Dell 2011 Annual Report Download - page 21

Table of Contents
security of user data. Our ability to execute transactions and to possess and use personal information and data in conducting our business subjects us to
legislative and regulatory burdens that may require us to notify customers or employees of a data security breach. We have incurred, and will continue to
incur, significant expenses to comply with mandatory privacy and security standards and protocols imposed by law, regulation, industry standards, or
contractual obligations.
•Our performance could be adversely affected by our failure to hedge effectively our exposure to fluctuations in foreign currency exchange rates
and interest rates.
We utilize derivative instruments to hedge our exposure to fluctuations in foreign currency exchange rates and interest rates. Some of these instruments and
contracts may involve elements of market and credit risk in excess of the amounts recognized in our financial statements. If we are not successful in
monitoring our foreign exchange exposures and conducting an effective hedging program, our foreign currency hedging activities may not offset the impact of
fluctuations in currency exchange rates on our future results of operations and financial position.
•The expiration of tax holidays or favorable tax rate structures, or unfavorable outcomes in tax audits and other tax compliance matters, could
result in an increase in our current tax expense or our effective income tax rate in the future.
Portions of our operations are subject to a reduced tax rate or are free of tax under various tax holidays that expire in whole or in part from time to time. Many
of these holidays may be extended when certain conditions are met, or terminated if certain conditions are not met. If the tax holidays are not extended, or if
we fail to satisfy the conditions of the reduced tax rate, then our effective tax rate would increase in the future. Our effective tax rate could also increase if our
geographic sales mix changes. We are under audit in various tax jurisdictions. An unfavorable outcome in certain of these matters could result in a substantial
increase to our tax expense. In addition, changes in tax laws (including U.S. taxes on foreign operations) could adversely affect our operations and
profitability.
•Our profitability could suffer from any impairment of our portfolio investments.
We invest a significant portion of our available funds in a portfolio consisting primarily of debt securities of various types and maturities pending the
deployment of these funds in our business. Our earnings performance could suffer from any impairment of our investments. Our portfolio securities generally
are classified as available-for-sale and are recorded on our Consolidated Statements of Financial Position at fair value. If any such investments experience
market price declines, we may recognize in earnings the decline in the fair market value of such investments below their cost or carrying value when the
decline is determined to be other than temporary.
•Unfavorable results of legal proceedings could harm our business and result in substantial costs.
We are involved in various claims, suits, investigations, and legal proceedings that arise from time to time in the ordinary course of our business, including
those described elsewhere in this report. Additional legal claims or regulatory matters may arise in the future and could involve stockholder, consumer,
government regulatory and compliance, intellectual property, antitrust, tax, and other issues on a global basis. Litigation is inherently unpredictable.
Regardless of the merits of the claims, litigation may be both time-consuming and disruptive to our business. We could incur judgments or enter into
settlements of claims that could adversely affect our operating results or cash flows in a particular period. In addition, our business, operating results, and
financial condition could be adversely affected if any infringement or other intellectual property claim made against us by any third-party is successful, or if
we fail to develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions.
•Our success depends on our ability to attract, retain, and motivate our key employees.
We rely on key personnel, including our CEO and executive leadership team, to support anticipated continued rapid international growth and increasingly
complex product and services offerings. We may not be able to attract, retain, and motivate the key professional, technical, marketing, and staff resources we
need.
•We face risks relating to any inability to maintain strong internal controls.
If management is not successful in maintaining a strong internal control environment, investors could lose confidence in our reported financial information.
This could lead to a decline in our stock price, limit our ability to access the
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