With People They Like.”

     Electronic versions of CDW’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports are available free of charge through our Web site, CDW.com , as soon as reasonably practicable after we electronically file these reports with the Securities and Exchange Commission.

Acquisitions

      Berbee. On October 11, 2006, we completed the acquisition of Berbee, a leading provider of information technology solutions and engineering capabilities in advanced technologies primarily across the Cisco, IBM, and Microsoft platforms. Areas of expertise include strategic technology planning, network infrastructure and unified communications, systems and storage, security, productivity applications and managed services. Berbee has 11 offices and two data centers in six Midwestern states and employed approximately 850 coworkers at December 31, 2006. Berbee operates as a separate strategic business unit of CDW with its current product and service offerings.

     Berbee’s customer base includes corporate, healthcare, education, and state and local government customers, many of whom are larger enterprise class customers. Customers value Berbee’s engineering capabilities, OEM relationships and certification levels, service in advanced technologies, and proprietary process methodologies.

     Berbee is a national gold certified partner with Cisco and a premier business partner with IBM authorized to sell all IBM server and storage lines, and has six Microsoft gold certifications. Berbee received recognition as Cisco’s U.S. IP Communications Partner of the Year in 2005, and IBM Beacon Award for Best IBM iSeries On Demand Solution in 2006, and Microsoft Central Region Partner of the Year in 2006.

      Micro Warehouse. In September 2003, we purchased selected U.S. assets and the Canadian operations of Micro Warehouse, a reseller of computers, software and peripheral products. Building on the Micro Warehouse transactions, we expanded our customer base, increased our penetration in the public sector, and extended our growth platform into Canada.

Business Strategy

     The Company’s strategy is to be a single source provider of information technology products and services for our customers. Historically, we implemented our strategy as a high volume, cost-efficient direct marketer of multi-branded, competitively-priced information technology products and services, while providing a high level of support to our customers.

     In 2006, through the purchase of Berbee, our strategy has evolved to include providing information technology solutions and engineering capabilities in advanced technologies. We intend to use Berbee as a platform to expand our capability to offer advanced technology solutions and engineering capability on a national basis. We will consider both organic and acquisition opportunities in expanding the platform.

     We believe that the following factors are of principal importance in our ability to implement our business strategy:

      Multi-Branded Products. We offer more than 100,000 products, which include a wide range of products from leading brands including Acer, Adobe, APC, Apple, Cisco, Fujitsu, Hewlett-Packard, IBM, Lenovo, Microsoft, Panasonic, Quantum, Samsung, Sony, Symantec, and ViewSonic, among others. With this broad selection of products, we can provide our customers with fully-integrated, multi-branded technology solutions and the convenience of one-stop shopping. We also continuously review and enhance our product mix based on new product introductions and the needs of our customers.

      Customer Focus. We focus our sales and marketing efforts on attracting and serving commercial customers, consisting of all customer types other than consumers. We believe commercial customers typically have ongoing requirements to purchase sophisticated products and systems and value our relationship-based approach and high level of service. Our field sales force actively calls on selected commercial customers and prospects in person to augment our inside sales force. We also reach our customers through our customized Web sites, CDW@work ® and CDWG@work ® .

      Competitive Pricing . We are able to offer our customers competitive prices due to our low cost structure, efficient distribution methods, ability to purchase products both directly from manufacturers as well as through distributors, and economies of scale in purchasing products. Our size, financial strength, and ability to successfully serve our customers allow us to negotiate advantageous purchasing terms and earn vendor incentives.

      Marketing. We use a marketing mix of direct response activities, including our catalogs and trade magazine advertising, combined with a multifaceted branding campaign, including print media, television and online advertising, and other activities. These activities are intended to promote a high level of awareness of CDW and generate customer response. Our marketing activities are directed to commercial customers and the decision makers in commercial organizations.

      Customer Service. Our sales force consists of account managers, field sales representatives and product category specialists who are highly trained in the products we sell and the Company’s systems and philosophies, enabling them to provide a high level of customer service. Account managers obtain an understanding of their customers’ businesses and technology systems and are able to recommend integrated product solutions based on customer needs, past purchases, and technological developments. Our account managers provide a high level of customer service utilizing CDW’s proprietary customer relationship management system. Customers also benefit from CDW’s team of technology specialists who have in-depth knowledge of and experience with complex technology products and applications in multiple product categories, such as networking solutions, storage applications, and software licenses.

      Advanced Technology Solutions. We provide a variety of advanced solutions and customized services to meet our customers’ complex technology needs, including strategic technology planning, network infrastructure and unified communications, systems and storage, security, productivity applications, and managed services. These solutions and services, provided by our Berbee operating segment, are performed by engineers and data center professionals who customize solutions designed to improve customers’ productivity and competitive position.

      Custom Configuration Services. We offer a broad range of custom configuration services such as the installation of accessories and expansion products into PCs and servers, loading of software, imaging for custom applications, and configuration of network operating systems and servers. These services are performed in specialized configuration centers within our distribution centers. Our custom configuration services benefit our customers by reducing the cost and time necessary to deploy new products into their existing technology environment.

      Technical Support. Our technical staff is well-trained and maintains high levels of professional certification from product manufacturers to assist our customers with technical questions and issues during regular business hours. We offer technical support services by telephone 24 hours a day, seven days a week. We believe that our commitment to service at the time of sale and after the purchase maximizes sales opportunities and encourages repeat customers.

      Proprietary Information Technology Systems. We use proprietary, real-time information technology systems which centralize the management of key functions and generate daily operating reports enabling management to identify and respond quickly to internal changes and to provide high levels of customer satisfaction. We also monitor trends in the information technology industry. We integrate our systems with our Web sites, CDW.com , CDWG.com, and CDW.ca , and our extranets, CDW@work ® and CDWG@work ® , providing real-time information for our customers.

      Effective Inventory Control. Our inventory tracking system, purchasing system, cycle counting system, and use of vendor stock balancing programs allow us to minimize our investment in inventory and to reduce inventory discrepancies and the risk of obsolescence while meeting customer needs by shipping orders generally on a same-day basis.

      High Quality Coworkers. We strive to attract, retain, and motivate high quality coworkers and provide our coworkers with competitive compensation and incentives designed to maximize performance and productivity. Our objective is, whenever possible, to promote coworkers from within the Company to positions of increased responsibility. Examples of rewards and motivations for our coworkers include short-term incentive programs, profit-sharing, and stock options and restricted stock for coworkers at the manager level and above.

Purchasing and Vendor Relationships

     We purchase products for resale from manufacturers, distributors, and other sources, all of whom we consider our vendors. During 2006, we purchased approximately 51% of the products we sold directly from manufacturers and the remaining amount from distributors and other sources. We believe that effective purchasing from a diverse vendor base is a key element of our business strategy. For the year ended December 31, 2006, purchases from distributors Tech Data and Ingram Micro represented approximately 16% and 14%, respectively, of our total purchases. Additionally, in 2006, sales of products manufactured by Hewlett-Packard comprised approximately 26% of our total sales.

     Our marketing and purchasing staffs work together to identify reliable, high-quality suppliers of products and then actively negotiate to achieve the lowest possible cost and expand vendor incentive programs. We seek to establish strong relationships with our vendors. Several of our leading vendors, such as Cisco, Hewlett-Packard, IBM, Lenovo, and Microsoft, have full-time product specialists on-site at our facilities.

     We are authorized by manufacturers to sell via direct marketing all or selected products offered by the manufacturer. Our authorization with each manufacturer provides for certain terms and conditions, which may include one or more of the following: product return privileges, price protection policies, purchase discounts and vendor incentive programs, such as purchase or sales rebates and cooperative advertising reimbursements. Vendors also periodically offer us opportunities to purchase a large amount of product at reduced prices. Vendor incentive programs are at the discretion of the vendors and usually require the achievement of a specified sales volume or growth rate within a specified period of time to qualify for all, or some, of the incentive programs.

Inventory Management/Distribution

     We utilize our proprietary information technology systems to manage our inventory in an aggressive, cost-efficient manner, resulting in a rapid-turn inventory model. We generally only stock

items that have attained a minimum sales volume and use vendor stock balancing programs to minimize our investment in inventory.

     Our distribution process is highly automated. Once a customer order is received, by phone, online, or by fax, it is processed for credit approval. After credit approval, orders are automatically routed to one of our distribution centers for picking and shipping.

     We operate two distribution centers: a 450,000 square foot facility in Vernon Hills, Illinois, and a 513,000 square foot facility in North Las Vegas, Nevada. We believe that these distribution centers are ideally located for purposes of shipping products throughout the United States and provide timely access to our principal distributors. Our locations enable us to obtain non-stocked items for same-day shipping. We believe that competitive sources of supply are available in substantially all of the merchandise categories we carry.

     Our distribution center in North Las Vegas, Nevada became operational in late 2005. This facility handled approximately 30% of our total shipping volume at the end of 2006 and predominantly serves customers located in the Western United States.

Marketing and Advertising Activities

     We market to our current and prospective customers using catalogs, direct mail programs, advertising, and an outbound calling program. In addition, we promote the CDW brand through a national branding campaign, which includes print media, television and online advertisements, and other activities.

     Catalogs are one of our main advertising vehicles and our catalog strategy has evolved to include specialty catalogs for products such as networking communications and software. Many of our catalogs include articles about noteworthy technology developments and interviews with industry executives. We also hold a Customer Technology Seminar Series, hosting representatives from industry manufacturers and influential persons in the technology field who discuss the latest information technology issues with our customers. We also develop trend advisories, case studies and white papers addressing various business opportunities or challenges and how CDW can help customers use technology to advance their business.

     As a result of our relationships with our vendors, a substantial portion of our advertising and marketing expenses are reimbursed through cooperative advertising reimbursement programs. Participation in these cooperative advertising programs is at the discretion of our vendors and are typically tied to sales or purchasing volumes or other commitments required to be met by the Company within a specified period of time. To measure the effectiveness of our various marketing activities, we track customer responses to our efforts by a variety of means. We use this information to further refine our marketing strategy and to develop more effective programs.

E-commerce

     We utilize our Web sites and extranets to implement our business strategy. Our objective is to make it easy for our customers to transact business with the Company and ultimately to enhance our customer relationships. Our Web sites include many advanced features to attract new customers and produce sales, including more than 100,000 computer products to search and order online, advanced search capabilities, product specifications, customer reviews, and information on product availability and pricing. During 2006 and 2005, we generated $1.982 billion and $1.769 billion, respectively, of direct online sales over our Web sites, representing approximately 29% and 28% of total sales, respectively.

     We continue to enhance our customized Web sites, marketed as CDW@work ® and CDWG@work ® extranets. These sites give customers online access to information such as order and shipping status, payment details, purchase history and details about their dedicated account

team. Customers may also use their sites to automate technology purchasing procedures, manage software licenses, inventory asset-tagged items, reprint invoices and retrieve quotes prepared by their account managers. Many customers use the extranets to gather product information, including pricing and availability, and then follow up with their account managers to access the account managers’ knowledge regarding product compatibility and other information.

Sales Activities and Order Fulfillment

     Our success is due in part to the strength of our account managers’ relationships with customers that are developed by calling existing and potential new customers, providing advice on products, responding to customer inquiries, and developing solutions to customers’ complex technology needs. Our account managers have in-depth product knowledge, are trained in Company philosophies and systems, and are motivated to maximize gross profit and provide high levels of customer service. New account managers are immersed in CDW Academy, our proprietary sales training program, and complete an intensive sales consulting, product training, systems, and customer service curriculum. Our sales force is organized based on various customer segments, including industry verticals, geography, and customer size. We seek to build customer relationships by addressing customers’ unique needs in the various segments to order to maximize customer satisfaction and gross profit.

     Each catalog and advertisement distributed by the Company lists a toll-free number and Web site address to be used by customers in contacting CDW to place a product order. Once a customer order is received, by phone, online, or by fax, it is processed for credit approval. We ship most credit approved orders on the day the order is received. We generally ship products to customers by AIT, DHL, Eagle, FedEx, United Parcel Service, and other commercial delivery services and invoice customers for delivery charges.

Customers

     We are not dependent on any one customer. For the year ended December 31, 2006, our largest customer comprised approximately 0.3% of net sales and our top five customers comprised approximately 1.3% of net sales. Our corporate sector customers are primarily small, medium, and large size businesses that generally have up to 1,000 employees at a single location. We also serve larger enterprise class customers which generally have more than 1,000 employees at a single location, including FORTUNE 1000 companies, as either a primary or secondary vendor. Our public sector segment focuses on meeting the technology needs of federal, state and local governments, educational institutions, and healthcare institutions. Our Berbee segment serves a broad spectrum of corporate, healthcare, education, and state and local government customers, including enterprise class customers.

     Our customers are located almost entirely in the United States. Approximately 2% of our sales in 2006 were to customers outside of the continental United States, primarily in Canada.

Custom Configuration and Technical Support

     We offer custom configuration services such as the installation of accessories and expansion products, loading of software, imaging for custom applications and configuration of network operating systems. Custom configurations provide additional value to our customers because they reduce the cost and time necessary to deploy new products into their existing technology environments. The ability to configure products to customer specifications enables CDW to generate incremental sales. In order to meet growing demand for configuration services, we have 24,000 square feet devoted to configuration services in our Vernon Hills, Illinois distribution center, including an 8,000 square foot enterprise configuration center for specialized configuration services. In addition, we have 25,000 square feet of configuration space in our North Las Vegas, Nevada distribution center used in performing standard and specialized configuration services.

     Our technical support staff is well trained and maintains high levels of professional certification from manufacturers relating to the products we sell. Our technical support staff is motivated to obtain

high certification levels, as they are compensated, in part, on the levels of those certifications. Technical support is available by telephone 24 hours a day, seven days a week to assist customers with technical problems or answer questions in order to increase customer satisfaction and reduce product returns. We have developed a proprietary customer service tracking system to ensure that customer-initiated service requests are responded to rapidly.

Information Technology Systems

     Our information technology systems are a key element in our ability to be a leading provider of multi-branded information technology products and services in the United States and Canada. Our customized information technology and telephony systems allow for centralized management of key functions, including inventory management, collection of accounts receivable, purchasing, sales, and distribution. Additionally, our systems enable the preparation of daily operating reports which provide thorough, detailed and timely information regarding key aspects of our business. Our proprietary information technology systems enable us to enhance productivity, ship customer orders on a same-day basis, respond quickly to industry changes and provide high levels of customer service. Historical customer orders are tracked within our system so that we can provide our customers with updates regarding product upgrades and other information relating to the products they purchase from the Company.

     During 2007, we intend to integrate Berbee, acquired in October 2006, into our information technology systems, to aid the alignment of the CDW and Berbee sales organizations, maintain our centralized management of key functions across the entire organization, and leverage our investment in our proprietary information technology systems.

     Our success is dependent on the accuracy and proper utilization of our information technology and telephony systems. We anticipate that we will continue to upgrade the software and hardware for our information technology systems. In addition, our ability to adapt our systems to changes in the competitive environment or to take advantage of additional automation is dependent on our ability to recruit and retain qualified information technology professionals.

Coworkers, Training and Culture

     On December 31, 2006, we employed approximately 5,500 coworkers. We consider our coworker relations to be excellent. No coworkers are covered by collective bargaining agreements.

     We emphasize the recruiting, training and development of high quality coworkers throughout our organization. Our objective is to promote coworkers from within the Company to positions of increased responsibility, whenever possible. We help our coworkers develop through CDW University, our company-wide training program. CDW University provides specialized training in sales and relationship-building techniques, technical certifications, leadership development skills and interpersonal and professional skills.

     We strive to create a supportive and rewarding work environment. In 2007, we were named by FORTUNE magazine as one of the “100 Best Companies to Work For” for the ninth consecutive year. CDW coworkers are encouraged to provide their thoughts and concerns regarding the Company directly to management, including through our whistleblower hotline and coworker surveys.

Incentive and Regular Compensation Arrangements

      Compensation Arrangements . Our coworkers are compensated on a basis that rewards performance and the achievement of identified goals. For example, account managers generally receive compensation pursuant to a monthly commission schedule which is based on the gross profit they generate. Account managers have the authority to negotiate and adjust prices for products, provided that the product is sold at a price which meets established management guidelines and pursuant to various contracted prices, where applicable. Account managers have the opportunity to

achieve relatively high compensation levels and have historically shown increased productivity as training and experience levels increase.

      Stock Incentive Plans. In addition to regular cash compensation, we provide coworkers at the manager level and above with additional long-term incentives designed to maximize performance and productivity. To this end, we have adopted various stock-based compensation plans which enable these coworkers to share in the Company’s success through appreciation in the value of the Company’s stock.

Trademarks and Trade Names

     We conduct business under a number of trademarks, trade names and service marks including “CDW ® ,” “CDW. THE RIGHT TECHNOLOGY. RIGHT AWAY. ® ,” “CDW@WORK ® ,” “CDW-G ® ,” “CDW-G@WORK ® ,” and “BERBEE ® .” We have taken steps to protect these marks, some of which are registered, and believe they have significant value and are important factors in our marketing programs and business strategy.

Item 1A.   Risk Factors

     There are many factors that affect our business and the results of operations, some of which are beyond our control. The following is a description of some important factors that may cause the actual results of operations in future periods to differ materially from those currently expected or desired.

      Our sales and profitability may be affected by changes in the economic environment and other factors. There are many factors which could affect our business, including:
•   the capital and technology spending patterns of existing and prospective customers;  
•   general economic trends;  
•   the addition of new customers and further penetration of our existing customer base;  
•   the productivity and retention of our sales force;  
•   the optimization of our product mix and pricing strategies;  
•   the availability of products from our vendors;  
•   the successful development of new technology and products by equipment manufacturers and software developers; and  
•   new competitors and new forms of competition.

      Our business depends on our vendor relationships and the availability of products. We purchase products for resale from manufacturers, distributors and other sources, all of whom we consider our vendors. During 2006, we purchased approximately 51% of the products we sold directly from manufacturers and the remaining amount from distributors and other sources. We are authorized by manufacturers to sell all or some of their products via direct marketing activities. Our authorization with each manufacturer is subject to specific terms and conditions regarding such things as product return privileges, price protection policies, purchase discounts and vendor incentive programs, including purchase rebates, sales volume rebates and cooperative advertising reimbursements.

     From time to time, vendors may terminate our right to sell some or all of their products or change these terms and conditions or reduce or discontinue the incentives that they offer us. Any such termination or the implementation of such changes could have a negative impact on our operating income. Additionally, some products are subject to manufacturer allocation, which limits the number of units of those products that are available to resellers, including us.

     Sales of Cisco, Hewlett-Packard, IBM, Lenovo, and Microsoft products comprise a substantial portion of our sales. In 2006, sales of products manufactured by Hewlett-Packard represented

approximately 26% of our total sales and, therefore, we are dependent on the economic condition and product competitiveness of, and our business relationship with, this manufacturer in particular. In addition, although we purchase from a diverse vendor base, in 2006, products we purchased from distributors Tech Data and Ingram Micro represented approximately 16% and 14%, respectively, of our total purchases. The loss of, or change in business relationship with, any of these or any other key vendors, or the diminished availability of their products, could reduce the supply and increase the cost of products we sell and negatively impact our competitive position. Additionally, the relocation of key distributors utilized in our purchasing model could adversely impact our results of operations. Although to date mergers among manufacturers have not had an adverse impact on our business and results of operations, further consolidation could adversely impact us.

      The success of our business depends on the continuing development, maintenance and operation of our information technology systems. Our success is dependent on the accuracy, proper utilization and continuing development of our information technology systems, including our business application systems, Web servers and telephony system. The quality and our utilization of the information generated by our information technology systems, and our success in implementing new systems and upgrades, affects, among other things, our ability to:
•   conduct business with our customers;  
•   manage our inventory and accounts receivable;  
•   purchase, sell, ship and invoice our products efficiently and on a timely basis; and  
•   maintain our cost-efficient operating model.

     The integrity of our information technology systems is vulnerable to certain forms of disaster including, but not limited to, natural disasters such as tornadoes. While we have taken steps to protect our information technology systems from a variety of threats, including computer viruses and malicious hackers, there can be no guarantee that those steps will be effective. Furthermore, although we have redundant systems at a separate location to back up our primary application systems, there can be no assurance that these redundant systems will operate properly if and when required. Any disruption to or infiltration of our information technology systems could significantly harm our business and results of operations.

      Our sales are dependent on the continued development and application of new technologies and products. The market for information technology products and services has evolved as a result of the development of new technologies that are transformed by manufacturers into new products and applications. We have been and will continue to be dependent on the development of new technologies and products by manufacturers, as well as the acceptance of those technologies and products by customers. A decrease in the rate of development of new technologies and new products by manufacturers, or the lack of acceptance of those technologies and products by customers, could have an adverse effect on our business and results of operations.

      We would be adversely affected if we are not able to expand or retain our sales force or if we are not able to maintain or increase their productivity. Our statistics show that the level of sales achieved by our account managers increases with the number of years of experience they have with us. Our rate of sales growth and our operating results would be negatively affected if we are unable to expand the size of our sales force, if the turnover rate of account managers increases from relatively constant historical levels or if the sales volumes and profitability achieved by our account managers do not increase with experience.

      Substantial competition could reduce our market share and significantly harm our financial performance. The market for information technology products and accessories is highly competitive. Our competition includes:

•   national direct marketers, such as Insight Enterprises, PC Connection, PC Mall and Zones;  
•   value-added resellers;  
•   manufacturers, such as Dell, Hewlett-Packard, and Apple, who sell directly to customers;  
•   computer superstores, such as CompUSA;  
•   government resellers, such as GTSI;  
•   software resellers, such as ASAP, Softchoice, and Software House International;  
•   consumer electronic and office supply superstores, such as Best Buy, Circuit City, Office Depot, Office Max and Staples;  
•   corporate resellers;  
•   Web resellers, such as Amazon.com, Buy.com and Newegg.com;  
•   mass merchandisers, such as Wal-Mart and Costco; and  
•   managed service providers, such as IBM, Sungard, Vericenter, Verizon, AT&T, and EDS.

     Some of our hardware and software vendors, such as Apple, Hewlett-Packard, IBM, and Lenovo, have sold, and could intensify their efforts to sell, their products directly to customers. In addition, some software manufacturers have developed, and may continue to develop, sales methods that directly provide customers with subscription-based software programs and packages. If either of these trends becomes more prevalent, it could adversely affect our sales growth and profitability.

     We focus on offering a high level of service to gain new customers and retain existing customers. While our value proposition to customers includes competitive pricing, pricing is only one aspect of our ability to compete. However, competition may increase in the future, which could require us to reduce prices, increase advertising expenditures or take other actions which may have an adverse effect on our operating results. Some of our competitors have reduced their prices in an attempt to stimulate sales. Decreasing prices of information technology products and accessories resulting from competition and technological changes require us to sell a greater number of products to achieve the same level of net sales and gross profit. If this trend continues and we are unable to attract new customers and sell increased quantities of products, our sales growth and profitability could be adversely affected.

      We are exposed to inventory risks. We are exposed to inventory risks as a result of the rapid technological changes that affect the market and pricing for the products we sell. We seek to minimize our inventory exposure through a variety of inventory management procedures and policies, including our rapid-turn inventory model, as well as vendor price protection and product return programs. However, if we were unable to maintain our rapid-turn inventory model, if there were unforeseen product developments that created more rapid obsolescence or if vendors were to change their terms and conditions, our inventory risks could increase. We also periodically take advantage of cost savings associated with certain opportunistic bulk inventory purchases offered by our vendors. These bulk purchases could increase our exposure to inventory obsolescence.

      Our future operating results may fluctuate significantly. We may experience significant variations in our future quarterly results of operations. These fluctuations may result from many factors, including the condition of the information technology industry in general, shifts in demand and pricing for hardware and software products and the introduction of new products or upgrades. Our operating results are also highly dependent on our level of gross profit as a percentage of net sales. Our gross profit percentage fluctuates due to numerous factors, some of which may be outside of our control. These factors include:
•   our pricing strategies;  
•   changes in product costs from vendors;  
•   the availability of price protection, purchase discounts and incentive programs from vendors;  
•   the availability of cooperative advertising funds from vendors, which are classified as a reduction of cost of sales;  
•   the risk of some of the items in our inventory becoming obsolete;  
•   the relative mix of products sold, and customers sold to, during the period;

•   general market and competitive conditions; and  
•   increases in delivery costs that we cannot pass on to customers.

      A natural disaster or other adverse occurrence at one of our primary facilities or data centers could damage our business. Substantially all of our corporate, warehouse and distribution functions are located at our Vernon Hills, Illinois facilities and we have a second distribution center in North Las Vegas, Nevada. If the warehouse and distribution equipment at one of our distribution centers were to be seriously damaged by a natural disaster or other adverse occurrence, we could utilize the other distribution center or third-party distributors to ship products to our customers. However, this may not be sufficient to avoid interruptions in our service and may not enable us to meet all of the needs of our customers and would cause us to incur incremental operating costs. In addition, our Berbee operating segment operates two data centers which may contain business-critical and confidential information of our customers. A natural disaster or other adverse occurrence at one of the data centers could negatively impact our business and profitability.

      We are heavily dependent on commercial delivery services. We generally ship our products to customers by AIT, DHL, Eagle, FedEx, United Parcel Service, and other commercial delivery services and invoice customers for delivery charges. If we are unable to pass on to our customers future increases in the cost of commercial delivery services, our profitability could be adversely affected. Additionally, strikes or other service interruptions by such shippers could adversely affect our ability to deliver products on a timely basis.

      Our earnings and growth rate could be adversely affected by changes in general economic conditions and uncertain geopolitical conditions. Weak general economic conditions, along with uncertainties in geopolitical conditions, could adversely impact our revenue and growth rate. In addition, our revenue, gross margin and earnings could deteriorate in the future as a result of unfavorable economic or political conditions.

      We could be exposed to additional risks if we make additional acquisitions or enter into alliances. We may pursue transactions, including acquisitions or alliances, to extend or complement our existing business. These types of transactions involve numerous risks, including investor acceptance, finding suitable transaction partners and negotiating terms that are acceptable to us, the diversion of management’s attention from other business concerns, extending our product or service offerings into areas in which we have limited experience, entering into new geographic markets, the potential loss of key coworkers or business relationships and successfully integrating acquired businesses, any of which could adversely affect our operations or the price of our stock.

      The failure to comply with our public sector contracts could result in, among other things, fines or other liabilities. Revenues from the public sector segment are derived from sales to federal, state and local governmental departments and agencies, as well as to educational institutions and healthcare customers, through various contracts and open market sales. Government contracting is a highly regulated area. Noncompliance with government procurement regulations or contract provisions could result in civil, criminal, and administrative liability, including substantial monetary fines or damages, termination of government contracts, and suspension, debarment or ineligibility from doing business with the government. The effect of any of these possible actions by any governmental department or agency could adversely affect our business and results of operations.

      We are exposed to the risks of a global market. Many of our products are either produced, or have major components produced, in the Asia Pacific region. We engage in U.S. dollar denominated transactions with U.S. divisions and subsidiaries of companies located in this region. As a result, we may be indirectly affected by risks associated with international events, including economic and labor conditions, political instability, tariffs and taxes, availability of products and currency fluctuations in the U.S. dollar versus the regional currencies. In the past, countries in the Asia Pacific region have experienced volatility in their currency, banking and equity markets. Future volatility could adversely affect the supply and price of products and components and ultimately, our results of operations.

      We are exposed to litigation risk. CDW is party to legal proceedings that arise from time to time, both with respect to specific transactions and in the ordinary course of our business. We do not believe that any currently pending or threatened litigation will have a material adverse effect on our financial condition. Litigation, however, involves uncertainties and it is possible that the eventual outcome of litigation could adversely affect our results of operations for a particular period.

Item 1B.   Unresolved Staff Comments

     None.