COMPETITION
While the market for ATM access products is still evolving, the networking
industry as a whole is intensely competitive. Among the companies who have
already produced ATM access products are ADC Kentrox and 3Com. In addition,
Ascend Communications has developed an ATM access product. Other companies,
including Cisco Systems/StrataCom, Nortel, General DataComm, Digital Link,
Fore Systems and Newbridge Networks, have already developed networking
equipment that may be competitive with the Company's products. The Company
expects that some of these companies and other networking and computer systems
companies may in the future announce plans to develop ATM access products that
are directly competitive with the Company's products.
The Company does not intend to compete solely on the basis of price.
Instead, it intends to compete by offering superior features, performance,
reliability and flexibility at competitive prices. Yurie's management is
adopting this strategy because equipment price is only one component in
overall communications costs. WAN bandwidth and network operating expenses
generally exceed the total cost of the network equipment for a typical
customer.
As competition in the ATM access market increases, the Company believes that
the ATM access industry may be characterized by the intense price competition
similar to that present in the broader networking market. In response to this,
the Company has already implemented cost improvement measures and will
continue to seek ways to improve upon the LDR products' price-to-performance
ratio.
INTELLECTUAL PROPERTY, PROPRIETARY INFORMATION AND TECHNICAL KNOW HOW
The Company believes that its future success depends, in part, upon its
ability to develop and protect proprietary technology contained in its
products. The Company currently relies upon a combination of trade secret,
copyright, patent and trademark laws, as well as contractual restrictions, to
establish and protect proprietary rights in its products. The Company also has
entered into nondisclosure, noncompete and invention assignment agreements
with substantially all of its employees and nondisclosure agreements with
certain of its suppliers, distributors and customers so as to limit access to
and disclosure of its proprietary information. There can be no assurance that
these statutory and contractual arrangements will prove sufficient to deter
misappropriation of the Company's technologies or independent third-party
development of similar technologies. The Company also possesses and relies
upon a valuable body of technical know how related to the design and operation
of its products.
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The U.S. Patent and Trademark Office has issued U.S. Patent No. 5,568,482 to
the Company for its LANET protocol. LANET is a significant technological
invention that allows ATM to run over transmission media of any speed or
quality. The Company intends to provide the technology covered by the LANET
patent at no cost to the public because it believes that making the LANET
technology freely available to the public would have greater benefits than
licensing the technology to third parties or preserving the technology solely
for its own use. The Company, however, retains its patent rights in the LANET
technology, although third parties are free to use the technology in
unmodified form for their own purposes. The Company anticipates that making
LANET available at no cost to the public will create demand for and facilitate
widespread use of LANET and increase name recognition for Yurie as the
developer of LANET.
Two additional patent applications have been filed for (i) the AQueMan
algorithm developed by the Company to regulate and prioritize the flow of
traffic in ATM access products and (ii) error-tolerant addressing to enhance
the ability to transport ATM cells over noisy links (e.g., wireless circuits).
The Company intends to file another patent application for a method to
simplify authentication and key exchange in the establishment of secure links.
The Company does not now intend to make any of the technologies described in
these patent applications available to the public at no cost. There can be no
assurance that the Company's patent applications will result in issued patents
or that the Company's existing patent or future patents will be upheld as
valid or prevent the development of competitive products. The failure of the
Company to obtain a patent for AQueMan, or to be granted patents for any of
its other Company-developed technologies, could have a material adverse effect
on the Company's business and its growth prospects.
FACILITIES
The Company's principal offices are located in a 137,000 square foot
facility leased by the Company at 8301 Professional Place, Landover, MD 20785-
2237 (a suburb of Washington, DC). Approximately 40% of the space in this
facility is used or reserved for manufacturing, product development and
testing; the balance is used or reserved for sales, marketing and other
general and administrative activities.
The Company also leases 6,000 square feet of space for a research and
development facility at 2020 Challenger Drive, Suite 101, Alameda, California
and approximately 5,443 square feet in Atlanta, Georgia. Yurie believes that
its present facilities are well maintained and in good operating condition,
although additional facilities may be needed to meet anticipated levels of
operations in the foreseeable future.
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