HP 2006 Annual Report Download - page 15

Seasonality
General economic conditions have an impact on our business and financial results. From time to
time, the markets in which we sell our products experience weak economic conditions that may
negatively affect sales. We experience some seasonal trends in the sale of our products and services.
For example, sales to governments (particularly sales to the U.S. government) often are stronger in the
third calendar quarter, European sales often are weaker in the summer months and consumer sales
often are stronger in the fourth calendar quarter. Demand during the spring and early summer months
also may be adversely impacted by market anticipation of seasonal trends. See ‘‘Risk Factors—Our
sales cycle makes planning and inventory management difficult and future financial results less
predictable,’’ in Item 1A, which is incorporated herein by reference.
Competition
We encounter aggressive competition in all areas of our business activity. We compete primarily on
the basis of technology, performance, price, quality, reliability, brand, reputation, distribution, range of
products and services, ease of use of our products, account relationships, customer training, service and
support, security and availability of application software and our Internet infrastructure offerings.
The markets for each of our business segments are characterized by vigorous competition among
major corporations with long-established positions and a large number of new and rapidly growing
firms. Product life cycles are short, and to remain competitive we must develop new products and
services, periodically enhance our existing products and services and compete effectively on the basis of
the factors listed above. In addition, we compete with many of our current and potential partners,
including OEMs that design, manufacture and often market their products under their own brand
names. Our successful management of these competitive partner relationships will continue to be
critical to our future success. Moreover, we anticipate that we will have to continue to adjust prices on
many of our products and services to stay competitive.
On an overall basis we are among the largest U.S.-based companies offering our range of general
purpose computers and personal information, imaging and printing products for industrial, scientific,
business and consumer applications, and IT services. We are the leader or among the leaders in each of
our principal business segments.
The competitive environments in which each segment operates are described below:
Enterprise Storage and Servers. The areas in which ESS operates are intensely competitive and are
characterized by rapid and ongoing technological innovation and price reductions. Our competitors
range from broad solutions providers such as International Business Machines Corporation (‘‘IBM’’) to
more focused competitors such as EMC Corporation in storage, Dell, Inc. (‘‘Dell’’) in industry standard
servers, and Sun Microsystems, Inc. in UNIX-based servers. We believe that our important
competitive advantages in this segment include our broad range of server and storage products and
related software and services, our global reach, our significant intellectual property portfolio and
research and development capabilities, which will contribute to further enhancements of our product
offerings and our ability to cross sell our portfolio and leverage scale advantages in everything from
brand to procurement leverage.
HP Services. The principal areas in which HPS competes are technology services, consulting and
integration and managed services. The technology services and consulting and integration markets have
been under significant pressure as customers scrutinize their IT spending. However, this trend has
benefited the managed services business as customers attempt to reduce their IT costs and focus their
resources on their core businesses. Our key competitors in this segment include IBM Global Services,
systems integration firms such as Accenture Ltd., outsourcing firms such as Electronic Data Systems
Corporation and offshore companies. Many of our competitors are able to offer a wide range of
services through a global network of service providers, and some of our competitors enjoy significant
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