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Supply and Demand

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We believe that in any rapidly shifting supply and demand environment such as the one we experienced in fiscal 2010, shifts in lead

times, inventory levels, purchase commitments, and manufacturing outputs will occur. During fiscal 2010, we experienced longer

than normal lead times on several of our products and we continue to see challenges at some of our component suppliers. This

was attributable in part to increasing demand driven by the improvement in our overall markets. In addition, and similar to what is

happening throughout the industry, the longer than normal lead times also stemmed from supplier constraints based upon their

labor and other actions taken during the global economic downturn. While we may continue to experience longer than normal lead

times, our lead times improved on the majority of our products in the second half of fiscal 2010, and at the end of fiscal 2010,

product lead times to customers were within a normal range for the majority of our products. We have increased our efforts in

procuring components in order to meet customer expectations, which have contributed to an increase in purchase commitments. If,

however, lead times for key components lengthen further, our operating results for a particular future period could be adversely

affected if we further increase our purchase commitments, which could lead to excess and obsolete inventory charges.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the

United States requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated

Financial Statements and accompanying notes. Note 2 to the Consolidated Financial Statements describes the significant

accounting policies and methods used in the preparation of the Consolidated Financial Statements. The accounting policies

described below are significantly affected by critical accounting estimates. Such accounting policies require significant judgments,

assumptions, and estimates used in the preparation of the Consolidated Financial Statements, and actual results could differ

materially from the amounts reported based on these policies.

Revenue Recognition




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