HP 2009 Annual Report Download - page 44

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
real estate costs. In addition, we are continuing to implement the restructuring plan announced in the
fourth quarter of fiscal 2008 to optimize the cost structure of our services business and the
restructuring plan announced in May 2009 to structurally change and improve the effectiveness of
several of our product businesses. See Note 8 to the Consolidated Financial Statements in Item 8 for
further discussion of these restructuring plans and the associated restructuring charges.
We also took actions in fiscal 2009 to further improve our cost structure and further shift our
employee compensation structure from fixed to variable. As part of those actions, we reduced base pay
for many of our employees, we reduced the matching contributions under the HP 401(k) Plan for all
U.S. employees and began funding these matching contributions quarterly on a discretionary basis
based on our financial performance, and we modified our employee stock purchase plan to eliminate
the discount applicable to purchases made under the plan. We are continuing to evaluate our
businesses and market conditions and may consider additional restructuring or other actions in future
periods.
Investing for Growth
We are investing some of the savings derived from our efficiency initiatives for growth. For
example, we are increasing our sales coverage to expand the size of the market that we cover, including
expanding into emerging markets such as China, India and Brazil. We are creating innovative new
products and developing new channels to connect with our customers, particularly in our PC business.
In addition, we are expanding our portfolio of products and services that we can offer to our
customers, both through acquisitions and through organic growth. A critical component of this strategy
was our acquisition of Electronic Data Systems Corporation (‘‘EDS’’) in August 2008, which has
increased the size and breadth of our services business and enabled us to provide comprehensive IT
product and services solutions to our customers.
In November 2009, we entered into a definitive agreement to acquire 3Com Corporation, a global
enterprise provider of networking switching, routing and security solutions, at a price of $7.90 per share
in cash or an enterprise value of approximately $2.7 billion. The acquisition is subject to customary
closing conditions, including the receipt of domestic and foreign regulatory approvals and the approval
of 3Com’s stockholders. The transaction is expected to close in our second fiscal quarter of 2010.
Leveraging our Portfolio and Scale
We now offer one of the IT industry’s broadest portfolios of products and services, and we are
working to leverage that portfolio as a strategic advantage. For example, in our enterprise business, we
are able to provide servers, storage and networking packaged with services that can be delivered to
customers in the manner of their choosing, be it in-house, outsourced or as a service via the Internet.
Our portfolio of management software completes the package by allowing our customers to manage
their IT operations in an efficient and cost-effective manner. In addition, we are working to optimize
our supply chain by eliminating complexity, reducing fixed costs, and leveraging our scale to ensure the
availability of components at favorable prices even during shortages. We are also expanding our use of
industry standard components in our enterprise products to further leverage our scale.
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