CDW 2003 Annual Report Download - page 21

8
Our business depends on our vendor relationships and the availability of products. We purchase products
for resale both directly from manufacturers and indirectly through distributors and other sources, all of whom we
consider our vendors. During 2003, we purchased approximately 53% of the products we sold directly from
manufacturers and the remaining amount from distributors and other sources. We are authorized by
manufacturers to sell all or some of their products via direct marketing activities. Our authorization with each
manufacturer is subject to specific terms and conditions regarding such things as product return privileges, price
protection policies, purchase discounts and vendor incentive programs including purchase rebates, sales volume
rebates and cooperative advertising reimbursements.
From time to time, vendors may terminate our right to sell some or all of their products or change these
terms and conditions or reduce or discontinue the incentives that they offer us. Any such termination or the
implementation of such changes could have a negative impact on our operating income. Additionally, some
products are subject to manufacturer allocation, which limits the number of units of those products that are
available to resellers, including us.
Sales of Cisco, Hewlett-Packard, IBM, Microsoft, Sony and Toshiba products comprise a substantial
portion of our sales. In 2003, sales of products manufactured by Hewlett-Packard represented approximately
28% of our total sales and, therefore, we are dependent on the economic condition and product competitiveness
of, and our business relationship with, this manufacturer in particular. In addition, although we purchase from a
diverse vendor base, in 2003, products we purchased from distributors Tech Data and Ingram Micro each
represented approximately 15% of our total purchases. The loss of, or change in business relationship with, any
of these or any other key vendors, or the diminished availability of their products, could reduce the supply and
increase the costs of products we sell and negatively impact our competitive position. Additionally, the
relocation of key distributors utilized in our purchasing model could adversely impact our results of operations.
Although to date mergers among manufacturers have not had an adverse impact on our business and results of
operations, further consolidation could adversely impact us.
The success of our business depends on the continuing development, maintenance and operation of our
information technology systems. Our success is dependent on the accuracy, proper utilization and continuing
development of our information technology systems, including our business application systems, Web servers
and telephony system. The quality and our utilization of the information generated by our information
technology systems, and our success in implementing new systems and upgrades, affects, among other things,
our ability to:
• conduct business with our customers;
• manage our inventory and accounts receivable;
• purchase, sell, ship and invoice our products efficiently and on a timely basis; and
• maintain our cost-efficient operating model.
The integrity of our information technology systems is vulnerable to certain forms of disaster including, but
not limited to, natural disasters such as tornadoes. While we have taken steps to protect our information
technology systems from a variety of threats, including computer viruses and malicious hackers, there can be no
guarantee that those steps will be effective. Furthermore, although we have redundant systems at a separate
location to back up our primary application systems, there can be no assurance that these redundant systems will
operate properly if and when required. Any disruption to or infiltration of our information technology systems
could significantly harm our business and results of operations.
Our sales are dependent on the continued development of new technologies and products. The market for
computers and related technology products and services has evolved as a result of the development of new
technologies that are transformed by manufacturers into new products and applications. We have been and will
continue to be dependent on the development of new technologies and products by manufacturers, as well as the
acceptance of those technologies and products by customers. A decrease in the rate of development of new