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Natural
MicroSystems Corporation
FORWARD-LOOKING
INFORMATION
This
prospectus includes and incorporates forward-looking statements
that involve substantial risks and uncertainties and fall
within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934.
You can identify these forward-looking statements by our use
of the words “believes,” “anticipates,” “plans,” “expects,”
“may,” “will,” “would,” “intends,” “estimates,” “predicts,”
“potential,” “continue” and similar expressions, whether in
the negative or affirmative. We cannot guarantee that we actually
will achieve these plans, intentions or expectations. Actual
results or events could differ materially from the plans,
intentions and expectations disclosed in the forward-looking
statements we make. Factors that could cause or contribute
to such differences include, but are not limited to, those
discussed in “Risk Factors,” beginning on page 13, as well
as other risks and uncertainties referenced in this prospectus.
We do not assume any obligation to update any of the forward-looking
statements after the date of this prospectus to conform these
statements to actual results.
RISK
FACTORS
We
have experienced recent operating losses and may not return
to profitability. We experienced operating losses
in the last three quarters of 1998 and all four quarters of
1999. As a result, for the years ended December 31, 1998 and
1999, we reported operating losses of approximately $10.0
million and $16.6 million, respectively. We expect to continue
to increase our levels of research and development and sales
and marketing expenditures, and therefore we will achieve
profitability only if we can significantly increase our revenues.
We currently anticipate that our results will be no better
than approximately break-even until at the earliest the second
half of 2000. If our revenues do not meet the levels that
we anticipate, or if our costs and expenses exceed our expectations,
we will continue to sustain losses and the price of our common
stock may decline substantially. Even if we do achieve profitability,
we may not be able to sustain it on a quarterly or annual
basis.
Our
operating results fluctuate and are difficult to predict,
which could cause our stock price to decline.
Our revenues and net income, if any, in any particular period
may be lower than revenues and net income, if any, in a preceding
or comparable period. Factors contributing to these fluctuations,
some of which are beyond our control, include:
- fluctuations
in our customers’ businesses;
- demands
for our customers’ products incorporating our products;
timing and market acceptance of new products or enhancements
introduced by us or our competitors;
- availability
of components from our suppliers and the manufacturing capacity
of our subcontractors;
- timing
and level of expenditures for sales, marketing and product
development; and
- changes
in the prices of our products or of our competitors’ products.
In addition,
we have historically operated with less than one quarter’s
worth of backlog and a customer order pattern that is skewed
toward the later weeks of the quarter. In recent quarters,
we have received orders more evenly throughout the quarter,
but we cannot be sure that this will continue in the future.
Any significant deferral of orders for our products would
cause a shortfall in revenue for the quarter. If our quarterly
revenue or operating results fall below the expectations of
investors or public market analysts, our common stock price
may decline substantially.
Internal
development efforts by our customers may adversely affect
demand for our products.
Many of our customers, including the large equipment
manufacturers on which we focus a significant portion of our
sales and marketing efforts, have the technical and financial
ability to design and produce components replicating or improving
on the functionality of most of our products. These organizations
often consider in-house development of technologies and products
as an alternative to doing business with us. We cannot be
certain that these customers will resolve these “makebuy”
decisions in favor of working with us, rather than attempting
to develop similar technology and products internally or obtaining
them through acquisition.
The
markets we serve are highly competitive, and we may be unable
to compete effectively.
Competition in the high growth markets that we target for
our products is intense, and we expect it to intensify as
current competitors expand their product offerings and new
competitors enter the market. Although competition in many
of our markets is highly fragmented, our current competitors
include Dialogic Corp., a wholly owned subsidiary of Intel
Corporation, AudioCodes Ltd., Radisys Corporation and Brooktrout
Technology, Inc. Other companies, including original equipment
manufacturers that are current or targeted customers, may
enter our markets in the future. Our competitors and customers
may be able to develop products and services that are superior
to our products and services, that achieve greater customer
acceptance or that have significantly improved functionality
as compared to our existing and future products and services.
In particular, by focusing all of their efforts on a specific
niche of the market, some of our competitors may succeed in
introducing products that change the competitive dynamic in
that market niche and adversely affect demand for our products.
Certain of our competitors may be able to negotiate alliances
with strategic partners on more favorable terms than we are
able to negotiate. Many of our competitors have well-established
relationships with our existing and prospective customers,
including those on which we have focused significant sales
and marketing efforts.
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