CompUSA 2009 Annual Report Download - page 67

7
Competition and Other Market Factors
Technology Products
The North American and European technology product markets are highly competitive, with many U.S., Asian and European
companies vying for market share. There are few barriers of entry, with these products being sold through multiple channels of
distribution, including direct marketers, local and national retail computer stores, computer resellers, mass merchants, over the internet
and by computer and office supply superstores.
Timely introduction of new products or product features are critical elements to remaining competitive. Other competitive factors
include product performance, quality and reliability, technical support and customer service, marketing and distribution and price.
Some of our competitors have stronger brand-recognition, broader product lines and greater financial, marketing, manufacturing and
technological resources than us. Additionally, our results could also be adversely affected should we be unable to maintain our
technological and marketing arrangements with other companies, such as Microsoft®, Intel® and Advanced Micro Devices®.
With conditions in the market for technology products remaining highly competitive, reductions in retail prices, as we experienced in
2009, would adversely affect our revenues and profits. Additionally, we rely in part upon the introduction of new technologies and
products by other manufacturers in order to sustain long-term sales growth and profitability. There is no assurance that the rapid rate
of such technological advances and product development will continue.
Current economic conditions raise additional factors as the loss of consumer confidence in the Company’ s markets could result in a
decrease of spending in the categories of products we sell. It is also possible that as manufacturers react to the marketplace they may
reduce manufacturing capacity and create shortages of product.
Industrial Products
The market for the sale of industrial products in North America is highly fragmented and is characterized by multiple distribution
channels such as small dealerships, direct mail distribution, internet-based resellers, large warehouse stores and retail outlets. We also
face competition from manufacturers’ own sales representatives, who sell industrial equipment directly to customers, and from
regional or local distributors. Many high volume purchasers, however, utilize catalog distributors as their first source of product. In the
industrial products market, customer purchasing decisions are primarily based on price, product selection, product availability, level of
service and convenience. We believe that direct marketing via sales representatives, catalog and the internet are effective and
convenient distribution methods to reach mid-sized facilities that place many small orders and require a wide selection of products. In
addition, because the industrial products market is highly fragmented and generally less brand oriented, it is well suited to private label
products.
Software Solutions
In June 2009, the Company announced plans to exit the Software Solutions segment as the result of economic conditions and
difficulties in marketing the segment’ s products successfully (See Note 7 to the Consolidated Financial Statements included in Item 15
of this Form 10-K). Our Software Solutions segment participated in the emerging market for on-demand, web-based business software
applications through the marketing of our PCS ProfitCenter Software™application. As of December 31, 2009 substantially all of the
third party business activities of the Software Solutions segments had been ended.
Employees
As of December 31, 2009, we employed a total of approximately 5,000 employees, of whom 3,500 were in North America and 1,500
were in Europe.
Seasonality
As the Company’ s consumer channel sales have grown significantly in the past few years, the fourth quarter has represented a greater
portion of annual sales than historically. Net sales have historically been modestly weaker during the second and third quarters as a
result of lower business activity during those months. See Item 7, Management’ s Discussions and Analysis of Financial Condition
and Results of Operations; Seasonality.
Environmental Matters
Under various national, state and local environmental laws and regulations in North America and Western Europe, a current or
previous owner or operator (including the lessee) of real property may become liable for the costs of removal or remediation of
hazardous substances at such real property. Such laws and regulations often impose liability without regard to fault. We lease most of
our facilities. In connection with such leases, we could be held liable for the costs of removal or remedial actions with respect to