EMC 2006 Annual Report Download - page 11

Table of Contents
ITEM 1A. RISK FACTORS
This Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Federal securities laws, about our business and
prospects. The forward-looking statements do not include the potential impact of any mergers, acquisitions, divestitures or business combinations that may be
announced after the date hereof. Our future results may differ materially from our past results and from those projected in the forward-looking statements due
to various uncertainties and risks, including but not limited to those set forth below, one-time events and other important factors disclosed previously and from
time to time in our other filings with the SEC. We disclaim any obligation to update any forward-looking statements contained herein after the date of this
Annual Report.
The risk factors that appear below could materially affect our business, financial condition and results of operations. The risks and uncertainties
described below are not the only risks and uncertainties facing us. Our business is also subject to general risks and uncertainties that affect many other
companies.
Our business could be materially adversely affected as a result of general economic and market conditions.
We are subject to the effects of general global economic and market conditions. If these conditions deteriorate, our business, results of operations or
financial condition could be materially adversely affected.
Our business could be materially adversely affected as a result of a lessening demand in the information technology market.
Our revenue and profitability depend on the overall demand for our products and services. Delays or reductions in IT spending, domestically or
internationally, could materially adversely affect demand for our products and services which could result in decreased revenues or earnings.
Competitive pricing, sales volume, mix and component costs could materially adversely affect our revenues, gross margins and earnings.
Our gross margins are impacted by a variety of factors, including competitive pricing, component and product design costs as well as the volume and
relative mixture of product and services revenues. Increased component costs, increased pricing pressures, the relative and varying rates of increases or
decreases in component costs and product price, changes in product and services revenue mixture or decreased volume could have a material adverse effect on
our revenues, gross margins or earnings.
The costs of third-party components comprise a significant portion of our product costs. While we generally have been able to manage our component
and product design costs, we may have difficulty managing such costs if supplies of certain components become limited or component prices increase. Any
such limitation could result in an increase in our component costs. An increase in component or design costs relative to our product prices could have a
material adverse effect on our gross margins and earnings. Moreover, certain competitors may have advantages due to vertical integration of their supply
chain, which may include disk drives, microprocessors, memory components and servers.
The markets in which we do business are highly competitive and we encounter aggressive price competition for all of our products and services from
numerous companies globally. There also has been and may continue to be a willingness on the part of certain competitors to reduce prices or provide
information infrastructure products or services, together with other IT products or services, at minimal or no additional cost in order to preserve or gain
market share. Such price competition may result in pressure on our product and service prices, and reductions in product and service prices may have a
material adverse effect on our revenues, gross margins and earnings. We currently believe that pricing pressures are likely to continue.
If our suppliers are not able to meet our requirements, we could have decreased revenues and earnings.
We purchase or license many sophisticated components and products from one or a limited number of qualified suppliers, including some of our
competitors. These components and products include disk drives, high density memory components, power supplies and software developed and maintained
by third parties. We have experienced delivery delays from time to time because of high industry demand or the inability of some vendors to consistently meet
our quality or delivery requirements. If any of our suppliers were to cancel or materially change contracts or commitments with us or fail to meet the quality
or delivery requirements needed to satisfy customer orders for our products, we could lose time-sensitive customer orders, be unable to develop or sell certain
products cost-effectively or on a timely basis, if at all, and have significantly decreased quarterly revenues and earnings, which would have a material adverse
effect on our business, results of operations and financial condition. Additionally, we periodically transition our product line to incorporate new technologies.
The importance of transitioning our customers smoothly to new technologies, along with our historically uneven pattern of quarterly sales, intensifies the risk
that the failure of a supplier to meet our quality or delivery requirements will have a material adverse impact on our revenues and earnings.
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