Dell 2010 Annual Report Download - page 20

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Table of Contents
reductions in debt availability and could limit our ability to continue asset securitizations or other financings from debt or
capital sources, reduce the amount of financing receivables that we originate, or negatively affect the costs or terms on which
we may be able to obtain capital. Any of these developments could unfavorably affect our net revenue, profitability, and cash
flows.
• Loss of government contracts could harm our business.
Contracts with the U.S. federal, state and local governments and foreign governments are subject to future funding that may
affect the extension or termination of programs and are subject to the right of the government to terminate for convenience or
non-appropriation. In addition, if we violate legal or regulatory requirements, the applicable government could suspend or
disbar us as a contractor, which would unfavorably affect our net revenue and profitability.
• We are subject to the risk of temporary suspension or debarment from contracting with U.S. federal, state and local
governments as a result of settlements of an SEC investigation by our company and our Chairman and CEO.
As part of our settlements of the SEC investigation into certain disclosure, accounting and financial reporting matters, we and
our Chairman and CEO consented, without admitting or denying the SEC's allegations, to a permanent injunction against future
violations of certain provisions of the federal securities laws. The existence and terms of such injunctions may adversely affect
our business under contracts with U.S. federal, state and local governments. The procurement regulations of federal
governmental agencies and many state and local governments with which we do business generally vest those governments
with broad discretion to suspend or debar companies from product and services contracts for periods of generally up to three
years if the governments determine that companies do not prospectively qualify as currently responsible contracting parties. The
various levels of government could also require us to operate under special reporting and other compliance measures, which
could increase our costs of performance under the applicable contracts.
• The exercise by customers of certain rights under our services contracts, or our failure to perform as we anticipate at the time
we enter services contracts, could adversely affect our revenue and profitability.
Many of our services contracts allow the customer to take the following actions that may adversely affect our revenue and
profitability:
• Terminate the contract if our performance does not meet specified service levels
• Look to a benchmarker's opinion of market rates in order to request a rate reduction or alternatively terminate the contract
• Reduce the customer's use of our services and, as a result, reduce our fees
• Terminate the contract early upon payment of an agreed fee
In addition, we estimate our costs to deliver the services at the outset of the contract. If we fail to estimate accurately, our actual
costs may significantly exceed our estimates, even for a time and materials contract, and we may incur losses on the services
contracts.
• Our business could suffer if we do not develop and protect our own intellectual property or do not obtain or protect licenses to
intellectual property developed by others on commercially reasonable and competitive terms.
If we or our suppliers are unable to develop or protect desirable technology or technology licenses, we may be prevented from
marketing products, could be forced to market products without desirable features, or could incur substantial costs to redesign
products, defend or enforce legal actions, or pay damages. Although our suppliers might be contractually obligated to obtain or
protect such licenses and indemnify us against related expenses, those suppliers could be unable to meet their obligations.
Similarly, we invest in research and development and obtain additional intellectual property through acquisitions, but these
activities do not guarantee that we will develop or obtain intellectual property necessary for profitable
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