Ingram Micro 2008 Annual Report Download - page 26

some of which were caused by organized attacks. In addition, some websites have experienced security break-
downs. To date, our website has not experienced any material breakdowns, disruptions or breaches in security;
however, we cannot assure that this will not occur in the future. If we were to experience a security breakdown,
disruption or breach that compromised sensitive information, this could harm our relationship with our customers,
suppliers or associates. Disruption of our website or the Internet in general could impair our order processing or
more generally prevent our customers and suppliers from accessing information. This could cause us to lose
business.
Terminations of a supply or services agreement or a significant change in supplier terms or conditions of
sale could negatively affect our operating margins, revenue or the level of capital required to fund our
operations. A significant percentage of our net sales relates to products sold to us by relatively few suppliers or
publishers. As a result of such concentration risk, terminations of supply or services agreements, or a significant
change in the terms or conditions of sale from one or more of our more significant partners, or bankruptcy or closure
of business by one or more of our more significant partners could negatively affect our operating margins, revenues
or the level of capital required to fund our operations. Our suppliers have the ability to make, and in the past have
made, rapid and significantly adverse changes in their sales terms and conditions, such as reducing the amount of
price protection and return rights as well as reducing the level of purchase discounts and rebates they make available
to us. In most cases, we have no guaranteed price or delivery agreements with suppliers. In certain product
categories, such as systems, limited price protection or return rights offered by suppliers may have a bearing on the
amount of product we may be willing to stock. We expect restrictive supplier terms and conditions to continue in the
foreseeable future. Our inability to pass through to our reseller customers the impact of these changes, as well as our
failure to develop systems to manage ongoing supplier programs, could cause us to record inventory write-downs or
other losses and could have a material negative impact on our gross margins.
We receive purchase discounts and rebates from suppliers based on various factors, including sales or purchase
volume and breadth of customers. These purchase discounts and rebates may affect gross margins. Many purchase
discounts from suppliers are based on percentage increases in sales of products. Our operating results could be
negatively impacted if these rebates or discounts are reduced or eliminated or if our vendors significantly increase
the complexity of process and costs for us to receive such rebates.
Our ability to obtain particular products or product lines in the required quantities and to fulfill customer orders
on a timely basis is critical to our success. The IT industry experiences significant product supply shortages and
customer order backlogs from time to time due to the inability of certain suppliers to supply certain products on a
timely basis. As a result, we have experienced, and may in the future continue to experience, short-term shortages of
specific products. In addition, suppliers who currently distribute their products through us may decide to shift to or
substantially increase their existing distribution, through other distributors, their own dealer networks, or directly to
resellers or end-users. Suppliers have, from time to time, made efforts to reduce the number of distributors with
which they do business. This could result in more intense competition as distributors strive to secure distribution
rights with these vendors, which could have an adverse effect on our operating results. If suppliers are not able to
provide us with an adequate supply of products to fulfill our customer orders on a timely basis or we cannot
otherwise obtain particular products or a product line or suppliers substantially increase their existing distribution
through other distributors, their own dealer networks, or directly to resellers, our reputation, sales and profitability
may suffer.
Changes in, or interpretations of, tax rules and regulations may adversely affect our effective income tax
rates or operating margins and we may be required to pay additional tax assessments. Unanticipated changes
in our tax rates could also affect our future results of operations. Our future effective income tax rates or operating
margins could also be unfavorably affected by unanticipated decreases in the amount of revenue or earnings in
countries in low statutory tax rates, or by changes in the valuation of our deferred tax assets and liabilities. In
addition, we are subject to the continuous examination of our income tax returns by the Internal Revenue Service
and other domestic and foreign tax authorities. We regularly evaluate our tax contingencies and uncertain tax
positions to determine the adequacy of our provision for income and other taxes based on the technical merits and
the likelihood of success resulting from tax examinations. Any adverse outcome from these continuous exam-
inations may have an adverse effect on our operating results and financial position.
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