HP 2012 Annual Report Download - page 30

system software and applications that we produce or procure from third parties may contain defects in
design or manufacture, including ‘‘bugs’’ and other problems that could unexpectedly interfere with the
operation of the system. The costs to us to eliminate or alleviate cyber or other security problems,
bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and
our efforts to address these problems may not be successful and could result in interruptions, delays,
cessation of service and loss of existing or potential customers that may impede our sales,
manufacturing, distribution or other critical functions.
We manage and store various proprietary information and sensitive or confidential data relating to
our business. In addition, our outsourcing services business routinely processes, stores and transmits
large amounts of data for our clients, including sensitive and personally identifiable information.
Breaches of our security measures or the accidental loss, inadvertent disclosure or unapproved
dissemination of proprietary information or sensitive or confidential data about us, our clients or
customers, including the potential loss or disclosure of such information or data as a result of fraud,
trickery or other forms of deception, could expose us, our customers or the individuals affected to a
risk of loss or misuse of this information, result in litigation and potential liability for us, damage our
brand and reputation or otherwise harm our business. We also could lose existing or potential
customers of outsourcing services or other IT solutions or incur significant expenses in connection with
our customers’ system failures or any actual or perceived security vulnerabilities in our products. In
addition, the cost and operational consequences of implementing further data protection measures
could be significant.
Portions of our IT infrastructure also may experience interruptions, delays or cessations of service
or produce errors in connection with systems integration or migration work that takes place from time
to time. We may not be successful in implementing new systems and transitioning data, which could
cause business disruptions and be more expensive, time-consuming, disruptive and resource intensive.
Such disruptions could adversely impact our ability to fulfill orders and respond to customer requests
and interrupt other processes. Delayed sales, lower margins or lost customers resulting from these
disruptions have adversely affected, and in the future could adversely affect, our financial results, stock
price and reputation.
The revenue and profitability of our operations have historically varied, which makes our future financial
results less predictable.
Our revenue, gross margin and profit vary among our products and services, customer groups and
geographic markets and therefore will likely be different in future periods than our current results. Our
revenue depends on the overall demand for our products and services. Delays or reductions in IT
spending could materially adversely affect demand for our products and services, which could result in
a significant decline in revenues. Overall gross margins and profitability in any given period are
dependent partially on the product, service, customer and geographic mix reflected in that period’s net
revenue. Competition, lawsuits, investigations and other risks affecting those businesses therefore may
have a significant impact on our overall gross margin and profitability. Certain segments have a higher
fixed cost structure and more variation in gross margins across their business units and product
portfolios than others and may therefore experience significant operating profit volatility on a quarterly
basis. In addition, newer geographic markets may be relatively less profitable due to investments
associated with entering those markets and local pricing pressures, and we may have difficulty
establishing and maintaining the operating infrastructure necessary to support the high growth rate
associated with some of those markets. Market trends, industry shifts, competitive pressures,
commoditization of products, seasonal rebates, increased component or shipping costs, regulatory
impacts and other factors may result in reductions in revenue or pressure on gross margins of certain
segments in a given period, which may necessitate adjustments to our operations. Moreover, the
execution of our efforts to address the challenges facing our business could increase the level of
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