National Oilwell Varco 2010 Annual Report Download - page 16

The Petroleum Services & Supplies segments customers for tubular services include major and independent oil and gas companies, national oil
companies, oilfield equipment and product distributors and manufacturers, drilling and workover contractors, oilfield service companies, pressure
pumpers, pipeline operators, pipe mills, manufacturers and processors, and other industrial companies. Certain tubular inspection and tubular
coating products and services often are incorporated as a part of a tubular package sold by tubular supply stores to end users. The Company
primarily has direct operations in the international marketplace, but operates through agents in certain markets.
The Petroleum Services & Supplies segments customers for drilling services are predominantly major and independent oil and gas companies,
national oil companies, drilling contractors, well servicing companies, providers of drilling fluids, and other oilfield service companies. This
segment operates sales and distribution facilities at strategic locations worldwide to service areas with high drilling activity. Strategically located
service and engineering facilities provide specialty repair and maintenance services to customers. Sales of capital equipment are sometimes made
through rig fabricators, and often are bid as part of a rig fabrication package or rig refurbishment package. Sometimes these packages cover
multiple rigs, and often the Company bids jointly with other related service providers.
Distribution Services sales are made through our network of distribution service centers. Customers for our products and services include drilling
and other service contractors, exploration and production companies, supply companies and nationally owned or controlled drilling and
production companies.
The Companys foreign operations, which include significant operations in Canada, Europe, the Far East, the Middle East, Africa and Latin
America, are subject to the risks normally associated with conducting business in foreign countries, including foreign currency exchange risks
and uncertain political and economic environments, which may limit or disrupt markets, restrict the movement of funds or result in the
deprivation of contract rights or the taking of property without fair compensation. Government-owned petroleum companies located in some of
the countries in which the Company operates have adopted policies (or are subject to governmental policies) giving preference to the purchase of
goods and services from companies that are majority-owned by local nationals. As a result of such policies, the Company relies on joint ventures,
license arrangements and other business combinations with local nationals in these countries. In addition, political considerations may disrupt the
commercial relationship between the Company and such government-owned petroleum companies. Although the Company has not experienced
any material problems in foreign countries arising from nationalistic policies, political instability, economic instability or currency restrictions,
there can be no assurance that such a problem will not arise in the future. As discussed in Item 7A. Quantitative and Qualitative Disclosures
about Market Risk, the Venezuelan government devalued its currency in 2010. See Note 15 to the Consolidated Financial Statements for
information regarding geographic revenue information.
Research and New Product Development and Intellectual Property
The Company believes that it has been a leader in the development of new technology and equipment to enhance the safety and productivity of
drilling and well servicing processes and that its sales and earnings have been dependent, in part, upon the successful introduction of new or
improved products. Through its internal development programs and certain acquisitions, the Company has assembled an extensive array of
technologies protected by a substantial number of trade and service marks, patents, trade secrets, and other proprietary rights.
As of December 31, 2010, the Company held a substantial number of United States patents and had several patent applications pending.
Expiration dates of such patents range from 2011 to 2030. As of this date, the Company also had foreign patents and patent applications pending
relating to inventions covered by the United States patents. Additionally, the Company maintains a substantial number of trade and service marks
and maintains a number of trade secrets.
Although the Company believes that this intellectual property has value, competitive products with different designs have been successfully
developed and marketed by others. The Company considers the quality and timely delivery of its products, the service it provides to its customers
and the technical knowledge and skills of its personnel to be as important as its intellectual property in its ability to compete. While the Company
stresses the importance of its research and development programs, the technical challenges and market uncertainties associated with the
development and successful introduction of new products are such that there can be no assurance that the Company will realize future revenues
from new products. 16