HP 2009 Annual Report Download - page 69

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
The components of the weighted net revenue change as compared to prior-year periods by
business unit were as follows for the following fiscal years ended October 31:
2009 2008
Percentage Points
Desktop PCs .................................................. (8.9) 2.1
Notebook PCs ................................................. (5.8) 13.8
Workstations .................................................. (1.5) 0.4
Handhelds .................................................... (0.4) (0.5)
Other ....................................................... 0.1 0.4
Total PSG .................................................... (16.5) 16.2
PSG net revenue decreased 16.5% (11.6% when adjusted for currency) in fiscal 2009 from fiscal
2008. The revenue decline was primarily the result of the overall slowdown in the global economy.
Despite the overall regional declines, revenue in China increased for fiscal 2009 as compared to fiscal
2008. PSG net revenue decreased across all businesses in fiscal 2009. Unit volume increased slightly in
fiscal 2009 as compared to fiscal 2008, as an increase in notebook PC volume was offset by a decline in
desktop PCs, workstations, and handheld devices. The unit volume increase in notebook PCs was due
in part to growth of the HP and Compaq mini notebooks. In fiscal 2009, net revenue for notebook PCs
decreased 11%, while net revenue for desktop PCs decreased 23% from fiscal 2008. Workstations and
handheld revenues declined 33% and 52%, respectively, in fiscal 2009 from fiscal 2008. In fiscal 2009,
net revenue for consumer clients decreased 14%, while net revenue for commercial clients decreased
19% from fiscal 2008. The net revenue increase in Other PSG was related primarily to increased sales
of extended warranties, support services and third-party branded options. In fiscal 2009, PSG net
revenue was also impacted by ASP declines. ASPs in consumer clients declined 21%, while ASPs in
commercial clients declined 16%. ASPs declined from fiscal 2008 due primarily to a competitive pricing
environment, component cost reductions and the impact of currency combined with a mix shift toward
lower-end models. The ASP decline in fiscal 2009 was offset slightly by an increase in the option and
monitor attach rates.
PSG earnings from operations as a percentage of net revenue decreased by 0.9 percentage points
in fiscal 2009 from fiscal 2008. The decrease was due primarily to a gross margin decline resulting from
ASPs declining at a faster pace than component costs combined with a mix shift toward lower-end
products, the effects of which were partially offset by lower warranty and supply chain costs and
improvements in the option attach rate. The decrease in operating expenses as a percentage of net
revenue in fiscal 2009 was the result of effective cost controls.
PSG net revenue increased 16.2% (10.8% when adjusted for currency) in fiscal 2008 from fiscal
2007. Unit volumes increased by 22% in fiscal 2008 as compared to fiscal 2007. The unit volume
increase was the result of strong growth in notebooks, with continued strength in emerging markets. In
fiscal 2008, net revenue for notebook PCs increased 28% while net revenue for desktop PCs increased
5% from fiscal 2007. In fiscal 2008, net revenue for consumer clients increased 19%, while net revenue
for commercial clients increased 15% from fiscal 2007. The net revenue increase in Other PSG in fiscal
2008 was related primarily to increased sales of third-party branded options and extended warranties.
The revenue increase was partially offset by a decline in handhelds revenue driven by product transition
within converged devices. In fiscal 2008, the positive revenue impact from the PSG unit volume
increase compared to fiscal 2007 was also moderated by a 7% decline in commercial client ASPs and a
62