Dell 2009 Annual Report Download - page 20

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Table of Contents
• Our performance could be adversely affected by our failure to hedge effectively our exposure to fluctuations in foreign currency
exchange rates and interest rates.
We utilize derivative instruments to hedge our exposure to fluctuations in foreign currency exchange rates and interest rates.
Some of these instruments and contracts may involve elements of market and credit risk in excess of the amounts recognized in
our financial statements. If we are not successful in monitoring our foreign exchange exposures and conducting an effective
hedging program, our foreign currency hedging activities may not offset the impact of fluctuations in currency exchange rates
on our future results of operations and financial position.
• We are subject to counterparty default risks.
We enter into numerous financing arrangements, including foreign currency option contracts and forward contracts, with a wide
array of bank counterparties. As a result, we are subject to the risk that the counterparty to one or more of these contracts will
default, either voluntarily or involuntarily, on its performance under the contract. In times of market distress, a counterparty
may default rapidly and without notice to us, and we may be unable to take action to cover our exposure, either because we lack
the contractual ability or because market conditions make it difficult to take effective action. In the event of a counterparty
default, we could incur significant losses, which could harm our business, results of operations, and financial condition. In the
event that one of our counterparties becomes insolvent or files for bankruptcy, our ability eventually to recover any losses
suffered as a result of that counterparty's default may be limited by the liquidity of the counterparty or the applicable legal
regime governing the bankruptcy proceeding. In addition, our deposits at financial institutions are at risk.
• Unfavorable results of legal proceedings could harm our business and result in substantial costs.
We are involved in various claims, suits, investigations, and legal proceedings that arise from time to time in the ordinary
course of our business and that are not yet resolved, including those described elsewhere in this Report. Additional legal claims
or regulatory matters may arise in the future and could involve stockholder, consumer, antitrust, tax and other issues on a global
basis. Litigation is inherently unpredictable. Regardless of the merit of the claims, litigation may be both time-consuming and
disruptive to our business. Therefore, we could incur judgments or enter into settlements of claims that could adversely affect
our operating results or cash flows in a particular period. For example, we could be exposed to enforcement or other actions
with respect to the continuing SEC investigation into certain accounting and financial reporting matters. In addition, our
business, operating results and financial condition could be adversely affected if any infringement or other intellectual property
claim made against us by any third party is successful, or if we fail to develop non-infringing technology or license the
proprietary rights on commercially reasonable terms and conditions.
• Our business could suffer if we do not obtain licenses to intellectual property developed by others on commercially reasonable
and competitive terms.
If we or our suppliers are unable to obtain desirable technology licenses, we may be prevented from marketing products, could
be forced to market products without desirable features, or could incur substantial costs to redesign products, defend legal
actions, or pay damages. Although our suppliers might be contractually obligated to obtain such licenses and indemnify us
against such expenses, those suppliers could be unable to meet their obligations. In addition, our operating costs could increase
because of copyright levies or similar fees by rights holders and collection agencies in European and other countries.
• The expiration of tax holidays or favorable tax rate structures, or unfavorable outcomes in tax audits and other tax compliance
matters, could result in an increase of our effective income tax rate in the future.
Portions of our operations are subject to a reduced tax rate or are free of tax under various tax holidays that expire in whole or
in part during Fiscal 2011 through Fiscal 2019. Many of these holidays may be extended when certain conditions are met, or
terminated if certain conditions are not met. If they are not extended, or if we fail to satisfy the conditions of the reduced tax
rate, then our effective tax rate would increase in the
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