HP 2013 Annual Report Download - page 34

services and highly volatile exchange rates. We may incur significant losses from our hedging activities
due to factors such as volatility and currency variations. In addition, our hedging activities may be
ineffective or may not offset any or more than a portion of the adverse financial impact resulting from
currency variations. Losses associated with hedging activities also may impact our revenue and to a
lesser extent our cost of sales and financial condition.
In many foreign countries, particularly in those with developing economies, it is common to engage
in business practices that are prohibited by laws and regulations applicable to us, such as the Foreign
Corrupt Practices Act (the ‘‘FCPA’’). For example, as discussed in Note 17 to the Consolidated
Financial Statements, the German Public Prosecutor’s Office, the U.S. Department of Justice and the
Securities and Exchange Commission have been investigating allegations that certain current and
former employees of HP engaged in bribery, embezzlement and tax evasion. In addition, the U.S.
enforcement authorities, as well as the Polish Central Anti-Corruption Bureau, are conducting
investigations into potential FCPA violations by a former employee of an HP subsidiary in connection
with certain public-sector transactions in Poland, and the U.S. enforcement authorities are conducting
investigations into certain other public-sector transactions in Russia, Poland, the Commonwealth of
Independent States and Mexico, among other countries. Although we implement policies and
procedures designed to facilitate compliance with these laws, our employees, contractors and agents, as
well as those companies to which we outsource certain of our business operations, may take actions in
violation of our policies. Any such violation, even if prohibited by our policies, could have an adverse
effect on our business and reputation.
Any failure by us to identify, manage, complete and integrate acquisitions, divestitures and other significant
transactions successfully could harm our financial results, business and prospects, and the costs, expenses and
other financial and operational effects associated with managing, completing and integrating acquisitions may
result in financial results that are different than expected.
As part of our business strategy, we may acquire companies or businesses, divest businesses or
assets, enter into strategic alliances and joint ventures and make investments to further our business
(collectively, ‘‘business combination and investment transactions’’). In order to pursue this strategy
successfully, we must identify candidates for and successfully complete business combination and
investment transactions, some of which may be large or complex, and manage post-closing issues such
as the integration of acquired businesses, products, services or employees. Risks associated with
business combination and investment transactions include the following, any of which could adversely
affect our revenue, gross margin, profitability and financial results:
• Managing business combination and investment transactions requires varying levels of
management resources, which may divert our attention from other business operations.
• We may not fully realize all of the anticipated benefits of any business combination and
investment transaction, and the timeframe for realizing benefits of a business combination and
investment transaction may depend partially upon the actions of employees, advisors, suppliers
or other third-parties.
• Business combination and investment transactions have resulted, and in the future may result, in
significant costs and expenses and charges to earnings, including those related to severance pay,
early retirement costs, employee benefit costs, goodwill and asset impairment charges, charges
from the elimination of duplicative facilities and contracts, asset impairment charges, inventory
adjustments, assumed litigation and other liabilities, legal, accounting and financial advisory fees,
and required payments to executive officers and key employees under retention plans.
• Any increased or unexpected costs, unanticipated delays or failure to meet contractual
obligations could make business combination and investment transactions less profitable or
unprofitable.
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