HP 2009 Annual Report Download - page 59

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Gross Margin
The gross margin table below identifies each segment’s weighted contribution to the change in the
total company gross margin from the corresponding prior year. The segment contribution components
of the gross margin decline as compared to the prior-year periods were as follows:
2009 2008
Percentage Points
Enterprise Storage and Servers ....................................... (0.8) (0.1)
Services ........................................................ (0.1) (0.2)
HP Software .................................................... (0.1) 0.1
HP Financial Services .............................................. — —
Corporate Investments/Other ........................................ — —
Imaging and Printing Group ......................................... 0.2 (0.1)
Personal Systems Group ............................................ 0.2 (0.1)
Total HP ....................................................... (0.6) (0.4)
Fiscal 2009
Total company gross margin decreased by 0.6 percentage points in fiscal 2009 as compared to fiscal
2008. From a segment perspective and on a weighted basis, ESS had the largest impact to the total
company gross margin decline due to mix and rate declines.
ESS gross margin decreased in fiscal 2009 from the prior year due primarily to competitive pricing
across each of the segment business units and product mix shifts.
The gross margin in our Services segment increased for fiscal 2009 from fiscal 2008 due primarily
to the continued focus on cost structure improvements, including delivery efficiencies and cost controls
in our technology services business, and EDS-related acquisition synergies. This was partially offset by
the mix effect from the acquisition of the EDS business, which has lower gross margins.
The increase in HP Software gross margin in fiscal 2009 from the prior year resulted primarily
from a favorable support and services revenue mix and improved services margins, the effect of which
was partially offset by an unfavorable license revenue mix.
The HPFS gross margin decline in fiscal 2009 from fiscal 2008 was driven by unfavorable currency
impacts, lower margins relating to end-of-lease activities, higher bad debt expenses and lower margins
for remarketing and buyout activities, the effect of which was partially offset by higher portfolio
margins.
Gross margin in Corporate Investments and Other declined for fiscal 2009 from fiscal 2008 as a
result of a unit volume decline in the sale of network infrastructure products and competitive pricing
pressures.
The improvement in IPG gross margin in fiscal 2009 from the prior year resulted primarily from
an increase in the supplies mix and supplies pricing, the effect of which was partially offset by hardware
margin declines.
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