HP 2008 Annual Report Download - page 25

on these types of devices. If imposed, the total amount of the copyright levies would depend on the
types of products determined to be subject to the levy, the number of units of those products sold
during the period covered by the levy, and the per unit fee for each type of product, all of which may
be affected by several factors, including the outcome of ongoing litigation involving HP and other
industry participants and possible action by the legislative bodies in the applicable countries, but which
could be substantial. Consequently, the ultimate impact of these potential copyright levies or similar
fees, and the ability of HP to recover such amounts through increased prices, remain uncertain.
Economic conditions and uncertainty could adversely affect our revenue, gross margin and expenses.
Our revenue and gross margin depend significantly on general economic conditions and the
demand for computing and imaging products and services in the markets in which we compete.
Economic weakness and constrained IT spending has resulted, and may result in the future, in
decreased revenue, gross margin, earnings or growth rates and problems with our ability to manage
inventory levels and collect customer receivables. We have experienced, and may experience in the
future, reduced spending in our consumer and financial services businesses due to the current financial
turmoil affecting the banking system and financial markets, conditions in the residential real estate and
mortgage markets, access to credit and other macroeconomic factors affecting spending behavior. In
addition, customer financial difficulties have resulted, and could result in the future, in increases in bad
debt write-offs and additions to reserves in our receivables portfolio, inability by our lessees to make
required lease payments and reduction in the value of leased equipment upon its return to us
compared to the value estimated at lease inception. In particular, our exposure to certain industries
currently experiencing financial difficulties, including the U.S. automobile industry, and certain
financially troubled customers, could have an adverse affect on our results of operations. We also have
experienced, and may experience in the future, gross margin declines in certain businesses, reflecting
the effect of items such as competitive pricing pressures, inventory write-downs, charges associated with
the cancellation of planned production line expansion, increases in pension and post-retirement benefit
expenses, and increases in component and manufacturing costs resulting from higher labor and material
costs borne by our manufacturers and suppliers that, as a result of competitive pricing pressures or
other factors, we are unable to pass on to our customers. Economic downturns also may lead to
restructuring actions and associated expenses. Uncertainty about future economic conditions makes it
difficult for us to forecast operating results and to make decisions about future investments. Delays or
reductions in information technology spending could have a material adverse effect on demand for our
products and services, and consequently our results of operations, prospects and stock price.
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.
Sales outside the United States make up approximately 69% of our net revenue. In addition, an
increasing portion of our business activity is being conducted in emerging markets, including Brazil,
Russia, India and China. Our future revenue, gross margin, expenses and financial condition could
suffer due to a variety of international factors, including:
• ongoing instability or changes in a country’s or region’s economic or political conditions,
including inflation, recession, interest rate fluctuations and actual or anticipated military or
political conflicts;
• longer accounts receivable cycles and financial instability among customers;
• trade regulations and procedures and actions affecting production, pricing and marketing of
products;
• local labor conditions and regulations;
19