HP 2007 Annual Report Download - page 23

products with short life cycles (although some of these sources have operations in multiple locations). We are dependent
upon Intel as a supplier of processors and Microsoft for various software products. However, we believe that disruptions with
these suppliers would result in industry-wide dislocations and therefore would not disproportionately disadvantage us relative
to our competitors. We also have a valued relationship with AMD, and we have continued to see solid acceptance of AMD
processors in the market during fiscal 2007.
Like other participants in the high technology industry, we ordinarily acquire materials and components through a
combination of blanket and scheduled purchase orders to support our requirements for periods averaging 90 to 120 days.
From time to time, we experience significant price volatility and supply constraints of certain components that are not
available from multiple sources. Frequently, we are able to obtain scarce components for somewhat higher prices on the open
market, which may have an impact on gross margin but does not disrupt production. On occasion, we acquire component
inventory in anticipation of supply constraints or enter into longer-term pricing commitments with vendors to improve the
priority, price and availability of supply. See “Risk Factors—We depend on third-party suppliers, and our revenue and gross
margin could suffer if we fail to manage supplier issues properly,” in Item 1A, which is incorporated herein by reference.
International
Our products and services are available worldwide. We believe this geographic diversity allows us to meet demand on a
worldwide basis for both consumer and enterprise customers, draws on business and technical expertise from a worldwide
workforce, provides stability to our operations, allows us to drive economies of scale, provides revenue streams to offset
geographic economic trends and offers us an opportunity to access new markets for maturing products. In addition, we
believe that future growth is dependent in part on our ability to develop products and sales models that target developing
countries. In this regard, we believe that our broad geographic presence gives us a solid base upon which to build such future
growth.
A summary of our domestic and international net revenue and net property, plant and equipment is set forth in Note 18 to
the Consolidated Financial Statements in Item 8, which is incorporated herein by reference. Approximately 67% of our
overall net revenue in fiscal 2007 came from outside the United States. The substantial majority of our net revenue
originating outside the United States was from customers other than foreign governments.
For a discussion of risks attendant to HP’ s foreign operations, see “Risk Factors—Due to the international nature of our
business, political or economic changes or other factors could harm our future revenue, costs and expenses and financial
condition,” in Item 1A, “Quantitative and Qualitative Disclosure about Market Risk” in Item 7A and Note 9 to the
Consolidated Financial Statements in Item 8, which are incorporated herein by reference.
Research and Development
We remain committed to innovation as a key element of HP’ s culture. Our development efforts are focused on designing
and developing products, services and solutions that anticipate customers’ changing needs and desires and emerging
technological trends. Our efforts also are focused on identifying the areas where we believe we can make a unique
contribution and the areas where partnering with other leading technology companies will leverage our cost structure and
maximize our customers’ experiences.
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