Siemens 2011 Annual Report Download - page 228

6 A. To our shareholders
23 B. Corporate Governance 51 C. Combined management’s discussion and analysis
52 C. Business and operating environment
80 C. Fiscal  – Financial summary
83 C. Results of operations
101 C. Financial position
114 C. Net assets position
117 C. Overall assessment of the economic position
118 C. Report on post-balance sheet date events
119 C. Report on expected developments and
associated material opportunities and risks
135 C. Information required pursuant to Section  ()
and Section  () of the German Commercial
Code (HGB) and explanatory report

acquisition, then these intangible assets, including goodwill,
might have to be written down, which could materially and
adversely affect our results of operations. The likelihood of
such adverse business developments increases in times of dif-
ficult or uncertain macroeconomic conditions.
We may be adversely affected by our equity interests and
strategic alliances: Our strategy includes strengthening our
business interests through joint ventures, associated compa-
nies and strategic alliances. Certain of our investments are ac-
counted for using the equity method, including, among oth-
ers, Nokia Siemens Networks B.V. (NSN), Enterprise Networks
Holdings B.V. (EN) and BSH Bosch und Siemens Hausgeräte
GmbH (BSH). Any factors negatively influencing the profitabil-
ity of our equity investments, including negative effects on
revenues, profits or on cash, could have an adverse effect on
our equity pick-up related to these equity interests or may re-
sult in a write-down of these investments. In addition, our
business, financial condition and results of operations could
also be adversely affected in connection with loans, guaran-
tees or non-compliance with financial covenants related to
these equity investments. Furthermore, such investments are
inherently risky as we may not be able to sufficiently influ-
ence corporate governance processes or business decisions
taken by our equity investments and strategic alliances that
may have a negative effect on our business. In addition, joint
ventures bear the risk of difficulties that may arise when inte-
grating people, operations, technologies and products. Strate-
gic alliances may also pose risks for us because we compete in
some business areas with companies with which we have
strategic alliances.
C... OPERATIONS RISKS
We are dependent upon hiring and retaining highly quali-
fied management and technical personnel: Competition for
highly qualified management and technical personnel re-
mains intense in the industries and regions in which our busi-
ness operates. In many of our business areas, we intend to ex-
pand our business activities, for which we will need highly
skilled employees. Our future success depends in part on our
continued ability to hire, assimilate and retain engineers and
other qualified personnel. There can be no assurance that we
will continue to be successful in attracting and retaining all
the highly qualified employees and key personnel needed in
the future, including in appropriate geographic locations, and
any inability to do so could have a material adverse effect on
our business.
We may face operational failures and quality problems in
our value chain processes: Our value chain comprises all
steps, from research and development to supply chain man-
agement, production, marketing, sales and services. Opera-
tional failures in our value chain processes could result in
quality problems or potential product, labor safety, regulatory
or environmental risks. Such risks are particularly present in
relation to our production facilities, which are located all over
the world and have a high degree of organizational and tech-
nological complexity. From time to time, some of the products
we sell might have quality issues resulting from the design or
manufacture of such products or from the software integrated
into them.
Furthermore, failures on the part of service providers we em-
ploy, such as in the area of IT infrastructure, may have an ad-
verse effect on our processes and operations and our ability to
meet our commitments to customers or increase our operat-
ing costs. Any operational failures or quality issues could have
a material adverse effect on our business, financial condition
and results of operations.
We may face interruption of our supply chain, including
the inability of third parties to deliver parts, components
and services on time, and we may be subject to rising raw
material prices: Our financial performance depends in part
on reliable and effective supply chain management for com-
ponents, sub-assemblies and other materials. Capacity con-
straints and supply shortages resulting from ineffective sup-
ply chain management may lead to delays and additional cost.
We rely on third parties to supply us with parts, components
and services. Using third parties to manufacture, assemble
and test our products reduces our control over manufacturing
yields, quality assurance, product delivery schedules and
costs. The third parties that supply us with parts and compo-
nents also have other customers and may not have sufficient
capacity to meet all of their customers’ needs, including ours,
during periods of excess demand. Component supply delays
can affect the performance of our Sectors. Although we work
closely with our suppliers to avoid supply-related problems,
there can be no assurance that we will not encounter supply
problems in the future or that we will be able to replace a sup-
plier that is not able to meet our demand. This risk is particu-
larly evident in businesses with a very limited number of sup-
pliers. Shortages and delays could materially harm our busi-
ness. Unanticipated increases in the price of components due
to market shortages or other reasons could also adversely af-
fect the performance of our Sectors. Furthermore, we may be