Citrix 2013 Annual Report Download - page 25

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• variability of foreign economic, political and labor conditions;
• changing restrictions imposed by regulatory requirements, tariffs or other trade barriers or by U.S. export laws;
• regional data privacy laws that apply to the transmission of our customers’ data across international borders;
• health or similar issues such as pandemic or epidemic;
• difficulties in staffing and managing international operations;
• 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.
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 approximately 14% of our net revenues in 2013. 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.
Our Cloud Networking business could suffer if there are any interruptions or delays in the supply of hardware or hardware
components from our third-party sources.
We rely on a concentrated number of third-party suppliers, who provide hardware or hardware components for our Cloud
Networking products, and contract manufacturers. If we are required to change suppliers, there could be a delay in the supply
of our hardware or hardware components and our ability to meet the demands of our customers could be adversely affected,
which could cause the loss of Cloud Networking sales and existing or potential customers and delayed revenue recognition and
adversely affect our results of operations. While we have not, to date, experienced any material difficulties or delays in the
manufacture and assembly of our Cloud Networking 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 their ability to meet our demand.
We are exposed to fluctuations in foreign currency exchange rates, which could adversely affect our future operating
results.
Our results of operations are subject to fluctuations in exchange rates, which could adversely affect our future revenue
and overall operating results. In order to minimize volatility in earnings associated with fluctuations in the value of foreign
currency relative to the U.S. dollar, we use financial instruments to hedge our exposure to foreign currencies as we deem
appropriate for a portion of our expenses, which are denominated in the local currency of our foreign subsidiaries. We generally
initiate our hedging of currency exchange risks one year in advance of anticipated foreign currency expenses for those