HP 2014 Annual Report Download - page 33

•Contingent workers. We also rely on third-party suppliers for the provision of contingent workers,
and our failure to manage our use of such workers effectively could adversely affect our results
of operations. We have been exposed to various legal claims relating to the status of contingent
workers in the past and could face similar claims in the future. We may be subject to shortages,
oversupply or fixed contractual terms relating to contingent workers. Our ability to manage the
size of, and costs associated with, the contingent workforce may be subject to additional
constraints imposed by local laws.
•Single source suppliers. Our use of single source suppliers for certain components could
exacerbate any supplier issues. We obtain a significant number of components from single
sources due to technology, availability, price, quality or other considerations. For example, we
rely on Intel to provide us with a sufficient supply of processors for many of our PCs,
workstations and servers and AMD to provide us with a sufficient supply of processors for other
products. Some of those processors are customized for our products. New products that we
introduce may utilize custom components obtained from only one source initially until we have
evaluated whether there is a need for additional suppliers. Replacing a single source supplier
could delay production of some products as replacement suppliers may be subject to capacity
constraints or other output limitations. For some components, such as customized components
and some of the processors that we obtain from Intel, alternative sources either may not exist or
may be unable to produce the quantities of those components necessary to satisfy our
production requirements. In addition, we sometimes purchase components from single source
suppliers under short-term agreements that contain favorable pricing and other terms but that
may be unilaterally modified or terminated by the supplier with limited notice and with little or
no penalty. The performance of such single source suppliers under those agreements (and the
renewal or extension of those agreements upon similar terms) may affect the quality, quantity
and price of components to HP. The loss of a single source supplier, the deterioration of our
relationship with a single source supplier, or any unilateral modification to the contractual terms
under which we are supplied components by a single source supplier could adversely affect our
revenue, gross margin and cash flows.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs
and expenses.
Our worldwide operations could be disrupted by earthquakes, telecommunications failures, power
or water shortages, tsunamis, floods, hurricanes, typhoons, fires, extreme weather conditions, medical
epidemics or pandemics and other natural or manmade disasters or catastrophic events, for which we
are predominantly self-insured. The occurrence of any of these business disruptions could result in
significant losses, seriously harm our revenue, profitability and financial condition, adversely affect our
competitive position, increase our costs and expenses, and require substantial expenditures and recovery
time in order to fully resume operations. Our corporate headquarters and a portion of our research
and development activities are located in California, and other critical business operations and some of
our suppliers are located in California and Asia, near major earthquake faults known for seismic
activity. In addition, six of our principal worldwide IT data centers are located in the southern United
States, making our operations more vulnerable to natural disasters or other business disruptions
occurring in that geographical area. The manufacture of product components, the final assembly of our
products and other critical operations are concentrated in certain geographic locations, including
Shanghai, Singapore and India. We also rely on major logistics hubs primarily in Asia to manufacture
and distribute our products and in the southwestern United States to import products into the
Americas region. Our operations could be adversely affected if manufacturing, logistics or other
operations in these locations are disrupted for any reason, including natural disasters, information
technology system failures, military actions or economic, business, labor, environmental, public health,
regulatory or political issues. The ultimate impact on us, our significant suppliers and our general
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