Dell 2007 Annual Report Download - page 16

Table of Contents
• Declining general economic, business, or industry conditions may cause reduced net revenue. We are a global company with
customers in virtually every business and industry. If the economic climate in the U.S. or abroad deteriorates, customers or potential
customers could reduce or delay their technology investments, which could impact our ability to manage inventory levels, collect
customer receivables, and ultimately decrease our net revenue and profitability.
• Failure to reestablish a cost advantage may result in reduced market share, revenue, and profitability. Our success has historically
been based on our ability to profitably offer products at a lower price than our competitors. However, we compete with many
companies globally in all aspects of our business. If our increasing reliance on third-party original equipment manufacturers, original
design manufacturing partnerships, and manufacturing outsourcing relationships fails to generate cost efficiencies, our profitability
could be adversely impacted. Our profitability is also affected by our ability to negotiate favorable pricing with our vendors,
including vendor rebates, marketing funds, and other vendor funding. Because these supplier negotiations are continuous and reflect
the ongoing competitive environment, the variability in timing and amount of incremental vendor discounts and rebates can affect our
profitability. An inability to reestablish our cost advantage or determine alternative means to deliver value to our customers may
adversely affect our market share, revenue, and profitability.
• Our ability to generate substantial non-U.S. net revenue faces many additional risks and uncertainties. Sales outside the
U.S. accounted for approximately 47% of our consolidated net revenue in Fiscal 2008. Our future growth rates and success are
dependent on continued growth outside the U.S., including the key developing countries of Brazil, Russia, India, and China
("BRIC"). Our international operations face many risks and uncertainties, including varied local economic and labor conditions,
political instability, and unexpected changes in the regulatory environment, trade protection measures, tax laws (including U.S. taxes
on foreign operations), copyright levies, and foreign currency exchange rates. Any of these factors could adversely affect our
operations and profitability.
• Our profitability may be affected by our product, customer, and geographic sales mix and by seasonal sales trends. Our profit
margins vary among products, customers, and geographies. In addition, our business is subject to certain seasonal sales trends. For
example, sales to government customers (particularly the U.S. federal government) are typically stronger in our third fiscal quarter,
sales in EMEA are often weaker in our third fiscal quarter, and consumer sales are typically strongest during our fourth fiscal quarter.
As a result of these factors, our overall profitability for any particular period will be affected by the mix of products, customers, and
geographies reflected in our sales for that period, as well as by seasonality trends.
• Infrastructure failures and breaches in data security could harm our business. We depend on our information technology and
manufacturing infrastructure to achieve our business objectives. If a problem, such as a computer virus, intentional disruption by a
third party, natural disaster, manufacturing failure, or telephone system failure impairs our infrastructure, we may be unable to book
or process orders, manufacture, and ship in a timely manner, or otherwise carry on our business. An infrastructure disruption could
damage our reputation and cause us to lose customers and revenue, result in the unintentional disclosure of company or customer
information, and require us to incur significant expense to eliminate these problems and address related data security concerns. The
harm to our business could be even greater if it occurs during a period of disproportionately heavy demand.
• Our failure to effectively manage a product transition could reduce the demand for our products and the profitability of our
operations. Continuing improvements in technology mean frequent new product introductions, short product life cycles, and
improvement in product performance characteristics. Product transitions present execution challenges and risks for any company. If
we are unable to effectively manage a product transition, our business and results of operations could be unfavorably affected.
• Disruptions in component or product availability could unfavorably affect our performance. Our manufacturing and supply chain
efficiencies give us the ability to operate with reduced levels of component and finished goods inventories. Our financial success is
partly due to our supply chain management practices, including our ability to achieve rapid inventory turns. Because we maintain
minimal levels of component and product
12