Citrix 2012 Annual Report Download - page 24

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• longer accounts receivable payment cycles;
• potentially adverse tax consequences;
• difficulties in protecting intellectual property;
• burdens of complying with a wide variety of foreign laws; and
• as we generate cash flow in non-U.S. jurisdictions, if required, we may experience difficulty transferring such
funds to the U.S. in a tax efficient manner.
Our success depends, in part, on our ability to anticipate and address these risks. We cannot guarantee that these or other
factors will not adversely affect our business or results of operations.
Our business could be harmed if we do not effectively manage our direct sales force alone and in combination with our
distribution channels.
We utilize a direct sales force, as well as a network of distribution channels, to sell our products and services. We may
experience difficulty in hiring, retaining and motivating our direct sales force team, and sales representatives will require
substantial amounts of training, including regular updates to cover new and upgraded products and services, particularly in
connection with our acquisitions. Moreover, our recent hires and sales personnel added through our recent acquisition activity
may not become as productive as we would like, as in most cases it takes a significant period of time before they achieve full
productivity.
Successfully managing the interaction of our direct sales force and channel partners to reach various potential customers
for our products and services is a complex process. If we are unsuccessful in balancing the growth and expansion of our various
sales channels, growth in one area might harm our relationships or efforts in another channel. In addition, each sales channel
has distinct risks and costs, and therefore, our failure to implement the most advantageous balance in the sales model for our
products and services could materially and adversely affect our revenue and profitability.
We rely on indirect distribution channels and major distributors that we do not control.
We rely significantly on independent distributors and resellers to market and distribute our products and appliances. For
instance, one distributor, Ingram Micro, accounted for 16% of our net revenues in 2012. Our distributor arrangements with
Ingram Micro consist of several non-exclusive, independently negotiated agreements with our subsidiaries, each of which cover
different countries or regions. In addition, our reseller base is relatively concentrated. We maintain and periodically revise our
sales incentive programs for our independent distributors and resellers, and such program revisions may adversely impact our
results of operations. Our competitors may in some cases be effective in providing incentives to current or potential distributors
and resellers to favor their products or to prevent or reduce sales of our products. The loss of or reduction in sales to our
distributors or resellers could materially reduce our revenues. Further, we could maintain individually significant accounts
receivable balances with certain distributors. The financial condition of our distributors could deteriorate and distributors could
significantly delay or default on their payment obligations. Any significant delays, defaults or terminations could have a
material adverse effect on our business, results of operations and financial condition.
We plan to diversify our base of channel relationships by adding and training more channel members with abilities to
reach larger enterprise customers and to sell our newer products. We also plan to create relationships with new channel
partners, such as systems integrators and OEMs. In addition to this diversification of our base, we will need to maintain a
healthy mix of channel members who service smaller customers. We may need to add and remove distribution members to
maintain customer satisfaction and a steady adoption rate of our products, which could increase our operating expenses.
Through our Citrix Partner Network and other programs, we are currently investing, and intend to continue to invest,
significant resources to develop these channels, which could reduce our profits.
For certain of our products we rely on third-party suppliers and contract manufacturers, making us vulnerable to supply
problems and price fluctuations.
We rely on a concentrated number of third-party suppliers, who provide hardware or hardware components for our
products, and contract manufacturers. For example, the production, final test, warehousing and shipping for our Networking
and Cloud products that contain a hardware component, are primarily performed by a third-party contract manufacturer. We do
not typically have long-term supply agreements with our suppliers; and, in most cases, we purchase the products and
components on an as-needed purchase order basis. While we have not, to date, experienced any material difficulties or delays in
the manufacture and assembly of our products, our suppliers may encounter problems during manufacturing due to a variety of
reasons, including failure to follow specific protocols and procedures, failure to comply with applicable regulations, or the need
to implement costly or time-consuming protocols to comply with applicable regulations (including regulations related to
conflict minerals), equipment malfunction, natural disasters and environmental factors, any of which could delay or impede