HP 2007 Annual Report Download - page 39

impacted by market anticipation of seasonal trends. Moreover, to the extent that we introduce new products in anticipation of
seasonal demand trends, our discounting of existing products may adversely affect our gross margin prior to or shortly after
such product launches. Typically, our third fiscal quarter is our weakest and our fourth fiscal quarter is our strongest. Many
of the factors that create and affect seasonal trends are beyond our control.
Any failure by us to execute planned cost reductions successfully could result in total costs and expenses that are greater
than expected.
We have adopted restructuring and other cost reduction plans to bring operational expenses to appropriate levels for each
of our businesses, while simultaneously implementing extensive new company-wide expense control programs. These
initiatives include:
• A workforce restructuring program and a related U.S. early retirement program announced in July 2005 that we
expect to result in the elimination of approximately 14,985 positions by the end of fiscal 2008;
• A multi-year plan announced in the third fiscal quarter of 2006 to reduce IT spending by consolidating HP’ s 85 data
centers worldwide into six larger centers located in three U.S. cities;
• A multi-year program announced in the third fiscal quarter of 2006 to reduce real estate costs by consolidating
several hundred HP real estate locations worldwide to fewer core sites;
• Modifications to our defined benefit pension plan, our subsidized retiree medical program and our 401(k) plan
announced in February 2007 pursuant to which affected employees will cease accruing pension benefits and will,
instead, receive an increased 401(k) match effective January 1, 2008; and
• A U.S. early retirement program announced in February 2007 under which 3,080 employees left the company as of
May 31, 2007, all of whom have been or we expect will be replaced.
Our ability to achieve the anticipated cost savings and other benefits from these initiatives within the expected time
frame is subject to many estimates and assumptions, including estimates and assumptions regarding the cost of consolidating
the data centers and real estate locations, the amount of accelerated depreciation or asset impairment to be incurred when we
vacate facilities or cease using equipment before the end of their respective lease term or asset life, the savings associated
with the benefit plan changes announced in February 2007, the costs associated with the replacement of employees who
retired under the February 2007 early retirement program and the costs and timing of other activities in connection with these
initiatives. These estimates and assumptions are subject to significant economic, competitive and other uncertainties, some of
which are beyond our control. If these estimates and assumptions are incorrect, if we experience delays, or if other
unforeseen events occur, our business and results of operations could be adversely affected.
In order to be successful, we must attract, retain and motivate key employees, and failure to do so could seriously harm us.
In order to be successful, we must attract, retain and motivate executives and other key employees, including those in
managerial, technical, sales, marketing and IT support positions. Hiring and retaining qualified executives, engineers, skilled
solutions providers in the IT support business and qualified sales representatives are critical to our future, and competition for
experienced employees in the IT industry can be intense. The failure to hire executives and key employees or the loss of
executives and key employees could have a significant impact on our operations.
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