EMC 2003 Annual Report Download - page 31

Terrorist acts or acts of war may cause damage or disruption to our employees, facilities, customers, partners, suppliers and distributors and resellers,
which could have a material adverse effect on our business, results of operations or financial condition. Such conflicts may also cause damage or disruption to
transportation and communication systems and to our ability to manage logistics in such an environment, including receipt of components and distribution of
products.
Our business may suffer if we are unable to retain or attract key personnel.
Our business depends to a significant extent on the continued service of senior management and other key employees, the development of additional
management personnel and the hiring of new qualified employees. There can be no assurance that we will be successful in retaining existing personnel or
recruiting new personnel. The loss of one or more key or other employees, our inability to attract additional qualified employees or the delay in hiring key
personnel could have a material adverse effect on our business, results of operations or financial condition.
Historically uneven sales patterns could significantly impact our quarterly revenues and earnings.
Our quarterly sales have historically reflected an uneven pattern in which a disproportionate percentage of a quarter's total sales occur in the last month
and weeks and days of each quarter. This pattern makes prediction of revenues, earnings and working capital for each financial period especially difficult and
uncertain and increases the risk of unanticipated variations in quarterly results and financial condition. We believe this uneven sales pattern is a result of many
factors including:
the size of our product and services prices in relation to our customers' budgets, resulting in long lead times for customers' budgetary approval,
which tends to be given late in a quarter
the tendency of customers to wait until late in a quarter to commit to purchase in the hope of obtaining more favorable pricing from one or more
competitors seeking their business
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the fourth quarter influence of customers' spending their remaining capital budget authorization prior to new budget constraints in the first quarter
of the following year
seasonal influences
Our uneven sales pattern also makes it extremely difficult to predict near-term demand and adjust manufacturing capacity accordingly. If predicted
demand is substantially greater than orders, there will be excess inventory. Alternatively, if orders substantially exceed predicted demand, the ability to
assemble, test and ship orders received in the last weeks and days of each quarter may be limited, which could materially adversely affect quarterly revenues
and earnings.
In addition, our revenues in any quarter are substantially dependent on orders booked and shipped in that quarter and our backlog at any particular time is
not necessarily indicative of future sales levels. This is because:
we assemble our products on the basis of our forecast of near-term demand and maintain inventory in advance of receipt of firm orders from
customers
we generally ship products shortly after receipt of the order
customers may reschedule or cancel orders with little or no penalty
Loss of infrastructure, due to factors such as an information systems failure, loss of public utilities or extreme weather conditions, could impact our
ability to ship products in a timely manner. Delays in product shipping or an unexpected decline in revenues without a corresponding and timely slowdown in
expenses, could intensify the impact of these factors on our business, results of operations and financial condition.
Risks associated with our distribution channels may materially adversely affect our financial results.
In addition to our direct sales force, we have agreements in place with many distributors, systems integrators, resellers and original equipment
manufacturers to market and sell our products and services. We may, from time to time, derive a significant percentage of our revenues from such distribution
channels. Our financial results could be materially adversely affected if our contracts with channel partners were terminated, if our relationship with channel
partners were to deteriorate or if the financial condition of our channel partners were to weaken. In addition, as our market opportunities change, we may have
an increased reliance on channel partners, which may negatively impact our gross margins. There can be no assurance that we will be successful in
maintaining or expanding these channels. If we are not successful, we may lose sales opportunities, customers and market share. Furthermore, the partial
reliance on channel partners may materially reduce the visibility to our management of potential customers and demand for products and services, thereby
making it more difficult to accurately forecast such demand. In addition, there can be no assurance that our channel partners will not develop, market or sell
products or services in competition with us in the future.
Changes in foreign conditions could impair our international operations.
A substantial portion of our revenues is derived from sales outside the United States. In addition, a substantial portion of our products is manufactured
outside of the United States. Accordingly, our future results could be materially adversely affected by a variety of factors, including changes in foreign
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