HP 2007 Annual Report Download - page 34

the adverse financial impact resulting from currency variations. Gains or losses associated with hedging activities also may
impact our revenue and to a lesser extent our cost of sales and financial condition.
In many foreign countries, particularly in those with developing economies, it is common to engage in business practices
that are prohibited by laws and regulations applicable to us, such as the Foreign Corrupt Practices Act. Although we
implement policies and procedures designed to facilitate compliance with these laws, our employees, contractors and agents,
as well as those companies to which we outsource certain of our business operations, may take actions in violation of our
policies. Any such violation, even if prohibited by our policies, could have a material adverse effect on our business.
Terrorist acts, conflicts and wars may seriously harm our business and revenue, costs and expenses and financial condition
and stock price.
Terrorist acts, conflicts or wars (wherever located around the world) may cause damage or disruption to HP, our
employees, facilities, partners, suppliers, distributors, resellers or customers. The potential for future attacks, the national and
international responses to attacks or perceived threats to national security, and other actual or potential conflicts or wars,
including the ongoing military operations in Iraq, have created many economic and political uncertainties. In addition, as a
major multi-national company with headquarters and significant operations located in the United States, actions against or by
the United States may impact our business or employees. Although it is impossible to predict the occurrences or
consequences of any such events, they could result in a decrease in demand for our products, make it difficult or impossible
to deliver products to our customers or to receive components from our suppliers, create delays and inefficiencies in our
supply chain and result in the need to impose employee travel restrictions. We are predominantly uninsured for losses and
interruptions caused by terrorist acts, conflicts and wars.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our worldwide operations could be subject to earthquakes, power shortages, telecommunications failures, water
shortages, tsunamis, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or
manmade disasters or business interruptions, for which we are predominantly self-insured. The occurrence of any of these
business disruptions could seriously harm our revenue and financial condition and increase our costs and expenses. Our
corporate headquarters, and a portion of our research and development activities, are located in California, and other critical
business operations and some of our suppliers are located in California and Asia, near major earthquake faults. The ultimate
impact on us, our significant suppliers and our general infrastructure of being located near major earthquake faults is
unknown, but our revenue, profitability and financial condition could suffer in the event of a major earthquake or other
natural disaster. In addition, some areas, including California and parts of the East Coast, Southwest and Midwest of the
United States, have previously experienced, and may experience in the future, major power shortages and blackouts. These
blackouts could cause disruptions to our operations or the operations of our suppliers, distributors and resellers, or customers.
Moreover, the consolidation of all of our worldwide IT data centers into six centers located in the southern United States,
when completed, could increase the impact on us of a natural disaster or other business disruption occurring in that
geographic area.
If we fail to manage the distribution of our products and services properly, our revenue, gross margin and profitability could
suffer.
We use a variety of different distribution methods to sell our products and services, including third-party resellers and
distributors and both direct and indirect sales to both enterprise accounts and consumers. Successfully managing the
interaction of our direct and indirect channel efforts to reach various potential customer segments for our products and
services is a complex process. Moreover, since each distribution method has distinct risks and gross margins, our failure to
implement the most
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