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Through our existing manufacturing model, we are generally able to obtain sufficient materials and components from global sources to meet
the needs of our four reportable segments. In each of our reportable segments, we:
Comparing 2003 to 2002, we observed fewer instances of supply surpluses because of adjustments to eliminate excess capacity. In 2003, we
continued our focus on inventory management and component cost reduction. In 2004, we continued to purchase, manufacture, or otherwise
obtain sufficient components and materials to supply our products, systems and networks within customary delivery periods.
For more information on our supply arrangements, see “Commitments” in note 14 of the accompanying consolidated financial statements and
“Developments in 2003 and 2004” and “Liquidity and capital resources — Contractual cash obligations — Outsourcing contracts” in the
MD&A section of this report.
Seasonality
Prior to 2001, our business results in all of our reportable segments were generally strongest in our fourth quarter, second strongest in our
second quarter, third strongest in our third quarter and the weakest in our first quarter, primarily due to the networking industry purchasing
cycles exhibited by our customers. The industry adjustment and economic downturn in the United States and elsewhere in 2001 and 2002
affected our customers’ traditional purchasing patterns, the demand for our products and services and the traditional seasonality of our
business. In 2003, we began to experience a period of relative industry stability. While our customers increased their purchasing levels in the
fourth quarter of 2003, our customers continued to spend cautiously. We experienced a seasonal decline in revenues in the first quarter of 2004
compared to the fourth quarter of 2003, followed by growth in the second quarter of 2004 compared to the first quarter of 2004 in all of our
four reportable segments. There will be a sequential decline in revenue in the third quarter of 2004 compared to the second quarter of 2004 and
that we expect the fourth quarter of 2004 will be the strongest quarter in 2004. The quarterly profile of our business results in 2004 is not
expected to be consistent across all of our reportable segments and there is no assurance that our results of operations for any quarter will
necessarily be consistent with our historical quarterly profile or indicative of our expected results in future quarters. See “Results of operations
— continuing operations — 2004 and 2005” and “Risk factors/forward looking statements” in the MD&A section of this report.
Strategic alliances, acquisitions and minority investments
We use strategic alliances to deliver certain solutions to our customers. These alliances are typically formed to fill product or service gaps in
areas that support our core businesses. We believe strategic alliances also augment our access to potential new customers. We intend to
continue to pursue strategic alliances with businesses that offer technology and/or resources that would enhance our ability to compete in
existing markets or exploit new market opportunities.
In 2003, we increased our then existing majority positions in certain companies to 100% ownership. See “Developments in 2003 and 2004 —
Ownership adjustment in our French and German operations” in the MD&A section of this report. However, we did not make any material
acquisitions in 2003 or in 2004. In the future, we may consider selective opportunistic acquisitions of companies with resources and product or
service offerings capable of providing us with additional enhancements to our networking solutions or access to new markets. For information
regarding the risks associated with strategic alliances and acquisitions, see “Risk factors/forward looking statements” in the MD&A section of
this report.
We continue to hold minority investments in certain “start-up” businesses with technology, products or services that, at the time of investment,
had the potential to fulfill key existing or emerging market opportunities. When minority investments are no longer required to maintain our
strategic relationship, or the relationship is no longer strategic to our core businesses, we intend to exit such investments at an opportune time.
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• make significant purchases of electronic components and assemblies, optical components, original equipment manufacturer, or
OEM, products, software products, outsourced assemblies and other materials and components from many domestic and foreign
sources;
• develop and maintain alternative sources for certain essential materials and components; and
• occasionally maintain special inventories of components internally or request that they be maintained by suppliers to satisfy
customer demand or to minimize effects of possible market shortages.