HP 2015 Annual Report Download - page 24

Table of Contents
changes in interest rates, borrowing costs, currency exchange rates, costs of hedging activities and the fair value of derivative instruments. Economic
downturns also may lead to restructuring actions and associated expenses.
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 diverse 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 hardware
and related services spending by our customers or potential customers could have a material adverse effect on demand for our products and services, which
could result in a significant decline in revenue. In addition, revenue declines in some of our businesses may affect revenue in our other businesses as we may
lose cross-selling opportunities. Overall gross margins and profitability in any given period are dependent partially on the product, service, customer and
geographic mix reflected in that period's net revenue. Competition, lawsuits, investigations, increases in component and manufacturing costs that we are
unable to pass on to our customers, component supply disruptions and other risks affecting those businesses therefore may have a significant impact on our
overall gross margin and profitability. In addition, newer geographic markets may be relatively less profitable due to our 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, industry shifts, competitive pressures, commoditization of products, increased
component or shipping costs, regulatory impacts and other factors may result in reductions in revenue or pressure on gross margins in a given period, which
may lead to adjustments to our operations. Moreover, our efforts to address the challenges facing our business could increase the level of variability in our
financial results because the rate at which we are able to realize the benefits from those efforts may vary from period to period.
If we fail to manage the distribution of our products and services properly, our business and financial performance could suffer.
We use a variety of distribution methods to sell our products and services around the world, including third-party resellers and distributors and both
direct and indirect sales to enterprise accounts and consumers. Successfully managing the interaction of our direct and indirect channel efforts to reach
various potential customer segments for our products and services is a complex process. Moreover, since each distribution method has distinct risks and gross
margins, our failure to implement the most advantageous balance in the delivery model for our products and services could adversely affect our revenue and
gross margins and therefore our profitability.
Our financial results could be materially adversely affected due to distribution channel conflicts or if the financial conditions of our channel partners
were to weaken. Our results of operations may be adversely affected by any conflicts that might arise between our various distribution channels or the loss or
deterioration of any alliance or distribution arrangement or the loss of retail shelf space. Moreover, some of our wholesale and retail distributors may have
insufficient financial resources and may not be able to withstand changes in business conditions, including economic weakness, industry consolidation and
market trends. Many of our significant distributors operate on narrow margins and have been negatively affected by business pressures in the past.
Considerable trade receivables that are not covered by collateral or credit insurance are outstanding with our distribution and retail channel partners.
Revenue from indirect sales could suffer, and we could experience disruptions in distribution, if our distributors' financial conditions, abilities to borrow
funds in the credit markets or operations weaken.
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Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.