CompUSA 2007 Annual Report Download - page 57

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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
• Restrictions and covenants in our credit facility may limit our ability to enter into certain
transactions.