CY » Topics » Although SunPower expects the acquisition of SP Systems to be beneficial, such benefits may not be realized because of integration difficulties or other challenges.

This excerpt taken from the CY 10-Q filed Aug 10, 2007.

Although SunPower expects the acquisition of SP Systems to be beneficial, such benefits may not be realized because of integration difficulties or other challenges.

During the first quarter of fiscal 2007, SunPower completed the acquisition of SP Systems, a privately-held leading provider of large-scale solar power systems. SP Systems has global operations that will need to be integrated successfully in order for SunPower to realize the benefits anticipated from the acquisition. Realizing these benefits will require the integration of technology, operations and personnel of SunPower and SP Systems into a single organization. SunPower expects the integration to be a complex, time-consuming and expensive process that, even with proper planning and implementation, could cause significant disruption. The challenges that SunPower may face include, but are not limited to, the following:

 

   

consolidating operations, including rationalizing corporate information technology and administrative infrastructures;

 

   

management gaining sufficient experience with technologies and markets in which the SP Systems business is involved, which may be necessary to successfully operate and integrate the business;

 

   

implementing and monitoring SP Systems’ revenue recognition policy on a “percent completion” basis;

 

   

coordinating sales and marketing efforts between the two companies;

 

   

overcoming any perceived adverse changes in business focus or model;

 

   

realizing synergies necessary to meet SunPower’s long-term margin targets, given SP Systems’ historical margins;

 

   

coordinating and harmonizing research and development activities to accelerate introduction of new products and technologies with reduced cost;

 

   

preserving customer, supplier, distribution and other important relationships of SunPower and SP Systems and resolving any potential conflicts that may arise;

 

   

retaining key employees and maintaining employee morale;

 

   

addressing differences in the business cultures of SunPower and SP Systems;

 

   

coordinating and combining operations, relationships and facilities outside of the United States, which may be subject to additional constraints imposed by geographic distance, local laws and regulations; and

 

   

creating a consolidated internal control over financial reporting structure so that SunPower and its independent auditors can report on the effectiveness of SunPower’s internal controls over financial reporting.

SunPower may not be able to successfully integrate the operations of SP Systems in a timely manner, or at all. In addition, SunPower may not realize the anticipated benefits and synergies of the acquisition to the extent or when anticipated. Even if the integration of SunPower and SP Systems’ operations, products and personnel is successful, it may place a significant burden on SunPower’s management resources. The diversion of management’s attention and any difficulties encountered in the transition and integration process could harm SunPower’s business, financial condition and operating results.

 

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