Ingram Micro 2006 Annual Report Download - page 35

gross margins, the impact of the risk factors stated below may magnify the impact on our operating results and/or
financial condition.
We continue to experience intense competition across all markets for our products and services. Our
competitors include regional, national, and international distributors, as well as suppliers that employ a direct-sales
model. As a result of intense price competition in the IT products and services distribution industry, our gross
margins have historically been narrow and we expect them to continue to be narrow in the future. In addition, when
there is overcapacity in our industry, our competitors may reduce their prices in response to this overcapacity. We
offer no assurance that we will not lose market share, or that we will not be forced in the future to reduce our prices
in response to the actions of our competitors and thereby experience a further reduction in our gross margins.
Furthermore, to remain competitive we may be forced to offer more credit or extended payment terms to our
customers. This could increase our required capital, financing costs, and the amount of our bad debt expenses. We
have also initiated and expect to continue to initiate other business activities and may face competition from
companies with more experience and/or from new entries in those new markets. As we enter new business areas, we
may encounter increased competition from current competitors and/or from new competitors, some of which may
be our current customers or suppliers, which may negatively impact our sales or profitability.
We have made and expect to continue to make investments in new business strategies and initiatives,
including acquisitions, which could disrupt our business and have an adverse effect on our operating results.
We have invested and may invest in the future in new business strategies or engage in acquisitions that complement
our strategic direction. Such endeavors may involve significant risks and uncertainties, including distraction of
management’s attention away from normal business operations; insufficient revenue generation to offset liabilities
assumed and expenses associated with the strategy; difficulty in the integration of new employees, business systems
and technology; inability to adapt to challenges of a new market; exposure to new regulations; and issues not
discovered in our due diligence process. These factors could adversely affect our operating results or financial
condition.
We operate a global business that exposes us to risks associated with international activities. We have
local sales offices and/or sales representatives in over 35 countries, and sell our products and services to resellers in
more than 150 countries. A large portion of our revenue is derived from our international operations. As a result, our
operating results and financial condition could be significantly affected by risks associated with international
activities, including trade protection laws, policies and measures; tariffs; export license requirements; economic
and labor conditions; political or social unrest; economic instability or natural disasters in a specific country or
region, such as hurricanes and tsunamis; environmental and trade protection measures and other regulatory
requirements; health or similar issues such as the outbreak of the avian flu; tax laws in various jurisdictions around
the world (as experienced in our Brazilian subsidiary); difficulties in staffing and managing international oper-
ations; and changes in the value of the U.S. dollar versus the local currency in which the products are sold and goods
and services are purchased, including devaluation and revaluation of local currencies. We manage our exposure to
fluctuations in the value of currencies and interest rates using a variety of financial instruments. However, we may
not be able to adequately mitigate all foreign currency related risks.
We are dependent on a variety of information systems and a failure of these systems as well as
infrastructure could disrupt our business and harm our reputation and net sales. We depend on a variety of
information systems for our operations, particularly our centralized IMpulse information processing system, which
supports operational functions that include inventory management, order processing, shipping, receiving, and
accounting. At the core of IMpulse is on-line, real-time distribution software, which supports basic order entry and
processing and customers’ shipments and returns. Although we have not in the past experienced material system-
wide failures or downtime of IMpulse or any of our other information systems, we have experienced failures in
IMpulse in certain specific geographies. Failures or significant downtime for IMpulse could prevent us from taking
customer orders, printing product pick-lists, and/or shipping product. It could also prevent customers from
accessing our price and product availability information. From time to time we may acquire other businesses
having information systems and records, which may be converted and integrated into IMpulse or other Ingram
Micro information systems. This can be a lengthy and expensive process that results in a material diversion of
resources from other operations. In addition, because IMpulse is comprised of a number of legacy, internally
developed applications, it can be harder to upgrade, and may not be adaptable to commercially available software.
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