Hypercom Corporation Annual Report - CiteSeer

• the type, timing and size of orders and shipments;
• product returns and warranty claims;
• variations in product mix and cost during any period;
• development of new relationships and maintenance and enhancement of existing relationships with customers and strategic
partners;
• deferral of customer contracts in anticipation of product or service enhancements;
• deferral of certain revenue or gross margin in accordance with U.S. GAAP requirements;
• incremental costs incurred as a result of product quality and/or performance issues;
• inventory obsolescence and write-downs related to product life cycles;
• write-off of doubtful accounts receivable;
• variations in operating expenses, including research and development, selling, and general and administrative expenses;
• lease portfolio risk adjustments and loss provisions;
• restructuring activities;
• employment and severance agreement charges;
• foreign currency exchange rate fluctuations;
• availability and cost of financing;
• variations in income tax as a function of income recognition by tax jurisdiction;
• changing security standards or other technological changes; and
The loss of one or more of our key customers could significantly reduce our revenues and profits.
We have derived, and believe that we may continue to derive, a significant portion of our net revenues from a limited number of
large customers. For the fiscal year ended December 31, 2009, our largest customer accounted for 5.2% of our net revenues, and our
five largest customers accounted for 19.0% of our net revenues. In addition, our largest customer does substantial business with some
of our most significant competitors. Our customers may buy less of our products or services depending on their own technological
developments, end-user demand for our products, internal budget cycles and market conditions. A major customer in one year may not
purchase any of our products or services in another year, which may negatively affect our financial performance. If any of our large
customers significantly reduces or delays purchases from us or if we are required to sell products to them at reduced prices or
unfavorable terms, our revenues and results of operations could be materially adversely affected. See “Item 1, Business — Sales and
Distribution” for more information on our customer base.
Our products may contain defects that may be difficult or even impossible to correct. Product defects could result in lost sales,
additional costs and customer erosion.
We offer technologically complex products that, when first introduced or released in new versions, may contain software or
hardware defects that are difficult to detect and correct. The existence of defects and delays in correcting them could result in negative
consequences, including the following:
• delays in shipping products;
• cancellation of orders;
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