caused us to record an expense over the stock option vesting period, based on the fair value at the date the options are granted, and could have a significant negative effect on our reported results.
Additionally, we are required to perform goodwill impairment tests on an annual basis and between annual tests in certain circumstances, to value our deferred tax assets and to accrue unfunded pension liabilities, each of which may result in a negative effect on our reported results.
We enter into agreements that may require us to make certain indemnification payments to third parties in the event of certain changes in an underlying economic characteristic related to assets, liabilities or equity securities of such third parties. The occurrence of events that may cause us to become liable to make an indemnification payment is not within our control and an obligation to make a significant indemnification payment under such agreements could have a significant negative effect on our reported results.
As a consequence, operating results for a particular future period are difficult to predict, and therefore, prior results are not necessarily indicative of results to be expected in future periods. Any of the foregoing factors, or any other factors described herein, could have a material adverse effect on our business, results of operations and financial condition that could adversely affect the price of our publicly traded securities.
Global economic conditions and other trends and factors affecting the telecommunications industry are beyond our control and may result in reduced demand and pricing pressure on our products.
There are trends and factors affecting the industry that are beyond our control and may affect our operations. These trends and factors include:
•adverse changes in the public and private equity and debt markets and our ability, as well as the ability of our customers and suppliers, to obtain financing or to fund working capital and capital expenditures;
•adverse changes in the credit quality of our customers and suppliers;
•adverse changes in the market conditions in our industry and the specific markets for our products;
•the trend towards the sale of converged networking solutions, which could lead to reduced capital spending on multiple networks by our customers;
•visibility to, and the actual size and timing of, capital expenditures by our customers;
•inventory practices, including the timing of product and service deployment, of our customers;
•the amount of network capacity and the network capacity utilization rates of our customers, and the amount of sharing and/or acquisition of new and/or existing network capacity by our customers;
•policies of our customers regarding utilization of single or multiple vendors for the products they purchase;
•the overall trend toward industry consolidation and rationalization among our customers, competitors and suppliers;
•conditions in the broader market for communications products, including data networking products and computerized information access equipment and services;
•increased price competition, particularly from low cost competitors;
•changes in legislation or accounting rules and governmental and environmental regulation or intervention affecting communications or data networking;
•computer viruses,
•acts of war or terrorism that could lead to disruptions in general global economic activity, changes in logistics and security arrangements and reduced customer demand for our products and services.
Cautious capital spending in our industry has affected, and could affect, demand for, or pricing pressures on, our products.
Our gross margins may decline, which would reduce our operating results and could contribute to volatility in the market price of our publicly traded securities.
Our gross margins may be negatively affected as a result of a number of factors, including:
•increased price competition, particularly from low cost competitors;
•changes in product and geographic mix;
•customer and contract settlement costs;
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