National Oilwell Varco 2003 Annual Report Download - page 5

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4
systems to maximize efficiencies for us and for our customers. We believe we have an advantage
in this effort due to our investment in technology, geographic size, knowledge of the industry and
customers, existing relationships with vendors and existing means of product delivery.
Marketing
Substantially all of our capital equipment and spare parts sales, and a large portion of our smaller
pumps and parts sales, are made through our direct sales force and distribution service centers.
Sales to foreign state-owned oil companies are typically made in conjunction with agent or
representative arrangements. Our downhole products are generally rented and sold worldwide
through our own sales force and through commissioned representatives. Distribution sales are
made through our network of distribution service centers. Customers for our products and
services include drilling and other service contractors, exploration and production companies,
supply companies and nationally owned or controlled drilling and production companies.
Competition
The oilfield services and equipment industry is highly competitive and our revenues and earnings
can be affected by price changes, introduction of new technologies and products and improved
availability and delivery. Our Products and Technology business segment competes with several
companies in North America that have drilling products that compete directly with certain of our
products. Our Distribution Services business segment competes with various smaller regional
competitors who may have strong direct ties with smaller or decentralized drilling and production
companies and other multinational distribution companies on the basis of service and price. None
of these competing companies dominate in any of the business segments or geographic areas in
which we operate.
Manufacturing and Backlog
National Oilwell has manufacturing facilities located in the United States, Canada, England,
France, Norway and China. The manufacture of parts or purchase of components is sometimes
outsourced to qualified subcontractors. The manufacturing operations require a variety of
components, parts and raw materials which we purchase from multiple commercial sources. We
have not experienced and do not expect any significant delays in obtaining deliveries of materials.
Sales of products are made on the basis of written orders and oral commitments. Our backlog for
equipment at recent year-ends has been:
December 31, 2003 $339 million
December 31, 2002 364 million
December 31, 2001 385 million
Distribution Suppliers
National Oilwell obtains products sold by its Distribution Services business from a number of
suppliers, including our own Products and Technology segment. No single supplier of products is
significant to our operations. We have not experienced and do not expect a shortage of products
that we sell.