HP 2012 Annual Report Download - page 29

products that we introduce may utilize custom components obtained from only one source
initially until we have evaluated whether there is a need for additional suppliers. Replacing a
single source supplier could delay production of some products as replacement suppliers may be
subject to capacity constraints or other output limitations. For some components, such as
customized components and some of the processors that we obtain from Intel, alternative
sources either may not exist or may be unable to produce the quantities of those components
necessary to satisfy our production requirements. In addition, we sometimes purchase
components from single source suppliers under short-term agreements that contain favorable
pricing and other terms but that may be unilaterally modified or terminated by the supplier with
limited notice and with little or no penalty. The performance of such single source suppliers
under those agreements (and the renewal or extension of those agreements upon similar terms)
may affect the quality, quantity and price of components to HP. The loss of a single source
supplier, the deterioration of our relationship with a single source supplier, or any unilateral
modification to the contractual terms under which we are supplied components by a single
source supplier could adversely affect our revenue and gross margins.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs
and expenses.
Our worldwide operations could be disrupted by earthquakes, telecommunications failures, power
or water shortages, tsunamis, floods, hurricanes, typhoons, fires, extreme weather conditions, medical
epidemics or pandemics and other natural or manmade disasters or catastrophic events, for which we
are predominantly self-insured. The occurrence of any of these business disruptions could result in
significant losses, seriously harm our revenue, profitability and financial condition, adversely affect our
competitive position, increase our costs and expenses, and require substantial expenditures and recovery
time in order to fully resume operations. Our corporate headquarters and a portion of our research
and development activities are located in California, and other critical business operations and some of
our suppliers are located in California and Asia, near major earthquake faults known for seismic
activity. In addition, six of our principal worldwide IT data centers are located in the southern United
States, making our operations more vulnerable to natural disasters or other business disruptions
occurring in that geographical area. The manufacture of product components, the final assembly of our
products and other critical operations are concentrated in certain geographic locations, including
Shanghai, Singapore and India. We also rely on major logistics hubs primarily in Asia to manufacture
and distribute our products and in the southwestern United States to import products into the
Americas region. Our operations could be adversely affected if manufacturing, logistics or other
operations in these locations are disrupted for any reason, including natural disasters, information
technology system failures, military actions or economic, business, labor, environmental, public health,
regulatory or political issues. The ultimate impact on us, our significant suppliers and our general
infrastructure of being located near locations more vulnerable to the occurrence of the aforementioned
business disruptions, such as near major earthquake faults, and being consolidated in certain
geographical areas is unknown and remains uncertain.
System security risks, data protection breaches, cyber attacks and systems integration issues could disrupt our
internal operations or information technology services provided to customers, and any such disruption could
reduce our expected revenue, increase our expenses, damage our reputation and adversely affect our stock
price.
Experienced computer programmers and hackers may be able to penetrate our network security
and misappropriate or compromise our confidential information or that of third parties, create system
disruptions or cause shutdowns. Computer programmers and hackers also may be able to develop and
deploy viruses, worms, and other malicious software programs that attack our products or otherwise
exploit any security vulnerabilities of our products. In addition, sophisticated hardware and operating
21