HP 2008 Annual Report Download - page 4

Looking Ahead: Long-term Opportunity; Near-term
Challenges
In the long term, we see extraordinary opportunities
for HP. The amount of information on the planet is
exploding. It has been estimated that the digital
data-set doubles every 18 months. All of that
information needs to be captured, stored, processed,
shared, printed and viewed. Consumers need
always on, always connected access to the data that
is increasingly central to their lives. Enterprises are
straining to meet ever-growing demand with aging,
complex, proprietary and inefficient IT infrastructures.
These dynamics are creating a massive disruption in
the IT marketplace and a massive opportunity for HP.
With a comprehensive portfolio of hardware,
software and services, HP is well positioned to help
customers manage and transform their IT
environments.
In the near term, we expect that economic conditions
in 2009 will be extremely challenging. It will take
continued discipline and tough decision making to
stay the course and continue executing our strategy
in the coming months.
However, our company has significant competitive
advantages:
• A strong balance sheet
• Diversified revenues with one-third of our revenue
and well over half of our profits from recurring
sources such as services and supplies
• A lean, variable cost structure and commitment to
continue to eliminate all costs that are not core to
the company’s success
• Proven financial and operational discipline
These advantages will be put to good use by our
outstanding executive leadership team. We will
continue to make strategic investments for the future
in sales coverage, opportunistic acquisitions,
research and development, and customer service and
support. Our plan is to get through this period
without losing any muscle in the organization or
changing our swing in the marketplace.
Great companies rise to the top in tough times, and I
believe HP is one of the best. We expect that HP’s
ability to execute in a challenging marketplace will
differentiate us from our competitors and enable HP
to emerge from the current environment as a stronger
force in the industry.
Thank you for your investment in HP.
Sincerely,
Mark V. Hurd
Chairman, Chief Executive Officer and President
*Fiscal year 2008 non-GAAP financial information excludes $973 million
of adjustments on an after-tax basis, or $0.37 per diluted share, related
primarily to the amortization of purchased intangible assets, in-process
research and development charges, restructuring charges and acquisition-
related charges. Fiscal year 2007 non-GAAP diluted EPS excludes $0.25
per share of adjustments on an after-tax basis related primarily to the
amortization of purchased intangible assets, in-process research and
development charges, restructuring charges and a net pension curtailment
gain. HP’s management uses non-GAAP operating profit and non-GAAP
diluted EPS to evaluate and forecast HP’s performance before gains,
losses or other charges that are considered by HP’s management to be
outside of HP’s core business segment operating results. HP believes that
presenting non-GAAP operating profit and non-GAAP diluted EPS in
addition to GAAP operating profit and GAAP diluted EPS provides
investors with greater transparency to the information used by HP’s
management in its financial and operational decision making. HP further
believes that providing this additional non-GAAP information helps
investors understand HP’s operating performance and evaluate the efficacy
of the methodology and information used by management to evaluate and
measure such performance. This additional non-GAAP information is not
intended to be considered in isolation or as a substitute for GAAP
operating profit and GAAP diluted EPS.