Citrix 2007 Annual Report Download - page 30

Our success may depend on our ability to attract and retain small-sized customers.
In order to successfully attract new customer segments to our XenApp products and expand our existing
relationships with enterprise customers, we must reach and retain small-sized customers and small project
initiatives within our larger enterprise customers. We have begun a marketing initiative to reach these customers
that includes extending our Advisor Rewards program to include a broader range of license types. In 2005, we
also introduced a new product, Access EssentialsTM, specifically developed, packaged and priced to bring secure
application virtualization and efficient centralized management of information resources to small and mid-sized
businesses. We cannot guarantee that our small-sized customer marketing initiative or new product will be
successful. Our failure to attract and retain small sized customers and small project initiatives within our larger
enterprise customers could have a material adverse effect on our business, results of operations and financial
condition. Additionally, as we attempt to attract and retain small sized customers and small project initiatives
within our larger enterprise customers, we may need to increase corporate branding and broaden our marketing
activities, which could increase our operating expenses. These efforts may not proportionally increase our
operating revenues and could reduce our profits.
We rely on indirect distribution channels and major distributors that we do not control.
We rely significantly on independent distributors and resellers to market and distribute our products and
appliances. We do not control our distributors and resellers. Additionally, our distributors and resellers are not
obligated to buy our products and could also represent other lines of products. We maintain and periodically
revise our sales incentive programs for our independent distributors and resellers, and such program revisions
may adversely impact our results of operations. Some of our distributors and resellers maintain inventories of our
packaged products for resale to smaller end-users. If distributors and resellers reduce their inventory of our
packaged products, our business could be adversely affected. Further, we could maintain individually significant
accounts receivable balances with certain distributors. The financial condition of our distributors could
deteriorate and distributors could significantly delay or default on their payment obligations. Any significant
delays, defaults or terminations could have a material adverse effect on our business, results of operations and
financial condition.
For certain of our products we rely on third-party suppliers and contract manufacturers, making us
vulnerable to supply problems and price fluctuations.
We rely on a number of third-party suppliers who provide hardware or hardware components, many of
which are sole-source suppliers. For example, all of the production, final test, warehousing and shipping for our
Application Networking products, including our NetScaler products, Access Gateway products and WANScaler
products are primarily performed by a third-party contract manufacturer. We do not typically have long-term
supply agreements with our suppliers; and, in most cases, we purchase the products and components on an
as-needed purchase order basis. In some instances, such as with respect to our Application Networking products,
we maintain internal manufacturing capabilities to supplement third-party contract manufacturers and provide us
with the flexibility needed to meet our product delivery requirements on sales orders on a limited basis. While we
have not, to date, experienced any material difficulties or delays in the manufacture and assembly of our
products, our suppliers may encounter problems during manufacturing due to a variety of reasons, including
failure to follow specific protocols and procedures, failure to comply with applicable regulations, equipment
malfunction and environmental factors, any of which could delay or impede their ability to meet our demand.
Our reliance on these third-party suppliers and contract manufacturers subjects us to risks that could harm our
business, including:
• we may have difficulty locating and qualifying alternative suppliers for our sole-source supplies;
• our suppliers, especially new suppliers, may make errors in manufacturing components that could
negatively affect the efficacy of our products or cause delays in shipment;
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