937941--3/31/2006--PC_MALL

related topics

{product, market, service}

{customer, product, revenue}

{system, service, information}

{regulation, government, change}

{acquisition, growth, future}

{condition, economic, financial}

{personnel, key, retain}

{stock, price, operating}

{control, financial, internal}

{operation, natural, condition}

{cost, operation, labor}

{property, intellectual, protect}

{cost, regulation, environmental}

{operation, international, foreign}

Our revenue is dependent on sales of products from a small number of key manufacturers, and a decline in sales of products from these manufacturers could materially harm our business. Certain of our key vendors provide us with incentives and other assistance that reduce our operating costs, and any future decline in these incentives and other assistance could materially harm our operating results. We do not have long-term supply agreements or guaranteed price or delivery arrangements with our vendors. Substantially all of our agreements with vendors are terminable within 30 days. Our success is dependent in part upon the ability of our vendors to develop and market products that meet changes in marketplace demand, as well as our ability to sell popular products from new vendors. We may not be able to maintain existing or build new vendor relationships, which may affect our ability to offer a broad selection of products at competitive prices and negatively impact our results of operations. Our narrow gross margins magnify the impact of variations in our operating costs and of adverse or unforeseen events on our operating results. We experience variability in our net sales and net income on a quarterly basis as a result of many factors. The transition of our business strategy to increasingly focus on business and public sector sales presents numerous risks and challenges, and may not improve our profitability or result in expanded market share. Our increased investments in our outbound telemarketing sales force model may not improve our profitability or result in expanded market share. The success of our Canadian call center is dependent, in part, on our receipt of government labor credits. Existing or future government and tax regulations could expose us to liabilities or costly changes in our business operations, and could reduce demand for our products and services. Part of our business strategy includes the acquisition of other companies, and we may have difficulties integrating acquired companies into our operations in a cost-effective manner, if at all. We may not be able to maintain profitability on a quarterly or annual basis. Changes in accounting rules for stock-based compensation may adversely affect our consolidated operating results, our stock price and our ability to hire, retain and motivate employees. Our operating results are difficult to predict and may adversely affect our stock price. If we fail to accurately predict our inventory risk, our gross margins may decline as a result of required inventory write downs due to lower prices obtained from older or obsolete products. We may need additional financing and may not be able to raise additional financing on favorable terms or at all, which could increase our costs, limit our ability to grow and dilute the ownership interests of existing stockholders. We may be subject to claims regarding our intellectual property, including our business processes, or the products we sell, any of which could result in expensive litigation, distract our management or force us to enter into costly royalty or licensing agreements. We may fail to expand our merchandise categories, product offerings, websites and processing systems in a cost-effective and timely manner as may be required to efficiently operate our business. We may not be able to attract and retain key personnel such as senior management and information technology specialists. If we fail to achieve and maintain adequate internal controls, we may not be able to produce reliable financial reports in a timely manner or prevent financial fraud. Any inability to effectively manage our growth may prevent us from successfully expanding our business. Our advertising and marketing efforts may be costly and may not achieve desired results. Changes and uncertainties in the economic climate could negatively affect the rate of information technology spending by our customers, which would likely have an impact on our business. Increased product returns or a failure to accurately predict product returns could decrease our revenue and impact profitability. Our business may be harmed by fraudulent activities on our websites, including fraudulent credit card transactions. We may be liable for misappropriation of our customers personal information. Laws or regulations relating to privacy and data protection may adversely affect the growth of our Internet business or our marketing efforts. The security risks of e-commerce may discourage customers from purchasing goods from us. Credit card fraud could decrease our revenue and profitability. Our facilities and systems are vulnerable to natural disasters or other catastrophic events. We rely on independent shipping companies to deliver the products we sell. We may not be able to compete successfully against existing or future competitors, which include some of our largest vendors. Our success is tied to the continued use of the Internet and the adequacy of the Internet infrastructure. Our earnings and growth rate could be adversely affected by changes in economic and geopolitical conditions. We are exposed to the risks of business and other conditions in the Asia Pacific region. We are subject to risks associated with the evolution of, and consolidation within, our industry. Our success is in part dependent on the accuracy and proper utilization of our management information systems. If we are unable to provide satisfactory customer service, we could lose customers or fail to attract new customers. Our stock price may be volatile.

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937941--3/31/2006--PC_MALL_INC