CDW 2006 Annual Report Download - page 19

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Sales of Cisco, Hewlett-Packard, IBM, Lenovo, and Microsoft products comprise a substantial
portion of our sales. In 2006, sales of products manufactured by Hewlett-Packard represented
approximately 26% of our total sales and, therefore, we are dependent on the economic condition
and product competitiveness of, and our business relationship with, this manufacturer in particular. In
addition, although we purchase from a diverse vendor base, in 2006, products we purchased from
distributors Tech Data and Ingram Micro represented approximately 16% and 14%, respectively, of
our total purchases. The loss of, or change in business relationship with, any of these or any other
key vendors, or the diminished availability of their products, could reduce the supply and increase the
cost of products we sell and negatively impact our competitive position. Additionally, the relocation of
key distributors utilized in our purchasing model could adversely impact our results of operations.
Although to date mergers among manufacturers have not had an adverse impact on our business
and results of operations, further consolidation could adversely impact us.
The success of our business depends on the continuing development, maintenance and
operation of our information technology systems. Our success is dependent on the accuracy, proper
utilization and continuing development of our information technology systems, including our business
application systems, Web servers and telephony system. The quality and our utilization of the
information generated by our information technology systems, and our success in implementing new
systems and upgrades, affects, among other things, our ability to:
• conduct business with our customers;
• manage our inventory and accounts receivable;
• purchase, sell, ship and invoice our products efficiently and on a timely basis; and
• maintain our cost-efficient operating model.
The integrity of our information technology systems is vulnerable to certain forms of disaster
including, but not limited to, natural disasters such as tornadoes. While we have taken steps to
protect our information technology systems from a variety of threats, including computer viruses and
malicious hackers, there can be no guarantee that those steps will be effective. Furthermore,
although we have redundant systems at a separate location to back up our primary application
systems, there can be no assurance that these redundant systems will operate properly if and when
required. Any disruption to or infiltration of our information technology systems could significantly
harm our business and results of operations.
Our sales are dependent on the continued development and application of new technologies and
products. The market for information technology products and services has evolved as a result of the
development of new technologies that are transformed by manufacturers into new products and
applications. We have been and will continue to be dependent on the development of new
technologies and products by manufacturers, as well as the acceptance of those technologies and
products by customers. A decrease in the rate of development of new 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 and profitability 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 information technology products and accessories is highly competitive.
Our competition includes: