Ingram Micro 2010 Annual Report Download - page 22

We continually experience intense competition across all markets for our products and services. Our
competitors include local, 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 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 entrants in those markets. As we enter new areas of business or geographies, or we
expand our offerings of new products or vendors, we may encounter increased competition from current com-
petitors and/or from new competitors, some of which may be our current customers or suppliers, which may
negatively impact our sales or profitability.
We are dependent on a variety of information systems, which, if not properly functioning or available
could adversely disrupt our business and harm our reputation and net sales. We depend on a variety of
information systems for our operations, many of which are proprietary, which have historically supported many of
our business operations such as inventory and order management, shipping, receiving, and accounting. Because
most of our information systems consist of a number of internally developed applications, it can be more difficult to
upgrade or adapt them compared to commercially available software solutions.
We are in the process of implementing a new company-wide single enterprise resource planning (“ERP”)
software system and related business processes to further improve company efficiencies on a global basis. We began
committing resources to this conversion process in 2007, and deployment of the new solution commenced in 2009
and is expected to be completed over the next several years. This conversion is being managed in well-defined
stages to consolidate and rationalize a wide range of core processes and legacy systems that will be transitioned to
standard and consistent business processes integrated globally. We are following a project plan that we believe
provides for a reasonable allocation of resources for the conversion program. However, execution of such a plan, or
a divergence from it, may result in cost overruns, project delays, or business interruptions. Furthermore, divergence
from our project plan could impact the timing and/or extent of benefits we expect to achieve from the system and
process efficiencies.
Any disruptions, delays or deficiencies in the design and implementation of the new ERP system, or in the
performance of our legacy systems, particularly any disruptions, delays or deficiencies that impact our operations,
could adversely affect our ability to effectively run and manage our business and potentially for our customers to
access our price and product availability information. Further, as we are dependent upon our ability to gather and
promptly transmit accurate information to key decision makers, our business, results of operations and financial
condition may be adversely affected if our information systems do not allow us to transmit accurate information,
even for a short period of time. We may also be limited in our ability to integrate any new business that we may
acquire. Failure to properly or adequately address these issues could impact our ability to perform necessary
business operations, which could adversely affect our reputation, competitive position, business, results of
operations and financial condition.
Finally, we also rely on the Internet for a significant percentage of our orders and information exchanges with
our customers. The Internet and individual websites have experienced a number of disruptions and slowdowns,
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.
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