HP 2009 Annual Report Download - page 73

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Consolidated Financial Statements in Item 8, which is incorporated herein by reference. Portfolio
assets also include capitalized profit on intercompany equipment transactions of approximately
$700 million at October 31, 2009 and October 31, 2008, and intercompany leases of approximately
$1.0 billion and $800 million at October 31, 2009 and October 31, 2008, both of which are
eliminated in consolidation.
(2) Allowance for doubtful accounts includes both the short-term and the long-term portions of the
allowance on financing receivables.
(3) HPFS debt consists of intercompany equity that is treated as debt for segment reporting purposes,
intercompany debt and debt issued directly by HPFS.
Net portfolio assets at October 31, 2009 increased 20.8% from October 31, 2008. The increase
resulted from higher levels of financing originations in fiscal 2009 and a favorable currency impact. The
overall percentage of portfolio assets reserves remained flat due to continued strong portfolio
performance. HPFS funds its operations mainly through a combination of intercompany debt and
equity. In addition to the balances reflected above, HP assumed net portfolio assets of $51 million
through the acquisition of EDS.
Rollforward of Reserves:
Deductions,
October 31, Additions to net of October 31,
2008 allowance recoveries 2009
In millions
Allowance for doubtful accounts ................. $ 90 $63 $(45) $108
Operating lease equipment reserve ............... 60 19 (8) 71
Total reserve ............................... $150 $82 $(53) $179
Corporate Investments
For the fiscal years ended October 31
2009 2008 2007
In millions
Net revenue .......................................... $768 $965 $ 762
(Loss) earnings from operations ............................ $(56) $ 49 $(57)
(Loss) earnings from operations as a % of net revenue ........... (7.3)% 5.1% (7.5)%
Net revenue in Corporate Investments relates primarily to network infrastructure products sold
under the brand ‘‘ProCurve Networking.’’ In fiscal 2009, revenue from network infrastructure products
decreased 19.6% as compared to fiscal 2008, resulting from the slowdown in the networking market
and a resulting decrease in sales of enterprise ethernet switch products. Partially offsetting the revenue
decline was revenue resulting from the acquisition of Colubris Networks, Inc. (‘‘Colubris’’), which HP
acquired in October 2008.
Corporate Investments reported a loss from operations in fiscal 2009 as compared to the positive
earnings from operations reported in fiscal 2008 due primarily to lower earnings from operations
generated by network infrastructure products. Gross margin in Corporate Investments declined for
fiscal 2009 as the result of a unit volume decline in the sale of network infrastructure products and
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