HP 2007 Annual Report Download - page 26

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 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 contaminated sites. Many of our products are subject to various federal,
state, local and international laws governing chemical substances in products, including laws regulating the manufacture and
distribution of chemical substances and laws restricting the presence of certain substances in electronics products. We could
incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, third-party damage or personal injury
claims, if we were to violate or become liable under environmental laws or if our products become non-compliant with
environmental laws. We also face increasing complexity in our product design and procurement operations as we adjust to
new and future requirements relating to the materials composition of our products, including the restrictions on
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