Circuit City 2007 Annual Report Download - page 16

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• We are dependent on third-party suppliers.
We purchase a significant portion of our computer products from major distributors such as Ingram Micro Inc. and Tech Data and
directly from large manufacturers such as Hewlett Packard and Acer, who may 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 maintain 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 could be adversely affected.
We purchase a number of our products from vendors outside of the United States. Difficulties encountered by one or several of these
suppliers could halt or disrupt production and delay completion or cause the cancellation of our orders. Delays or interruptions in the
transportation network could result in loss or delay of timely receipt of product required to fulfill customer orders.
Many product suppliers provide us with co-
op advertising support in exchange for featuring their products in our catalogs and on our
internet sites. Certain suppliers provide us with other incentives such as rebates, reimbursements, payment discounts, price
protection and other similar arrangements. These incentives are offset against cost of goods sold or selling, general and
administrative expenses, as applicable. The level of co-op advertising support and other incentives received from suppliers may
decline in the future, which could increase our cost of goods sold or selling, general and administrative expenses and have an
adverse effect on results of operations and cash flows.
• We may encounter risks in connection with sales of our web-hosted software application.
In 2004, we introduced our web-based and hosted, on-
demand software suite of products, marketed as PCS ProfitCenter Software™.
We have a limited operating history with this type of product offering and may encounter risks inherent in the software industry,
including but not limited to:
• Failure to implement effective general and application controls
• Errors or security flaws in our product
• Technical difficulties which we can not resolve on a timely or cost-effective basis,
• Inability to provide the level of service we commit to
• Inability to deliver product upgrades and enhancements
• Delays in development
• Inability to hire and retain qualified technical personnel
• Impact of privacy laws on the use of our product
• Exposure to claims of infringement of intellectual property rights
14