Citrix 2000 Annual Report Download - page 10

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8
subject to ordering an equal dollar amount of other Citrix products. Although
the Company believes that it has adequate reserves to cover product returns,
there can be no assurance that the Company will not experience significant
returns in the future or that such reserves will be adequate. The Company also
provides most of its distributors with price protection rights. Price protection
rights require that the Company grant retroactive price adjustments for
inventories of Citrix products held by distributors if the Company lowers its
prices for such products. In the event that the Company determines to reduce its
prices, it will establish a reserve to cover exposure to distributor inventory.
The majority of the Company's services and support activities are related
to software and network integration issues. Using the Company's own "shadowing"
technology, support representatives are able to troubleshoot user issues
remotely from Citrix call centers located in the United States, Ireland and
Australia. The Company also provides technical advice to channel and strategic
partners, who are utilized as first line support for their customers.
Additionally, users can choose from a comprehensive fee−based support program
ranging from one−time incident charges to an annual support agreement covering
multiple sites and servers. Training for resellers is provided at the Company's
Citrix Authorized Learning Centers ("CALCs"), which include a number of the
world's leading IT training organizations. CALCs are staffed with Citrix
Certified Instructors, who teach Citrix−developed courseware. In addition, the
Company provides technical advice through its on−line services, quarterly
Solution Search CD−ROM and fax services.
OPERATIONS
The Company controls all purchasing, inventory, scheduling, order
processing and accounting functions related to its operations. Production,
warehousing and fulfillment are performed by independent contractors on a
purchase order basis in the United States and in Ireland. Shipping is primarily
performed at the locations of the independent contractors, although limited
shipments are made from the Company's facilities. Master software diskettes,
development of user manuals, packaging designs, initial product quality control
and testing are performed at the Company's facilities. The independent
contractors duplicate diskettes and CD−ROMs, print documentation, and package
and assemble product to the Company's specifications. To date, the Company has
not experienced any material difficulties or delays in the manufacture and
assembly of its products.
The Company has identified and evaluated alternative manufacturing vendors
and believes that such alternative vendors are capable of producing the
requisite quality and volumes at competitive prices. However, if difficulties
and delays were to be encountered, and transition to an alternate manufacturer
was not completed promptly, the Company's business, results of operations, and
financial condition could be materially adversely affected.
The Company generally ships products upon receipt of an order. As a result,
the Company does not have significant backlog at any given time, and does not
consider backlog to be a significant indicator of future performance.
COMPETITION
The Company believes that companies, including Microsoft, have entered or
will enter the market with solutions that involve a similar approach to the
Company's multi−user application server. In particular, GraphOn Corporation and
Santa Cruz Operation market products that claim to have functions similar to
those found in MetaFrame, and Microsoft includes as a component of Windows
Server Operating Systems its Remote Desktop Protocol (RDP), which has certain
capabilities of the Company's ICA protocol. See "−−Strategic Relationships" and
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations −− Certain Factors Which May Affect Future Results." Additionally,
the announcement of the release, and the actual release, of products competitive
to the Company's existing and future product lines, could cause existing and
potential customers of the Company to postpone or cancel plans to license
certain of the Company's existing and future product offerings, which would
adversely impact the Company's business, results of operations, and financial
condition.
8