EMC 2004 Annual Report Download - page 40

Table of Contents
• the fourth quarter influence of customers' spending their remaining capital budget authorization prior to new budget constraints in the first six
months of the following year
• seasonal influences
Our uneven sales pattern also makes it extremely difficult to predict near-term demand and adjust manufacturing capacity accordingly. If predicted
demand is substantially greater than orders, there will be excess 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
Loss of infrastructure, due to factors such as an information systems failure, loss of public utilities or extreme weather conditions, could impact our ability
to ship products in a timely manner. Delays in product shipping 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.
In addition, unanticipated changes in our customers' purchasing behaviors such as customers taking longer to negotiate and complete their purchases or
making smaller, incremental purchases based on their current needs, also make the prediction of revenues, earnings and working capital for each financial
period difficult and uncertain and increase the risk of unanticipated variations in our quarterly results 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, market or sell
products or services in competition with us in the future.
In addition, as we focus on new market opportunities and additional customers through our various distribution channels, including small-to-medium sized
businesses, we may be required to provide different levels of service and support than we typically provided in the past. We may have difficulty managing
directly or indirectly through our channels these different service and support requirements and may be required to incur substantial costs to provide such
services which may adversely affect our business, results of operations or financial condition.
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