SMCI Super Micro Computer Inc.

Risks

• Risks Related to Our Business and Industry
• Our quarterly operating results have fluctuated and will likely fluctuate in the future, which could cause rapid declines in our stock price.
• Our revenue and margins for a particular period are difficult to predict, and a shortfall in revenue or decline in margins may harm our operating results.
• As we increasingly target larger customers and larger sales opportunities, our customer base may become more concentrated, our cost of sales may increase, our margins may be lower and our sales may be less predictable.
• If we fail to meet any publicly announced financial guidance or other expectations about our business, it could cause our stock to decline in value.
• Increases in average selling prices for our server solutions have historically significantly contributed to increases in net sales in some of the periods covered by this Annual Report. Such prices are subject to decline if customers do not continue to purchase our latest generation products or additional components or as a result of factors related to the COVID-19 pandemic, which could harm our results of operations.
• Our cost structure and ability to deliver server solutions to customers in a timely manner may be adversely affected by volatility of the market for core components and certain materials for our products.
• Adverse economic conditions may harm our business.
• We may lose sales or incur unexpected expenses relating to insufficient, excess or obsolete inventory.
• Difficulties we encounter relating to automating internal controls utilizing our ERP systems or integrating processes that occur in other IT applications could adversely impact our controls environment.
• Because our products and services may store, process and use data, some of which contains personal information, we are subject to complex and evolving federal, state and foreign laws and regulations regarding privacy, data protection and other matters, which are subject to change.
• If we do not successfully manage the expansion of our international manufacturing capacity and business operations, our business could be harmed.
• We may not be able to successfully manage our business for growth and expansion.
• We depend upon the development of new products and enhancements to our existing products, and if we fail to predict or respond to emerging technological trends and our customers’ changing needs, our operating results and market share may suffer.
• Our future effective income tax rates could be affected by changes in the relative mix of our operations and income among different geographic regions and by changes in domestic and foreign income tax laws, which could affect our future operating results, financial condition and cash flows.
• If negative publicity arises with respect to us, our employees, our third-party service providers or our partners, our business and operating results could be adversely affected, regardless of whether the negative publicity is true.
• The market in which we participate is highly competitive, and if we do not compete effectively, we may not be able to increase our market penetration, grow our net sales or improve our gross margins.
• Industry consolidation may lead to increased competition and may harm our operating results.
• Any failure to adequately expand or retain our sales force will impede our growth.
• We must work closely with our suppliers to make timely new product introductions.
• Our suppliers’ failure to improve the functionality and performance of materials and key components for our products may impair or delay our ability to deliver innovative products to our customers.
• We rely on a limited number of suppliers for certain raw materials used to manufacture our products.
• We rely on indirect sales channels for a significant percentage of our revenue and any disruption in these channels could adversely affect our sales.
• Our direct sales efforts may create confusion for our end customers and harm our relationships in our indirect sales channel and with our OEMs.
• Our research and development expenditures, as a percentage of our net sales, are considerably higher than many of our competitors and our earnings will depend upon maintaining revenues and margins that offset these expenditures.
• Our failure to deliver high quality server and storage solutions could damage our reputation and diminish demand for our products.
• Conflicts of interest may arise between us and Ablecom and Compuware, and those conflicts may adversely affect our operations.
• Our reliance on Ablecom could be subject to risks associated with our reliance on a limited source of contract manufacturing services and inventory warehousing.
• Our growth into markets outside the United States exposes us to risks inherent in international business operations.
• Our results of operations may be subject to fluctuations based upon our investment in corporate ventures.
• Despite following previously issued SEC Staff guidance, the filing of our Annual Report Form 10-K for our fiscal year ended June 30, 2019 (the “2019 10-K”) may not make us “current” in our Exchange Act filing obligations, which means we may not be eligible to use certain forms or rely on certain rules of the SEC.
• We have identified a material weakness in our internal control over financial reporting, which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.
• We incurred significant expenses related to the matters that led to the delay in the filing of our 2017 10-K and may incur expenses related to the remediation of remaining deficiencies in our internal control over financial reporting and disclosure controls and procedures, and any resulting litigation.
• Failure to comply with the U.S. Foreign Corrupt Practices Act, other applicable anti-corruption and anti-bribery laws, and applicable trade control laws could subject us to penalties and other adverse consequences.
• Any failure to protect our intellectual property rights, trade secrets and technical know-how could impair our brand and our competitiveness.
• Resolution of claims that we have violated or may violate the intellectual property rights of others could require us to indemnify our customers, indirect sales channel partners or vendors, redesign our products, or pay significant royalties to third parties, and materially harm our business.
• If we lose Charles Liang, our President, Chief Executive Officer and Chairman, or any other current key employee or are unable to attract additional key employees, we may not be able to implement our business strategy in a timely manner.
• If we are unable to attract and integrate additional key employees in a manner that enables us to scale our business and operations effectively, or if we do not maintain competitive compensation policies to retain our employees, our ability to operate effectively and efficiently could be limited.
• Backlog does not provide a substantial portion of our net sales in any quarter.
• Our business and operations are especially subject to the risks of earthquakes and other natural catastrophic events.
• Our operations could involve the use of regulated materials, and we must comply with environmental, health and safety laws and regulations, which can be expensive, and may affect our business, results of operations and financial condition.
• Risks Related to Owning Our Stock
• The trading price of our common stock is likely to be volatile, and you might not be able to sell your shares at or above the price at which you purchased the shares.
• Future sales of shares by existing stockholders could cause our stock price to decline.
• The concentration of our capital stock ownership with insiders will likely limit your ability to influence corporate matters.
• Provisions of our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, as a result, depress the trading price of our common stock.
• We do not expect to pay any cash dividends for the foreseeable future.