HP 2013 Annual Report Download - page 33

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.
Sales outside the United States make up approximately 64% of our net revenue. In addition, an
increasing portion of our business activity is being conducted in emerging markets, including Brazil,
Russia, India and China. Our future revenue, gross margin, expenses and financial condition could
suffer due to a variety of international factors, including:
• ongoing instability or changes in a country’s or region’s economic or political conditions,
including inflation, recession, interest rate fluctuations and actual or anticipated military or
political conflicts;
• longer collection cycles and financial instability among customers;
• trade regulations and procedures and actions affecting production, pricing and marketing of
products;
• local labor conditions and regulations, including local labor issues faced by specific HP suppliers
and OMs;
• managing a geographically dispersed workforce;
• changes in the regulatory or legal environment;
• differing technology standards or customer requirements;
• import, export or other business licensing requirements or requirements relating to making
foreign direct investments, which could increase our cost of doing business in certain
jurisdictions, prevent us from shipping products to particular countries or markets, affect our
ability to obtain favorable terms for components, increase our operating costs or lead to
penalties or restrictions;
• difficulties associated with repatriating earnings generated or held abroad in a tax-efficient
manner and changes in tax laws; and
• fluctuations in freight costs, limitations on shipping and receiving capacity, and other disruptions
in the transportation and shipping infrastructure at important geographic points of exit and entry
for our products and shipments.
The factors described above also could disrupt our product and component manufacturing and key
suppliers located outside of the United States. For example, we rely on manufacturers in Taiwan for the
production of notebook computers and other suppliers in Asia for product assembly and manufacture.
Currencies other than the U.S. dollar, including the euro, the British pound, Chinese yuan
renminbi and the Japanese yen, can have an impact on our results (expressed in U.S. dollars). In
particular, the economic uncertainties relating to European sovereign and other debt obligations and
the related European financial restructuring efforts may cause the value of the euro to fluctuate.
Currency variations also contribute to variations in sales of products and services in impacted
jurisdictions. For example, in the event that one or more European countries were to replace the euro
with another currency, our sales into such countries, or into Europe generally, would likely be adversely
affected until stable exchange rates are established. Accordingly, fluctuations in foreign currency rates,
most notably the strengthening of the dollar against the euro, could adversely affect our revenue
growth in future periods. In addition, currency variations can adversely affect margins on sales of our
products in countries outside of the United States and margins on sales of products that include
components obtained from suppliers located outside of the United States. We use a combination of
forward contracts and options designated as cash flow hedges to protect against foreign currency
exchange rate risks. The effectiveness of our hedges depends on our ability to accurately forecast future
cash flows, which is particularly difficult during periods of uncertain demand for our products and
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