GameStop 2005 Annual Report Download - page 24

Download and view the complete annual report

Please find page 24 of the 2005 GameStop annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 120

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120

We may fail to realize the anticipated synergies, cost savings and other benefits expected from the
mergers.
The future success of GameStop will depend, in part, on our ability to realize the anticipated growth
opportunities and cost savings from combining the businesses of Historical GameStop and EB. We estimate that
cost savings and operating synergies resulting from the mergers will be approximately $70 to $80 million annually
beginning in fiscal 2006. Such cost savings and operating synergies are expected to be realized by capitalizing on
consolidation and integration of certain functions as well as through the adoption of best practices from both
Historical GameStop and EB. However, to realize the anticipated benefits from the mergers, we must successfully
combine the businesses of Historical GameStop and EB in a manner that permits those cost savings synergies to be
realized. In addition, we must achieve these savings without adversely affecting our revenues. If we are not able to
successfully achieve these objectives, the anticipated benefits of the mergers may not be realized fully or at all or
may take longer to realize than expected.
We depend upon our key personnel and they would be difficult to replace.
Our success depends upon our ability to attract, motivate and retain key management for our stores and skilled
merchandising, marketing and administrative personnel at our headquarters. We depend upon the continued
services of our key executive officers, R. Richard Fontaine, our Chairman of the Board and Chief Executive Officer,
Daniel A. DeMatteo, our Vice Chairman and Chief Operating Officer, Steven R. Morgan, our President, and David
W. Carlson, our Executive Vice President and Chief Financial Officer. The loss of services of any of our key
personnel could have a negative impact on our business.
We depend upon the timely delivery of products.
We depend on major hardware manufacturers, primarily Sony, Nintendo and Microsoft, to deliver new and
existing video game platforms on a timely basis and in anticipated quantities. In addition, we depend on software
publishers to introduce new and updated software titles. Any material delay in the introduction or delivery of
hardware platforms or software titles could result in reduced sales in one or more fiscal quarters.
We depend upon third parties to develop products and software.
Our business depends upon the continued development of new and enhanced video game platforms, PC
hardware and video game and PC entertainment software. Our business could suffer due to the failure of
manufacturers to develop new or enhanced video game platforms, a decline in the continued technological
development and use of multimedia PCs, or the failure of software publishers to develop popular game and
entertainment titles for current or future generation video game systems or PC hardware.
Our ability to obtain favorable terms from our suppliers may impact our financial results.
Our financial results depend significantly upon the business terms we can obtain from our suppliers, including
competitive prices, unsold product return policies, advertising and market development allowances, freight charges
and payment terms. We purchase substantially all of our products directly from manufacturers, software publishers
and approximately five distributors. Our largest vendors are Sony, Microsoft and Electronic Arts, which accounted
for 18%, 13% and 11%, respectively, of our new product purchases in fiscal 2005. If our suppliers do not provide us
with favorable business terms, we may not be able to offer products to our customers at competitive prices.
If our vendors fail to provide marketing and merchandising support at historical levels, our sales and
earnings could be negatively impacted.
The manufacturers of video game hardware and software and PC entertainment software have typically
provided retailers with significant marketing and merchandising support for their products. As part of this support,
we receive cooperative advertising and market development payments from these vendors. These cooperative
advertising and market development payments enable us to actively promote and merchandise the products we sell
and drive sales at our stores and on our website. We cannot assure you that vendors will continue to provide this
support at historical levels. If they fail to do so, our sales and earnings could be negatively impacted.
15