Avnet 2011 Annual Report Download - page 11

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Table of Contents
Except as required by law, Avnet does not undertake any obligation to update any forward-
looking statements, whether as a
result of new information, future events or otherwise. Factors that may cause actual results to differ materially from those contained in
the forward-looking statements include the following:
Economic weakness and uncertainty could adversely affect our revenues and gross margins.
The Company’
s revenues and gross profit margins depend significantly on worldwide economic conditions, the demand for its
products and services and the financial condition of its customers. Economic weakness and uncertainty have in the past resulted, and
may result in the future, in decreased revenues and gross profit margins. Economic weakness and uncertainty also make it more
difficult for the Company to forecast with a great deal of confidence the overall supply and demand throughout the IT supply chain.
While the Company’
s operating results over the past four quarters would suggest that the business has experienced a significant
recovery, there can be no assurance that the recovery to date will continue at the current pace or at all; nor can there be any assurance
that such economic volatility experienced recently will not reoccur or continue.
The electronics component and computer industries are highly competitive and if the Company fails to compete effectively, its
revenues, gross profit margins and prospects may decline.
The market for the Company’
s products and services is very competitive and subject to rapid technological advances. Not only
does the Company compete with other global distributors, it also competes for customers with regional distributors and some of the
Company’s own suppliers. The Company’
s failure to maintain and enhance its competitive position could adversely affect its business
and prospects. Furthermore, the Company’
s efforts to compete in the marketplace could cause deterioration of gross profit margins
and, thus, overall profitability.
The size of the Company’
s competitors vary across market sectors, as do the resources the Company has allocated to the sectors
and geographic areas in which it does business. Therefore, some of the competitors may have greater financial, personnel, capacity
and other resources or a more extensive customer base than the Company has in one or more of its market sectors and geographic
areas.
An industry down-cycle in semiconductors could significantly affect the Company’
s operating results as a large portion of
revenues comes from sales of semiconductors, which is a highly cyclical industry.
The semiconductor industry historically has experienced periodic fluctuations in product supply and demand, often associated
with changes in technology and manufacturing capacity, and is generally considered to be highly cyclical. During each of the last three
fiscal years, sales of semiconductors represented over 50% of the Company’s consolidated sales, and the Company’
s revenues,
particularly those of EM, closely follow the strength or weakness of the semiconductor market. Future downturns in the technology
industry, particularly in the semiconductor sector, could negatively affect the Company’
s operating results and negatively impact the
Company’s ability to maintain its current profitability levels.
Failure to maintain its relationships with key suppliers could adversely affect the Company’s sales.
One of the Company’
s competitive strengths is the breadth and quality of the suppliers whose products the Company distributes.
However, sales of products and services from one of the Company’
s suppliers, IBM, accounted for approximately 12% of the
Company’
s consolidated sales in fiscal year 2011. Management expects IBM products and services to continue to account for roughly
a similar percentage of the Company’s consolidated sales in fiscal year 2012. The Company’
s contracts with its suppliers, including
those with IBM, vary in duration and are generally terminable by either party at will upon notice. To the extent IBM or other primary
suppliers significantly reduce their volume of business with the Company in the future, because of a product shortage, an
unwillingness to do business with Avnet or otherwise, the Company’
s business and relationships with its customers could be
materially and adversely affected because its customers depend on the Company’
s distribution of electronic components and computer
products from the industry’s leading suppliers. In addition, to the extent that any of the Company’
s key suppliers modify the terms of
their contracts including, without limitation, the terms regarding price protection, rights of return, rebates or other terms that protect
the Company’s gross margins, it could materially and adversely affect the Company’
s results of operations, financial condition or
liquidity.
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