EMC 2011 Annual Report Download - page 16

Table of Contents
Our quarterly revenues and earnings could be materially adversely affected by uneven sales patterns and changing purchasing behaviors.
Our quarterly sales have historically reflected an uneven pattern in which a disproportionate percentage of a quarter's total sales occur in the last month
and weeks and days of each quarter. This pattern makes prediction of revenues, earnings and working capital for each financial period especially difficult and
uncertain and increases the risk of unanticipated variations in quarterly results and financial condition. We believe this uneven sales pattern is a result of many
factors including:
• the relative dollar amount of our product and services offerings in relation to many of our customers' budgets, resulting in long lead times for
customers' budgetary approval, which tends to be given late in a quarter;
• the tendency of customers to wait until late in a quarter to commit to purchase in the hope of obtaining more favorable pricing from one or more
competitors seeking their business;
• the fourth quarter influence of customers' spending their remaining capital budget authorization prior to new budget constraints in the first nine
months of the following year; and
• seasonal influences.
Our uneven sales pattern also makes it extremely difficult to predict near-term demand and adjust manufacturing capacity or our supply chain
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; and
• customers may generally 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, natural disasters 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, if the financial condition of our channel partners were to weaken, if our channel partners were not able to timely and effectively
implement their planned actions or if the level of demand for our channel partners' products and services were to decrease. 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 or acquire other companies that 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
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