HP 2009 Annual Report Download - page 26

PCs, workstations, handheld computing devices and servers, and some of those processors are
customized for our products. New products that we introduce may utilize custom components
obtained from only one source initially until we have evaluated whether there is a need for
additional suppliers. Replacing a single source supplier could delay production of some products
as replacement suppliers initially may be subject to capacity constraints or other output
limitations. For some components, such as customized components and some of the processors
that we obtain from Intel, alternative sources may not exist or those alternative sources may be
unable to produce the quantities of those components necessary to satisfy our production
requirements. In addition, we sometimes purchase components from single source suppliers
under short-term agreements that contain favorable pricing and other terms but that may be
unilaterally modified or terminated by the supplier with limited notice and with little or no
penalty. The performance of such single source suppliers under those agreements (and the
renewal or extension of those agreements upon similar terms) may affect the quality, quantity
and price of components to HP. The loss of a single source supplier, the deterioration of our
relationship with a single source supplier, or any unilateral modification to the contractual terms
under which we are supplied components by a single source supplier could adversely affect our
revenue and gross margins.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs
and expenses.
Our worldwide operations could be subject to earthquakes, power shortages, telecommunications
failures, water shortages, tsunamis, floods, hurricanes, typhoons, fires, extreme weather conditions,
medical epidemics or pandemics and other natural or manmade disasters or business interruptions, for
which we are predominantly self-insured. The occurrence of any of these business disruptions could
seriously harm our revenue and financial condition and increase our costs and expenses. Our corporate
headquarters, and a portion of our research and development activities, are located in California, and
other critical business operations and some of our suppliers are located in California and Asia, near
major earthquake faults. In addition, all six of our worldwide IT data centers are located in the
southern United States, making our operations more vulnerable to natural disasters or other business
disruptions occurring in that geographical area. The manufacture of product components, the final
assembly of our products and other critical operations are concentrated in certain geographic locations,
including Shanghai, Singapore and India. We also rely on major logistics hubs primarily in Asia to
manufacture and distribute our products and in the southwestern United States to import products into
the Americas region. Our operations could be adversely affected if manufacturing, logistics or other
operations in these locations are disrupted for any reason, including natural disasters, information
technology system failures, military actions or economic, business, labor, environmental, public health,
or political issues. The ultimate impact on us, our significant suppliers and our general infrastructure of
being located near major earthquake faults and being consolidated in certain geographical areas is
unknown, but our revenue, profitability and financial condition could suffer in the event of a major
earthquake or other natural disaster.
System security risks, data protection breaches and systems integration issues could disrupt our internal
operations or information technology services provided to customers, and any such disruption could reduce
our expected revenue, increase our expenses, damage our reputation and adversely affect our stock price.
Experienced computer programmers and hackers may be able to penetrate our network security
and misappropriate our confidential information or that of third parties, create system disruptions or
cause shutdowns. Computer programmers and hackers also may be able to develop and deploy viruses,
worms, and other malicious software programs that attack our products or otherwise exploit any
security vulnerabilities of our products. In addition, sophisticated hardware and operating system
software and applications that we produce or procure from third parties may contain defects in design
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