HP 2010 Annual Report Download - page 29

The revenue and profitability of our operations have historically varied, which makes our future financial
results less predictable.
Our revenue, gross margin and profit vary among our products and services, customer groups and
geographic markets and therefore will likely be different in future periods than our current results. Our
revenue depends on the overall demand for our products and services. Delays or reductions in IT
spending could materially adversely affect demand for our products and services, which could result in
a significant decline in revenues. Overall gross margins and profitability in any given period are
dependent partially on the product, customer and geographic mix reflected in that period’s net revenue.
In particular, IPG and certain of its business units such as printer supplies contribute significantly to
our gross margin and profitability. In addition, our services business has contributed significantly to our
revenue and operating profit in recent periods. Competition, lawsuits, investigations and other risks
affecting those businesses therefore may have a significant impact on our overall gross margin and
profitability. Certain segments, and ESS in particular, have a higher fixed cost structure and more
variation in gross margins across their business units and product portfolios than others and may
therefore experience significant operating profit volatility on a quarterly basis. In addition, newer
geographic markets may be relatively less profitable due to investments associated with entering those
markets and local pricing pressures, and we may have difficulty establishing and maintaining the
operating infrastructure necessary to support the high growth rate associated with some of those
markets. Market trends, competitive pressures, commoditization of products, seasonal rebates, increased
component or shipping costs, regulatory impacts and other factors may result in reductions in revenue
or pressure on gross margins of certain segments in a given period, which may necessitate adjustments
to our operations.
HP’s stock price has historically fluctuated and may continue to fluctuate, which may make future prices of
HP’s stock difficult to predict.
HP’s stock price, like that of other technology companies, can be volatile. Some of the factors that
could affect our stock price are:
• speculation in the press or investment community about, or actual changes in, our business,
strategic position, market share, organizational structure, operations, financial condition,
financial reporting and results, effectiveness of cost cutting efforts, value or liquidity of our
investments, exposure to market volatility, prospects, business combination or investment
transactions, or executive team;
• the announcement of new products, services, technological innovations or acquisitions by HP or
its competitors;
• quarterly increases or decreases in revenue, gross margin, earnings or cash flow from operations,
changes in estimates by the investment community or guidance provided by HP, and variations
between actual and estimated financial results;
• announcements of actual and anticipated financial results by HP’s competitors and other
companies in the IT industry; and
• the timing and amount of share repurchases by HP.
General or industry specific market conditions or stock market performance or domestic or
international macroeconomic and geopolitical factors unrelated to HP’s performance also may affect
the price of HP common stock. For these reasons, investors should not rely on recent trends to predict
future stock prices, financial condition, results of operations or cash flows. In addition, following
periods of volatility in a company’s securities, securities class action litigation against a company is
sometimes instituted. If instituted against HP, this type of litigation could result in substantial costs and
the diversion of management time and resources.
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