HP 2006 Annual Report Download - page 23

Economic uncertainty could affect adversely our revenue, gross margin and expenses.
Our revenue and gross margin depend significantly on general economic conditions and the
demand for computing and imaging products and services in the markets in which we compete.
Economic weakness and constrained IT spending has previously resulted, and may result in the future,
in decreased revenue, gross margin, earnings or growth rates and problems with our ability to manage
inventory levels and collect customer receivables. We could experience such economic weakness and
reduced spending, particularly in our consumer businesses, due to the effects of high fuel costs. In
addition, customer financial difficulties have previously resulted, and could result in the future, in
increases in bad debt write-offs and additions to reserves in our receivables portfolio, inability by our
lessees to make required lease payments and reduction in the value of leased equipment upon its
return to us compared to the value estimated at lease inception. We also have experienced, and may
experience in the future, gross margin declines in certain businesses, reflecting the effect of items such
as competitive pricing pressures, inventory write-downs, charges associated with the cancellation of
planned production line expansion, and increases in pension and post-retirement benefit expenses.
Economic downturns also may lead to restructuring actions and associated expenses. Uncertainty about
future economic conditions makes it difficult for us to forecast operating results and to make decisions
about future investments. Delays or reductions in information technology spending could have a
material adverse effect on demand for our products and services, and consequently our results of
operations, prospects and stock price.
Terrorist acts, conflicts and wars may seriously harm our business and revenue, costs and expenses and
financial condition and stock price.
Terrorist acts, conflicts or wars (wherever located around the world) may cause damage or
disruption to HP, our employees, facilities, partners, suppliers, distributors, resellers or customers. The
potential for future attacks, the national and international responses to attacks or perceived threats to
national security, and other actual or potential conflicts or wars, including the ongoing military
operations in Iraq, have created many economic and political uncertainties. In addition, as a major
multi-national company with headquarters and significant operations located in the United States,
actions against or by the United States may impact our business or employees. Although it is
impossible to predict the occurrences or consequences of any such events, they could result in a
decrease in demand for our products, make it difficult or impossible to deliver products to our
customers or to receive components from our suppliers, create delays and inefficiencies in our supply
chain and result in the need to impose employee travel restrictions. We are predominantly uninsured
for losses and interruptions caused by terrorist acts, conflicts and wars.
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 more than 60% of our net revenue. Our future revenue,
gross margin, expenses and financial condition also 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 accounts receivable cycles and financial instability among customers;
• trade regulations and procedures and actions affecting production, pricing and marketing of
products;
• local labor conditions and regulations;
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