HP 2006 Annual Report Download - page 12

distribution is organized by direct and channel. Within the channel, we have various types of partners
that we utilize for various customer groups. The partners include:
• retailers that sell our products to the public through their own physical or Internet stores;
• resellers that sell our products and services, frequently with their own value-added products or
services, to targeted customer groups;
• distribution partners that supply our solutions to smaller resellers with which we do not have
direct relationships;
• independent distributors that sell our products into geographies or customer segments in which
we have little or no presence;
• original equipment manufacturers (‘‘OEMs’’) that integrate our products with their own
hardware or software and sell the integrated products;
• independent software vendors (‘‘ISVs’’) that provide their clients with specialized software
products, frequently driving sales of additional non-HP products and services, and often assist us
in selling our products and services to clients purchasing their products; and
• systems integrators that provide various levels and kinds of expertise in designing and
implementing custom IT solutions and often partner with HPS to extend their expertise or
influence the sale of our products and services.
The mix of HP’s business by channel or direct sales differs substantially by business and region. We
believe that customer buying patterns and different regional market conditions necessitate sales,
marketing and distribution to be tailored accordingly. HP is focused on driving efficiencies and
productivity gains in both the direct and indirect business.
TSG manages enterprise and public sector customer relationships and also is charged with
simplifying sales processes across our segments to improve speed and effectiveness of customer
delivery. In this capacity, TSG manages our direct sales for value products including UNIX, enterprise
storage and software and pre-sales technical consultants, as well as our direct distribution activities for
commercial products and go-to-market activities with systems integrators and ISVs. TSG also drives
HP’s vertical sales and marketing approach in the communication, media and entertainment, financial
services manufacturing and distribution and public sector industries.
PSG manages SMB customer relationships and commercial reseller channels, due largely to the
significant volume of commercial PCs that HP sells through these channels. In addition to commercial
channel relationships, the volume direct organization, which is charged with the management of direct
sales for volume products such as commercial PCs and industry standard servers, is hosted within PSG.
IPG manages HP’s overall consumer-related sales and marketing activities, including our annual
consumer product launch for the back-to-school and holiday seasons. IPG also manages consumer
channel relationships with approximately 28,000 third-party retail locations for imaging and printing
products, as well as other consumer products, including consumer PCs, which provides for a bundled
sale opportunity between PCs and IPG products. In addition, IPG manages direct consumer sales
through www.hp.com.
Manufacturing and Materials
We utilize a number of contract manufacturers (‘‘CMs’’) and original design manufacturers
(‘‘ODMs’’) around the world to manufacture HP-designed products. The use of CMs and ODMs is
intended to generate cost efficiencies and reduce time to market for certain HP-designed products.
Third-party OEMs manufacture some products that we purchase and resell under the HP brand. In
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