EMC 2002 Annual Report Download - page 35

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Table of Contents
inventory. Alternatively, if orders substantially exceed predicted demand, the ability to assemble, test and ship orders received in the last weeks and days of
each quarter may be limited, which could materially adversely affect quarterly revenues and earnings.
In addition, our revenues in any quarter are substantially dependent on orders booked and shipped in that quarter and our backlog at any particular time
is not necessarily indicative of future sales levels. This is because:
• we assemble our products on the basis of our forecast of near-term demand and maintain inventory in advance of receipt of firm orders from
customers
• we generally ship products shortly after receipt of the order
• customers may reschedule or cancel orders with little or no penalty
Moreover, delays in product shipping, caused by loss of power or telecommunications or similar services, or an unexpected decline in revenues without
a corresponding and timely slowdown in expenses, could intensify the impact of these factors on our business, results of operations and financial condition.
Risks associated with our distribution channels may materially adversely affect our financial results.
In addition to our direct sales force, we have agreements in place with many distributors, systems integrators, resellers and original equipment
manufacturers to market and sell our products and services. We may, from time to time, derive a significant percentage of our revenues from such distribution
channels. Our financial results could be materially adversely affected if our contracts with channel partners were terminated, if our relationship with channel
partners were to deteriorate or if the financial condition of our channel partners were to weaken. In addition, as our market opportunities change, we may have
an increased reliance on channel partners, which may negatively impact our gross margins. There can be no assurance that we will be successful in
maintaining or expanding these channels. If we are not successful, we may lose sales opportunities, customers and market share. Furthermore, the partial
reliance on channel partners may materially reduce the visibility to our management of potential customers and demand for products and services, thereby
making it more difficult to accurately forecast such demand. In addition, there can be no assurance that our channel partners will not develop or market
products or services in competition with us in the future.
Our business could be materially adversely affected as a result of the risks associated with acquisitions and investments.
As part of our business strategy, we seek to acquire businesses that offer complementary products, services or technologies. These acquisitions are
accompanied by the risks commonly encountered in an acquisition of a business including, among other things:
• the effect of the acquisition on our financial and strategic position and reputation
• the failure of an acquired business to further our strategies
• the difficulty of integrating the acquired business
• the lack of experience in new markets, products or technologies or the initial dependence on unfamiliar supply or distribution partners
• the diversion of our management's attention from other business concerns
• the impairment of relationships with customers of the acquired business
• the potential loss of key employees of the acquired company
• the potential impairment of acquired assets
These factors could have a material adverse effect on our business, results of operations or financial condition. To the extent that we issue shares of our
Common Stock or other rights to purchase Common Stock in
32