HP 2009 Annual Report Download - page 24

adversely affected, and we could face possible claims if we fail to meet our customers’ expectations. In
addition, quality issues can impair our relationships with new or existing customers and adversely affect
our brand and reputation, which could have a material adverse effect on our operating results.
Economic weakness and uncertainty could adversely affect our revenue, gross margin and expenses.
Our revenue and gross margin depend significantly on worldwide economic conditions and the
demand for computing and imaging products and services in the markets in which we compete.
Economic weakness and uncertainty have resulted, and may result in the future, in decreased revenue,
gross margin, earnings or growth rates and difficulty managing inventory levels. For example, we have
recently experienced reduced revenue from our product businesses due to slowing global economic
growth, declines in the availability of credit, weakening consumer and business confidence, increased
unemployment, reduced levels of capital expenditures and other challenges currently affecting the
global economy. Sustained uncertainty about current global economic conditions may result in our
customers continuing to postpone spending, which could adversely affect demand for our products and
services. Economic weakness and uncertainty also make it more difficult for us to make accurate
forecasts of revenue, gross margin and expenses.
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
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. In addition, our business may be disrupted if we
are unable to obtain equipment, parts and components from our suppliers—and our suppliers from
their suppliers—due to the insolvency of key suppliers or the inability of key suppliers to obtain credit.
Economic weakness and uncertainty could cause our expenses to vary materially from our
expectations. Any renewed financial turmoil affecting the banking system and financial markets or any
significant financial services institution failures could negatively impact our treasury operations, as the
financial condition of such parties may deteriorate rapidly and without notice in times of market
volatility and disruption. Poor financial performance of asset markets could lead to increased pension
and post-retirement benefit expenses. Other income and expense could vary materially from
expectations depending on changes in interest rates, borrowing costs, currency exchange rates, hedging
expenses and the fair value of derivative instruments. Economic downturns also may lead to
restructuring actions and associated expenses.
We depend on third-party suppliers, and our revenue and gross margin could suffer if we fail to manage
suppliers properly.
Our operations depend on our ability to anticipate our needs for components, products and
services and our suppliers’ ability to deliver sufficient quantities of quality components, products and
services at reasonable prices in time for us to meet critical schedules. Given the wide variety of systems,
products and services that we offer, the large number of our suppliers and contract manufacturers that
are dispersed across the globe, and the long lead times that are required to manufacture, assemble and
deliver certain components and products, problems could arise in planning production and managing
inventory levels that could seriously harm us. Other supplier problems that we could face include
component shortages, excess supply, risks related to the terms of our contracts with suppliers, risks
associated with contingent workers, and risks related to our relationships with single source suppliers,
as described below.
•Shortages. Occasionally we may experience a shortage of, or a delay in receiving, certain
components as a result of strong demand, capacity constraints, supplier financial weaknesses,
inability of suppliers to borrow funds in the credit markets, disputes with suppliers (some of
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