CompUSA 2010 Annual Report Download - page 61

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being replaced currently. The occurrence of a significant system failure, electrical or telecommunications outages or our
failure to expand or successfully implement new systems could have a material adverse effect on our results of operations.
Our information systems networks, including our websites, and applications could be adversely affected by viruses or
worms and may be vulnerable to malicious acts such as hacking. The availability and efficiency of sales via our websites
could also be adversely affected by “denial of service” attacks and other unfair competitive practices. Although we take
preventive measures, these procedures may not be sufficient to avoid harm to our operations, which could have an adverse
effect on our results of operations.
We rely on third party suppliers for most of our products and services. The loss or interruption of these relationships could
impact our sales volumes, the levels of inventory we must carry, and/or result in sales delays and/or higher inventory costs
from new suppliers. Coop advertising and other sales incentives provided by our suppliers could decrease in the future
thereby increasing our expenses and adversely affecting our results of operations and cash flows.
We purchase substantially all of our technology products from major distributors and directly from large manufacturers
who may deliver those products directly to our customers. These relationships enable us to make available to our
customers a wide selection of products without having to maintain large amounts of inventory. The termination or
interruption of our relationships with any of these suppliers could materially adversely affect our business.
We purchase a number of our products from vendors outside of the United States. Difficulties encountered by one or
several of these suppliers could halt or disrupt production and delay completion or cause the cancellation of our orders.
Delays or interruptions in the transportation network could result in loss or delay of timely receipt of product required to
fulfill customer orders. Our ability to find qualified vendors who meet our standards and supply products in a timely and
efficient manner is a significant challenge, especially with respect to goods sourced from outside the U.S. Political or
financial instability, merchandise quality issues, product safety concerns, trade restrictions, work stoppages, tariffs, foreign
currency exchange rates, transportation capacity and costs, inflation, civil unrest, outbreaks of pandemics and other factors
relating to foreign trade are beyond our control. These and other issues affecting our vendors could materially adversely
affect our revenue and gross profit.
Our PC products contain electronic components, subassemblies and software that in some cases are supplied through sole
or limited source third-party suppliers, some of which are located outside of the U.S. Although we do not anticipate any
problems procuring supplies in the near-term, there is no assurance that parts and supplies will be available in a timely
manner and at reasonable prices. Any loss of, or interruption of, supply from key suppliers may require us to find new
suppliers. This could result in production or development delays while new suppliers are located, which could
substantially impair operating results. If the availability of these or other components used in the manufacture of our
products was to decrease, or if the prices for these components were to increase significantly, operating costs and expenses
could be adversely affected.
Many product suppliers provide us with co-op advertising support in exchange for featuring their products in our catalogs
and on our internet sites. Certain suppliers provide us with other incentives such as rebates, reimbursements, payment
discounts, price protection and other similar arrangements. These incentives are offset against cost of goods sold or selling,
general and administrative expenses, as applicable. The level of co-op advertising support and other incentives received
from suppliers may decline in the future, which could increase our cost of goods sold or selling, general and administrative
expenses and have an adverse effect on results of operations and cash flows.
We currently offer a wide variety of products manufactured in Japan or utilizing Japanese components. In this regard, the
recent and still unfolding events in Japan could adversely impact our ability to source products manufactured in Japan as
well as products manufactured elsewhere utilizing Japanese components, and such events are expected to result in higher
prices for available products. If we are unable to source such products, procure alternative product sources or pass along
such price increases, our sales and margins could be materially adversely affected.
Goodwill and intangible assets may become impaired resulting in a charge to earnings.
The acquisition of certain assets of CompUSA, CircuitCity and the purchase of the stock of WStore Europe SA resulted in
the recording of significant intangible assets and or goodwill. We are required to test goodwill and intangible assets
annually to determine if the carrying values of these assets are impaired or on a more frequent basis if indicators of
impairment exist. If any of our goodwill or intangible assets are determined to be impaired we may be required to record a
significant charge to earnings in the period during which the impairment is discovered.
Our substantial international operations are subject to risks such as fluctuations in currency rates (which can adversely
impact foreign revenues and profits when translated to US Dollars), foreign regulatory requirements, political uncertainty
and the management of our growing international operations.