HP 2008 Annual Report Download - page 35

complete business combination and investment transactions, some of which may be large and complex,
and manage post-closing issues such as the integration of acquired companies or employees. We may
not fully realize all of the anticipated benefits of any business combination and investment transaction,
and the timeframe for achieving benefits of a business combination and investment transaction may
depend partially upon the actions of employees, suppliers or other third parties. In addition, the pricing
and other terms of our contracts for business combination and investment transactions require us to
make estimates and assumptions at the time we enter into these contracts, and, during the course of
our due diligence, we may not identify all of the factors necessary to estimate our costs accurately. Any
increased or unexpected costs, unanticipated delays or failure to achieve contractual obligations could
make these transactions less profitable or unprofitable. Moreover, if we fail to identify and complete
successfully business combination and investment transactions that further our strategic objectives, we
may be required to expend resources to develop products and technology internally, we may be at a
competitive disadvantage or we may be adversely affected by negative market perceptions, any of which
may have a material adverse effect on our revenue, gross margin and profitability.
Integration issues are complex, time-consuming and expensive and, without proper planning and
implementation, could significantly disrupt our business. The challenges involved in integration include:
• combining product offerings and entering into new markets in which we are not experienced;
• convincing customers and distributors that the transaction will not diminish client service
standards or business focus, preventing customers and distributors from deferring purchasing
decisions or switching to other suppliers (which could result in our incurring additional
obligations in order to address customer uncertainty), minimizing sales force attrition and
coordinating sales, marketing and distribution efforts;
• consolidating and rationalizing corporate IT infrastructure, which may include multiple legacy
systems from various acquisitions and integrating software code;
• minimizing the diversion of management attention from ongoing business concerns;
• persuading employees that business cultures are compatible, maintaining employee morale and
retaining key employees, engaging with employee works councils representing an acquired
company’s non-U.S. employees, integrating employees into HP, correctly estimating employee
benefit costs and implementing restructuring programs;
• coordinating and combining administrative, manufacturing, research and development and other
operations, subsidiaries, facilities and relationships with third parties in accordance with local
laws and other obligations while maintaining adequate standards, controls and procedures;
• achieving savings from supply chain integration; and
• managing integration issues shortly after or pending the completion of other independent
transactions.
Integration and other risks associated with business combination and investment transactions can
be more pronounced for larger and more complicated transactions. For example, in August 2008, we
completed our acquisition of EDS, and we are in the process of integrating EDS into our company.
The size of the acquisition of EDS increases both the scope and consequence of ongoing integration
risks. We may not successfully address the integration challenges in a timely manner, or at all, and we
may not fully realize all of the anticipated benefits or synergies of the EDS acquisition. If we fail to
realize such anticipated benefits or synergies, our operating results could be materially adversely
affected.
Managing business combination and investment transactions requires varying levels of management
resources, which may divert our attention from other business operations. These business combination
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