What changed in this filing

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Item 1A. Risk Factors

2023-02-23 compared with 2022-02-17 · 294 added, 282 removed, 443 unchanged (57% of the section changed)

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You should read this summary together with the more detailed description of each risk factor contained below.

Strategic Risks

The successful execution of our CommScope NEXT transformation plan is key to the long-term success of our business.

Our plan to spin-off our Home Networks business from CommScope (the Spin-Off), or any other potential separation, discontinuance or divestiture of a business or product line, is subject to various risks and uncertainties and may not be completed within any specified time period or at all;

may not achieve the expected benefits;

and will involve significant time, expense and cash flows, which could disrupt or adversely affect our business.

Our business strategy has historically relied, in part, on acquisitions to create growth.

We may not fully realize anticipated benefits from past or future acquisitions or investments in other companies.

The Carlyle Group (Carlyle) owns a substantial portion of our equity and its interests may not be aligned with yours.

Difficulties may be encountered in the realignment of manufacturing capacity and capabilities among our global manufacturing facilities and our contract manufacturers that could adversely affect our ability to meet customer demand for our products.

We may need to undertake additional restructuring actions in the future.

Supply Chain Risks

Our dependence on commodities and certain components subjects us to cost volatility and potential availability constraints.

We are dependent on a limited number of key suppliers for certain raw materials and components, and supply shortages or delays could limit our ability to manufacture products.

If our integrated global manufacturing operations, including our contract manufacturers, suffer capacity constraints or production or shipping delays, we may have difficulty meeting customer demand s .

Competitive Risks

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Changes to the regulatory environment in which our customers operate and changes in or uncertainty about government funded programs may negatively impact our business.

Supply Chain Risks

We are dependent on a limited number of key suppliers for logistics support and certain raw materials and components, and supply shortages or delays could limit our ability to manufacture products.

Our dependence on commodities and certain components subjects us to cost volatility and potential availability constraints.

Strategic Risks

The successful execution of our CommScope NEXT transformation plan is key to the long-term success of our business.

The separation, discontinuance or divestiture of a business or product line is subject to various risks and uncertainties that could disrupt or adversely affect our business.

Our business strategy has historically relied, in part, on acquisitions to create growth.

We may not fully realize anticipated benefits from past or future acquisitions or investments in other companies.

We may need to undertake additional restructuring actions in the future.

The Carlyle Group (Carlyle) owns a substantial portion of our equity and its interests may not be aligned with yours.

Financial Risks

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The IRS may not agree ARRIS International plc (ARRIS) was a foreign corporation for United States (U.S.) federal income tax purposes.

Labor Related Risks

We may not be able to attract and retain key employees.

Labor unrest could have a material adverse effect on our business, results of operations and financial condition.

Business and Operational Risks

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If our products do not effectively interoperate with cellular networks and mobile devices, future sales of our products could be negatively affected.

If our service offerings or products, including material purchased from our suppliers, have quality or performance issues, our business may suffer.

If our product or service offerings, including material purchased from our suppliers, have quality or performance issues, our business may suffer.

We depend on cloud computing infrastructure operated by third parties and any disruption in these operations could adversely affect our business.

Our business depends on effective management information systems.

Cyber-security incidents, including data security breaches, ransomware or computer viruses, could harm our business by exposing us to various liabilities, disrupting our delivery of products and services and damaging our reputation.

Cybersecurity incidents, including data security breaches, ransomware or computer viruses, could harm our business by exposing us to various liabilities, disrupting our delivery of products and services and damaging our reputation.

Climate change may have a long-term impact on our business.

Labor-Related Risks

We may not be able to attract and retain key employees.

Labor unrest could have a material adverse effect on our business, results of operations and financial condition.

International Risks

Our significant international operations expose us to economic, political, foreign exchange rate and other risks.

Additional tariffs or a global trade war could increase the cost of our products, which could adversely impact the competitiveness of our products.

Our international operations expose us to increased challenges in complying with anti-corruption laws and regulations of the U.S.

Additional or new tariffs or a global trade war could increase the cost of our products, which could adversely impact the competitiveness of our products.

Our significant international operations expose us to increased challenges in complying with anti-corruption laws and regulations of the U.S.

government and various other international jurisdictions.

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We may not be successful in protecting our intellectual property and in defending against claims that we are infringing on the intellectual property of others, and any such actions may be costly.

Because of the nature of information that may pass through or be stored on certain of our solutions or networks, we, our vendors and our end customers may be subject to complex and evolving U.S.

and foreign laws and regulations regarding privacy, data protection and other related matters.

Compliance with current and future environmental laws, efforts to mitigate climate change and potential environmental liabilities may have a material adverse impact on our business, financial condition and results of operations.

Because of the nature of information that may pass through or be stored on certain of our solutions or networks, we, our vendors and our end customers are subject to complex and evolving U.S.

and foreign laws and regulations regarding information privacy, data protection, cybersecurity, and other related matters.

Compliance with current and future social and environmental laws, regulations, policies and provisions, customer and investor pressures, other efforts to mitigate climate change and potential environmental liabilities may have a material adverse impact on our business, financial condition and results of operations.

General Risks

The current pandemic and new variants of COVID-19 and any other future public health crisis, could materially adversely affect our business, financial condition, results of operations and cash flows.

Any future public health crisis, similar to the COVID-19 pandemic, could materially adversely affect our business, financial condition, results of operations and cash flows.

Our stock price has been volatile and may continue to fluctuate significantly.

We may experience significant variability in our quarterly or annual effective income tax rate.

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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.

Strategic Risks

The successful execution of our CommScope NEXT transformation plan is key to the long-term success of our business.

CommScope NEXT could result in changes to our business that may result in a number of risks and uncertainties, including the following:

lost customers or reduced sales volumes if customers do not accept higher pricing, our new product offerings or if we discontinue or divest of product lines;

higher onetime costs such as restructuring costs and transaction, transformation and integration costs;

the loss of key management and other employees if we are not successful in getting employee buy-in for CommScope NEXT;

and additional supply chain disruptions or higher costs of supplies if we do not successfully execute our projects related to direct and indirect procurement.

The implementation of CommScope NEXT may take longer than anticipated, and once implemented, we may not realize, in full or in part, the anticipated benefits or such benefits may be realized more slowly than anticipated.

The failure to realize benefits, which may be due to our inability to execute plans or delays in the implementation of CommScope NEXT, could have a material adverse effect on our business, financial condition, results of operations, cash flows and stock price.

may not achieve the expected benefits;

and will involve significant time, expense and cash flows, which could disrupt or adversely affect our business.

As a step in the CommScope NEXT transformation plan, in April 2021, we announced a plan to spin-off the Home Networks business in 2022.

After thorough consideration of the current supply chain environment and its impact on the Home Networks business, our Board of Directors has determined that it is in the best interests of both CommScope and a future independent Home Networks business to delay execution of the Spin-Off.

We remain committed to the Spin-Off, but we currently do not have a firm timeline for restarting the plan.

The Spin-Off is complex in nature and has been and may continue to be affected by unanticipated developments or changes, including changes in the macroeconomic, regulatory or political environment, changes in credit or equity markets or changes in other market conditions.

These or other unanticipated developments have delayed and could continue to delay or prevent the Spin-Off or cause the Spin-Off to occur on terms or conditions that are different than anticipated, including the failure of the Spin-Off to qualify as tax-free to our stockholders .

If the Spin-Off is completed, we cannot assure you or any of our stakeholders that each company will be successful or achieve the future performance levels expected or that we will achieve the expected benefits of the Spin-Off.

The separation will result in CommScope and the new Home Networks company being smaller, less diversified companies with more limited businesses concentrated in their respective areas of focus.

As a result, each company may be more vulnerable to changing market conditions.

In addition, if the Spin-Off is completed, CommScope and the Home Networks company will incur ongoing costs, including costs of operating as independent companies, that the separated businesses will no longer be able to share.

Those costs may exceed our estimates or could diminish the benefits we expect to realize from the Spin-Off.

Further, there can be no assurance that the combined value of the common stock of the two publicly traded companies will be equal to or greater than what the value of our common stock would have been had the Spin-off not occurred.

Whether or not the Spin-Off is completed, our businesses may face risks and uncertainties, including, but not limited to:

the diversion of senior management’s attention from ongoing business concerns;

maintaining employee morale and retaining key management and other employees;

retaining existing business and operational relationships, including with customers, suppliers and employees, and attracting new business and operational relationships;

foreseen and unforeseen costs and expenses;

potential negative reactions from the financial markets if we fail to complete the Spin-Off as currently expected, within the anticipated time frame, or at all.

Any of these factors could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We periodically evaluate our product lines and may consider the separation, divestiture or discontinuance of other product lines.

Any such separation, divestiture or discontinuance of a product line also involves risks such as those described above and could adversely affect or our business, financial position, results of operation, cash flows and stock price.

Our business strategy has historically relied, in part, on acquisitions to create growth.

We may not fully realize anticipated benefits from past or future acquisitions or investments in other companies.

Our business strategy has historically relied, in part, on acquisitions to create growth, such as CommScope’s 2019 acquisition of ARRIS, ARRIS’

2017 acquisition of Ruckus Wireless and the ICX Switch business, ARRIS’

2016 combination with Pace plc and CommScope’s 2015 acquisition of TE Connectivity’s Broadband Network Solutions business.

We anticipate that a portion of our future growth may be accomplished by acquiring existing businesses, products or technologies.

We cannot guarantee that we will be able to identify suitable acquisition opportunities or obtain the necessary financing on acceptable terms to provide these future growth opportunities.

We may spend time and money investigating and negotiating with potential acquisition or investment targets but not complete the transaction which may divert or waste resources.

All acquisitions involve risks, such as the assumption of additional liabilities and expenses, issuance of debt, incurrence of transaction and integration costs, diversion of management’s attention from other business concerns, assumption of unknown contingent liabilities, unanticipated litigation costs and falling short of growth expectations.

There are also significant challenges to integrating an acquired operation into our business, including, but not limited to successfully managing the operations, manufacturing facilities and technology of the combined business;

integrating the sales organizations;

maintaining and increasing the customer base;

retaining key employees, suppliers and distributors;

integrating management information systems, including enterprise resource planning (ERP) systems;

integrating inventory management and accounting activities;

integrating R&D activities;

navigating markets in which we potentially have limited or no prior experience;

integrating and implementing effective disclosure controls and procedures and internal controls over financial reporting;

and the impact of goodwill or other impairment charges, amortization costs for acquired intangible assets and acquisition accounting treatment, including the loss of deferred revenue and increases in the fair values of inventory and other acquired assets, on our GAAP financial condition and results of operations.

Furthermore, such acquisitions may be dilutive to our financial results.

Although we typically expect to realize strategic, operational and financial benefits as a result of our past and future acquisitions and investments, we cannot predict or guarantee whether and to what extent anticipated cost savings, synergies and growth prospects will be achieved.

For example, we have not fully achieved the expected growth prospects associated with the ARRIS acquisition and that has had adverse effects on our financial condition, results of operations, cash flows and stock price.

Carlyle owns a substantial portion of our equity and its interests may not be aligned with yours.

Funding for the ARRIS acquisition included an investment by Carlyle in our Series A Convertible Preferred Stock.

As a result, Carlyle owns approximately 16% of our common stock on an if-converted basis and has the right to designate up to two directors on our Board of Directors.

In addition, certain of our existing directors are senior advisors to Carlyle.

As a result, Carlyle has significant influence on our business.

Circumstances may occur in which the interests of Carlyle could conflict with the interests of our other stockholders.

We periodically realign manufacturing capacity among our global facilities and contract manufacturers in order to reduce costs by improving manufacturing efficiency and to strengthen our long-term competitive position.

The implementation of these initiatives may include significant shifts of production capacity among facilities and contract manufacturers.

We have done this in the past related to the integration of certain acquisitions, including the integration of the ARRIS business.

Also, in prior years, with some of the uncertainties in the U.S.

trade tariff environment, we transitioned manufacturing for certain impacted products to non-tariff countries.

In addition, in response to intermittent shutdowns of our facilities during the COVID-19 pandemic, we transitioned certain manufacturing to less impacted facilities.

These changes are time-consuming and costly, and changes in our contract manufacturers or manufacturing locations may cause significant interruptions in supply if the manufacturers have difficulty manufacturing products to our specifications.

There are significant risks inherent in the implementation of these initiatives, including our failure to ensure the following:

adequate inventory on hand or production capacity to meet customer demand while capacity is being shifted among facilities;

maintaining product quality as a result of shifting capacity;

adequate raw material and other service providers to meet the needs at the new production locations;

ability to successfully remove, transport and re-install equipment;

and availability of adequate supervisory, production and support personnel to accommodate the shifted production.

In the event manufacturing realignment initiatives are not successfully implemented, we could experience lost future sales and increased operating costs, as well as customer relations problems, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may need to undertake additional restructuring actions in the future.

We have previously recognized restructuring charges to integrate acquisitions, in response to slowdowns in demand for our products and in conjunction with the implementation of initiatives to reduce costs and improve the efficiency of our operations.

Most recently, we have implemented a business transformation initiative called CommScope NEXT designed to drive stakeholder value which has included the planned closure of a manufacturing facility as well as workforce reductions.

In prior years, we have also undertaken a number of initiatives to support the integration of the ARRIS business, which included mostly workforce reductions.

In the past, we have undertaken initiatives to support the integration of other acquisitions, which included the closure of certain domestic and international manufacturing facilities and various other workforce reductions.

As a result of the continued efforts related to CommScope NEXT, changes in business conditions and other developments, we may need to initiate additional restructuring actions that could result in workforce reductions and restructuring charges, which could adversely and materially affect our cash flows.

Supply Chain Risks

Our dependence on commodities and certain components subjects us to cost volatility and potential availability constraints.

Our profitability may be materially affected by changes in the market price and availability of certain raw materials, most of which are linked to the commodity markets.

The principal raw materials and components we purchase are aluminum, copper, steel, bimetals, optical fiber, plastics and other polymers, capacitors, memory devices and silicon chips.

Prices for aluminum, copper, steel, silicon, fluoropolymers and certain other polymers have experienced significant volatility as a result of changes in the levels of global demand, supply disruptions, including port, transportation and distribution delays or interruptions, and other factors.

As a result, we have seen a significant increase in costs that has negatively impacted our results of operations.

We have adjusted our prices for certain products and plan to adjust prices for certain other products, but we may have to adjust prices again in the future.

Delays in implementing price increases or a failure to achieve market acceptance of price increases has in the past, and could in the future, have a material adverse impact on our results of operations.

Conversely, in an environment of falling commodities prices, we may be unable to sell higher-cost inventory before implementing price decreases, which could have a material adverse impact on our business, financial condition and results of operations.

We are dependent on a limited number of key suppliers for certain raw materials and components, and supply shortages or delays could limit our ability to manufacture products.

We are dependent on a limited number of key suppliers for certain of our raw material and component purchases, including certain semiconductors, memory and chip capacitors, polymers, copper rod, copper and aluminum tapes, fine aluminum wire, steel wire, optical fiber, circuit boards and other electronic components, subassemblies and modules.

Certain of our suppliers are sole source suppliers and a number of our agreements with suppliers are short-term in nature.

Our reliance on sole or limited suppliers and our reliance on subcontractors involves several risks, including a potential inability to obtain an adequate supply of required materials, components and other products, and reduced control over pricing, quality, terms and conditions of purchase and timely delivery.

Current limited supply of memory devices, capacitors and silicon chips have impacted and could continue to impact our ability to deliver on a timely basis due to extended lead times and have increased and could continue to increase overall product costs.

The price of these components within our products may vary, and we may not be able to pass along all cost increases to customers.

Key silicon providers may have significant power and ability to influence prices and supply.

We are currently experiencing extended lead times from certain of our key suppliers which has affected our ability to deliver on a timely basis and could continue to affect our performance in the future.

In some instances, we are purchasing components as much as fifteen months in advance of our expected need for such components, which may divert our working capital from other needs.

The extended lead times also contribute to increased risk for excess and obsolescence of components which can lead to increases costs.

Our key suppliers have experienced in the past, and could experience in the future, production, operational or financial difficulties, or there may be global shortages and pricing inflation of certain raw materials or components we use.

Our inability to find sufficient sources of supply on reasonable terms could impact our ability to manufacture products in a cost-effective manner.

We have adjusted our market prices for certain of our products as component prices have changed, but we may not be able to pass along all further cost increases to our customers, which could have a material adverse effect on our gross margin and results of operations.

Our ability to ship products on a timely basis has been and may continue to be unfavorably impacted, which could damage relationships with current and prospective customers and potentially have a material adverse effect on our business.

We also face the risk of our customers canceling their orders and moving them to our competitors who can ship more timely, which would not allow us to realize our backlog and would have a material adverse effect on our business.

We also source many of our components from international markets.

Any changes in the laws and policies of the U.S.

or other countries affecting trade is a risk to us.

To the extent there are unfavorable changes imposed by the U.S.

or other countries and/or retaliatory actions taken by trading partners, such as the addition of new tariffs or trade restrictions, we may experience material adverse impacts on earnings.

For a more complete discussion of our risks related to tariffs and trade restrictions, see the risk factor, “Additional tariffs or a global trade war could increase the cost of our products, which could adversely impact the competitiveness of our products”

under our “International Risk Factors”

in this Item 1A.

Risk Factors section.

If our integrated global manufacturing operations, including our contract manufacturers, suffer capacity constraints or production or shipping delays, we may have difficulty meeting customer demands.

Disruption of our ability to produce at or distribute from our manufacturing or contract manufacturing facilities could adversely affect our ability to manufacture products at our other manufacturing or contract manufacturing facilities in a cost-effective and timely manner.

We have experienced lost sales opportunities in 2021 due to the lack of capacity to meet the demand for certain of our Broadband segment products.

If we cannot ramp up capacity fast enough to meet customer demand, we may continue to experience lost sales opportunities, lose market share and experience customer relations problems, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Also, in 2020, the COVID-19 pandemic resulted in supply constraints primarily related to the temporary shutdown of certain of our facilities, which led to difficulty in meeting customer demands.

In 2021, increased customer demand has also indirectly had unfavorable business impacts, including commodity inflation, logistics cost increases, extended lead times and certain component part shortages.

Similar supply constraints, inflation, or delays in the future could have a material adverse effect on our business, financial condition, results of operations and cash flows.

For a more complete discussion of our risks related to the COVID-19 pandemic, see the risk factor below under “General Risk Factors”

in this Item 1A, “The current pandemic and new variants of COVID-19 and any other future public health crisis, could materially adversely affect our business, financial condition, results of operations and cash flows.”

We rely on unaffiliated contract manufacturers, both domestically and internationally, to produce certain products or key components of products.

Our reliance on these contract manufacturers reduces our control over the manufacturing process and exposes us to risks, including reduced control over quality assurance, product supply and costs and timing.

Any manufacturing disruption by our contract manufacturers could severely impair our ability to fulfill orders.

Our reliance on outsourced manufacturers also increases the potential for infringement or misappropriation of our intellectual property .

If we are unable to manage our relationships with our contract manufacturers effectively, or if our contract manufacturers suffer delays or disruptions in production or other operations for any reason, including financial instability, labor disturbances or shortages, fires, electrical outages, pandemics/epidemics, severe weather events, natural disasters, geopolitical instability, acts of violence or terrorism, shipping interruptions including port distribution delays or interruptions, increased manufacturing lead times, capacity constraints or quality control problems in their manufacturing operations, failure to meet our future requirements for timely delivery or some other catastrophic event, our ability to manufacture products at our manufacturing or contract manufacturer facilities and ship products to our customers in a cost-effective and timely manner could be impaired, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Th ese manufacturers typically fulfill our supply requirements on the basis of individual orders.

In most cases, we do not have long-term contracts with our contract manufacturers that guarantee capacity, the continuation of particular pricing terms or the extension of credit limits.

Accordingly, our contract manufacturers are not always obligated to continue to fulfill our supply requirements, which could result in supply shortages, and the prices we are charged for manufacturing services could be increased on short notice.

If our manufacturers are unable or unwilling to continue manufacturing our products in required volumes, we will be required to identify one or more acceptable alternative manufacturers to satisfy our demand.

There is no assurance that we would be able to identify suitable alternative manufacturing partners on a timely basis, on terms that are acceptable to us, or at all.

Some of our manufacturing and contract manufacturing facilities rely on aging production equipment and information technology infrastructure, and if we fail or our contract manufacturers fail to properly maintain or update this equipment, it could affect our ability to manufacture or ship products.

Competitive Risks

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A variety of factors affect the timing and amount of capital spending in the communications industry, including:

general economic and market conditions, including increased costs due to rising inflation or interest rates;

customer-specific financial conditions or budget allocation decisions;

competitive pressures, including pricing pressures;

competing technologies;

general economic and market conditions;

timing and adoption of the global rollout of new technologies;

customer acceptance of new technologies and services offered;

foreign currency fluctuations;

seasonality of outdoor deployments;

timing and adoption of the global rollout of new technologies;

customer-specific financial conditions or budget allocation decisions;

changes in customer preferences or requirements;

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consumer demand for video content and pay TV services;

competitive pressures, including pricing pressures;

customer acceptance of new technologies and services offered;

variability of shipments under large contracts;

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real or perceived trends or uncertainties in these factors.

We have previously experienced a decrease in demand for certain of our products as a result of the COVID-19 pandemic.

Although we have had a recovery in demand of certain of our products during 2021, product demand could be negatively impacted in the near term as a result of new variants of COVID-19 or any other future public health crisis.

For a more complete discussion of our risks related to COVID-19, see the risk factor under “General Risk Factors”

in this Item 1A, Risk Factors section, “The current pandemic and new variants of COVID-19 and any other future public health crisis, could materially adversely affect our business, financial condition, results of operations and cash flows.”

As a result of these factors, we may not be able to maintain or increase our sales in the future, and our business, financial condition, results of operations and cash flows could be materially and adversely affected.

The global economy experienced high inflation in 2022, which many central banks are responding to by raising interest rates.

Many perceive these actions as increasing the risk of a downturn in the economy in 2023.

A downturn in the economy that negatively impacts the capital spending of our customers could materially adversely affect our business, financial condition, results of operations, cash flows and stock price.

A substantial portion of our business is derived from a limited number of key customers and channel partners.

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lower sales volumes that could result from the loss of one or more of our key customers;

dependency on customers with substantial purchasing power and leverage in negotiating contractual obligations as well as the operational structure of the relationship, resulting in lower net sales and gross profit;

less efficient operations that could result in higher costs from an inability to accurately forecast and plan for volatile spending patterns of key customers;

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We are also exposed to similar risks to the extent that we have significant indirect sales to one or more end-users of our products, who may also be a direct customer.

We generally have no minimum purchase commitments with any of our distributors, value-added resellers, operators or OEMs or other customers, and our contracts with these parties generally do not prohibit them from purchasing or offering products or services that compete with ours.

We have historically experienced variability in the level of purchases by our key customers and expect similar variability that could affect future sales.

Any significant reduction in sales to these customers, including as a result of the inability or unwillingness of these customers to continue purchasing our products, could materially and adversely affect our business, financial condition, results of operations and cash flows.

A material portion of our sales is derived through our channel partners, including distributors, systems integrators and value-added resellers.

Our channel partners have experienced financial difficulties in the past that has adversely affected our collection of accounts receivable.

Our exposure to credit risks of our channel partners may increase if our channel partners and their end customers are adversely affected by global or regional economic conditions.

One or more of these channel partners could delay payments or default on credit extended to them, either of which could materially adversely affect our business, financial condition, results of operations and cash flows.

We generally have no minimum purchase commitments with any of our distributors, value-added resellers, operators, OEMs or other customers, and our contracts with these parties generally do not prohibit them from purchasing or offering products or services that compete with ours.

We have historically experienced variability in the level of purchases by our key customers and expect that similar variability could affect future sales.

We face competitive pressures with respect to all our major product groups.

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Service providers also have the goal of virtualizing CCAP management and control functions as they deploy DAA, and although we are developing a fully virtualized CCAP product, this could potentially enable new competitors to enter the market and reduce operator dependence on our products.

As there is technology evolution or transformation within the industry, be it DOCSIS 4.0, PON or Wi-Fi technology, there is a risk that our market position would be weakened.

In our mobile wireless markets, the shift to 5G includes the deployment of new spectrum in higher frequency bands where larger available bandwidths enable a significant increase in network capacity.

In many cases, massive MIMO technology (active antennas) is the most effective way to deliver coverage in these bands.

Consequently, 5G deployments present an inherent headwind to our traditional passive base station antenna business.

We are developing technologies and new products to address this shift from passive to active antennas, but we may not be able to completely offset this trend.

As there is technology evolution or transformation within the industry, whether it be DOCSIS 4.0, PON, Wi-Fi technology or the shift to 5G, there is a risk that our market position would be weakened.

If any of our competitors’

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These channel partners may also provide support for other third-party products, which may potentially distract resources from support for our products.

If we and our channel partners do not effectively assist our end customers in deploying our products, quickly resolving post-deployment issues and provide effective ongoing support, it would adversely affect our ability to sell our products to existing end customers and could harm our reputation with potential end customers.

If we and our channel partners do not effectively assist our end customers in deploying our products, quickly resolving post-deployment issues and provide effective ongoing support, it could adversely affect our ability to sell our products to existing end customers and could harm our reputation with potential end customers.

In some cases, we guarantee a certain level of performance to our end customers, which could prove to be resource-intensive and expensive for us to fulfill if unforeseen technical problems arise.

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decisions regarding capital spending.

We, as well as some of our customers, also participate in and benefit from government funded programs that encourage the development of network infrastructures.

We, as well as some of our customers, also participate in and benefit from government funded programs that encourage the development of network infrastructures such as the Infrastructure Investment and Jobs Act (IIJA), Rural Digital Opportunity Fund (RDOF) and American Rescue Plan Act (ARPA).

Changes in government programs in our industry or uncertainty regarding future changes could adversely impact our customers’

decisions regarding capital spending, which could decrease demand for our products and could materially and adversely affect our business, financial condition, results of operations and cash flows.

decisions regarding capital spending, which could decrease demand for our products and could materially and adversely affect our business, financial condition, results of operations, cash flows and stock price.

Supply Chain Risks

We are dependent on a limited number of key suppliers for logistics support and certain raw materials and components, and supply shortages or delays could limit our ability to manufacture products.

We are dependent on a limited number of key suppliers for logistics support and certain of our raw material and component purchases, including certain semiconductors, memory and chip capacitors, polymers, copper rod, copper and aluminum tapes, fine aluminum wire, steel wire, optical fiber, circuit boards and other electronic components, subassemblies and modules.

Certain of our suppliers are sole source suppliers and a number of our agreements with suppliers are short-term in nature.

Key silicon providers may have significant power and ability to influence prices and supply.

In some instances, we are purchasing components as much as fifteen months in advance of our expected need for such components, which has diverted and may continue to divert our working capital from other needs.

The extended lead times also contribute to increased risk of excess and obsolescence of components which can lead to increased costs.

Our inability to find sufficient sources of supply on reasonable terms could impact our ability to manufacture products in a cost-effective manner.

We also source many of our components from international markets.

Any change in the laws and policies of the U.S.

or other countries affecting trade is a risk to us.

To the extent there are unfavorable changes imposed by the U.S.

or other countries and/or retaliatory actions taken by trading partners, such as the addition of new tariffs or trade restrictions, we may experience material adverse impacts on earnings.

under our “International Risk Factors”

in this Item 1A.

Risk Factors section.

Our dependence on commodities and certain components subjects us to cost volatility and potential availability constraints.

Our profitability may be materially affected by changes in the market price and availability of certain raw materials and components, some of which are linked to the commodity markets.

The principal raw materials and components we purchase are aluminum, copper, steel, bimetals, optical fiber, plastics and other polymers, capacitors, memory devices and silicon chips.

As a result, we have seen a significant increase in costs that has negatively impacted our results of operations.

We have adjusted our prices for most of our products, but we may have to adjust prices again in the future.

If our integrated global manufacturing operations, including our contract manufacturers, suffer capacity constraints or production or shipping delays, we may have difficulty meeting customer demands.

Disruption of our ability to produce at or distribute from our manufacturing or contract manufacturing facilities could adversely affect our ability to manufacture products in a cost-effective and timely manner.

We experienced lost sales opportunities in the past due to lack of capacity to meet the demand for certain of our products.

If we cannot ramp up capacity fast enough to meet customer demand in the future, we may experience lost sales opportunities, lose market share and experience customer relations problems, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We rely on unaffiliated contract manufacturers, both domestically and internationally, to produce certain products or key components of products.

Any manufacturing disruption by our contract manufacturers could severely impair our ability to fulfill orders.

Our reliance on outsourced manufacturers also increases the potential for infringement or misappropriation of our intellectual property.

If our internal manufacturing operations or contract manufacturers suffer delays or disruptions in production or other operations for any reason, including financial instability of the contract manufacturer, labor disturbances or shortages, fires, electrical outages, cybersecurity incidents, pandemics/epidemics, severe weather events, natural disasters, geopolitical instability, acts of violence or terrorism, shipping interruptions including port distribution delays or interruptions, increased manufacturing lead times, capacity constraints or quality control problems in their manufacturing operations, failure to meet our future requirements for timely delivery or some other catastrophic event, our ability to manufacture products at our manufacturing or contract manufacturer facilities and ship products to our customers in a cost-effective and timely manner could be impaired, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our contract manufacturers typically fulfill our supply requirements on the basis of individual orders.

In most cases, we do not have long-term contracts with our contract manufacturers that guarantee capacity, the continuation of particular pricing terms or the extension of credit limits.

There is no assurance that we would be able to identify suitable alternative manufacturing partners on a timely basis, on terms that are acceptable to us, or at all.

Strategic Risks

The successful execution of our CommScope NEXT transformation plan is key to the long-term success of our business.

We are currently implementing a business transformation initiative called CommScope NEXT, designed to drive stakeholder value.

CommScope NEXT could result in changes to our business that may result in a number of risks and uncertainties, including the following:

lost customers or reduced sales volumes if customers do not accept higher pricing, our new product offerings or if we discontinue or divest of product lines;

higher one-time costs such as restructuring costs and transaction, transformation and integration costs;

the loss of key management and other employees if we are not successful in getting employee buy-in for CommScope NEXT;

and additional supply chain disruptions or higher costs of supplies if we do not successfully execute our projects related to direct and indirect procurement.

The implementation of these strategic initiatives may include significant shifts of production capacity among facilities and contract manufacturers.