protection regulations in the
United States. We cannot assure you that current or future regulation of the materials
necessary for our products would not have a material adverse effect on our business,
financial condition and results of operations. Environmental regulations often require
parties to fund remedial action for violations of such regulations regardless of fault.
Consequently, it is often difficult to estimate the future impact of environmental
matters, including potential liabilities. We cannot assure you that the amount of expense
and capital expenditures that might be required to satisfy environmental liabilities, to
complete remedial actions and to continue to comply with applicable environmental laws
will not have a material adverse effect on our business, financial condition and results
of operations.
Our stock price has been volatile
and may fluctuate in the future. Accordingly, you might not be able to sell your shares of
common stock at or above the price you paid for them.
The trading price of our common stock
has and may continue to fluctuate significantly. Such fluctuations may be influenced by
many factors, including:
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• our performance and prospects;
• the performance and prospects of our major customers;
• the depth and liquidity of the market for our common stock;
• investor perception of us and the industry in which we operate;
• changes in earnings estimates or buy/sell recommendations by analysts;
• general financial and other market conditions; and
• domestic and
international economic conditions. |
Public stock markets have recently
experienced extreme price and trading volume volatility, particularly in the technology
sectors of the market. This volatility has significantly affected the market prices of
securities of many technology companies for reasons frequently unrelated to or
disproportionately impacted by the operating performance of these companies. These broad
market fluctuations may materially and adversely affect the market price of our common
stock.
In addition, fluctuations in our
stock price and our price-to-earnings multiple may have made our stock attractive to
momentum, hedge or day-trading investors who often shift funds into and out of stocks
rapidly, exacerbating price fluctuations in either direction, particularly when viewed on
a quarterly basis. Furthermore, if our operating results do not meet the expectations of
securities analysts or investors, our stock price may decline, possibly substantially over
a short period of time. Accordingly, you may not be able to resell your shares of common
stock at or above the price you paid.
Changes in the accounting
treatment of stock options could adversely affect our results of operations.
In
December 2004, the Financial Accounting Standards Board issued SFAS No. 123R,
“Share-Based Payment” to require companies to expense employee stock options for
financial reporting purposes, effective for interim or annual periods beginning after
June 15, 2005. Such stock option expensing will require us to value our employee
stock option grants pursuant to an option valuation formula and amortize that value
against our earnings over the vesting period in effect for those options. We currently
account for stock-based awards to employees in accordance with Accounting Principles Board
Opinion No. 25, “Accounting for Stock Issued to Employees,” and have
adopted the disclosure-only alternative of SFAS No. 123, “Accounting for
Stock-Based Compensation.” When we are required to expense employee stock options in
the future, this change in accounting treatment could materially and adversely affect our
reported results of operations as the stock-based compensation expense would be charged
directly against our reported earnings. For an illustration of the effect of such a change
on our recent results of operations, see Note 9 of Notes to Interim Consolidated
Financial Statements.
ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have exposure to foreign exchange
and interest rate risk. There have been no material changes in market risk exposures from
those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30,
2004.
ITEM 4. CONTROLS AND
PROCEDURES
Under the supervision and with the
participation of our management, including our President and Chief Executive Officer and
Chief Financial Officer, we evaluated the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act)
as of the end of the period covered by this Quarterly Report (the “Evaluation
Date”). Based upon that evaluation, the President and Chief Executive Officer and
Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls
and procedures were effective in timely alerting them to the material information relating
to us (or our consolidated subsidiaries) required to be included in our periodic SEC
filings. In designing and evaluating the disclosure controls and procedures, our
management recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and our management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
There were no significant changes
made in our internal control over financial reporting during the fiscal quarter ended
December 31, 2004 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 5. OTHER INFORMATION
(a) |
|
Mr. Donald Beall has notified the Registrant of his intention to resign from the
Board of Directors of the Registrant immediately following the next Annual
Meeting of the Stockholders of the Registrant. Mr. Beall’s resignation is a
planned reduction in his many commitments and is not the result of any
disagreement with the Registrant. In addition, on February 1, 2005, Mr. David
McGlade was elected to the Board of Directors of the Registrant as a Class III
Director. The Registant anticipates that Mr. McGlade will be appointed to the
Audit Committee of the Board of Directors at a later date.
|
ITEM 6. EXHIBITS
(a) Exhibits
Number
|
Description
|
|
|---|
31.a |
|
Certification of CEO - Rule 13a-14(a) or 15d-14(a) * |
|
|
|
31.b | |
Certification of CFO - Rule 13a-14(a) or 15d-14(a) * | |
32 | |
Certification pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * | |
| |
| |
*
Filed herewith.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: February 7, 2005
SKYWORKS SOLUTIONS,
INC.
Registrant
By: /s/ DAVID J. ALDRICH |
David J. Aldrich |
Chief Executive Officer |
President |
Director |
By: /s/ ALLAN M. KLINE |
Allan M. Kline |
Chief Financial Officer |
EXHIBIT INDEX
Number
|
Description
|
|
|---|
31.a |
|
Certification of CEO - Rule 13a-14(a) or 15d-14(a) |
|
|
|
31.b | |
Certification of CFO - Rule 13a-14(a) or 15d-14(a) | |
32 | |
Certification pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| |
| |