GameStop 2006 Annual Report Download - page 30

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our Company. The risks described below are not the only ones facing our Company. Additional risks not presently
known to us, or that we consider immaterial, may also impair our business operations. Any of the following risks
could materially adversely affect our business, operating results or financial condition, and could cause a decline in
the trading price of our common stock and the value of your investment.
Risks Related to Our Business
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, or
limited allocations, 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 worldwide are Microsoft, Sony, Nintendo and Electronic
Arts, which accounted for 14%, 13%, 11% and 10%, respectively, of our new product purchases in fiscal 2006. 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 websites. 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.
The electronic game industry is cyclical, which could cause significant fluctuation in our earnings.
The electronic game industry has been cyclical in nature in response to the introduction and maturation of new
technology. Following the introduction of new video game platforms, sales of these platforms and related software
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