HP 2013 Annual Report Download - page 17

products to order and configuring products to order seek to minimize inventory holding periods by
taking delivery of the inventory and manufacturing immediately prior to the sale or distribution of
products to our customers.
We purchase materials, supplies and product subassemblies from a substantial number of vendors.
For most of our products, we have existing alternate sources of supply or such sources are readily
available. However, we do rely on sole sources for laser printer engines, LaserJet supplies, certain
customized parts and parts for products with short life cycles (although some of these sources have
operations in multiple locations in the event of a disruption). We are dependent upon Intel and AMD
as suppliers of processors and Microsoft for various software products; however, we believe that
disruptions with these suppliers would result in industry-wide dislocations and therefore would not
disproportionately disadvantage us relative to our competitors. See ‘‘Risk Factors—We depend on
third-party suppliers, and our financial results could suffer if we fail to manage suppliers properly,’’ in
Item 1A, which is incorporated herein by reference.
Like other participants in the IT industry, we ordinarily acquire materials and components through
a combination of blanket and scheduled purchase orders to support our requirements for periods
averaging 90 to 120 days. From time to time, we may experience significant price volatility or supply
constraints for certain components that are not available from multiple sources. Frequently, we are able
to obtain scarce components for somewhat higher prices on the open market, which may have an
impact on our gross margin but does not generally disrupt production. We also aim to acquire
component inventory in anticipation of supply constraints or enter into longer-term pricing
commitments with vendors to improve the priority, price and availability of supply. See ‘‘Risk Factors—
We depend on third-party suppliers, and our financial results could suffer if we fail to manage suppliers
properly,’’ in Item 1A, which is incorporated herein by reference.
International
Our products and services are available worldwide. We believe this geographic diversity allows us
to meet demand on a worldwide basis for both consumer and enterprise customers, draws on business
and technical expertise from a worldwide workforce, provides stability to our operations, allows us to
drive economies of scale, provides revenue streams to offset geographic economic trends and offers us
an opportunity to access new markets for maturing products. In addition, we believe that future growth
is dependent in part on our ability to develop products and sales models that target developing
countries. In this regard, we believe that our broad geographic presence gives us a solid base on which
to build such future growth.
A summary of our domestic and international net revenue and net property, plant and equipment
is set forth in Note 18 to the Consolidated Financial Statements in Item 8, which is incorporated herein
by reference. Approximately 64% of our overall net revenue in fiscal 2013 came from outside the
United States.
For a discussion of risks attendant to HP’s international operations, see ‘‘Risk Factors—Due to the
international nature of our business, political or economic changes or other factors could harm our
future revenue, costs and expenses, and financial condition,’’ in Item 1A, ‘‘Quantitative and Qualitative
Disclosure about Market Risk’’ in Item 7A and Note 9 to the Consolidated Financial Statements in
Item 8, which are incorporated herein by reference.
Research and Development
Innovation is a key element of our culture. Our development efforts are focused on designing and
developing products, services and solutions that anticipate customers’ changing needs and desires, and
emerging technological trends. Our efforts also are focused on identifying the areas where we believe
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