Ingram Micro 2006 Annual Report Download - page 30

Networking. Our networking category includes networking hardware, communication products and network
security. Networking hardware includes switches, hubs, routers, wireless local area networks, wireless wide area
networks, network interface cards, cellular data cards, network-attached storage and storage area networks.
Communication products incorporate Voice Over Internet Protocol communications, modems, phone systems
and video/audio conferencing. Network security hardware includes firewalls, Virtual Private Networks, intrusion
detection, and authentication devices and appliances.
Services
We offer fee-based services and services that we provide along with our product sales. Our fee-based services
include supply chain services to suppliers and customers desiring to outsource specific supply chain functions
through our Ingram Micro Logistics division in North America and existing business units in other regions. We also
receive compensation for various services, including technical support, financial services, sales and marketing
services, eCommerce services, and licensing solutions.
Although services represent one of the initiatives of our long-term strategy, they have contributed less than
10% of our revenues in the past and may not reach that level in the near term.
Suppliers
Our worldwide suppliers include leading computer hardware suppliers, networking equipment suppliers,
software publishers, CE manufacturers, and AIDC/POS suppliers, such as Acer; Adobe; Advanced Micro Devices
Inc.; Canon USA, Inc.; Computer Associates; Epson;Hewlett-Packard; IBM; InFocus; Intel; Juniper Networks;
Kingston Technology; Lenovo; Lexmark; LG Electronics; Microsoft;Motorola’s Enterprise Mobility business;
NEC Display Solutions; Palm; Philips; Printronix; Samsung; Seagate;Symantec; Tom Tom;Toshiba; ViewSonic
Corporation; Western Digital; Xerox; and Zebra. Products purchased from Hewlett-Packard generated approxi-
mately 22%, 23%, and 22% of our net sales in fiscal years 2006, 2005 and 2004, respectively. There were no other
vendors that represented 10% or more of our net sales in any of the last three years.
Our suppliers generally warrant the products we distribute and allow returns of defective products, including
those returned to us by our customers. We do not independently warrant the products we distribute; however, local
laws might impose warranty obligations upon distributors (such as in the case of supplier liquidation). We do
warrant services, products that we build-to-order from components purchased from other sources, and our own
branded products. Provision for estimated warranty costs is recorded at the time of sale and periodically adjusted to
reflect actual experience. Historically, warranty expense has not been material.
We have written distribution agreements with many of our suppliers; however, these agreements usually
provide for nonexclusive distribution rights and often include territorial restrictions that limit the countries in which
we can distribute the products. The agreements also are generally short term, subject to periodic renewal, and often
contain provisions permitting termination by either party without cause upon relatively short notice. Certain
distribution agreements either require (at our option) or allow for the repurchase of inventory upon termination of
the agreement. For those agreements where inventory returns upon termination are not required, in practice many
suppliers will elect to repurchase the inventory while other suppliers will either assist with liquidation or resale of
the inventory.
Competition
We operate in a highly competitive environment in each of the regions in which we operate (North America,
Europe, Asia-Pacific and Latin America). Factors that we compete on include:
• ability to tailor specific solutions to customer needs;
• availability of technical and product information;
• credit terms and availability;
• effectiveness of sales and marketing programs;
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