HP 2006 Annual Report Download - page 16

brand recognition. HPS teams with many companies that offer services which allow us to extend our
reach and augment our capabilities. Our competitive advantages include our global delivery
organization, our deep technical expertise, our diagnostic and IT management tools as well as our
ability to offer customers alternative service offerings from hardware support to consulting to
datacenter outsourcing.
Software. Our software competitors include companies focused on providing software solutions for
IT management, such as BMC Software Inc, CA Inc., and IBM Tivoli Software.
Personal Systems Group. The areas in which PSG operates are intensely competitive and are
characterized by rapid price reductions and inventory depreciation. Our primary competitors for the
branded personal computers are Dell, Acer Inc, Apple Computer, Inc., Gateway, Inc., Lenovo Group
Limited and Toshiba Corporation. In particular regions, we also experience competition from local
companies and from generically-branded or ‘‘white box’’ manufacturers. Our competitive advantages
include our broad product portfolio, our innovation and research and development capabilities, our
brand and procurement leverage, our ability to cross sell our portfolio of offerings, our extensive
service and support offerings and the availability of our broad based distribution of products from retail
and commercial channels to direct sales.
Imaging and Printing Group. We are the leading imaging and printing systems provider in the
world for printer hardware, printing supplies and scanning devices. We believe that our brand
recognition, reputation for quality, breadth of product offerings and large customer base are important
competitive advantages. However, the markets for printer hardware and associated supplies are highly
competitive, especially with respect to pricing and the introduction of new products and features. IPG’s
key competitors include Canon USA, Inc., Lexmark International, Inc., Xerox Corporation (‘‘Xerox’’),
Seiko Epson Corporation, Samsung Electronics Co. Ltd. and Dell. In addition, independent suppliers
offer refill and remanufactured alternatives for our supplies which, although generally offering lower
print quality and reliability, may be offered at lower prices and put pressure on our supplies sales and
margins. Other companies also have developed and marketed new compatible cartridges for HP’s laser
and inkjet products, particularly in jurisdictions outside of the United States where adequate
intellectual property protection may not exist. In recent years, we and our competitors have regularly
lowered prices on printer hardware both to reach new customers and in response to the competitive
environment. Important areas for future growth include digital photography in the home and outside
the home, printer-based multi-function devices in the office space, digital presses in our imaging and
graphics space and driving color printing expansion in the office. While we encounter competitors in
some product categories whose current market share is greater than ours, such as Xerox in copiers and
Heidelberger Druckmaschinen Aktiengesellschaft in publishing, we believe we will provide important
new contributions in the home, the office and publishing environments by providing comprehensive
solutions.
HP Financial Services. In our financing business, our competitors are captive financing companies,
mainly IBM Global Financing, as well as banks and financial institutions. We believe our competitive
advantage in this business over banks and financial institutions is our ability to finance products,
services and total solutions.
For a discussion of risks attendant to these competitive factors, see ‘‘Risk Factors—The
competitive pressures we face could harm our revenue, gross margin and prospects,’’ in Item 1A, which
is incorporated herein by reference.
Environment
Some of our operations use substances regulated under various federal, state, local and
international laws governing the environment, including laws governing the discharge of pollutants into
the air and water, the management and disposal of hazardous substances and wastes and the cleanup of
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