Dell 2009 Annual Report Download - page 17

Table of Contents
• Weak economic conditions and additional regulation could harm our financial services activities.
Our financial services activities are negatively affected in the current adverse economic environment by loan delinquencies and
defaults. Although the trend of increasing loan delinquencies and defaults has slowed, defaults impact our net credit losses and
we may need to increase our reserves for customer receivables in the future. In addition, anticipated changes in financial
services regulation could unfavorably impact the profitability and cash flows of our consumer financing activities.
• We face intense competition, which may adversely affect our industry unit share position, revenue, and profitability.
We operate in an industry in which there are rapid technological advances in hardware, software and service offerings, and face
aggressive product and price competition from both branded and generic competitors. We compete based on our ability to
profitably offer competitive solutions with the most current and desired product features, as well as on customer service, quality
and reliability. We expect that competition will continue to be intense and that our competitors' products may be less costly,
provide better performance or include additional features when compared to our products. Our efforts to balance our mix of
products and services to optimize profitability, liquidity, and growth may also put pressure on our industry unit share position in
the short-term. As we continue to expand globally, we may see new and increased competition in different geographic regions.
In addition, barriers to entry in our businesses generally are low and products can be distributed broadly and quickly at
relatively low cost.
• If our cost cutting measures are not successful, we may become less competitive.
A variety of factors could prevent us from achieving our goal of better aligning our product and service offerings and cost
structure with customer needs in the current business environment. We are currently focused on reducing our operating
expenses, reducing total costs in procurement, product design, transformation, and simplifying our structure. For example, we
may experience delays in the anticipated timing of activities related to our cost savings plans and higher than expected or
unanticipated costs to implement the plans. As a result, we may not achieve our expected cost savings in the time anticipated, or
at all. In such case, our results of operations and profitability may be negatively impacted, making us less competitive and
potentially causing us to lose industry unit share.
• Our inability to effectively manage product and services transitions could reduce the demand for our products and the
profitability of our operations.
Continuing improvements in technology result in frequent new product and services introductions, short product life cycles, and
improvements in product performance characteristics. In addition, we are increasingly sourcing new products and transitioning
existing products through our contract manufacturers and manufacturing outsourcing relationships in order to generate cost
efficiencies, deliver products faster and better serve our customers in certain segments and geographical areas. The success of
product transitions depends on a number of factors, including the availability of products in appropriate quantities and costs to
meet demand, and the risk that new or upgraded products have quality or other defects. These product transitions present
execution challenges and risks. If we are unable to effectively manage a new product transition, our business and results of
operations could be unfavorably affected.
• We may not successfully execute our growth strategy if we fail to effectively manage the growth of our distribution capabilities,
and to add to the scope of our product and services offerings.
Our growth strategy involves reaching more customers worldwide through new distribution channels, such as consumer retail,
expanding our relationships with value-added resellers, and augmenting select areas of our business through targeted
acquisitions. As we reach more customers worldwide through an increasing number of new distribution channels, such as
consumer retail, and continue to expand our relationships with value-added resellers, inventory management becomes more
challenging and successful demand forecasting becomes more difficult. Our goal continues to be to optimize the balance of
liquidity, profitability, and growth with a focus on moving the weight of the product portfolio to higher margin products and
recurring revenue streams. Our ability to grow sales of these higher margin products, services
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