Dell 2010 Annual Report Download - page 21

Table of Contents
operations. Costs involved in developing and protecting rights in intellectual property may have a negative impact on our
business. 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.
• Infrastructure disruptions or breaches of data security could harm our business.
We depend on our information technology and manufacturing infrastructure to achieve our business objectives. If a disruption
impairs our infrastructure, such as one caused by a computer virus, natural disaster, manufacturing failure, telecommunications
system failure, defective or improperly installed new or upgraded business management systems, or intentional tampering or
data-breach by a third party, we may be unable to receive or process orders, manufacture and ship products in a timely manner,
or otherwise conduct our business in the normal course. Moreover, portions of our services business involve the processing,
storage, and transmission of data, which would also be negatively affected by such an event. A disruption could cause us to lose
customers and revenue, particularly during a period of disproportionately heavy demand, and could result in the loss or
unintentional disclosure of company or customer information and could damage our reputation. We also could incur significant
expense in remediating these problems and in addressing related data security and privacy concerns.
• 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 have numerous arrangements with financial institutions that include cash and investment deposits, interest rate swap
contracts, foreign currency option contracts, and forward contracts. As a result, we are subject to the risk that the counterparty
to one or more of these arrangements will default, either voluntarily or involuntarily, on its performance under the terms of the
arrangement. 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. If 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 the event of such default, we could incur significant losses, which could
harm our business, results of operations, and financial condition.
• 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, including those described elsewhere in this report. Additional legal claims or regulatory matters may
arise in the future and could involve stockholder, consumer, government regulatory and compliance, intellectual property,
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. We could incur judgments or enter into settlements of
claims that could adversely affect our operating results or cash flows in a particular period. 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.
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