CDW 2004 Annual Report Download - page 17

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technologies and new products by manufacturers, or the lack of acceptance of those technologies and products
by customers, could have an adverse effect on our business and results of operations.
We would be adversely affected if we are not able to expand or retain our sales force or if we are not able
to maintain or increase their productivity. Our statistics show that the level of sales achieved by our account
managers increases with the number of years of experience they have with us. Our rate of sales growth and our
operating results would be negatively affected if we are unable to expand the size of our sales force, if the
turnover rate of account managers increases from relatively constant historical levels or if the sales volumes
achieved by our account managers do not increase with experience.
Substantial competition could reduce our market share and significantly harm our financial performance.
The market for computers and related technology products and accessories is highly competitive. Our
competition includes:
x national direct marketers, such as Insight Enterprises, PC Connection, PC Mall and Zones;
x manufacturers, such as Dell, who sell directly to customers;
x computer superstores, such as CompUSA;
x government resellers, such as GTSI;
x consumer electronic and office supply superstores, such as Best Buy, Circuit City, Office Depot,
Office Max and Staples;
x value-added resellers;
x corporate resellers; and
x Web resellers, such as Amazon.com and Buy.com.
Some of our hardware and software vendors, such as Hewlett-Packard and IBM, have sold, and could
intensify their efforts to sell, their products directly to customers. In addition, some software manufacturers
have developed, and may continue to develop, sales methods that directly provide customers with subscription-
based software programs and packages. If either of these trends becomes more prevalent, it could adversely
affect our sales growth and profitability.
We believe that competition may increase in the future, which could require us to reduce prices, increase
advertising expenditures or take other actions which may have an adverse effect on our operating results. Some
of our competitors have reduced their prices in an attempt to stimulate sales. Decreasing prices of computers
and related technology products and accessories resulting from competition and technological changes require
us to sell a greater number of products to achieve the same level of net sales and gross profit. If this trend
continues and we are unable to attract new customers and sell increased quantities of products, our sales growth
and profitability could be adversely affected.
We are exposed to inventory risks. We are exposed to inventory risks as a result of the rapid technological
changes that affect the market and pricing for the products we sell. We seek to minimize our inventory
exposure through a variety of inventory management procedures and policies, including our rapid-turn
inventory model, as well as vendor price protection and product return programs. However, if we were unable
to maintain our rapid-turn inventory model, if there were unforeseen product developments or if vendors were
to change their terms and conditions, our inventory risks could increase. We also periodically take advantage
of cost savings associated with certain opportunistic bulk inventory purchases offered by our vendors. These
bulk purchases could increase our exposure to inventory obsolescence.
Our future operating results may fluctuate significantly. We may experience significant variations in our
future quarterly results of operations. These fluctuations may result from many factors, including the condition
of the information technology industry in general, shifts in demand and pricing for hardware and software
products and the introduction of new products or upgrades. Our operating results are also highly dependent on
our level of gross profit as a percentage of net sales. Our gross profit percentage fluctuates due to numerous
factors, some of which may be outside of our control. These factors include: