Siemens 2012 Annual Report Download - page 209

135 D. Consolidated Financial Statements
239 E. Additional Information
130 C. Siemens AG (Discussion on basis of
German Commercial Code)
134 C. Notes and forward-looking statements
129 C. Compensation Report, Corporate Governance
statement pursuant to Section a of the
German Commercial Code, Takeover-relevant
information and explanatory report

a number of global and local factors such as the crisis in the
credit markets, economic crises arising from sovereign debt
overruns, and government budget consolidation measures re-
lated thereto, reduced levels of capital expenditures, declining
consumer and business confidence, increasing unemployment
in certain countries, fluctuating commodity prices, bankrupt-
cies, natural disasters, political crises and other challenges.
In light of the latest economic developments, the high degree
of unemployment in certain countries, the level of public debt
in the United States as well as in Greece, Ireland, Italy, Spain,
Portugal and other European countries, uncertainties with re-
spect to the stability of the emerging markets, especially the
Chinese economy, and the potential impact of budget consoli-
dation measures by governments around the world, the bases
for our expectations relating to the overall economic situation
and specific conditions in markets relevant to us are subject to
considerable uncertainties. In general, due to the significant
proportion of long-cycle businesses in our Sectors and the im-
portance of long-term contracts for Siemens, there is usually a
time lag between the development of macroeconomic condi-
tions and their impact on our financial results. Important ex-
ceptions include our short-cycle businesses in the Industry
Sector, particularly those in Industry Automation and parts of
Drives Technologies, as well as parts of the Power Grid Solu-
tions & Products Business within the Infrastructure & Cities Sec-
tor, which are highly sensitive to volatility in market demand.
If the macroeconomic environment deteriorates further and if
we are not successful in adapting our production and cost
structure to subsequent changes to conditions in the markets,
in which we operate, there can be no assurance that we will
not experience adverse effects that may be material to our
business, financial condition, results of operations and our
ability to access capital. For example, it may become more dif-
ficult for our customers to obtain 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 great-
er extent than currently anticipated. In addition, contracted
payment terms, especially regarding the level of advance pay-
ments by our customers relating to long-term projects, may
become less favorable, which could negatively impact our
cash flows. Additionally, if customers are not successful in
generating sufficient revenue or securing 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
business, financial condition and results of operations.
Numerous other factors, such as fluctuations of energy and raw
material prices, as well as global political conflicts, including
those in the Middle East, North Africa and other regions, con-
tinue to impact macroeconomic parameters and the interna-
tional capital and credit markets. The uncertainty of economic
and political conditions can have a material adverse impact on
our business, financial condition and results of operations and
can also make our budgeting and forecasting more difficult.
Our business is affected by a variety of market conditions and
regulations. For example, our Energy Sector is exposed to the
development of global demand for energy and is considerably
affected by regulations related to energy and environmental
policies. Our Healthcare Sector, in turn, is dependent on devel-
opments and regulations in healthcare systems around the
world, particularly in the important U.S. healthcare market. Our
Industry Sector is vulnerable to unfavorable market conditions
in certain segments of the automotive and manufacturing in-
dustries. Our Infrastructure & Cities Sector focuses, among oth-
er things, on business with public authorities around the world
and is thus vulnerable to restrictions in public budgets.
Our businesses must keep pace with technological
changes and develop new products and services to re-
main competitive: The markets in which our businesses op-
erate experience rapid and significant changes due to the in-
troduction of innovative technologies. To meet our customers’
needs in these areas, we must continuously design new, and
update existing products and services, and invest in, and de-
velop new technologies. Introducing new products and tech-
nologies requires a significant commitment to research and
development, which in return requires expenditure of consid-
erable financial resources that may not always result in suc-
cess. Our sales and profitability may suffer if we invest in tech-
nologies that do not operate, or may not be integrated, as ex-
pected or that are not accepted in the marketplace as anticipat-
ed, or if our products or systems are not introduced to the
market in a timely manner, in particular, compared to our com-
petitors, or become obsolete. We constantly apply for new
patents and actively manage our intellectual property portfolio
to secure our technological position. However, our patents and
other intellectual property may not prevent competitors from
independently developing or selling products and services
similar to or duplicate of ours. There can be no assurance that
the resources invested by us to protect our intellectual proper-
ty will be sufficient or that our intellectual property portfolio
will adequately deter misappropriation or improper use of our
technology. 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 op-
erating 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. As
one of the latest technology trends we carefully estimate the
potential and relevance of cloud computing. We believe that
the potential and usage scenarios of this technology vary