HP 2008 Annual Report Download - page 71

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Corporate Investments
For the fiscal years ended October 31
2008 2007 2006
In millions
Net revenue ............................................ $965 $ 762 $ 566
Earnings (loss) from operations ............................. $ 49 $(57) $(151)
Earnings (loss) from operations as a % of net revenue ............. 5.1% (7.5)% (26.7)%
The majority of the net revenue in Corporate Investments relates to network infrastructure
products sold under the brand ‘‘ProCurve Networking.’’ In fiscal 2008, revenue from network
infrastructure products increased 26% compared to the same period in fiscal 2007 as the result of
continued increased sales of enterprise class gigabit and 10 gigabit Ethernet switch products. Fiscal
2008 network infrastructure revenue includes a small amount of revenue from Colubris Networks, Inc.,
a company that HP acquired on October 1, 2008.
Corporate Investments reported earnings from operations in fiscal 2008 compared to losses in
fiscal 2007 due primarily to increased earnings from operations generated by network infrastructure
products and lower expenses related to HP Labs.
In fiscal 2007, the majority of the net revenue in Corporate Investments related to network
infrastructure products, which grew 33% from fiscal 2006 as new product introductions continued to
drive increased sales of enterprise class gigabit Ethernet switch products.
Corporate Investments loss from operations in fiscal 2007 was due primarily to expenses associated
with corporate development, global alliances and HP Labs that are carried in the segment. The
year-over-year decrease in operating losses was driven primarily by higher earnings from operations
generated by network infrastructure products.
LIQUIDITY AND CAPITAL RESOURCES
Our cash balances are held in numerous locations throughout the world, including substantial
amounts held outside of the United States. Most of the amounts held outside of the United States
could be repatriated to the United States but, under current law, would be subject to United States
federal income taxes, less applicable foreign tax credits. Repatriation of some foreign balances is
restricted by local laws. We have provided for the United States federal tax liability on these amounts
for financial statement purposes, except for foreign earnings that are considered indefinitely reinvested
outside of the United States. Repatriation could result in additional United States federal income tax
payments in future years. Where local restrictions prevent an efficient intercompany transfer of funds,
our intent is that cash balances would remain outside of the United States and we would meet United
States liquidity needs through ongoing cash flows, external borrowings, or both. We utilize a variety of
tax planning and financing strategies in an effort to ensure that our worldwide cash is available in the
locations in which it is needed.
The information discussed below is presented based on our historical results, which include the
results of EDS for the period following the August 26, 2008 closing date of the acquisition.
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