What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-12-10 compared with 2020-12-10 · 120 added, 93 removed, 326 unchanged (40% of the section changed)

4 unchanged sentences

Business and Operational Risks

We are unable to predict the extent to which the global COVID-19 pandemic may adversely impact our business operations, financial performance and results of operations.

We are unable to predict the extent to which the ongoing global COVID-19 pandemic may adversely impact our business operations, financial performance and results of operations.

The COVID-19 pandemic and efforts to control its spread have significantly curtailed the movement of people, goods and services worldwide, including in most or all of the regions in which we sell our products and services and conduct our business operations.

3 unchanged sentences

In response to the COVID-19 pandemic and to ensure the safety of our employees, we have implemented a global work-from-home policy until further notice that applies to a significant majority of our employees, with the exception of those performing essential activities.

Most recently, we have announced a vaccination requirement for covered U.S.

employees as required by Executive Order 14042 for federal contractors.

We recognize that there are existing legal challenges to Executive Order 14042, and we will ensure that the timing and scope of the implementation of our vaccination requirement is consistent with the legal status of Executive Order 14042.

Our employees may elect to return to the office in jurisdictions where both local requirements and our own health and safety standards have been met.

If such instances occur, employees would return to the office in a phased process.

As such instances occur, employees have returned to the office in a phased process and remain subject to safety regimens anchored around vaccination or testing requirements, as we determine is appropriate based on local conditions.

Moreover, certain industry and customer events that we sponsor or at which we present have been canceled, postponed or moved to virtual-only experiences, and we may deem it advisable to similarly alter, postpone or cancel entirely additional events in the future.

We are also seeing an increase in customer requirements for HPE employees to be tested for COVID-19 before being able to enter customer sites, which could potentially present an operational challenge.

However, work-from-home and other modified business practices introduce additional operational risks, including cybersecurity risks, which may result in inefficiencies or delays, and have affected the way we conduct our product development, sales, customer support and other activities.

We are also seeing an increase in customer requirements for HPE employees to be vaccinated and/or tested for COVID-19 before being able to enter customer sites, which could potentially present an operational challenge.

Also, work-from-home and other modified business practices introduce additional operational risks, including cybersecurity risks, which may result in inefficiencies or delays, and have affected the way we conduct our product development, sales, customer support and other activities.

Unanticipated disruptions in services provided through our localized physical infrastructure caused by the COVID-19 pandemic can curtail the functioning of critical components of our IT systems, and adversely affect our ability to fulfill orders, provide services, respond to customer requests and maintain our worldwide business operations.

Our implementation of employee vaccination requirements may result in attrition, including attrition of critically skilled labor, and difficulty securing future labor needs, which could have a material adverse effect on our business, financial condition, and results of operations.

The pandemic has adversely affected, and could continue to adversely affect, our business, by negatively impacting the demand for our products and services;

2 unchanged sentences

and disrupting our research and development capabilities, engineering, design and manufacturing processes and other important business activities.

For example, we expect the conditions caused by the COVID-19 pandemic could affect the rate of IT spending, impact our customers' ability or willingness to purchase our products and services, delay prospective customers' purchasing decisions, delay the provisioning of our products and services, lengthen payment terms, reduce the value or duration of subscription contracts or affect attrition rates, all of which could adversely affect our sales, operating results and financial performance.

There have been, and likely will continue to be, delays of components shipments from our vendors in China and other jurisdictions in which normal business operations are disrupted.

There have been, and will continue to be, delays of hardware product shipments from our vendors and out of our manufacturing operations worldwide as a result of capacity issues.

We also expect product shipment delays as a result of shortages and capacity issues that continue to impact logistics operations.

We expect the COVID-19 pandemic could continue to have a negative impact on our sales and our results of operations, the size and duration of which we are currently unable to predict.

While such changes were factored into the forecast used to assess assets for reserves and impairment, including goodwill, and to calculate the annualized effective tax rate during the interim quarters of fiscal 2020, any changes to the profitability for the next fiscal year could impact the realizability of assets and the annualized effective tax rate applied to earnings.

While such changes were factored into the forecast used to assess assets for reserves and impairment, including goodwill, any changes to the profitability for the next fiscal year could impact the realizability of assets.

Additionally, concerns over the economic impact of the COVID-19 pandemic have caused extreme volatility in financial and other capital markets which has and may continue to adversely impact our stock price, our ability to access capital markets and our ability to fund liquidity needs.

In response, we announced our long-term cost optimization and prioritization plan to focus our investments and realign our workforce to areas of growth combined with short-term cost saving measures, including temporary base salary adjustments or unpaid leave for certain employees and hiring and salary freezes.

Execution of the plan may not achieve the results and savings we anticipate and our temporary cost saving measures may negatively affect employee morale and our future recruiting efforts.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this "Risk Factors" section and those incorporated by reference herein, such as

those related to our products and services, demand and distribution, financial performance, credit rating and debt obligations.

Given that developments concerning the COVID-19 pandemic have been constantly evolving, additional impacts and risks may arise that we are not aware of or able to appropriately respond to at this time.

To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition, and stock price, it may also have the effect of heightening many of the other risks described in this Part I, Item 1A of this Form 10-K.

Table of Content

Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

5 unchanged sentences

materials scarcity and price volatility;

terrorist acts, conflicts or wars;

terrorist acts, civil unrest, conflicts or wars;

and medical epidemics or pandemics.

3 unchanged sentences

Climate change serves as a risk multiplier increasing both the frequency and severity of natural disasters that may affect our worldwide business operations.

Our corporate headquarters and a portion of our research and development activities are located in California, which suffers from drought conditions and catastrophic wildfires affecting the health and safety of our employees.

To mitigate wildfire risk, electric utilities are deploying public safety power shutoffs (PSPS), which affects electricity reliability to our facilities and our communities.

Other critical business operations and some of our suppliers are located in California and Asia, near major earthquake faults known for seismic activity.

In 2017, our principal worldwide IT data centers in Houston were flooded due Hurricane Harvey.

Since then, HPE has increased its resiliency through site selection infrastructure technological investments to mitigate and adapt to physical risks from climate change.

The manufacture of product components, the final assembly of our products and other critical operations are concentrated in certain geographic locations, including the United States, Czech Republic, Mexico, China and Singapore.

Our corporate headquarters is located in Houston, Texas, which suffers from floods, hurricanes, and other extreme weather, and a portion of our research and development activities are located in California, which suffers from drought conditions and catastrophic wildfires, each affecting the health and safety of our employees.

In California, to mitigate wildfire risk, electric utilities are deploying public safety power shutoffs, which affects electricity reliability to our facilities and our communities.

In 2017, our principal worldwide IT data centers in Houston were flooded due to Hurricane Harvey.

Since then, HPE has increased its resiliency through site selection and infrastructure technological investments to mitigate and adapt to physical risks from climate change.

We also rely on major logistics hubs, which are strategically located near manufacturing facilities in the major regions and in proximity to HPE's distribution channels and customers.

Our operations could be adversely affected if manufacturing, logistics or other operations in these locations are disrupted for any reason, including natural disasters, IT system failures, military actions or economic, business, labor, environmental, public health, regulatory or political issues.

Other critical business operations and some of our suppliers are located in California and Asia, near major earthquake faults known for seismic activity.

The ultimate impact on us, our significant suppliers and our general infrastructure of being located near vulnerable locations is continuing to be assessed.

trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business and results of operations.

Given the change in the U.S.

presidential administration, we face uncertainty with regard to U.S.

government trade policy.

government trade policy includes the imposition of tariffs on certain foreign goods, including information and communication technology products.

These measures may materially increase costs for goods imported into the United States.

This in turn could require us to materially increase prices to our customers which may reduce demand, or, if we are unable to increase prices, result in lowering our margin on products sold.

government trade policy has resulted in, and could result in more, U.S.

trading partners adopting responsive trade policy making it more difficult or costly for us to export our products to those countries.

Our transition to a subscription-based business model may adversely affect our business, operating results and free cash flow.

We are currently transitioning to an as-a-Service company, providing our entire portfolio through a range of subscription-based, pay-per-use and as-a-Service offerings.

We will also continue to provide our hardware and software in a capital expenditure and license-based model, ultimately giving our customers choice in consuming HPE products and services in a traditional or as-a-Service offering.

Such business model changes entail significant risks and uncertainties, and we may be unable to complete the transition to a subscription-based business model, or manage the transition successfully and in a timely manner;

and our ability to accurately forecast our future operating results may be adversely affected.

Additionally, we may not realize all of the anticipated benefits of the subscription transition, even if we successfully complete the transition.

The transition to a subscription-based business model also means that our historical results, especially those achieved before we began the transition, may not be indicative of our future results.

Our transition to a subscription/consumption-based business model may adversely affect our business, operating results and free cash flow.

We are currently transitioning to an as-a-service company, providing our entire portfolio through a range of subscription/consumption-based, pay-per-use and as-a-service offerings.

We will also continue to provide our hardware and software in a capital expenditure and license-based model, ultimately giving our customers choices in consuming HPE products and services in a traditional or as-a-service offering.

Such business model changes entail significant risks and uncertainties, and we may be unable to complete the transition to a subscription/consumption-based business model or manage the transition successfully and in a timely manner, and our ability to accurately forecast our future operating results may be adversely affected.

Additionally, we may not realize all of the anticipated benefits of the subscription/consumption transition, even if we successfully complete the transition.

The transition to a subscription/consumption-based business model also means that our historical results, especially those achieved before we began the transition, may not be indicative of our future results.

Further, as customer demand for our consumption model offerings increases, we will experience differences in the timing of revenue recognition between our traditional offerings (for which revenue is generally recognized at the time of delivery) and our as-a-service offerings (for which revenue is generally recognized ratably over the term of the arrangement).

In addition, the transition to an as-a-service company is expected to require incremental capital requirements, resulting in a negative impact to cash flows in the near term, and may require us to dedicate additional resources, including sales and marketing costs.

Furthermore, we anticipate needing to redesign our go-to-market structure, to better align with the subscription-based business model.

Furthermore, we anticipate needing to redesign our go-to-market structure, to better align with the subscription/consumption-based business model.

We must adapt our sales processes for new sales and marketing approaches, including those required by our shift to subscription/consumption services and other changes resulting from the pandemic.

Changing our go-to-market structure may affect employee compensation models and ultimately our ability to retain employees.

There is no assurance that we will be able to successfully implement these adjustments in a timely or cost-effective manner, or that we will be able to realize all or any of the expected benefits from such adjustments.

Further, our subscription/consumption offerings could subject us to increased risk of liability related to the provision of services as well as operational, technical, legal or other costs.

Table of Content

We depend on third-party suppliers, and our financial results could suffer if we fail to manage our supplier relationships properly.

Our operations depend on our ability to anticipate our needs for components, products and services, as well as our suppliers' ability to deliver sufficient quantities of quality components, products and services at reasonable prices and in time for us to meet critical schedules for the delivery of our own products and services.

Our operations depend on our ability to anticipate our needs for components, products and services, as well as our suppliers' abilities to deliver sufficient quantities of quality components, products and services at reasonable prices and in time for us to meet critical schedules for the delivery of our own products and services.

Given the wide variety of solutions that we offer, the large and diverse distribution of our suppliers and contract manufacturers, and the long lead times required to manufacture, assemble and deliver certain solutions, problems could arise in production, planning and inventory management that could seriously harm our business.

3 unchanged sentences

• Component shortages.

We may experience a shortage of, or a delay in receiving, certain components as a result of strong demand, capacity constraints, supplier financial weaknesses, the inability of suppliers to borrow funds in the credit markets, disputes with suppliers (some of whom are also our customers), disruptions in the operations of component suppliers, other problems experienced by suppliers or problems faced during the transition to new suppliers.

If shortages or delays persist, the price of certain components may increase, we may be exposed to quality issues, or the components may not be available at all.

We have been and currently are experiencing delays and shortages of certain components as a result of strong demand and capacity constraints due to economic changes resulting from the COVID-19 pandemic, disruptions in the operations of component suppliers, and other problems experienced by suppliers or problems faced during the transition to new suppliers.

A surge in demand for silicon has arisen across numerous markets affecting availability of key components of our products and our supplier's products, which may adversely affect customer deliveries and our anticipated revenues.

As shortages or delays persist, the price of certain components has increased and may continue to increase, we may be exposed to quality issues, or, at some point, the components may not be available at all.

We may not be able to secure enough components at reasonable prices or of acceptable quality to build products or provide services in a timely manner in the quantities needed or according to our specifications.

2 unchanged sentences

• Excess supply.

In order to secure components for our products or services, at times we may make advance payments to suppliers or enter into non-cancelable commitments with vendors.

In order to secure components for our products or services, at times we may make advance payments to suppliers or enter into long term agreements or non-cancelable commitments with vendors.

In addition, we may purchase components strategically in advance of demand to take advantage of favorable pricing or to address concerns about the availability of future components.

16 unchanged sentences

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 business and financial performance.

Table of Content

We may not achieve some or all of the expected benefits of our restructuring plans and our periodic restructuring programs can be disruptive to our business.

We have announced restructuring plans, including the HPE Next initiative and the cost optimization and prioritization plan in order to realign our cost structure due to the changing nature of our business and to achieve operating efficiencies that we expect to reduce costs, as well as simplify our organizational structure, upgrade our IT infrastructure and redesign business processes.

We have announced restructuring plans, including the HPE Next initiative (whereby we are simplifying our operating model and streamlining our offerings, business processes and business systems) and the cost optimization and prioritization plan, in order to realign our cost structure due to the changing nature of our business and to achieve operating efficiencies that we expect to reduce costs, as well as simplify our organizational structure, upgrade our IT infrastructure and redesign business processes.

We may not be able to obtain the cost savings and benefits that were initially anticipated in connection with our restructuring.

4 unchanged sentences

Any failure by us to identify, manage and complete acquisitions and subsequent integrations, divestitures and other significant transactions successfully could harm our financial results, business and prospects.

As part of our strategy, we may acquire businesses, divest businesses or assets, enter into strategic alliances and joint ventures, and make investments to further our business, (collectively, "business combination and investment transactions") and handle any post-closing issues such as integration.

As part of our strategy, we may acquire businesses, divest businesses or assets, enter into strategic alliances and joint ventures, and make investments to further our business (collectively, "business combination and investment transactions"), and also handle any post-closing issues, such as integration.

For example, in September 2020, we acquired Silver Peak Systems, Inc., an SD-WAN industry leader and in September 2019, we acquired Cray Inc., a global supercomputer leader.

In April 2017 and September 2017, we spun off our Enterprise Services and Software businesses, respectively.

See also the risk factors below under the heading "Risks Related to the Separations of our Former Enterprise Services Business and our Former Software Segment".

See also the risk factors below under the heading "Risks Related to Prior Separations."

Risks associated with business combination and investment transactions include the following, any of which could adversely affect our financial results, including our effective tax rate:

3 unchanged sentences

• Our ability to conduct due diligence with respect to business combination and investment transactions, and our ability to evaluate the results of such due diligence, is dependent upon the veracity and completeness of statements and disclosures made or actions taken by third parties or their representatives.

We may fail to identify significant issues with the acquired company's product quality, financial disclosures, accounting practices or internal control deficiencies or all of the factors necessary to estimate accurately our costs, timing and other matters.

• In order to complete a business combination and investment transaction, we may issue common stock, potentially creating dilution for our existing stockholders or we may enter into financing arrangements, which could affect our liquidity and financial condition.

• For an acquisition or other combination, the acquisition partner may have differing or inadequate cybersecurity and data protection controls, which could impact our exposure to data security incidents and potentially increase anticipated costs or time to integrate the business.

• Business combination and investment transactions may lead to litigation, which could impact our financial condition and results of operations.

1 unchanged sentence

• For a divestiture, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, or we may dispose of a business at a price or on terms that are less desirable than we had anticipated.

• The impact of divestiture on our revenue growth may be larger than projected, as we may experience greater dis-synergies than expected.

• The impact of divestitures on our revenue growth may be larger than projected, as we may experience greater dis-synergies than expected.

If we do not satisfy pre-closing conditions and necessary regulatory and governmental approvals on acceptable terms, it may prevent us from completing the transaction.

Dispositions may also involve continued financial involvement in the divested business, such as through continuing equity ownership, guarantees, indemnities or other financial obligations.

Dispositions may also involve

Table of Content

continued financial involvement in the divested business, such as through continuing equity ownership, guarantees, indemnities or other financial obligations.

Under these arrangements, performance by the divested businesses or other conditions outside of our control could affect our future financial results.

• Our certificate of incorporation and bylaws could make it difficult or discourage an acquisition of Hewlett Packard Enterprise if our Board of Directors deems it to be undesirable.

Provisions such as indemnification, meeting

requirements, and blank check stock authorizations could deter or delay hostile takeovers, proxy contests, or changes in control or management of Hewlett Packard Enterprise.

Management's attention, or other resources, may be diverted if we fail to successfully complete or integrate business combination and investment transactions that further our strategic objectives.

System security risks, data protection breaches, cyberattacks and systems integration issues could disrupt our internal operations or IT services provided to customers, and any such disruption could reduce our revenue, increase our expenses, damage our reputation and adversely affect our stock price.

As a leading technology firm we are exposed to attacks from criminals, nation state actors and activist hackers (collectively, "malicious parties") who may be able to circumvent or bypass our cyber security measures and misappropriate, maliciously alter or destroy our confidential information or that of third parties, create system disruptions or cause shutdowns.

Provisions such as indemnification, meeting requirements, and blank check stock authorizations could deter or delay hostile takeovers, proxy contests, or changes in control or management of Hewlett Packard Enterprise.

Management's attention or other resources may be diverted during business combination and investment transactions and further impacted if we fail to successfully complete or integrate business combination and investment transactions that further our strategic objectives.

System security risks, data protection incidents, cyberattacks and systems integration issues could disrupt our internal operations or IT services provided to customers, and any such disruption could reduce our revenue, increase our expenses, damage our reputation and adversely affect our stock price.

As a leading technology firm we are exposed to attacks from criminals, nation state actors and activist hackers (collectively, "malicious parties") who have been able to circumvent or bypass our cyber security measures.

Although some of these attacks have caused disruptions or exposure of information, so far, these attacks have not resulted in material losses to HPE, nor have any of HPE's consumers, customers, or employees informed HPE that these attacks resulted in material harm to them.

It is possible that future attacks may result in material misappropriation, system disruptions or shutdowns, malicious alteration, or destruction of our confidential or personal information or that of third parties.

Malicious parties also may be able to develop and deploy viruses, worms, ransomware and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products.

3 unchanged sentences

We manage and store various proprietary information and sensitive or confidential data relating to our business.

In addition, our business may process, store and transmit our clients' data, including commercially sensitive and personal data, subject to the European General Data Protection Regulation and other privacy laws.

Breaches of our cyber or physical security measures or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information, sensitive or confidential data or personal data about us, our clients or our 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 (including regulatory fines) or misuse of this information, result in litigation and potential liability for us, damage our brand and reputation or otherwise harm our business.

In addition, our business may process, store and transmit customer data, including commercially sensitive and personal data, subject to the European General Data Protection Regulation and other privacy laws.

With our business increasingly providing cloud service offerings, malicious parties could target such services, potentially resulting in an increased risk of compromise of customer data and regulatory exposure.

Incidents involving our cyber or physical security measures or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information, sensitive, confidential, or personal data about us, our clients or our 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 regulatory fines, 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 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 and services.

In addition, the cost and operational consequences of implementing further data protection measures could be significant.

In addition, the cost and operational consequences of managing an incident and 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.

4 unchanged sentences

Our long-term strategy is focused on leveraging our portfolio of hardware, software and services as we deliver global edge-to-cloud platform as-a-service to help customers accelerate outcomes by unlocking value from all of their data, everywhere.

HPE delivers unique, open and intelligent technology solutions, with a consistent experience across all clouds and edge computing platforms.

To successfully execute this strategy, we must address business model shifts and optimize go-to-market execution by improving cost structure, aligning sales coverage with strategic goals, improving channel execution and strengthening our capabilities in our areas of strategic focus, while continuing to pursue new product innovation that builds on our strategic capabilities in areas such as cloud and data center computing, software-defined networking, converged storage, high-performance compute, and wireless networking.

HPE delivers unique, open and intelligent technology solutions, including those utilizing machine learning and artificial intelligence capabilities, with a consistent experience across all clouds and edge computing platforms.

To successfully execute this strategy, we must address business model shifts and optimize go-to-market execution by improving cost structure,

Table of Content

aligning sales coverage with strategic goals, improving channel execution and strengthening our capabilities in our areas of strategic focus, while continuing to pursue new product innovation that builds on our strategic capabilities in areas such as cloud and data center computing, software-defined networking, converged storage, high-performance compute, and wireless networking.

Any failure to successfully execute this strategy, including any failure to invest sufficiently in strategic growth areas, could adversely affect our business, results of operations and financial condition.

The process of developing new high-technology products, software, services and solutions and enhancing existing hardware and software products, services and solutions is complex, costly and uncertain, and any failure by us to anticipate customers' changing needs and emerging technological trends accurately could significantly harm our market share, results of operations and financial condition.

The process of developing an edge-to-cloud platform as-a-service solution and enhancing existing hardware and software products, services, and solutions is complex, costly and uncertain, and any failure by us to anticipate customers' changing needs and emerging technological trends accurately could significantly harm our market share, results of operations and financial condition.

For example, as the transition to an environment characterized by cloud-based computing and software being delivered as-a-service progresses, we must continue to successfully develop and deploy cloud-based solutions for our customers.

We must make long-term investments, develop or obtain and protect appropriate intellectual

property, and commit significant research and development and other resources before knowing whether our predictions will accurately reflect customer demand for our products, services and solutions.

We must make long-term investments, develop or obtain and protect appropriate intellectual property, and commit significant research and development and other resources before knowing whether our predictions will accurately reflect customer demand for our products, services and solutions.

Should such efforts fail to produce actionable insights or our products not perform as promised, our business results may be adversely affected.

Any failure to accurately predict technological and business trends, control research and development costs or execute our innovation strategy could harm our business and financial performance.

Our research and development initiatives may not be successful in whole or in part, including research and development projects which we have prioritized with respect to funding and/or personnel.

After we develop a product, we must be able to manufacture appropriate volumes quickly while also managing costs and preserving margins.

After we develop an edge-to-cloud platform product, we must be able to scale quickly while also managing costs and preserving margins.

To accomplish this, we must accurately forecast volumes, mixes of products and configurations that meet customer requirements, and we may not succeed at doing so within a given product's life cycle or at all.

10 unchanged sentences

If we fail to manage the distribution of our products and services properly, our business and financial performance could suffer.

We use a variety of distribution methods to sell our products and services around the world, including third-party resellers and distributors and both direct and indirect sales to enterprise accounts and consumers.

We use a variety of distribution methods to sell our products and services around the world, including both direct and indirect (distributors and resellers) sales to enterprise accounts and consumers.

Successfully managing the interaction of our direct and indirect channel efforts to reach various potential customer segments for our products and services is a complex process.

3 unchanged sentences

Moreover, some of our wholesale distributors may have insufficient financial resources and may not be able to withstand changes in business conditions, including economic weakness, industry consolidation and market trends.

Many of our significant distributors operate on narrow margins and have been negatively affected by business pressures in the past.

Table of Content

significant distributors operate on narrow margins and have been negatively affected by business pressures in the past.

Considerable trade receivables that are not covered by collateral or credit insurance are outstanding with our distribution channel partners.

6 unchanged sentences

If we have excess or obsolete inventory, we may have to reduce our prices and write down inventory.

Moreover, our use of indirect distribution channels may limit our willingness or ability to adjust prices quickly and

otherwise to respond to pricing changes by competitors.

Moreover, our use of indirect distribution channels may limit our willingness or ability to adjust prices quickly and otherwise to respond to pricing changes by competitors.

We also may have limited ability to estimate future product rebate redemptions in order to price our products effectively.

2 unchanged sentences

In order to attract and retain executives and other key employees in a competitive marketplace, we must provide a competitive compensation package, including cash- and equity-based compensation.

Our equity-based incentive awards may contain conditions relating to our stock price performance and our long-term financial performance that make the future value of those awards uncertain.

Certain equity-based incentive awards for certain executives contain conditions relating to our stock price performance and our long-term financial performance that make the future value of those awards uncertain.

If the anticipated value of such equity-based incentive awards does not materialize, if our equity-based compensation otherwise ceases to be viewed as a valuable benefit, if our total compensation package is not viewed as being competitive, or if we do not obtain the stockholder approval needed to continue granting equity-based incentive awards in the amounts we believe are necessary, our ability to attract, retain, and motivate executives and key employees could be weakened.

14 unchanged sentences

We face aggressive price competition and may have to continue lowering the prices of many of our products and services to stay competitive, while simultaneously seeking to maintain or improve our revenue and gross margin.

In addition, competitors who have a greater presence in some of the lower-cost markets in which we compete, or who can obtain better pricing, more favorable contractual terms and conditions or more favorable allocations of products and components during periods of limited supply may be able to offer lower prices than we are able to offer.

Table of Content

competitors who have a greater presence in some of the lower-cost markets in which we compete, or who can obtain better pricing, more favorable contractual terms and conditions or more favorable allocations of products and components during periods of limited supply may be able to offer lower prices than we are able to offer.

Our cash flows, results of operations and financial condition may be adversely affected by these and other industry-wide pricing pressures.

6 unchanged sentences

International Risks

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.

Due to the international nature of our business, political or economic changes and the laws and regulatory regimes applying to international transactions or other factors could harm our future revenue, costs and expenses, and financial condition.

Our business and financial performance depend significantly on worldwide economic conditions and the demand for technology hardware, software and services in the markets in which we compete.

8 unchanged sentences

government, and could negatively affect macroeconomic conditions in the United States, which could further reduce demand for our products, services and solutions.

Our business and financial performance also could be adversely affected by changes in U.S.

trade policy, U.S.

export controls and sanctions, and U.S.

regulations concerning imports, as well as international laws and regulations relating to global trade.

government trade policy includes the imposition of tariffs on certain foreign goods, including information and communication technology products.

These measures have materially increased costs for certain goods imported into the United States.

This in turn could require us to materially increase prices to our customers which may reduce demand, or, if we are unable to increase prices, result in lowering our margin on products sold.

government trade policy has resulted in, and could result in more, U.S.

trading partners adopting responsive trade policy making it more difficult or costly for us to export our products to those countries.

Similarly, changes in regulations relating to exports could prevent us from exporting products to certain locations or customers entirely.

In addition, changes in requirements relating to making foreign direct investments could increase our cost of doing business in certain jurisdictions, prevent us from shipping products to particular countries or markets, affect our ability to obtain favorable terms for components, increase our operating costs or lead to penalties or restrictions.

Sales outside the United States constituted approximately 68% of our net revenue in fiscal 2021.

1 unchanged sentence

• 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, including uncertainties and instability in economic and market conditions caused by the COVID-19 pandemic;

Table of Content

• inflationary pressures, such as those the market is currently experiencing, which may increase costs for materials, supplies, and services;

• network security, privacy and data sovereignty concerns, which could make foreign customers reluctant to purchase products and services from U.S.-based technology companies;

• longer collection cycles and financial instability among customers;

• trade regulations and procedures and actions affecting production, pricing and marketing of products, including policies adopted by countries that may champion or otherwise favor domestic companies and technologies over foreign competitors, U.S.

export controls and sanctions, and federal and state tax reforms;

• local labor conditions and regulations, including local labor issues faced by specific suppliers and original equipment manufacturers ("OEMs"), or changes to immigration and labor law policies which may adversely impact our access to technical and professional talent;

• managing our geographically dispersed workforce;

• changes in the international, national or local regulatory and legal environments;

• differing technology standards or customer requirements;

• import, export or other business licensing requirements or requirements relating to making foreign direct investments, which could increase our cost of doing business in certain jurisdictions, prevent us from shipping products to particular countries or markets, affect our ability to obtain favorable terms for components, increase our operating costs or lead to penalties or restrictions;

• difficulties associated with repatriating earnings in restricted countries, and changes in tax laws;

2 unchanged sentences

For example, we rely on suppliers in Asia for product assembly and manufacture.

In many foreign countries, particularly in those with developing economies, people may engage in business practices prohibited by anti-corruption laws such as the U.S.

We implement policies, procedures and training designed to facilitate compliance with anti-corruption laws around the world, including the U.S.

Foreign Corrupt Practices Act and the U.K.

Although we implement policies, procedures and training designed to facilitate compliance with these laws, our employees and third parties we work with may take actions in violation of our policies, and those actions could have an adverse effect on our business and reputation.

But in many foreign countries, particularly in those with developing economies, people may engage in business practices prohibited by anti-corruption laws.

Our employees and third parties we work with may take actions in violation of our policies, and those actions could have an adverse effect on our business and reputation.

We are exposed to fluctuations in foreign currency exchange rates.

20 unchanged sentences

For example, many of our software offerings are developed using software components or other intellectual property licensed from third parties, including through both proprietary and open source licenses.

These third-party software components may become obsolete, defective or incompatible with future versions of our products, or our relationship with the third party may deteriorate, or our agreements with the third party may expire or be terminated.

These third-party software components may become

Table of Content

obsolete, defective or incompatible with future versions of our products, or our relationship with the third party may deteriorate, or our agreements with the third party may expire or be terminated.

We may face legal or business disputes with licensors that may threaten or lead to the disruption of inbound licensing relationships.

10 unchanged sentences

Even if we believe that intellectual property claims are without merit, they can be time-consuming and costly to defend against and may divert management's attention and resources away from our business.

Claims of intellectual property infringement also might require us to redesign affected products, discontinue certain product offerings, enter into costly settlement or license agreements, pay costly damage awards or face a temporary or permanent injunction prohibiting us from

importing, marketing or selling certain of our products.

Even if we have an agreement to indemnify us against such costs, the indemnifying party may be unable or unwilling to uphold its contractual obligations to us.

17 unchanged sentences

In addition, our actual cash requirements in the future may be greater than expected.

Our cash flow from operations may not be sufficient to service our outstanding debt or to repay our outstanding debt as it becomes due, and we may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to service or refinance our debt.

Our cash flow from operations may not be sufficient to service our

Table of Content

outstanding debt or to repay our outstanding debt as it becomes due, and we may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to service or refinance our debt.

The revenue and profitability of our operations have historically varied, which makes our future financial results less predictable.

11 unchanged sentences

In some of our businesses, our quarterly sales have periodically reflected a pattern in which a disproportionate percentage of each quarter's total sales occurs towards the end of the quarter.

This uneven sales pattern makes predicting revenue, earnings,

cash flow from operations and working capital for each financial period difficult, increases the risk of unanticipated variations in our quarterly results and financial condition and places pressure on our inventory management and logistics systems.

This uneven sales pattern makes predicting revenue, earnings, cash flow from operations and working capital for each financial period difficult, increases the risk of unanticipated variations in our quarterly results and financial condition and places pressure on our inventory management and logistics systems.

If predicted demand is substantially greater than orders, there may be excess inventory.

12 unchanged sentences

For example, we face increasing complexity related to product design, the use of regulated, hazardous and scarce materials, the associated energy consumption and efficiency related to the use of products, the transportation and shipping of products, climate change regulations, and the reuse, recycling and/or disposal of products and their components at end-of-use or useful life as we adjust to new and future requirements relating to our transition to a more circular economy.

If we were to violate or become liable under environmental laws or if our products become non-compliant with environmental laws or market access requirements, our customers may refuse to purchase our products and we could incur substantial costs or face other sanctions, such as restrictions on our products entering certain jurisdictions, fines, and/or civil or criminal sanctions.

A significant portion of our hardware revenues come from international sales.

Any changes to current environmental legal requirements, such

Table of Content

as the EU Restriction of Hazardous Substances Directive, the EU Waste Electrical and Electronic Equipment Directive or China's regulation on Management Methods for Controlling Pollution Caused by Electronic Information Products, among others, may increase our cost of doing business internationally and impact our hardware revenues from the EU, China and/or other countries proposing or adopting similar environmental legal requirements.

In addition, other ESG-related laws, regulations, treaties, and similar initiatives and programs are being proposed, adopted and implemented throughout the world (including, but not limited to, the European Commission’s proposal on Sustainable Corporate Governance).

If we were to violate or become liable under environmental or certain ESG-related laws or if our products become non-compliant with such laws or market access requirements, our customers may refuse to purchase our products, and we could incur costs or face other sanctions, such as restrictions on our products entering certain jurisdictions, fines, and/or civil or criminal sanctions.

Environmental regulations may also impact the availability and cost of energy or emissions related to energy consumption which may increase our cost of manufacturing and/or the cost of powering and cooling owned IT infrastructures.

4 unchanged sentences

Failure to comply with government contracting regulations could adversely affect our business and results of operations.

Our contracts with federal, state, provincial and local governmental customers are subject to various procurement regulations, contract provisions and other requirements relating to their formation, administration and performance.

Any violation of government contracting regulations could result in the imposition of various civil and criminal penalties, which may include termination of contracts, forfeiture of profits, suspension of payments and, in the case of our government contracts, fines and suspension from future government contracting.

Our contracts with federal, state, provincial and local governmental customers are subject to various government procurement laws and regulations, required contract provisions, and other requirements relating to contract formation, administration, and performance.

Any violation of government contracting laws and regulations or contract terms could result in the imposition of various civil and criminal penalties, which may include termination of contracts, forfeiture of profits, suspension of payments and fines, treble damages, and suspension from future government contracting.

Such failures could also cause reputational damage to our business.

In addition, we may in the future be, subject to qui tam litigation brought by private individuals on behalf of the government relating to our government contracts, which could include claims for treble damages.

In addition, we will continue to be subject to qui tam litigation brought by private individuals on behalf of the government relating to our government contracts.

If we are suspended or disbarred from government work or if our ability to compete for new government contracts is adversely affected, our financial performance could suffer.

3 unchanged sentences

We are subject to ongoing tax audits in various jurisdictions.

Tax authorities may disagree with our intercompany charges, cross-

jurisdictional transfer pricing or other matters, and may assess additional taxes as a result.

Tax authorities may disagree with our intercompany charges, cross-jurisdictional transfer pricing or other matters, and may assess additional taxes as a result.

There can be no assurance that we will accurately predict the outcomes of these audits, and the amounts ultimately paid upon resolution of audits could be materially different from the amounts previously included in our income tax expense and therefore could have a material impact on our tax provision, net income and cash flows.

1 unchanged sentence

The carrying value of our deferred tax assets is dependent on our ability to generate future taxable income.

The Organisation for Economic Co-operation and Development (OECD), an international association of 34 countries including the United States, has proposed changes to numerous long-standing tax principles.

These proposals, if finalized and adopted by the associated countries, will likely increase tax uncertainty and may adversely affect our provision for income taxes.

President-elect Biden has provided some informal guidance on what tax law changes he would support.

Among other things, his proposals would raise the rate on both domestic and foreign income and impose a new alternative minimum tax on book income.

If these proposals are ultimately enacted into legislation, they could materially impact our tax provision, cash tax liability and effective tax rate.

The Organisation for Economic Co-operation and Development, an international association of 34 countries including the United States, has proposed changes to numerous long-standing tax principles.

These proposals, if finalized and adopted by the associated countries, would impose a global minimum corporate tax rate of 15%, could increase tax complexity and uncertainty, and may adversely affect our provision for income taxes.

House of Representatives has passed legislation consistent with the framework President Biden announced previously, which includes a number of changes that would impact the U.S.

federal taxation of corporations.

Among other items, the legislation includes provisions that would raise the tax rate on foreign income of U.S.

corporations, apply the Global Intangible Low-Tax Income regime on a country-by-country basis, impose a new alternative minimum tax on book income, and impose a surcharge on corporate stock buybacks.

Senate has not voted on or agreed to the legislation, but if this happens and President Biden signs it into law, it could materially impact our tax provision, cash tax liability and effective tax rate.

During fiscal 2019, we executed a Termination and Mutual Release Agreement which terminated our Tax Matters Agreement with HP Inc.

Because we now have limited indemnity rights from HP Inc., we potentially bear more economic risk for certain potential unfavorable tax assessments.

Table of Content

Risks Related to Prior Separations

17 unchanged sentences

Notwithstanding the foregoing, we incurred certain tax costs in connection with the completed separation of our former Enterprise Services business and Software Segment, including non-U.S.

tax expenses resulting from

the completed separation of our former Enterprise Services business and Software Segment in multiple non-U.S.

tax expenses resulting from the completed separation of our former Enterprise Services business and Software Segment in multiple non-U.S.

jurisdictions that do not legally provide for tax-free separations, which may be material.

12 unchanged sentences

We may be obligated to fully indemnify HP Inc.

for certain liabilities under the Separation agreements or HP Inc.

for certain liabilities under the

Table of Content

Separation agreements or HP Inc.

may not be able to fully cover their indemnification obligations to us under the same Separation agreements.

16 unchanged sentences

Volatility in the price of our securities could result in the filing of securities class action litigation matters, which could result in substantial costs and the diversion of management time and resources.

Table of Content

Unresolved Staff Comments.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors