Siemens 2010 Annual Report Download - page 186

6 To our shareholders 21 Corporate Governance 49 Combined management’s discussion and analysis
50 Business and operating environment
78 Fiscal  – Financial summary
81 Results of operations
98 Financial position
110 Net assets position
113 Overall assessment of the economic position
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given business area, as well as competitors from emerging
markets, which may have a better cost structure. Some indus-
tries in which we operate are undergoing consolidation, which
may result in stronger competitors and a change in our relative
market position. Certain competitors might be more effective
and faster in capturing available market opportunities, which
in turn may negatively impact our market share. These factors
alone or in combination may negatively impact our financial
condition, including effects on assets, liabilities and cash flows
(financial condition), and results of operations.
Our business is affected by the uncertainties of economic
and political conditions, in particular, in the current macro-
economic environment following the global downturn and
financial crisis: Our business environment is influenced by
conditions in the domestic and global economies. In fiscal
, certain indices and economic data showed signs of im-
provement and stabilization in the macroeconomic environ-
ment compared to the situation during fiscal , which was
characterized by a strong decline in consumer and business
confidence, increased unemployment and reduced levels of
capital expenditure, among other things. In light of the latest
economic developments, the high degree of unemployment in
certain countries, the level of public debt in the U.S., as well as
in Greece and other European countries, uncertainties with
respect to the stability of the Chinese economy, and the poten-
tial impact of budget consolidation measures by governments
around the world, there can be no assurance that these im-
provements will be broad-based and sustainable, and it is un-
clear, how they will affect the markets relevant for us. In gen-
eral, due to the significant proportion of longer-cycle busi-
nesses in our Sectors and the importance of long-term
contracts for Siemens, there is usually a time lag between the
development of macroeconomic conditions and their impact
on our financial results. If the improvements are only tempo-
rary and if we are not successful in adapting our production
and cost structure to the current market environment there
can be no assurance that we will not experience further ad-
verse effects that may be material to our financial condition,
results of operations and our ability to access capital. For ex-
ample, it may become more difficult for our customers to ob-
tain financing and as a result they may modify, delay or cancel
plans to purchase our products and services or to execute
transactions. Furthermore, prices may decline as a result of
adverse market conditions to a greater extent than currently
anticipated. In addition, contracted payment terms, especially
regarding the level of advance payments by our customers re-
lating to long-term projects, may become less favorable, which
could negatively impact our cash flows. Additionally, if custom-
ers are not successful in generating sufficient revenue or se-
curing access to the capital markets they may not be able to
pay, or may delay payment of, the amounts they owe us, which
may adversely affect our financial condition and results of op-
erations.
Numerous other factors, such as fluctuations of energy and
raw material prices as well as global political conflicts, includ-
ing in the Middle East and other regions, continue to impact
macroeconomic parameters and the international capital and
credit markets. The uncertainty of economic and political con-
ditions can have a material adverse impact on our investments,
financial condition and results of operations and can also make
our budgeting and forecasting more difficult.
Our Sectors and Cross-Sector Businesses are affected by a vari-
ety of market conditions and regulation. For example, our In-
dustry Sector is vulnerable to unfavorable market conditions in
certain segments of the automotive, manufacturing and con-
struction industries. Our Healthcare Sector, in turn, is depen-
dent on developments and regulations in the healthcare sys-
tems around the world, particularly in the important U.S.
healthcare market. Finally, our Energy Sector is exposed to the
development of global energy demand and is considerably af-
fected by regulations related to energy and environmental
policies.
Our businesses must keep pace with technological changes
and develop new products and services to remain competi-
tive: The markets in which our businesses operate experience
rapid and significant changes due to the introduction of inno-
vative technologies. To meet our customers’ needs in these
areas we must continuously design new, and update existing
products and services and invest in and develop new technolo-
gies. Introducing new products and technologies requires a
significant commitment to research and development, which
in return requires considerable financial resources that may
not always result in success. Our sales and profits may suffer if
we invest in technologies that do not operate or may not be
integrated as expected or are not accepted in the marketplace
as anticipated or if our products or systems are not introduced
to the market in a timely manner, in particular compared to our
competitors, or as they become obsolete. Furthermore, in
some of our markets, the need to develop and introduce new
products rapidly in order to capture available opportunities
may lead to quality problems. Our operating results depend to
a significant extent on our ability to anticipate and adapt to
changes in markets and to reduce the costs of producing high-
quality, new and existing products. Any inability to do so could