Charles Schwab 2010 Annual Report Download - page 26

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THE CHARLES SCHWAB CORPORATION
oversee operational areas involving risk, and implement policies and procedures designed to manage risk, there can be no assurance
that the Company will not suffer unexpected losses, reputational damage or regulatory action due to technology or other operational
failures, including those of its vendors.
The Company also faces risk related to its security guarantee which covers client losses from unauthorized account activity, such as
those caused by external fraud involving the compromise of clients’ login and password information. Losses reimbursed under the
guarantee could have a negative impact on the Company’s results of operations.
The Company relies on outsourced service providers to perform key functions.
The Company relies on external service providers to perform certain key technology, processing, servicing, and support functions.
These service providers also face technology and operating risk and any significant failures by them, including the improper use or
disclosure of the Company’s confidential client, employee, or company information, could cause the Company to incur losses and
could harm the Company’s reputation. An interruption in or the cessation of service by any external service provider as a result of
systems failures, capacity constraints, financial difficulties or for any other reason, and the Company’s inability to make alternative
arrangements in a timely manner could disrupt the Company’s operations. Switching to an alternative service provider may require a
transition period and result in less efficient operations.
Potential strategic transactions could have a negative impact on the Company’s financial position.
The Company evaluates potential strategic transactions, including business combinations, acquisitions, and dispositions. Any such
transaction could have a material impact on the Company’s financial position, results of operations, or cash flows. The process of
evaluating, negotiating, and effecting any such strategic transaction may divert management’s attention from other business concerns,
and might cause the loss of key clients, employees, and business partners. Moreover, integrating businesses and systems may result in
unforeseen expenditures as well as numerous risks and uncertainties, including the need to integrate operational, financial, and
management information systems and management controls, integrate relationships with clients and business partners, and manage
facilities and employees in different geographic areas. In addition, an acquisition may cause the Company to assume liabilities or
become subject to litigation. Further, the Company may not realize the anticipated benefits from an acquisition, and any future
acquisition could be dilutive to the Company’s current stockholders’ percentage ownership or to earnings per share (EPS).
The Company’s acquisitions and dispositions are typically subject to closing conditions, including regulatory approvals and the
absence of material adverse changes in the business, operations or financial condition of the entity being acquired or sold. To the
extent the Company enters into an agreement to buy or sell an entity, there can be no guarantee that the transaction will close when
expected, or at all. If a material transaction does not close, the Company’s stock price could decline.
The Company’s stock price has fluctuated historically, and may continue to fluctuate.
The Company’s stock price can be volatile. Among the factors that may affect the volatility of the Company’s stock price are the
following:
•
speculation in the investment community or the press about, or actual changes in, the Company’s competitive position,
organizational structure, executive team, operations, financial condition, financial reporting and results, effectiveness of cost
reduction initiatives, or strate
g
ic transactions;
•
the announcement of new products, services, acquisitions, or dispositions by the Company or its competitors;
Changes in the stock market generally or as it concerns the Company’s industry, as well as geopolitical, economic, and business
factors unrelated to the Company, may also affect the Company’s stock price.
-11 -
•
increases or decreases in revenue or earnings, changes in earnings estimates by the investment community, and variations
between estimated financial results and actual financial results.