EMC 2006 Annual Report Download - page 15

Table of Contents
of our revenues. 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, if the financial condition of our channel partners were to weaken, if our channel partners are not able to timely and
effectively implement their planned actions or if the level of demand for our channel partners' products and services decreases. 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.
Changes in foreign conditions could impair our international operations.
A substantial portion of our revenues is derived from sales outside the United States. In addition, a substantial portion of our products is manufactured
outside of the United States. Accordingly, our future results could be materially adversely affected by a variety of factors, including changes in foreign
currency exchange rates, changes in a specific country's or region's political or economic conditions, trade restrictions, import or export licensing
requirements, the overlap of different tax structures or changes in international tax laws, changes in regulatory requirements, compliance with a variety of
foreign laws and regulations and longer payment cycles in certain countries.
Undetected problems in our products could directly impair our financial results.
If flaws in design, production, assembly or testing of our products (by us or our suppliers) were to occur, we could experience a rate of failure in our
products that would result in substantial repair, replacement or service costs and potential damage to our reputation. Continued improvement in manufacturing
capabilities, control of material and manufacturing quality and costs and product testing are critical factors in our future growth. There can be no assurance
that our efforts to monitor, develop, modify and implement appropriate test and manufacturing processes for our products will be sufficient to permit us to
avoid a rate of failure in our products that results in substantial delays in shipment, significant repair or replacement costs or potential damage to our
reputation, any of which could have a material adverse effect on our business, results of operations or financial condition.
Our business could be materially adversely affected as a result of the risks associated with alliances.
We have alliances with leading information technology companies and we plan to continue our strategy of developing key alliances in order to expand
our reach into markets. There can be no assurance that we will be successful in our ongoing strategic alliances or that we will be able to find further suitable
business relationships as we develop new products and strategies. Any failure to continue or expand such relationships could have a material adverse effect on
our business, results of operations or financial condition.
There can be no assurance that companies with which we have strategic alliances, certain of which have substantially greater financial, marketing or
technological resources than us, will not develop or market products in competition with us in the future, discontinue their alliances with us or form alliances
with our competitors.
Our business may suffer if we cannot protect our intellectual property.
We generally rely upon patent, copyright, trademark and trade secret laws and contract rights in the United States and in other countries to establish and
maintain our proprietary rights in our technology and products. However, there can be no assurance that any of our proprietary rights will not be challenged,
invalidated or circumvented. In addition, the laws of certain countries do not protect our proprietary rights to the same extent as do the laws of the United
States. Therefore, there can be no assurance that we will be able to adequately protect our proprietary technology against unauthorized third-party copying or
use, which could adversely affect our competitive position. Further, there can be no assurance that we will be able to obtain licenses to any technology that we
may require to conduct our business or that, if obtainable, such technology can be licensed at a reasonable cost.
From time to time, we receive notices from third parties claiming infringement by our products of third-party patent or other intellectual property rights.
Responding to any such claim, regardless of its merit, could be time-consuming, result in costly litigation, divert management's attention and resources and
cause us to incur significant expenses. In the event there is a temporary
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