HP 2008 Annual Report Download - page 67

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
PSG net revenue increased 24.8% (20.6% when adjusted for currency) in fiscal 2007 from fiscal
2006. Unit volumes increased by 28% in fiscal 2007, driving double-digit net revenue growth across all
regions. The unit volume increase was the result of strong growth in notebooks, with significant
improvements in emerging markets. In fiscal 2007, net revenue for notebook PCs increased 47% while
net revenue for desktop PCs increased 9% from the prior-year period. In fiscal 2007, net revenue for
consumer clients increased 39%, while net revenue for commercial clients increased 16% from the
prior-year period. The net revenue increase in Other PSG in fiscal 2007 was related primarily to
improvements in extended warranty sales. The revenue increase was partially offset by decreases in
handhelds revenue due to declines in the PDA product market, which were partially offset by our new
converged device and travel companion products. In fiscal 2007, the positive revenue impact from the
PSG unit volume increase compared to fiscal 2006 was also moderated by a 5% decline in commercial
client ASPs and a 1% decline in consumer client ASPs. The decline in ASPs from the prior year was a
result of price erosion related to component cost reductions, the impact of which was partially offset by
increased notebook mix and monitor attach rates.
PSG earnings from operations as a percentage of net revenue increased by 1.4 percentage points in
fiscal 2007 from fiscal 2006 as a result of decreases in operating expenses as a percentage of net
revenue coupled with an increase in gross margin. The increased gross margin was primarily a result of
component cost declines and improvements in supply chain costs per unit, the impact of which was
partially offset by ASP declines. The operating expense decline as a percentage of net revenue in fiscal
2007 was the result primarily of the increased net revenue and continued efforts to improve our cost
structure through efficiency measures.
Imaging and Printing Group
For the fiscal years ended October 31
2008 2007 2006
In millions
Net revenue .......................................... $29,385 $28,465 $26,786
Earnings from operations ................................ $ 4,590 $ 4,315 $ 3,978
Earnings from operations as a % of net revenue ............... 15.6% 15.2% 14.9%
The components of weighted-average net revenue growth as compared to prior-year periods by
business unit were as follows for the following fiscal years ended October 31:
2008 2007
Percentage points
Supplies ......................................................... 5.2 5.7
Commercial hardware ............................................... (0.2) 0.5
Consumer hardware ................................................. (1.8) 0.1
Total IPG ........................................................ 3.2 6.3
IPG net revenue increased 3.2% (decreased 1.1% when adjusted for currency) in fiscal 2008 from
fiscal 2007. The growth in printer supplies net revenue in fiscal 2008 from fiscal 2007 reflected higher
unit volumes of supplies as a result of the strong performance of color-related products. The decrease
in commercial hardware net revenue in fiscal 2008 from fiscal 2007 was due mainly to competitive
pricing pressures, the effect of which was partially offset by unit volume growth in multifunction
printers, color laser printers and large format printing products and revenue from recent acquisitions.
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