HP 2007 Annual Report Download - page 6

CEO Letter
In our Imaging and Printing Group, we are extending
our leadership in our core printing business while also
taking advantage of new, high-growth opportunities
in supplies, graphic arts and enterprise printing. We
are expanding our sales coverage to accelerate growth
in the enterprise business, which we expect to be a
$121 billion market by 2010.
In each of these businesses, we are using our scale to
become even more competitive. We have more than
double the scale of each of our printer competitors
and all but one of our PC and server competitors. We
are leveraging this scale to consolidate share and
improve profits while continuing to reinvest to maintain
our technology leadership.
We expect continued growth in developed countries
but much higher growth in what are commonly
known as the BRIC countries—Brazil, Russia, India
and China—and in other emerging economies. Our
revenue in the BRIC countries grew 33 percent in
fiscal 2007 and now represents 8 percent of HP’s
total revenue.
As we reduce costs, we are shifting our investments to
capitalize on these market opportunities. While it
is important that we grow, it’s also important that we
grow the right way with the right mix. For example,
HP hired 1,000 sales professionals in fiscal 2007 to
expand our coverage in key accounts and markets,
and the company added more than 1,000 salespeople
through acquisitions.
We
also are investing in higher-margin categories such
as software and services. We spent more than $6 billion
across our businesses in fiscal 2007 to acquire 10
software, technology and service companies. We
expect that each one will add significant capabilities
and technology to our portfolio, as well as new oppor-
tunities for growth.
Between acquisitions and organic growth, revenue in
our software business nearly doubled in fiscal 2007—
making HP the sixth largest software company in the
world. Software is a critical differentiator for HP—not
only in our standalone software business but in each
of our businesses as well.
Efficiency
We have made great progress in reducing costs,
which allows us to compete more aggressively and win
in the market. But we have an opportunity to further
improve our efficiency.
We look at everything between revenue and non-GAAP
operating profit as a cost. From that perspective, HP
had almost $95 billion in costs in fiscal 2007. That is
too much. Even with all the work we have done, we
must become more efficient, further reduce costs and
invest the savings to create more stockholder value.
We assess our costs in three areas.
The first is corporate overhead, including IT, real estate
and other corporate expenses. We are reducing our IT
costs by consolidating and modernizing our data
centers and operations. We also are becoming more
efficient in our use of real estate, which is a significant
expense for a company of HP’s size. During the next
two years, we plan to reduce our number of sites
worldwide by almost 25 percent.
Second are our product costs. HP is the largest customer
for most of our suppliers, and we are continually
working with them to make sure we get the best terms,
including the best price.
Third are the costs owned by each of HP’s businesses.
The businesses have detailed plans to reduce their costs,
and we have launched new efforts to identify more savings.
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