Ingram Micro 2010 Annual Report Download - page 27

legal actions, including where third parties claim that we or vendors who may have indemnified us are infringing
upon their intellectual property rights. In recent years, individuals and groups have begun purchasing intellectual
property assets for the sole purpose of making claims of infringement and attempting to extract settlements from
target companies. Even if we believe that such infringement claims are without merit, the claims can be time-
consuming and costly to defend and divert management’s attention and resources away from our business. Claims
of intellectual property infringement also might require us to enter into costly settlements or pay costly damage
awards, or face a temporary or permanent injunction prohibiting us from marketing or selling certain products. Even
if we have an agreement to indemnify us against such costs, the indemnifying party may be unable or unwilling to
uphold its contractual obligations to us.
We face a variety of risks in our reliance on third-party service companies, including shipping
companies for the delivery of our products and outsourcing arrangements. We rely almost entirely on
arrangements with third-party shipping and freight forwarding companies for the delivery of our products. The
termination of our arrangements with one or more of these third-party shipping companies, or the failure or inability
of one or more of these third-party shipping companies to deliver products from suppliers to us or products from us
to our customers, could disrupt our business and harm our reputation and operating results.
In addition, we have outsourced various transaction-oriented service and support functions to business process
outsource providers. We have also outsourced a significant portion of our IT infrastructure function and certain IT
application development functions to third-party providers. We may outsource additional functions to third-party
providers. Our reliance on third-party providers to provide service to us, our customers and suppliers and for our IT
requirements to support our business could result in significant disruptions and costs to our operations, including
damaging our relationships with our suppliers and customers, if these third-party providers do not meet their
obligations to adequately maintain an appropriate level of service for the outsourced functions or fail to adequately
support our IT requirements. As a result of our outsourcing activities, it may also be more difficult to recruit and
retain qualified employees for our business needs.
Changes in accounting rules could adversely affect our future operating results. Our consolidated
financial statements are prepared in accordance with U.S. generally accepted accounting principles. These
principles are subject to interpretation by various governing bodies, including the Financial Accounting Standards
Board and the SEC, who create and interpret appropriate accounting standards. Future periodic assessments
required by current or new accounting standards may result in additional noncash charges and/or changes in
presentation or disclosure. A change from current accounting standards could have a significant adverse effect on
our financial position or results of operations.
Our quarterly results have fluctuated significantly. Our quarterly operating results have fluctuated
significantly in the past and will likely continue to do so in the future as a result of:
• general changes in economic or geopolitical conditions, including changes in legislation or regulatory
environments in which we operate;
• competitive conditions in our industry, which may impact the prices charged and terms and conditions
imposed by our suppliers and/or competitors and the prices we charge our customers, which in turn may
negatively impact our revenues and/or gross margins;
• seasonal variations in the demand for our products and services, which historically have included lower
demand in Europe during the summer months, worldwide pre-holiday stocking in the retail channel during
the September-to-December period and the seasonal increase in demand for our North American fee-based
logistics services in the fourth quarter, which affects our operating expenses and gross margins;
• changes in product mix, including entry or expansion into new markets, as well as the exit or retraction of
certain business;
• the impact of and possible disruption caused by reorganization actions and efforts to improve our IT
capabilities, as well as the related expenses and/or charges;
• currency fluctuations in countries in which we operate;
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