Circuit City 2004 Annual Report Download - page 23

23
24
lack of visibility relating to future orders. Our consolidated results of operations depend upon, among other
things, our ability to maintain and increase sales volumes with existing customers, our ability to attract new
customers and the financial condition of our customers. A decline in the economy that adversely affects our
customers, causing them to limit or defer their spending, would likely adversely affect us as well. We
cannot predict with any certainty whether we will be able to maintain or improve upon historical sales
volumes with existing customers, or whether we will be able to attract new customers.
In response to economic and market conditions, from time to time we have undertaken initiatives to reduce
our cost structure where appropriate. The initiatives already implemented as well as any future workforce
and facilities reductions undertaken may not be sufficient to meet the changes in economic and market
conditions and to achieve future profitability. In addition, costs actually incurred in connection with our
restructuring actions may be higher than our estimates of such costs and/or may not lead to the anticipated
cost savings.
• Competitive pressures could harm our revenue and gross margin.
We may not be able to compete effectively with current or future competitors. The market for our products
and services is intensely competitive and subject to constant technological change. We expect this
competition to further intensify in the future. Competitive factors include price, availability, service and
support. We compete with a wide variety of other resellers and retailers, as well as manufacturers. Some of
our competitors are larger companies with greater financial, marketing and product development resources
than ours. In addition, new competitors may enter our markets. This may place us at a disadvantage in
responding to competitors' pricing strategies, technological advances and other initiatives, resulting in our
inability to increase our revenues or maintain our gross margins in the future.
In many cases our products compete directly with those offered by other manufacturers and distributors. If
any of our competitors were to develop products or services that are more cost-effective or technically
superior, demand for our product offerings could decrease.
Our margins are also dependent on the mix of products we sell and could be adversely affected by a
continuation of our customers' shift to lower
-
priced products.
• We are dependent on third-party suppliers.
We purchase a significant portion of our computer products from major distributors such as Tech Data
Corporation and Ingram Micro Inc. and directly from large manufacturers such as IBM and Hewlett
Packard, who deliver those products directly to our customers. These relationships enable us to make
available to our customers a wide selection of products without having to maintaining large amounts of
inventory. The termination or interruption of our relationships with any of these suppliers could materially
adversely affect our business.
Our PC products contain electronic components, subassemblies and software that in some cases are
supplied through sole or limited source third-party suppliers, some of which are located outside of the U.S.
Although we do not anticipate any problems procuring supplies in the near-term, there can never be any
assurance that parts and supplies will be available in a timely manner and at reasonable prices. Any loss of,
or interruption of supply from key suppliers may require us to find new suppliers. This could result in
production or development delays while new suppliers are located, which could substantially impair
operating results. If the availability of these or other components used in the manufacture of our products
was to
decrease, or if the prices for these components were to increase significantly, operating costs and expenses