Hewlett Packard Enterprise Co
For the period ended Oct 31, 2025. Filed Dec 18, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Dec 18, 2025
HPE$44.77+1.4%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2024-10-31; filed 2024-12-19.
0001645590-24-000139
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2025-10-31; filed 2025-12-18.
0001645590-25-000130
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 196 previous paragraphs and 198 current paragraphs.
71 unchanged; 79 reworded; 42 added; 39 removed; 7 previous and 6 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (42)
Current report
Risks Related to Our Business Strategy and Industry
Current report
•Our success depends on our ability to successfully execute our go-to-market strategy, including offering solutions as-a-Service, effectively planning and managing our resources, and continuing to develop and manage our offerings to integrate new features and solutions.
Current report
•We depend on third-party suppliers, contract manufacturers (including original equipment and original design manufacturers), as well as single-source and limited source suppliers, and our financial results could suffer if we fail to manage these third party relationships effectively.
Current report
•Uncertainty and fluctuations in geopolitical and macroeconomic conditions may adversely impact our business, financial condition, and operating results.
Current report
•Long sales and implementation cycles for our offerings and dynamics related to large orders may cause our revenues and operating results to vary significantly from quarter-to-quarter.
Current report
•Our ability to achieve our strategy could be harmed if we are unable to attract, retain, train, motivate, develop, and transition key personnel.
Current report
Risks Related to Our Technology and Business Operations
Current report
•We may not achieve some or all of the expected benefits of our cost reduction actions, some or all of which may be disruptive to our business.
Current report
•We rely on the performance of our business systems and processes, as well as those of third-parties with whom we do business.
Current report
•Our revenue, profitability, and margins have historically varied, and we expect them to continue to vary over time.
Current report
•Unfavorable results of legal proceedings, investigations, and other disputes could harm our business and result in substantial costs.
Current report
Risks Related to Our Business Strategy and Industry
Current report
Our success depends on our ability to successfully execute our go-to-market strategy, including offering solutions as-a-Service, effectively planning and managing our resources, and continuing to develop and manage our offerings to integrate new features and solutions.
Current report
We anticipate adapting our go-to-market structure from time-to-time with new approaches to sales and marketing, to better align with aaS business models and to capture unique market opportunities, such as in hybrid cloud, AI, and AI-native networking. This incremental capital investment approach may require additional sales, marketing, or other expenses that negatively impact cash flows in the near term. Further, should such efforts fail to produce actionable insights, or our offerings not perform as designed or promised, our business results and financial condition may be adversely affected.
Current report
We depend on third-party suppliers, contract manufacturers (including original equipment and original design manufacturers), as well as single-source and limited source suppliers, and our financial results could suffer if we fail to manage these third party relationships effectively.
Current report
•Supply Chain Disruption. Any disruptions to our supply chain, significant increase in component costs or logistics costs, or shortages of critical components, could decrease our sales, earnings, and liquidity or otherwise adversely affect our business and result in increased costs. Disruptions could occur as a result of any number of events, including, but not limited to: an extended closure of, or any slowdown at our suppliers' plants or shipping delays; market shortages due to the surge in demand from other purchasers for critical components; increases in prices (including fuel prices and increases in prices due to inflation); the imposition of regulations, quotas, embargoes, or tariffs on components; labor stoppages; transportation delays, including due to labor strikes; third-party interference in the integrity of the products sourced through the supply chain; cyberattacks; the unavailability of raw materials; severe weather conditions and adverse effects of climate change, or natural disasters; geopolitical developments, war or terrorism; and disruptions in utilities and other services, some of which we have experienced. In addition, the development, licensing, or acquisition of new products in the future may increase the complexity of supply chain management. Failure to effectively manage the supply of components and products would adversely affect our business. Our ongoing efforts to geographically diversify and optimize the efficiency of our supply chain could cause supply disruptions and be more expensive, time-consuming, and resource-intensive than expected, and such impacts may be more pronounced as a result of increased tariffs between the U.S. and its trading partners. In this environment of heightened trade restrictions, we have experienced, and may continue to experience, cost increases from certain of our suppliers that result in price increases for some of our offerings and could subsequently limit demand for such offerings. If we are unable to pass on all or some of such cost increases to our customers, such increased prices may reduce our current margins and future margins. Furthermore, certain of our suppliers have discontinued conducting business with us or failed to perform under their contracts with us.
Current report
•Alternative Sources of Supply. The development of alternate sources for components is time-consuming, complex, and costly. For some components, such as customized components, alternative sources may not exist, we may not be able to locate alternative sources in a timely manner, or we may be unable to secure quantities of those components necessary to satisfy our production requirements. As a result, if an existing source of supply is unable to provide components in quantities sufficient to meet our requirements on a timely basis, we may not be able to deliver, or be delayed in delivering, products and services to our customers, which may affect present and future sales. If we are unable to buy components in quantities sufficient to meet our requirements on a timely basis, we will not be able to deliver products and services to our customers, which would seriously affect present and future sales, and would, in turn, adversely affect our business, financial condition, and results of operations.
Current report
In the ordinary course of business, we store sensitive data, including intellectual property, personal data, our proprietary business information and that of our employees, contractors, customers, vendors, partners, suppliers, and other third parties with whom we do business. In addition, we store sensitive data through cloud-based services that may be hosted by third parties and in data center infrastructure maintained by third parties. We have been, and expect to be, subject to cyberattacks and other attempted intrusions into our networks and systems by a wide range of actors, including, but not limited to, nation state actors, criminal enterprises, terrorist organizations, and other organizations or individuals, as well as errors, wrongful conduct or malfeasance by employees and third-party service providers, (collectively, “malicious parties”) who have at times been able to circumvent or bypass our cyber security measures. Geopolitical tensions or conflicts may also heighten the risk of such cyberattacks or exacerbate system vulnerabilities, considering our continued hybrid work environment and our globally dispersed operations, employees, contractors, suppliers, developers, partners, and other third parties.
Current report
The cybersecurity threat landscape is rapidly evolving and becoming increasingly sophisticated, and there can be no assurance that our controls and procedures will be sufficient to address future threats or remediate future incidents. Further, there has been an increase in the frequency and sophistication of attacks, and we expect these activities to continue to increase, including malicious actors potentially leveraging AI to develop malicious code or sophisticated phishing attempts. It is possible that such incidents may embolden other malicious actors to perpetrate future attacks that may result in material misappropriation, system disruptions or shutdowns, malicious alteration, or destruction of our confidential or personal information or that of third parties. Additionally, the proliferation of generative AI models within the internal systems, processes, and tools of HPE, our suppliers, our customers, or other third parties with whom we do business may create new attack methods for threat actors. The emergence of deepfakes and advanced social engineering tactics presents new challenges in preventing deception and unauthorized access, underscoring the importance of advanced verification and detection mechanisms. Zero-day vulnerabilities may include newly discovered security flaws in software that are exploited before patches are released, requiring proactive monitoring and immediate remediation efforts. Quantum computing may in the future present a risk to our business by potentially breaking traditional cryptographic methods on which we rely, thereby necessitating the shift to quantum-resistant encryption techniques.
Current report
Our suppliers, vendors, partners, and other third parties with whom we do business also face similar cybersecurity threats, risks, and concerns as those set forth above, which introduces vulnerabilities to our business and operations, including our manufacturing supply chain. Although HPE requires strict cybersecurity and data controls through its contractual agreements with third parties, if these third parties do not have adequate safeguards or their safeguards fail, it may result in breaches of their systems, networks, or applications, potentially leading to breaches of our networks and systems or unauthorized access to or disclosure of our and/or our customers' confidential data, thereby compromising us and our customers. While HPE relies on independent audit reports, in addition to our own security assessments and diligence of third parties with whom we do business as part of our third-party risk management practices, these efforts may not detect or identify all cybersecurity risks or vulnerabilities.
Current report
Our results of operations (particularly revenue, margins, and cash flows) and financial condition may be adversely affected by these and other industry-wide pricing pressures and our actions in response thereto.
Current report
Uncertainty and fluctuations in geopolitical and macroeconomic conditions may adversely impact our business, financial condition, and operating results.
Current report
Long sales and implementation cycles for our offerings and dynamics related to large orders may cause our revenues and operating results to vary significantly from quarter-to-quarter.
Current report
We have experienced, and may continue experiencing, lengthy sales cycles because our customers' decisions to purchase certain of our products, particularly new products, involve a significant commitment of their resources and a lengthy evaluation and product qualification process. Customers design and implement large IT deployments following lengthy procurement processes, which may impact expected future orders. Following a purchase, customers may also deploy our products and offerings slowly and deliberately. Furthermore, larger orders, including some orders for our AI systems, have typically required, and may continue to require, greater commitments of working capital, such as for purchases of key components, which could introduce variability in our quarterly cash flow and results of operations more generally. While we have seen the customer base for our AI systems offerings expand and expect it to continue expanding, our AI solutions have historically been purchased primarily by a small number of larger customers and cloud service providers. Sales of AI systems to such customers have caused, and may continue to cause, fluctuations in our results of operations, as such large orders may occur in some periods and not others and are generally subject to intense competition and pricing pressure, which can have an impact on our margins and results of operations. If we are not successful in continuing to expand sales to a broader base of customers, our financial results may be adversely affected. These sales and similar implementation cycle-related factors, including our expectation that customers may place large orders with the potential for widely varying implementation timelines, may cause our revenues and operating results to vary significantly from quarter-to-quarter.
Current report
Our ability to achieve our strategy could be harmed if we are unable to attract, retain, train, motivate, develop, and transition key personnel.
Current report
These risks to attracting and retaining highly qualified talent may be exacerbated by labor constraints, such as immigration policies which may impair the ability to recruit technical and professional talent, and inflationary pressures, which impact employee wages and benefits. Further, integration of employees and businesses as a result of our acquisitions, including the Merger, may present additional or unanticipated challenges, which could negatively affect our ability to achieve our future success. In addition, changes to our go-to-market structure may affect employee compensation models and ultimately our ability to retain employees. A number of our team members are foreign nationals who rely on visas and entry permits in order to legally work in the U.S. and other countries. In recent years, the U.S. has increased the level of scrutiny in granting such documentation. Compliance with new and unexpected U.S. immigration and labor laws could also require us to incur additional, and unexpected labor costs and expenses, or could restrain our ability to retain and attract skilled professionals. Any of these restrictions could have an adverse effect on our business, results of operations, and financial condition.
Current report
Risks Related to Our Technology and Business Operations
Current report
•the imposition of government controls (including for critical infrastructure protection) and any related licensing requirements (particularly for certain AI enabling products) that could affect the timing of shipments of our products and/or our ability to sell certain products in other countries;
Current report
We may not achieve some or all of the expected benefits of our cost reduction actions, some or all of which may be disruptive to our business.
Current report
We have announced a cost reduction program and a series of other cost-saving initiatives as part of our ongoing efforts to reduce structural operating costs, streamline how we operate and do business, and continue advancing the Company's ongoing commitment to profitable growth (which we are calling Catalyst). We may not be able to obtain the cost savings and benefits that are initially anticipated in connection with such actions. Additionally, as a result of these initiatives and the actions contemplated thereby, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiency during transitional periods. Implementing and overseeing such actions can require a significant amount of management and other employees' time and focus, which may divert attention from operating and growing our business. If we fail to achieve some or all of the expected benefits of these measures, it could have a material adverse effect on our competitive position, business, financial condition, results of operations, and cash flows.
Current report
We rely on the performance of our business systems and processes, as well as those of third-parties with whom we do business.
Current report
Additionally, some of our business processes depend upon the IT systems and processes of third parties, and the interfaces between those and our IT systems, as well as hosted SaaS applications from third parties. For example, we receive a broad range of information technology services, such as applications, including support, development and maintenance; infrastructure management and support, including for server storage and network devices; and end user support. Some of these services are provided to us through cloud providers, third party providers, and off-site facilities that may be vulnerable to damage or interruption, including performance problems from earthquakes, hurricanes, floods, fires, power loss, telecommunications failures, equipment failures, adverse events caused by operator error, cybersecurity attacks, pandemics, and similar events. In addition, because we lease certain off-site data center facilities, we cannot be assured that we will be able to expand our data center infrastructure to meet user demand in a timely manner, or on favorable financial terms. If we have issues receiving and processing data, this may delay our ability to provide products and services to our customers and business partners and damage our business. We also rely upon the performance of the systems and processes of our contract manufacturers to build and ship our products. If those systems and processes experience interruption or delay, the manufacture and shipment of our products in a timely manner may be impaired. Since IT is critical to our operations, in addition to the risks outlined above, problems with any of the third parties we rely on for our IT systems and services could result in liabilities to our customers and business partners, lower revenue and unexecuted efficiencies, and impact our results of operations and our stock price. We could also face significant additional costs or business disruption if our arrangements with these third parties are terminated or impaired and we cannot find alternative services or support on commercially reasonable terms or on a timely basis or if we are unable to hire new employees in order to provide these services in-house.
Current report
Evolving stakeholder expectations and our efforts and ability to manage these issues present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which may be outside of our control or could have adverse impacts on our business, including on our stock price. Regulators and stakeholders have evolving, varied, and sometimes conflicting expectations regarding sustainability and corporate responsibility matters, leading to heightened scrutiny of such corporate programs a. Additionally, there is an increasing number of federal, state, and local initiatives that may conflict with other regulatory requirements or priorities, such as those of the U.S. federal government, resulting in regulatory uncertainty. We may also increasingly see similar conflict between U.S. policy and the regulatory positions taken in other non-U.S. jurisdictions. Not only is there uncertainty due to the patchwork of environmental, social, and governance-related laws and regulations (especially as they may sometimes conflict), but also there remains uncertainty around the accounting standards and required disclosures associated with such laws and regulations (including the scope of reporting requirements and the related costs to comply with the emerging regulations).
Current report
Our revenue, profitability, and margins have historically varied, and we expect them to continue to vary over time.
Current report
We periodically evaluate goodwill and intangible assets to determine whether all or a portion of their carrying values may be impaired, in which case an impairment charge may be necessary. The value of goodwill may be materially and adversely affected if businesses that we acquire perform in a manner that is inconsistent with our assumptions at the time of acquisition. In addition, from time to time, we divest businesses, and any such divestiture could result in significant asset impairment and disposition charges, including those related to goodwill and intangible assets. During fiscal 2025, we recognized an impairment charge of $1.6 billion (which includes the $1.4 billion impairment charge disclosed in our Form 10-Q for the fiscal period ended April 30, 2025) for goodwill related to the Hybrid Cloud reporting unit, which was predominantly driven by an increase in the discount rate used in the analysis, as well as a strategic shift away from Non-IP storage business. Any future evaluations resulting in an impairment of goodwill or intangible assets could materially and adversely affect our results of operations and financial condition in the period in which the impairment is recognized.
Current report
Unfavorable results of legal proceedings, investigations, and other disputes could harm our business and result in substantial costs.
Current report
We are involved in various claims, suits, investigations, and legal proceedings that arise from time to time in the ordinary course of business or otherwise. Additional legal claims or regulatory matters affecting us and our subsidiaries may arise in the future and could involve stockholder, consumer, regulatory, compliance, intellectual property, antitrust, tax, trade, privacy, employment, warranty or product claims, and other issues on a global basis. In addition, we have received inquiries, and may be subject to demands, claims, lawsuits, regulatory investigations, and additional inquiries (including those from U.S. or foreign governmental authorities). Litigation is inherently unpredictable. Regardless of the merits of a claim, the expense of initiating and defending, and in some cases entering into settlements of claims, such litigation and investigations may be costly, and may cause us to suffer reputational harm, divert management’s attention from day-to-day operations of our business, and may require us to implement certain remedial measures that could disrupt our business, operations, results of operations, financial condition, or cash flows. In addition, if we fail to comply with the terms of any settlement agreement, we could face more substantial penalties. An unfavorable resolution of one or more of these matters could adversely affect our business, results of operations, financial condition, or cash flows. Even if we are not named a party to a particular suit, we may be subject to indemnification obligations to the named parties, including our directors and executive officers as well as other third parties, that could subject us to liability for damages or other amounts payable as a result of such judgments or settlements.
Current report
The current U.S. administration has issued executive orders and taken actions to curtail certain policies and programs that violate federal anti-discrimination laws, including requiring U.S. federal contractors and subcontractors to certify that they do not operate any such programs. A violation of these orders or similar federal or state orders, laws or regulations or becoming subject to adverse actions could expose us to penalties and sanctions or jeopardize our ability to continue to do work for the U.S. federal government, which may adversely affect our future results of operations. An allegation of a violation could result in reputational harm and subject us to increased litigation risk. Additionally, conflicting laws and regulations between federal, state and local governments may make it increasingly difficult for us to do business in every government jurisdiction.
Showing the first 40 of 42 passages. Open the source sections for the rest.
Removed paragraphs (39)
Previous report
•If we cannot successfully execute our go-to-market strategy, including offering our entire portfolio as-a-Service, our business, operating results, and financial performance may suffer.
Previous report
•We depend on third-party suppliers, and our financial results could suffer if we fail to manage our supplier relationships properly.
Previous report
•Failure to complete the Merger with Juniper Networks may adversely affect our business and our stock price.
Previous report
•Failure to realize the benefits expected from the Merger with Juniper Networks could adversely affect our business or our stock price.
Previous report
•In order to be successful, we must attract, retain, train, motivate, develop, and transition key employees, and failure to do so could seriously harm us.
Previous report
•Changes in the macroeconomic environment have, at times, impacted and may in the future negatively impact our results of operations.
Previous report
•The revenue and profitability of our operations have historically varied, which makes our future financial results less predictable.
Previous report
•The stock distribution in either or both of the completed separations of our former Enterprise Services business and our former Software segment could result in significant tax liability, and DXC Technology Company or Micro Focus International plc (as applicable) may in certain cases be obligated to indemnify us for any such tax liability imposed on us.
Previous report
If we cannot successfully execute our go-to-market strategy, including offering our entire portfolio as-a-Service, our business, operating results, and financial performance may suffer.
Previous report
We depend on third-party suppliers, and our financial results could suffer if we fail to manage our supplier relationships properly.
Previous report
Public health crises, such as the COVID-19 pandemic, and the measures taken in response to such events have in the past negatively impacted, and may again in the future negatively impact, our operations and workforce, as well as those of our partners, customers and suppliers. Additionally, concerns over the economic impact of such events have, from time to time, caused increased volatility in financial and other capital markets, adversely impacting our stock price, our ability to access the capital markets, and our ability to fund liquidity needs, and may do so again in the future. The negative impacts of any such events on business operations and demand for our offerings will depend on future developments and actions taken in response to such events, which may be outside our control, highly uncertain, and cannot be predicted at this time.
Previous report
Failure to complete the Merger with Juniper Networks may adversely affect our business and our stock price.
Previous report
In January 2024, we entered into a definitive agreement to acquire Juniper Networks, Inc., a leader in AI-native networks. Consummation of the Merger is subject to the satisfaction or waiver of certain conditions, including but not limited to (i) the adoption of the Agreement and Plan of Merger (the “Merger Agreement”), by and among Juniper Networks, HPE and Jasmine Acquisition Sub, Inc., a Delaware corporation and a wholly owned subsidiary of HPE (“Merger Sub”), by Juniper Networks’ stockholders (which was completed on April 2, 2024); (ii) the absence of any injunction, order or law preventing, prohibiting or making illegal the consummation of the Merger; (iii) the expiration or termination of the waiting period (or extension thereof) under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the receipt of all other required approvals, consents or clearances under specified foreign antitrust laws and foreign investment laws without imposition of a Burdensome Condition (as defined in the Merger Agreement); and (iv) in the case of the obligations of HPE and Merger Sub to effect the Merger, the absence of a material adverse effect with respect to Juniper Networks that is continuing as of the closing. There can be no assurance that these or other closing conditions will be satisfied in a timely manner or at all. Any delay in completing the Merger could cause us not to realize some or all of the anticipated benefits when expected, if at all.
Previous report
If the Merger is not completed, our stock price could be impacted to the extent it reflects an assumption that we will complete the Merger, and additionally, we may suffer other consequences that could adversely affect our business, results of operations, and stock price, including incurring significant acquisition costs that we would be unable to recover, negative publicity, and a negative impression of us in the investment community. Furthermore, under certain specified circumstances, including the termination of the Merger Agreement by either us or Juniper Networks because certain required regulatory clearances are not obtained or the terms of the Merger Agreement are materially breached by us, upon termination we would be required to pay Juniper Networks a termination fee of $815 million.
Previous report
Failure to realize the benefits expected from the Merger with Juniper Networks could adversely affect our business or our stock price.
Previous report
•preserving customer and other important relationships of Juniper Networks and attracting new business and operational relationships;
Previous report
If we do not successfully manage these issues and the other challenges inherent in integrating an acquired business, then we may not achieve the anticipated benefits of the Merger on our anticipated timeframe or at all, and our revenue, expenses, operating results, financial condition and stock price could be materially adversely affected. The successful integration of Juniper Networks will require significant management attention both before and after the completion of the Merger with Juniper Networks, and may divert the attention of management from our business and operational issues.
Previous report
In order to be successful, we must attract, retain, train, motivate, develop, and transition key employees, and failure to do so could seriously harm us.
Previous report
Changes in the macroeconomic environment have, at times, impacted and may in the future negatively impact our results of operations.
Previous report
Because our business model is based on providing innovative and high-quality products and services, we may spend a proportionately greater amount of our revenues on R&D than some of our competitors. If we cannot proportionately decrease our cost structure (apart from R&D expenses) on a timely basis in response to competitive price pressures, our profitability could be adversely affected. In addition, if our pricing and other facets of our offerings are not sufficiently competitive, or if there is an adverse reaction to our product decisions, we may lose market share in certain areas, which could adversely affect our financial performance and business prospects.
Previous report
Even if we are able to maintain or increase market share for a particular product, its financial performance could decline because the product is in a maturing industry or market segment or contains technology that is becoming obsolete. Financial performance could decline due to increased competition from other types of products that perform similar functions as our offerings.
Previous report
Our obligation to consummate the Merger is not subject to a financing condition, and as such, may be subject to events beyond our control, such as the timing of receipt of regulatory approvals. Further, portions of our recently issued debt contain special mandatory redemption provisions, and if we do not consummate the Merger before October 2025, we may be required to redeem certain series of such debt, which would result in less flexibility to address other funding needs.
Previous report
The revenue and profitability of our operations have historically varied, which makes our future financial results less predictable.
Previous report
The stock distribution in either or both of the completed separations of our former Enterprise Services business and our former Software segment could result in significant tax liability, and DXC Technology Company or Micro Focus International plc (as applicable) may in certain cases be obligated to indemnify us for any such tax liability imposed on us.
Previous report
The completed separations and mergers of our former Enterprise Services business with DXC Technology Company (“DXC”) (the “Everett Transaction” or “Everett”) and our Software Segment with Micro Focus International plc (“Micro Focus”) (the “Seattle Transaction” or “Seattle”) were conditioned upon the receipt of an opinion from outside counsel regarding the qualification of (i) the relevant distribution and related transactions as a “reorganization” within the meaning of Sections 368(a), 361 and 355 of the Internal Revenue Code of 1986 (the “Code”) and (ii) the relevant merger as a “reorganization” within the meaning of Section 368(a) of the Code. While the Seattle Transaction generally qualified for tax-free treatment for us, Seattle SpinCo and Micro Focus, the acquisition of Seattle SpinCo by Micro Focus resulted in the recognition of gain (but not loss) for U.S. persons who received Micro Focus American Depositary Shares in the Software separation.
Previous report
Each opinion of outside counsel was based upon and relied on, among other things, certain facts and assumptions, as well as certain representations, statements and undertakings of us, Everett SpinCo and CSC, or us, Seattle SpinCo and Micro Focus, as applicable. If any of these representations, statements or undertakings are, or become, inaccurate or incomplete, or if any party breaches any of its covenants in the relevant separation documents, the relevant opinion of counsel may be invalid and the conclusions reached therein could be jeopardized. Notwithstanding the opinions of counsel, the Internal Revenue Service (the “IRS”) could determine that either or both of the distributions should be treated as a taxable transaction if it determines that any of the facts, assumptions, representations, statements or undertakings upon which the relevant opinion of counsel was based are false or have been violated, or if it disagrees with the conclusions in the opinion of counsel. An opinion of counsel is not binding on the IRS and there can be no assurance that the IRS will not assert a contrary position.
Previous report
If the distribution of Everett SpinCo or Seattle SpinCo, as applicable, together with certain related transactions, failed to qualify as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code, in general, we would recognize taxable gain as if we had sold the stock of Everett SpinCo or Seattle SpinCo, as applicable, in a taxable sale for its fair market value, and our stockholders who receive Everett SpinCo shares or Seattle SpinCo shares in the relevant distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.
Previous report
We obtained private letter rulings from the IRS regarding certain U.S. federal income tax matters relating to the separation of our Enterprise Services business and Software Segment. Those rulings concluded that certain transactions in those separations are generally tax-free for U.S. federal income tax purposes. The conclusions of the IRS private letter rulings were based, among other things, on various factual assumptions we have authorized and representations we have made to the IRS. If any of these assumptions or representations are, or become, inaccurate or incomplete, the validity of the IRS private letter rulings may be affected. 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. jurisdictions that do not legally provide for tax-free separations, which may be material. If the completed separation of our former Enterprise Services business or Software Segment (including certain internal transactions undertaken in anticipation of those separations) are determined to be taxable for U.S. federal income tax purposes, we, our stockholders that are subject to U.S. federal income tax and/or DXC and/or Micro Focus could incur significant U.S. federal income tax liabilities.
Reworded paragraphs (79)
Previous wording
You should carefully consider the following risks and other information in this Form 10-K in evaluating Hewlett Packard Enterprise. Any of the following risks could materially and adversely affect our results of operations or financial condition. The following risk factors should be read in conjunction with Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operation” and the Consolidated Financial Statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.
Current wording
You should carefully consider the following risks and other information in this Annual Report on Form 10-K in evaluating Hewlett Packard Enterprise. Any of the following risks could materially and adversely affect our results of operations or financial condition. Some of the factors, events, and contingencies discussed below may have occurred in the past, but the disclosures below are not representations as to whether or not the factors, events or contingencies have occurred in the past and instead reflect our beliefs and opinions as to the factors, events, or contingencies that could materially and adversely affect us in the future. The following risk factors should be read in conjunction with Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operation,” and the Consolidated Financial Statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report Form 10-K.
Previous wording
•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.
Current wording
•Any failure by us to identify, manage, and complete acquisitions and subsequent integrations (including the integration of Juniper Networks following the Merger), divestitures, and other significant transactions successfully could harm our financial results, business, prospects, and stock price.
Previous wording
•If we fail to manage the distribution of our products and services properly, our business and financial performance could suffer.
Current wording
•If we experience or fail to properly manage disruption in the distribution of our products and services properly, our business and financial performance could suffer.
Previous wording
•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.
Current wording
•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, financial condition, and results of operations.
Previous wording
•Failure to meet responsible and sustainable business expectations or standards or achieve our Living Progress goals could adversely affect our business, results of operations, financial condition, or stock price.
Current wording
•Our sustainable and responsible business expectations and actions towards achieving our Living Progress objectives may expose us to operational, legal, or reputational risks and could adversely affect our business, results of operations, financial condition, or stock price.
Previous wording
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. We provide our entire portfolio through a range of subscription and consumption-based, pay-per-use, and aaS offerings. We will also continue to provide our hardware and software in a capital expenditure and license-based model, giving our customers choices in consuming HPE products and services. Furthermore, subject to our anticipated consummation of the acquisition of Juniper Networks, Inc. (“Juniper Networks”) (the “Merger”), we will seek to offer secure, unified cloud- and AI-native networking to enhance innovation across edge to cloud. To successfully execute on these strategic pillars, we must continue to improve cost structures, align sales coverage with strategic goals, improve channel execution, and strengthen 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 edge computing, hybrid cloud, artificial intelligence, data center networking, network security, and high-performance compute. We must make sufficient long-term investments in strategic growth areas, such as developing, obtaining, and protecting appropriate intellectual property, and commit or transition significant R&D and other resources before knowing whether our projections will reasonably reflect customer demand for our solutions. Should such efforts fail to produce actionable insights, or our offerings not perform as designed or promised, our business results and financial condition may be adversely affected. Furthermore, such incremental capital requirements may negatively impact cash flows in the near term and may require us to dedicate additional resources, including sales and marketing costs.
Current wording
Our long-term go-to-market strategy is focused on leveraging our portfolio composed of hardware, software, and services as we deliver global edge-to-cloud platform as-a-Service (“aaS”) to help customers accelerate outcomes by unlocking value from their data, everywhere. We offer a substantial portion of our portfolio through a range of subscription and consumption-based offerings. We will also continue to provide our hardware and software in capital expenditure and license-based models, to give our customers choices in consuming HPE products and services. Following the acquisition of Juniper Networks on July 2, 2025 (the “Merger”), we seek to enhance our networking solutions by offering secure, unified cloud and AI-native networking to enhance innovation across edge to cloud.
Previous wording
The process of improving our HPE GreenLake cloud offerings, enhancing existing hardware, software, and cloud-based solutions, and developing and improving the systems necessary for new and evolving data-intensive artificial intelligence-based workloads are all complex, costly, and uncertain, and any failure by us to anticipate customers’ changing needs and emerging technological trends accurately, to invest sufficiently in strategic growth areas, or to otherwise successfully execute this strategy could significantly harm our market share, results of operations, and financial performance.
Current wording
Our ongoing process of improving HPE GreenLake; expanding our offerings across all our businesses (including cloud, AI, and networking offerings); enhancing existing hardware, software, and cloud-based solutions; and developing and improving the systems necessary for new and evolving data-intensive AI-based workloads are all complex, costly, and uncertain, and any failure by us to anticipate customers’ changing needs and emerging technological trends accurately, to invest sufficiently in strategic growth areas, or to otherwise successfully execute this strategy could significantly harm our market share, results of operations, and financial performance.
Previous wording
Having developed a cloud platform product in HPE GreenLake and the hardware capabilities to support artificial intelligence computing, we must be able to continue integrating new features that are relevant to our customers and to scale quickly, while also managing costs and preserving margins, which means accurately forecasting volumes, mixes of products, and configurations that meet customer requirements, which we may not succeed at doing. These offerings face competition from peer companies with their own cloud platform and artificial intelligence computing offerings, and any delay in the development, production, or marketing of a new product, service, or solution could result in our offerings being late to reach the market, which could harm our competitive position. In addition, should we successfully consummate the Merger, the process of integrating and streamlining our offerings (including integrating Juniper Networks’ offerings with ours) or developing new solutions based on our respective technological portfolios may be complex, costly, time-consuming, and uncertain, and failure by us to successfully do so could adversely impact our future results of operations and financial performance. Furthermore, we anticipate needing to adapt our go-to-market structure from time to time with new sales and marketing approaches, to better align with aaS business models and to capture unique market opportunities, such as in hybrid cloud and artificial intelligence. 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 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 them.
Current wording
Having developed a cloud platform product in HPE GreenLake and the hardware capabilities to support AI computing, we must be able to continue integrating new features that are relevant to our customers and to scale quickly, while also managing costs and preserving margins, which means accurately forecasting volumes, mixes of products, and configurations that meet customer requirements. In addition, through HPE Networking we now offer a full networking IP stack: from silicon, to infrastructure, to the operating system, to security, to software and services, in a cloud-native and AI-driven approach following the Merger. The process of integrating and streamlining our offerings (including integrating Juniper Networks’ offerings with ours) or developing new solutions based on our respective technological portfolios may be complex, costly, time-consuming, and uncertain, and failure by us to successfully do so could adversely impact our future results of operations and financial performance. These offerings face competition from peer companies, and any delay in our development, production, or marketing of a new product, service, or solution could result in our offerings being late to reach the market, which could harm our competitive position. These offerings also depend on the continued growth of demand for secure network and internet protocol (“IP”) infrastructure from customers that are able to build their network capacity, grow their IP services, and choose to deploy our products in their networks and IP infrastructures. There is no assurance that we will be able to 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 them.
Previous wording
Our HPE GreenLake solutions generally are multiyear agreements, which result in recurring revenue streams over the term of the arrangement. As customer demand for our aaS offerings increases, we have experienced, and will continue to 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 aaS offerings (for which revenue is generally recognized ratably over the term of the arrangement). As such, our financial results and growth depend, in part, on customers continuing to purchase our services and solutions over the contract life on the agreed terms. Additionally, implementing this business model also means that our historical results, especially those from before the transition, may not be indicative of future results, which may adversely affect our ability to accurately forecast our future operating results. Our aaS offerings also could subject us to increased risk of liability related to the provision of services as well as operational, technical, legal, regulatory, or other costs.
Current wording
Our HPE GreenLake and networking solutions generally are multiyear agreements, which result in recurring revenue streams over the term of the arrangement. As customer demand for our aaS offerings increases, we have experienced, and will continue to 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 aaS offerings (for which revenue is generally recognized ratably over the term of the contract). As such, our financial results and growth depend, in part, on customers continuing to purchase our services and solutions over the contract life on the agreed terms. Additionally, implementing this business model means that our historical results, especially those from before the Merger, may not be indicative of future results, which may adversely affect our ability to accurately forecast our future operating results. Our aaS offerings also could subject us to increased risk of liability related to the provision of services as well as operational, technical, legal, regulatory, or other costs.
Previous wording
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 have, from time to time in the past, arisen, and could in the future arise, in production, planning, and inventory management that could harm our business. In addition, our ongoing efforts to optimize the efficiency of our supply chain could cause supply disruptions and be more expensive, time-consuming, and resource-intensive than expected. Furthermore, certain of our suppliers have at times decided, and may in the future decide, to discontinue conducting business with us. Other supplier problems that we have faced, and could again face in the future, include component shortages, excess supply, and contractual, relational, and labor risks, each of which is described below.
Current wording
Our operations depend on our ability to anticipate our needs for components, products, and services, as well as the ability of our manufacturers (including original equipment manufacturers, original and outsourced design manufacturers, and contract manufacturers), and suppliers 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 products and solutions, problems in production, planning, and inventory management have harmed our business at times, and may do so again in the future. Any delay in our ability to produce and deliver our products could cause our customers to purchase alternative products from our competitors. Manufacturing and supply problems that we have faced, and could face in the future, are described below.
Previous wording
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, Puerto Rico, Costa Rica, Czech Republic, Malaysia, Mexico, China, Taiwan, South Korea, and Singapore. 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. Other critical business operations and some of our suppliers are located in California and Asia, near major earthquake faults known for seismic activity. Our operations could be adversely affected if manufacturing, logistics, or other operations in these locations are disrupted for any reason, including those enumerated above, as they have been in the past by natural disasters and public health issues in the United States, Puerto Rico, and China. To the extent such disruptions adversely affect our business, results of operations, financial condition, and stock price, they may also have the effect of heightening many of the other risks described in this Item 1A of Part I of this Form 10-K.
Current wording
•Manufacturing Issues. We may experience supply shortfalls or delays in shipping products to our customers if our manufacturers experience delays, disruptions, or quality control problems in their manufacturing operations, or if we have to change or add manufacturers or contract manufacturing locations. We have contracts with our manufacturers that include terms to protect us in the event of an early termination or breach, yet we may not have adequate time to transition all of our manufacturing needs to an alternative manufacturer under comparable commercial terms. We have experienced in the past, and may experience in the future, an increase in the expected time required to manufacture our products or ship products. Moreover, a significant portion of our manufacturing is performed in foreign countries. 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, Puerto Rico, Vietnam, Thailand, Costa Rica, Brazil, Czech Republic, Malaysia, Mexico, China, Taiwan, India, South Korea, Saudi Arabia, and Singapore. 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. These operations are therefore subject to risks associated with doing business outside of the U.S., including trade restrictions and related costs, government sanctions, disruptions to our supply chain, cyberattacks, cyberwarfare, pandemics, regional health emergencies, regional climate-related events, or regional conflicts. Other critical business operations and some of our suppliers are located in California and Asia, near major earthquake faults known for seismic activity. Our operations could be adversely affected if manufacturing, logistics, or other operations in these locations are disrupted for any reason or due to natural disasters and public health issues in the United States, Puerto Rico, and China.
Previous wording
•Component shortages. We have in the past experienced, and may experience again in the future, delays and shortages of certain components as a result of strong demand, supplier transitions, raw material or capacity constraints, and other problems experienced by suppliers in certain geographies and markets, resulting in insufficient supply to meet total market demand. In the past, we have experienced shortages or delays, which led to higher prices of certain components and exposure to quality issues and delivery delays, which may occur again in the future. We may not be able to secure enough components at reasonable prices, of acceptable quality, or at all, to build products or provide services in a timely manner in the quantities needed or according to our specifications. Accordingly, our business and financial performance could suffer from a loss of time-sensitive sales, additional freight costs incurred, or the inability to pass on price increases to our customers. If we cannot adequately address supply issues, we may have to reengineer some product or service offerings, which could result in further costs and delays.
Current wording
•Component Supply Shortages. We provide demand forecasts for our products to our manufacturers, who order components and plan capacity based on these forecasts. We have experienced, and may experience again in the future, delays and shortages of certain components as a result of strong demand, supplier transitions, raw material or capacity constraints, and other problems experienced by suppliers in certain geographies and markets, resulting in insufficient supply to meet total market demand. We have experienced shortages or delays, which led to higher prices of certain components and exposure to quality issues and delivery delays, and may experience such delays and associated impacts in the future. We may not be able to secure enough components at reasonable prices, of acceptable quality, or at all, to build products or provide services in a timely manner in the quantities needed or according to our specifications. Accordingly, our business and financial performance could suffer from a loss of time-sensitive sales, additional freight costs incurred, or the inability to pass on price increases to our customers. If we cannot adequately address supply issues, we may have to reengineer some product or service offerings, which could result in further costs and delays.
Previous wording
•Excess supply. 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, non-cancellable commitments, or other inventory management arrangements 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. If we fail to anticipate customer demand properly, a temporary oversupply can result in excess or obsolete components (which has happened at times in the past), which has at times adversely impacted and could in the future adversely impact our business and financial performance.
Current wording
•Excess Supply. In order to secure components for our products or services, at times we have made advance payments to suppliers or entered into long term agreements, non-cancellable commitments, or other inventory management arrangements with vendors. In addition, we have also, at times, purchased components strategically in advance of demand to take advantage of favorable pricing, to address concerns about the availability of future components, or to prepare to fulfill large orders. If our manufacturers assess charges, we have liabilities for excess inventory or raw materials (each of which could negatively affect our gross margins), we fail to adequately anticipate customer demand and overestimate our requirements, continue to take actions to make strategic purchases in advance of demand, or these dynamics are exacerbated due to order delays or cancellations, a temporary oversupply may result in excess or obsolete components, which may result in additional charges from our manufacturers, or we may have liabilities for excess inventory or raw materials, each of which could negatively affect our gross margins. We have experienced adverse impacts to our business and financial performance due to excess supply and could do so again in the future.
Previous wording
•Single-source suppliers. We obtain certain components from single-source suppliers due to technology, availability, price, quality, scale, or customization needs. Certain of such suppliers have, in the past decided, and may in the future decide, to discontinue manufacturing components used in our products, which may cause us to discontinue certain products, incur additional costs to redesign our products so as not to incorporate such discontinued components, or incur time and expense to find replacement suppliers. Replacing a single-source supplier has at times delayed, and could delay, production of some products as replacement suppliers may initially be unable to meet demand or be subject to other output limitations. For some components, such as customized components, 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 our components. 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.
Current wording
•Single-Source Suppliers. We obtain certain components from single-source suppliers due to technology, availability, price, quality, scale, or customization needs. Certain single source suppliers have discontinued, and may again in the future discontinue, manufacturing components used in our products, which may cause us to discontinue certain products, incur additional costs to redesign our products so as not to incorporate such discontinued components, or incur time and expense to find replacement suppliers. Replacing a single-source supplier has at times delayed, and could delay, production of some products as replacement suppliers may initially be unable to meet demand or be subject to other output limitations. In addition, we may purchase components from single-source suppliers under agreements that contain favorable pricing and other terms for us, but allow the supplier to modify or terminate the contract with limited notice to us 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 our components. 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 receive components from a single-source supplier could adversely affect our business and financial performance.
Previous wording
•Contingent workers. We also rely on third-party suppliers for the provision of contingent workers, and our failure to manage our use of such workers effectively could adversely affect our results of operations. We have been exposed to various legal claims relating to the status of contingent workers in the past and could face similar claims in the future. We may be subject to shortages, oversupply or fixed contractual terms relating to contingent workers. Our ability to manage the size and cost of our contingent workforce may be subject to additional constraints imposed by local laws.
Current wording
•Contingent Workers. We also rely on third-party suppliers for the provision of contingent workers, and our failure to effectively manage our use of such workers could adversely affect our results of operations. We have been exposed to various legal claims relating to the status of contingent workers in the past and could face similar claims in the future. We may be subject to shortages, oversupply, or fixed contractual terms relating to contingent workers. Our ability to manage the size and cost of our contingent workforce may be subject to additional constraints imposed by local laws.
Previous wording
Malicious parties may compromise our manufacturing supply chain and the systems or networks of other third parties on whom we rely, and as such, may embed malicious software or hardware in our products, thereby compromising our customers. Geopolitical tensions or conflicts, such as the ongoing conflicts between Russia and Ukraine or in the Middle East, may heighten the risk of such cyberattacks or exacerbate system vulnerabilities, considering our continued hybrid work environment and our globally dispersed operations, employees, contractors, suppliers, developers, partners, and other third parties. In addition, sophisticated hardware and operating system software and applications that we produce, procure or integrate from third parties, including those of companies we have acquired, may contain defects in design or manufacturing, including flaws that could unexpectedly interfere with the operation of the system. The costs associated with cybersecurity tools and infrastructure and competition for cybersecurity and IT talent have at times limited, and may in the future limit, our ability and the ability of third parties on whom we rely to efficiently identify, eliminate, or remediate cyber or other security vulnerabilities or problems or enact changes to minimize the attack surface of our network. Furthermore, our efforts, and the efforts of third parties on whom we rely, to address these problems, at times, have not been, and may in the future not be successful and could result in interruptions, delays, cessation of service, compromise of sensitive information, and loss of existing or potential customers, any of which may impede our sales, manufacturing, distribution or other critical functions. Additional impacts from cybersecurity incidents could include reimbursement of remediation costs to our customers, suppliers, or distributors, such as liability for stolen assets or information, repairs of system damage, and incentives for continued business; lost revenue resulting from the unauthorized use of proprietary information or the failure to retain or attract business partners following an incident; increased insurance premiums; and damage to our competitiveness, stock price, and long-term shareholder value. Further, it may be difficult to determine the best way to investigate, mitigate, contain, and remediate any harm caused by a cybersecurity incident. Such efforts may not be successful, and we may make errors or fail to take necessary actions. It may take considerable time for us to investigate and evaluate the full impact of incidents, particularly for sophisticated attacks. These factors may inhibit our ability to provide prompt, full, and reliable information about the incident to our customers, partners, regulators, and the public. Additionally, to the extent we carry insurance coverage for such possibilities, we cannot be certain that any such coverage will be adequate or otherwise protect us with respect to claims, expenses, fines, pena…
Excerpt shortened here; the source contains the full paragraph.
Current wording
Despite our security measures, our information systems, infrastructure, and data have experienced security incidents and breaches and may be subject to or vulnerable to security incidents and breaches in the future, including ransomware and distributed denial-of-service attacks. These attacks have not resulted in material negative impacts to HPE, nor have any of HPE’s consumers, customers, or employees informed HPE that these attacks resulted in material harm to them. While we investigate and remediate incidents, there can be no assurance that we can remediate all incidents completely, that we won’t make errors or fail to take necessary actions, or that the threat actor will not identify alternative means of intrusion or opportunities to otherwise utilize the information it accessed to adversely affect our business or results of operations. It may take considerable time for us to investigate and evaluate the full impact of incidents, particularly for sophisticated attacks, limiting our ability to provide prompt, full, and reliable information about the incident to our customers, partners, regulators, and the public. The costs associated with cybersecurity tools and infrastructure and competition for cybersecurity and IT talent have limited, and may in the future continue to limit, our ability to efficiently identify, eliminate, or remediate cyber or other security vulnerabilities or problems or enact changes to minimize the attack surface of our network. Furthermore, our efforts to address these problems, at times, have not been, and may in the future not be, successful and have resulted and could result in interruptions, delays, cessation of service, compromise of sensitive information, and loss of existing or potential customers, any of which may impede our sales, manufacturing, distribution or other critical functions.
Previous wording
As a leading technology firm, we are exposed to attacks from criminals, nation state actors, malicious insiders, and activist hackers (collectively, “malicious parties”) who have at times 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 negative impacts to HPE, nor have any of HPE’s consumers, customers, or employees informed HPE that these attacks resulted in material harm to them. While we investigate and remediate incidents, there can be no assurance that we will do so comprehensively or that the threat actor will not identify alternative means of intrusion or opportunities to otherwise utilize the information it accessed to adversely affect our business or results of operations. It is also possible that incidents may embolden other malicious actors to perpetrate future attacks that may result in material misappropriation, system disruptions or shutdowns, malicious alteration, or destruction of our confidential or personal information or that of third parties. Further, there has been an increase in the frequency and sophistication of such attacks, and we expect these activities to continue to increase, including malicious actors potentially leveraging AI to develop malicious code or sophisticated phishing attempts. Malicious parties may also be able to otherwise develop and deploy viruses, worms, ransomware, and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products, including within our cloud-based environments and offerings, such that we may be unable to anticipate such malicious parties’ techniques, implement adequate preventative measures, or remediate any intrusion on a timely or effective basis even if our security measures are appropriate, reasonable, and comply with applicable legal requirements. Further, cyberattacks or incidents have in the past gone, and could in the future go, undetected in our environments for a period of time, and we may discover additional impacts of earlier incidents that we believe were remediated. For example, as previously disclosed in our Form 8-K filed with the Securities and Exchange Commission on January 24, 2024, we learned in December 2023 that, beginning in May 2023, a nation-state- associated threat actor gained unauthorized access to and exfiltrated data from HPE’s cloud-based email and SharePoint environments. While this incident has been investigated and remediated with no material impact experienced by HPE to date, this may have nevertheless resulted in harm to our reputation and customer relationships (and may do so in the future, as well), and there can be no assurance that the threat actor will not utilize the information accessed to adversely affect our business or results of operations. Given our broad and diverse network environment, resource limitations, and operational cons…
Excerpt shortened here; the source contains the full paragraph.
Current wording
Malicious parties may also be able to otherwise develop and deploy viruses, worms, ransomware, and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products, including within our cloud-based environments and offerings, such that we may be unable to anticipate such malicious parties’ techniques, implement adequate preventative measures, or remediate any intrusion on a timely or effective basis even if our security measures are appropriate, reasonable, and comply with applicable legal requirements. Advanced persistent threats can include highly sophisticated intrusions by threat actors aiming to establish prolonged access within our network. Such intrusions have in the past gone, and could in the future go, undetected in our environments for a period of time, and we may discover additional impacts of earlier incidents that we believe were remediated. Given resource limitations, operational constraints, and our broad and diverse network environment, when vulnerabilities are discovered, we evaluate the risk, prioritize our responses, apply patches or take other remediation actions and notify customers, business partners, and suppliers, as appropriate. Exploitation of vulnerabilities and critical security defects have occurred and may occur in the future if we fail to patch certain security vulnerabilities in time to prevent successful disruptions of our infrastructure or exposure of information, or the failure of third-party providers to remedy vulnerabilities or security defects, or customers not deploying security releases or deciding not to upgrade products, services or solutions, could, in each case, result in claims of liability against us, damage our reputation or otherwise harm our business.
Previous wording
We manage and store various proprietary information, intellectual property, and sensitive or confidential data relating to our business. In addition, our business may process, store, and transmit customer data, including commercially sensitive, government-related, and/or personal data, subject to the European General Data Protection Regulation, United Kingdom General Data Protection Regulation, and various U.S. state and foreign data security and privacy laws, which give new data privacy rights to their residents and impose significant obligations related to the handling of personal data. Compliance with data security and privacy laws is complex and costly. With our business increasingly providing aaS offerings, malicious parties could target such services, potentially resulting in an increased risk of compromise of customer or employee data resulting in regulatory exposure. Incidents involving our cyber or physical security measures or the accidental loss, inadvertent disclosure, or unapproved dissemination of proprietary information, intellectual property, or sensitive, confidential, or personal data about us, our clients, or our customers, including the potential loss or disclosure of such data as a result of fraud 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 managing an incident and implementing further data protection measures could be significant.
Current wording
With our business increasingly providing aaS offerings, malicious parties could target such services, potentially resulting in an increased risk of compromise of customer or employee data resulting in regulatory exposure. Incidents involving our cyber or physical security measures or the accidental loss, inadvertent disclosure, or unapproved dissemination of proprietary information, intellectual property, or sensitive, confidential, or personal data about us, our clients, or our customers, including the potential loss or disclosure of such data as a result of fraud 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 managing an incident and implementing further data protection measures could be significant.
Previous wording
While we seek to identify and remediate vulnerabilities in our products, services, IT systems, controls, and software that could be exploited by any malicious parties, we may not be aware of all such vulnerabilities, and we have at times failed, and may fail, to anticipate, detect, identify, and/or remediate such vulnerabilities before they are exploited or such vulnerabilities may persist after issuing security patches because system software updates may occur asynchronously across our customer base. Additionally, we have acquired and may continue to acquire companies with cybersecurity vulnerabilities or different security standards, which exposes us to related cybersecurity, operational, and financial risks. Further, as our products and services in some instances are integrated with our customers' systems and processes, even if we are successful in identifying vulnerabilities, a successful attack on us could compromise customers’ IT systems and sensitive data, despite active monitoring and development of tools designed to identify and remediate such vulnerabilities. There is no guarantee that a series of issues may not be determined to be material in the aggregate at a future date even if they may not be material individually at the time of their occurrence.
Current wording
Additionally, we have acquired and may continue to acquire companies with cybersecurity vulnerabilities, gaps or different security standards, which exposes us to related cybersecurity, operational, and financial risks. Further, as our products and services in some instances are integrated with our customers' systems and processes, even if we are successful in identifying vulnerabilities, a successful attack on us could compromise customers’ IT systems and sensitive data, despite active monitoring and development of tools designed to identify and remediate such vulnerabilities. There is no guarantee that a series of issues may not be determined to be material in the aggregate at a future date even if they may not be material individually at the time of their occurrence.
Previous wording
Our ability to implement solutions for our customers, anticipate and respond to rapid and continuing changes in technology (such as cloud-, AI-, and security-related offerings, which are continually evolving), and develop new service offerings or incorporate technological improvements into our offerings that meet current and prospective customers’ needs, as well as evolving industry standards, is critical to our competitiveness and success. We encounter aggressive competition from numerous and varied competitors in all areas of our business, and our competitors have targeted and are expected to continue targeting our key market segments. We compete primarily on the basis of technology, innovation, performance, price, quality, reliability, brand, reputation, distribution, range of products and services, ease of use of our products, account relationships, customer training, service and support, security, and the availability of our IT infrastructure offerings. If our products, services, support, and cost structure do not enable us to compete successfully based on any of those criteria, our results of operations and business prospects could be harmed.
Current wording
The markets that we serve are rapidly evolving and highly competitive and include well-established companies. We also compete with other companies that are developing technologies that compete with our products. Our ability to implement solutions for our customers, anticipate and respond to rapid and continuing changes in technology (such as cloud-, AI-, networking- and security-related offerings), and develop new service offerings or incorporate technological improvements into our existing offerings that meet our customers’ needs and evolving industry standards, is critical to our competitiveness and success. We encounter aggressive competition from numerous competitors in all areas of our business (which we expect will continue across a wider array of networking offerings due to the Merger), and our competitors have targeted and are expected to continue targeting our key market segments. We compete primarily on the basis of technology, innovation, performance, price, quality, reliability, brand, reputation, distribution, range of products and services, ease of use of our products, account relationships, customer training, service and support, security, and the availability of our IT infrastructure offerings. If our products, services, support, and cost structure do not enable us to compete successfully based on any of those criteria, our results of operations and business prospects could be harmed.
Previous wording
We have a large portfolio of products and services and must allocate our financial, personnel, and other resources across all of our products and services while competing with companies that have smaller portfolios or specialize in one or more of our product or service lines. As a result, we may invest less in certain areas of our business than our competitors do, and our competitors may have greater financial, technical, and marketing resources available to them compared to the resources allocated to our products and services that compete against theirs. If we do not sufficiently invest in new technologies, successfully adapt to industry developments and changing demand, and evolve and expand our business at sufficient speed and scale to keep pace with the demands of the markets we serve, we may be unable to develop and maintain a competitive advantage and execute on our growth strategy, which would adversely affect our business, results of operations, and financial condition. Industry consolidation may also affect competition by creating larger, more homogeneous, and potentially stronger competitors in the markets in which we operate. Additionally, our competitors may affect our business by entering into exclusive arrangements with our existing or potential customers or suppliers.
Current wording
We have a large portfolio of products and services and must allocate our financial, personnel, and other resources, including R&D efforts, across all of our products and services while competing with companies that have smaller portfolios or specialize in one or more of our product or service lines. As a result, we may invest less in certain areas of our business than our competitors do, and our competitors may have greater financial, technical, and marketing resources available to them compared to the resources allocated to our products and services that compete against theirs. We may also spend a proportionately greater amount of our revenues on R&D than some of our competitors. If we do not sufficiently manage our cost structure and R&D priorities while investing in new technologies, successfully adapt to industry developments and changing demand, and evolve and expand our business at sufficient speed and scale to keep pace with the demands of the markets we serve, we may be unable to develop and maintain a competitive advantage and execute on our growth strategy, which would adversely affect our business, results of operations, and financial condition. Industry consolidation may also affect competition by creating larger, more homogeneous, and potentially stronger competitors in the markets in which we operate. Additionally, our competitors may affect our business by entering into exclusive arrangements with our existing or potential customers or suppliers.
Previous wording
We face aggressive price competition and may continue to do so. As a consequence of inflation and higher supply chain and manufacturing costs, we have in the past increased the prices of many of our products and services to maintain or improve our revenue and gross margin, and may do so again in the future. 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. Our cash flows, results of operations, and financial condition may be adversely affected by these and other industry-wide pricing pressures.
Current wording
We face aggressive price competition. As a consequence of inflation and higher supply chain and manufacturing costs, from time-to-time we take pricing actions to increase the prices of many of our products and services 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. As a consequence, and to maintain our competitive position, from time-to-time we take pricing actions to offer heavier than normal discounts or elect not to pass on cost increases to customers on the sale of certain products and services, which has had and could have a negative impact on our financial results. Additionally, we have at times purchased, and may continue to purchase components strategically in advance of demand to take advantage of favorable pricing to lower costs and secure supply for future orders, which have and could in the future negatively affect our margins, especially if we don’t accurately anticipate customer demand.
Previous wording
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.
Current wording
Any failure by us to identify, manage, and complete acquisitions and subsequent integrations (including the integration of Juniper Networks following the Merger), divestitures, and other significant transactions successfully could harm our financial results, business, prospects, and stock price.
Previous wording
There can be no assurance that we will realize any of the significant benefits that we expect to result from the Merger, or realize them within the anticipated timeframe. Achieving these benefits will depend, in part, on our ability to integrate Juniper Networks’ business successfully and efficiently. The challenges involved in this integration, which will be complex and time-consuming, include the following:
Current wording
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”). 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: Any of these risks could be more significant due to the size and complexity of the business combination and investment transactions. Further, there can be no assurance that we will realize all or any of the anticipated benefits that we expect from any acquisition or other significant transaction (including the Merger) or realize them within the anticipated timeframe. Achieving these benefits will depend, in part, on our ability to integrate such acquired company or asset successfully and efficiently with our existing business and portfolio of offerings.
Previous wording
•We may not successfully combine product or service offerings or realize all of the anticipated benefits of any particular business combination and investment transaction, which may result in (1) failure to execute on our business strategy; (2) failure to coordinate sales and marketing efforts to effectively position our capabilities; (3) failure to retain employees, customers, distributors, and suppliers or attract new business and operational relationships; (4) increase in unanticipated delays or failure to meet contractual obligations which may cause financial results to differ from expectations; and (5) pay, early retirement costs, employee benefit costs, charges from the elimination of duplicative facilities and contracts, inventory adjustments, assumed litigation and other liabilities, legal, accounting and financial advisory fees, and required payments to executive officers and key employees under retention plans.
Current wording
•We may not successfully combine product or service offerings or realize all of the anticipated benefits of any particular business combination and investment transaction, which may result in (1) failure to execute on our business strategy; (2) failure to integrate disparate technological offerings into a coherent portfolio of solutions; (3) failure to coordinate sales and marketing efforts to effectively position our capabilities; (4) failure to retain employees, customers, distributors, suppliers, and other important relationships, or attract new business and operational relationships; and (5) unanticipated delays or failure to meet contractual obligations which may cause financial results to differ from expectations.
Previous wording
•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.
Current wording
•For an acquisition or other combination, the acquisition partner may have differing or inadequate cybersecurity and data protection controls or vulnerabilities, which could expose us to cybersecurity, operational, and financial risk; increase the likelihood of data security incidents; and potentially increase anticipated costs or time to integrate the business. In addition, sophisticated hardware, operating system software, and applications that we integrate from acquired companies may contain defects that could interfere with the operations of our systems. We may also face other risks if acquired companies use technology that is managed outside the scope of our information technology organization, resulting in incomplete coverage by our cybersecurity threat risk management tools.
Previous wording
Management’s attention or other resources may be diverted during business combination and investment transactions and may be further impacted if we fail to successfully complete or integrate business combination and investment transactions that further our strategic objectives. See also the risk factors below under the heading “Risks Related to Prior Separations.”
Current wording
Management’s attention or other resources may be diverted during business combination and investment transactions and may be further impacted if we fail to successfully complete or integrate such transactions that further our strategic objectives. In particular, the integration of Juniper Networks has required significant management attention both before and after the completion of the Merger and will continue to require sustained management attention, diverting the attention of management from other areas of our business and operational issues. Furthermore, recent procedural developments in the court’s Tunney Act review of the settlement reached by HPE and the United States Department of Justice in the litigation relating to the Merger may disrupt or delay our ongoing integration efforts and our ability to realize some or all of the anticipated benefits or synergies from the Merger. Such disruptions or delays to the integration may also damage our reputation in the market and result in uncertainty from customers, partners, and other third parties with whom we do business regarding our offerings and go-to-market strategy. See also the risk factors below under the heading “Risks Related to Prior Separations.”
Previous wording
Changes in macroeconomic conditions have, at times, affected and may in the future affect consumer and enterprise spending, and as a result, our customers have postponed or cancelled, and may also in the future postpone or cancel, spending in response to numerous reasons, including but not limited to volatility in credit and equity markets, negative financial news and/or declines in income or asset values, all of which may have an adverse effect on the demand for our products and/or result in changes in our product prices. Other factors that have had, and could again in the future have, an adverse effect on demand for our products, financial condition and results of operations include inflation, slower economic growth or economic recession, conditions in the labor market, healthcare costs, access to credit, consumer confidence, and other macroeconomic factors affecting consumer and business spending behavior. These changes could happen rapidly and we may not be able to react quickly to prevent or limit our losses or exposures. Additionally, other macroeconomic developments, such as efforts of governments to stimulate or stabilize the economy, international conflicts, trade disputes, sanctions, increased tariffs internationally, including between the United States and China and on imports into the United States from various countries, have at times impacted, and may in the future impact our business in an adverse manner, whether directly or indirectly, such as through their impacts on the financial positions and operations of our customers, suppliers, and other third parties with whom we do business or on whom we rely, and as a consequence, their ability to perform their obligations under their agreements with us. Persistent inflation has negatively affected our business in recent quarters and could do so again in the future, as well. A general weakening of, and related declining corporate confidence in, the global economy or the curtailment in government or corporate spending have at times caused current or potential customers to reduce their IT budgets or be unable to fund data storage products, which have led them to delay, decrease or cancel purchases of our products or to not pay us or to delay paying us for previously purchased products and services, all of which may occur again in the future.
Current wording
Our business, financial condition, and operating results depend significantly on general macroeconomic conditions and the demand for our solutions and offerings. Economic weakness or uncertainty has contributed, and may contribute, to customer financial difficulties, thereby constraining customer spending on IT projects or upgrades, including through reduced, postponed, or cancelled orders. Such dynamics have resulted in, and may result in, decreased revenue and earnings. These factors could make it difficult to accurately forecast revenues and operating results, effectively plan business actions and allocate resources, and manage our contract manufacturer relationships and other expenses and to make decisions about future investments. In addition, economic and/or geopolitical instability or uncertainty resulting from inflationary pressures, recessionary risks, tariffs and other trade restrictions in the U.S. and internationally, trade conflicts, the effects of global health emergencies, the ongoing conflict between Russia and Ukraine, the continuous geopolitical instability in the Middle East, and efforts of governments to stimulate or stabilize the economy have, and may continue to, put pressure on economic conditions, including volatility in global and regional financial markets, which has led and could lead to reduced income or asset values, reduced demand for our offerings, delays or reductions in spending on and implementation of IT investments, and/or higher costs of production which could have an adverse effect on our business, financial condition, and results of operations. Such geopolitical and macroeconomic changes can happen rapidly, and we may not be able to react quickly to prevent or limit our losses or exposures. Additionally, any of the above dynamics could result in price concessions in certain markets, with certain customer groups, and/or for certain offerings. These events have at times impacted, and may in the future impact our business in an adverse manner, whether directly or indirectly, such as through their impacts on the financial positions and operations of our customers, suppliers, and other third parties with whom we do business or on whom we rely, and as a consequence, their ability to perform their obligations under their agreements with us. In addition, we may not be able to react quickly enough to prevent or limit our losses or exposures from such geopolitical or macroeconomic events or changes, and any mitigation plans or response we do employ may not mitigate the adverse impacts on our business completely, or at all. Any such failure could have an adverse effect on our reputation, demand for our products, and consequently, our financial condition.
Previous wording
If we fail to manage the distribution of our products and services properly, our business and financial performance could suffer.
Current wording
If we experience or fail to properly manage disruption in the distribution of our products and services properly, our business and financial performance could suffer.
Previous wording
We use a variety of distribution methods to sell our products and services around the world, including both direct and indirect sales to end-users. 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. Moreover, since each distribution method has distinct risks and gross margins, our failure to implement the most advantageous balance in the delivery model for our products and services could adversely affect our revenue and gross margins and therefore our profitability.
Current wording
We use a variety of direct and indirect distribution methods that differ by business and region to sell our products and services to end-users around the world. Successfully managing the interaction of our direct and indirect channel efforts to reach our customer segments is a complex process and each distribution method has distinct risks and potential impacts on our financial performance. Failure to implement the most advantageous balance in the delivery model for our products and services could adversely affect our revenue and gross margins and therefore our profitability.
Previous wording
Our financial results could be materially adversely affected due to distribution channel conflicts or if the financial conditions of our channel partners were to weaken. Our results of operations may be adversely affected by any conflicts that might arise between our various distribution channels or the loss or deterioration of any alliance or distribution arrangement. 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. Considerable trade receivables that are not covered by collateral or credit insurance are outstanding with our distribution channel partners. Revenue from indirect sales could suffer, and we could experience disruptions in distribution, if our distributors’ financial conditions, abilities to borrow funds in the credit markets, or operations weaken.
Current wording
Our financial results could be adversely affected due to distribution channel conflicts, if the financial conditions of our channel partners were to weaken, if we experience the loss or deterioration of any alliance or distribution arrangement, or if our wholesale distributors are not able to withstand changes in business conditions, including economic weakness, industry consolidation, tariffs, and/or market trends. Considerable trade receivables that are not covered by collateral or credit insurance are outstanding with our distribution channel partners. Revenue from indirect sales could suffer, and we could experience disruptions in distribution, if our distributors’ financial conditions, abilities to borrow funds in the credit markets, or operations weaken.
Previous wording
Our inventory management is complex, as we continue to sell a significant mix of products through distributors. We must manage both owned and channel inventory effectively, particularly with respect to sales to distributors, which involves forecasting demand and pricing challenges. Distributors have in the past adjusted orders during periods of product shortages, and may do so in the future, in addition to cancelling orders if their inventory is too high or delaying orders in anticipation of new products. Distributors also may adjust their orders in response to the supply of our products and the products of our competitors and seasonal fluctuations in end-user demand. If we have excess or obsolete inventory, we may have to reduce our prices and write down inventory, and have done so from time to time in the past. Moreover, our use of indirect distribution channels may limit our willingness or ability to adjust prices quickly and otherwise to respond to pricing changes.
Current wording
Our inventory management is complex, as we continue to sell a significant mix of products through distributors. We must manage both owned and channel inventory effectively, particularly with respect to sales to distributors, which involves forecasting demand and meeting pricing challenges. Our distributors may adjust orders during periods of product shortages, cancel orders if their inventory is too high, or delay orders in anticipation of new products. They may also adjust their orders in response to the supply of our products and the products of our competitors and seasonal fluctuations in end-user demand. As a result of these considerations, we have experienced, and may in the future again experience, abnormally high inventory levels. When we have excess or obsolete inventory, which we have experienced from time to time, we may have to reduce our prices and/or write down inventory, either of which may adversely impact our gross margin and our results of operations. These dynamics are accentuated for larger orders, including some orders for our AI systems, and particularly so if they are delayed or cancelled. Moreover, our use of indirect distribution channels may limit our willingness or ability to adjust prices quickly and otherwise to respond to pricing changes or tariffs.
Previous wording
Our worldwide operations and supply chain could be disrupted by natural or human-induced disasters including, but not limited to, earthquakes; tsunamis; floods; hurricanes, cyclones or typhoons; fires; other extreme weather conditions; power or water shortages; telecommunications failures; materials scarcity and price volatility; terrorist acts, civil unrest, conflicts or wars; and health epidemics or pandemics. The impacts and frequency of any of the above could be further exacerbated by climate change, particularly in countries where we operate that have limited infrastructure and disaster recovery resources. While we are predominantly self-insured to mitigate the impact of most catastrophic events, the occurrence of business disruptions could, among other impacts, harm our revenue, profitability, and financial condition; adversely affect our competitive position; increase our costs and expenses; make it difficult or impossible to provide our offerings to our customers or to receive components from our suppliers; create delays and inefficiencies in our supply chain; or require substantial expenditures and recovery time in order to fully resume operations.
Current wording
Our worldwide operations and supply chain could be disrupted by natural or human-induced events including, but not limited to, earthquakes; tsunamis; floods; hurricanes, cyclones or typhoons; fires; other extreme weather conditions; power or water shortages; telecommunications failures; materials scarcity and price volatility; terrorist acts, civil unrest, conflicts or wars; trade tensions, tariffs, quotas, or import or export restrictions, and changes thereto, which are difficult to accurately predict; and health epidemics or pandemics. The impacts and frequency of any of the above could be further exacerbated by climate change, particularly in countries where we operate that have limited infrastructure and disaster recovery resources. While we are predominantly self-insured to mitigate the impact of most catastrophic events, the occurrence of business disruptions could, among other impacts, harm our revenue, profitability, and financial condition; cause derivative impacts on our employees; adversely affect our competitive position; increase our costs and expenses; make it difficult or impossible to provide our offerings to our customers or to receive components from our suppliers; create delays and inefficiencies in our supply chain; or require substantial expenditures and recovery time in order to fully resume operations. To the extent such disruptions adversely affect our business, results of operations, financial condition, and stock price, they may also have the effect of heightening many of the other risks described in this Item 1A of Part I of this Annual Report on Form 10-K.
Previous wording
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. If predicted demand is substantially greater than orders, there may be excess inventory; and alternatively, if orders substantially exceed predicted demand, we may not be able to fulfill all of the orders received in each quarter and such orders may be canceled, all of which we experienced from time to time in the past and may do so again in the future. Depending on when they occur in a quarter, developments such as a systems failure, component pricing movements, component shortages, or global logistics disruptions, have in the past adversely impacted, and could in the future adversely impact, our inventory levels and results of operations in a manner that is disproportionate to the number of days in the quarter affected. We experience some seasonal trends in the sale of our products that also have produced, and may in the future produce, variations in our quarterly results and financial condition. Many of the factors that create and affect seasonal trends are beyond our control.
Current wording
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. If predicted demand is substantially greater than orders, there may be excess inventory and greater risk of inventory write downs, which we have experienced from time to time. Larger orders, including some orders for our AI systems, may be particularly susceptible to this risk. Alternatively, if orders substantially exceed predicted demand, we may not be able to fulfill all of the orders received in each quarter and such orders may be canceled. As a result of such variations in predicted demand, we have experienced these impacts from time to time and may do so again in the future. Depending on when they occur in a quarter, developments such as a systems failure, component pricing movements, component shortages, or global logistics disruptions, have in the past adversely impacted, and could in the future adversely impact, our inventory levels and results of operations in a manner that is disproportionate to the number of days in the quarter affected. We experience some seasonal trends in the sale of our solutions that also have produced, and may in the future produce, variations in our quarterly results and financial condition. Many of the factors that create and affect seasonal trends are beyond our control.
Previous wording
Separately, periodic supply chain shortages and constraints have, in some instances, resulted in, and may result in, increases to the costs of production of our hardware products that we have, at times, not been able to, and may, in the future, not be able to pass on to our customers. We have, in some instances, responded to such constraints by committing to higher inventory purchases and balances relative to our historical positions in order to secure manufacturing capacity, components to fulfill orders, or both. While these measures have been taken to shorten lead times to deliver products to customers, they may also result in excess or obsolete components in the future if the demand for our products is less than we anticipate or orders are cancelled, which could adversely affect our business and financial performance.
Current wording
Separately, periodic supply chain shortages and constraints have, in some instances, resulted in, and may result in, increases to the costs of production of our hardware products that we have, at times, not been able to, and may, in the future, not be able to pass on to our customers. For a further discussion of such risks, see also the risk factor titled “We depend on third-party suppliers, contract manufacturers (including original equipment and original design manufacturers), as well as single-source and limited source suppliers, and our financial results could suffer if we fail to manage these third party relationships effectively.”
Previous wording
In order to be successful, we must attract, retain, train, motivate, develop, and transition qualified executives and other key employees, including those in managerial, technical, development, sales, marketing, and IT positions. 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. These are particularly important considering our growth strategy to capture the market opportunities presented by networking, hybrid cloud, and AI. 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.
Current wording
In order to achieve our growth strategy and capture the market opportunities presented by networking, hybrid cloud, and AI, we must attract, retain, train, motivate, develop, and transition qualified executives and other key employees, including those in managerial, technical, development, sales, marketing, and IT positions. We must provide a competitive compensation package, including cash and equity-based compensation to attract and retain executives and other key employees in a competitive marketplace. Our ability to attract, retain, and motivate highly qualified executives and key employees could be adversely affected if the anticipated value of our 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 required to continue granting equity-based incentive awards in the amounts we believe are necessary.
Previous wording
Our failure to successfully hire executives and key employees or the loss of any executives and key employees could have a significant impact on our operations and our ability to execute our strategy. Further, changes in our management team may be disruptive to our business, and any failure to successfully transition and assimilate key new hires or promoted employees could adversely affect our business and results of operations. As competition for highly skilled employees in our industry has grown increasingly intense, we have in the past experienced, and may in the future experience, higher than anticipated levels of employee attrition, which has resulted in increased costs to hire new employees with the desired skills and may do so again in the future. In addition, significant or prolonged turnover or revised hiring priorities may negatively impact our operations and culture, as well as our ability to successfully maintain our processes and procedures, including due to the loss of historical, technical, and other expertise. These risks to attracting and retaining the necessary talent may be exacerbated by labor constraints, such as immigration policies which may impair the ability to recruit technical and professional talent, and inflationary pressures, which impact employee wages and benefits. Further, integration of employees and businesses as a result of our acquisitions, including the Merger, may present challenges, which could negatively affect our ability to retain and recruit personnel who are essential to our future success.
Current wording
Our failure to successfully hire executives and key employees or the loss of any executives and key employees could have a significant impact on our operations and our ability to execute our strategy. Further, changes in our management team may be disruptive to our business, and any failure to successfully transition and assimilate key new hires or promoted employees could adversely affect our business and results of operations. As competition for highly skilled employees in our industry has grown increasingly intense, we have in the past experienced, and may in the future experience, higher than anticipated levels of employee attrition, which has resulted in increased costs to hire new employees with desired skills. In addition, significant or prolonged turnover or revised hiring priorities may negatively impact our operations and our ability to successfully maintain our processes and procedures, including due to the loss of historical, technical, and other expertise.
Previous wording
Climate change serves as a risk multiplier that could increase both the frequency and severity of natural disasters that may affect our worldwide business operations and those of suppliers and customers. Our corporate headquarters is located in Spring, 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 have, at times periodically deployed, and may in the future, periodically deploy public safety power shutoffs, which affect electricity reliability to our facilities and our communities. Certain sites located in the United States, Middle East, China, and India experience exposure to extreme heat and water stress, which could potentially jeopardize the health and well-being of our employees, consequently impacting our operations. While we seek to mitigate business risks, including those associated with climate change, through site selection, infrastructure technological investments, business continuity planning, and robust environmental programs, this may require us to incur substantial costs, and we may be unsuccessful in doing so as there are inherent climate-related risks wherever business is conducted. Furthermore, climate change may reduce the availability or increase the cost of insurance for these negative impacts of natural disasters by contributing to an increase in the incidence and severity of such natural disasters.
Current wording
Climate change serves as a risk multiplier that could increase both the frequency and severity of natural disasters that may affect our worldwide business operations and those of suppliers and customers. Our corporate headquarters is located in Spring, 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 potentially affecting the health and safety of our employees and our business in these locations. In California, to mitigate wildfire risk, electric utilities have periodically deployed, and may in the future, periodically deploy public safety power shutoffs, which affect electricity reliability to our facilities and our communities. Certain sites located in the United States, Middle East, China, and India experience exposure to extreme heat and water stress, which could potentially strain our operational continuity and also jeopardize the health and well-being of our employees, both of which may consequently impact our operations. Furthermore, our data centers depend on predictable and reliable energy and networking capabilities, the cost or availability of which could be adversely affected or disrupted by a variety of factors, including, but not limited to, the effects of climate change. Increased energy consumption, including as a result of AI-related growth, climate-related events, energy market volatility, and power grid disruptions, may increase the operational costs related to inputs across our value chain. While we seek to mitigate business risks, through site selection, infrastructure technological investments, business continuity planning, and robust environmental programs, this may require us to incur substantial costs, and we may be unsuccessful in doing so as there are inherent climate-related risks wherever business is conducted. Furthermore, climate change may reduce the availability or increase the cost of insurance for these negative impacts of natural disasters by contributing to an increase in the incidence and severity of such natural disasters.
Previous wording
The increasing concern over climate change could also result in transition risks, such as efforts and expenditures related to carbon abatement, shifting customer preferences, or compliance risks from changing regulatory and legal requirements. We have already observed changing customer preferences resulting in increased demands for sustainable solutions, products, and services. While we have been integrating such trends into our business and sales strategies thus far, we may not be able to successfully do so in the future. Further, continually changing customer preferences may cause us to incur additional costs, invest more in R&D, or make other changes to other operations to respond to such demands, which may not be carried out successfully, and if so, could adversely affect our financial results. We may also confront higher electricity prices as the grid decarbonizes, and higher costs for supplies or components that comply with certain environmental regulatory thresholds, potentially impacting our margins or the pricing of our offerings. If we fail to manage these and other transition risks in an effective manner, customer demand for our solutions, products, and services could diminish, and our profitability could suffer.
Current wording
The increasing concerns over climate change could also result in transition risks, such as efforts and expenditures related to carbon abatement, shifting customer preferences, or compliance risks from changing regulatory and legal requirements. We continue to observe increased customer demand for more sustainable and energy-efficient solutions, products, and services. While we have been integrating such trends into our business and sales strategies thus far, we may not be able to successfully do so in the future. Further, continually changing customer preferences may cause us to incur additional costs, invest more in R&D, or make other changes to other operations to respond to such demands, which may not be carried out successfully, and if so, could adversely affect our financial results. We may also confront higher electricity prices, and higher costs for supplies or components that comply with certain environmental regulatory thresholds, potentially impacting our margins or the pricing of our offerings. If we fail to manage these and other transition risks in an effective manner, customer demand for our solutions, products, and services could diminish, and our profitability could suffer.
Previous wording
We believe the proliferation of AI, especially as it relates to our products and solutions that enable AI workloads, will have a significant impact on customer preferences and market dynamics in our industry, and our ability to effectively compete in this space will be critical to our financial performance. We currently incorporate AI capabilities into certain offerings and manufacture hardware designed to support AI capabilities, and our research into and continued development of such capabilities and manufacturing processes remain ongoing. We have invested, and expect to continue to invest, significant resources to build and support the development of these capabilities and manufacturing processes, and if our AI-related offerings fail to operate as anticipated or as well as competing offerings or otherwise do not meet customer needs or if we are unable to bring AI-related offerings to market as effectively as our competitors, we may fail to recoup our investments in AI, our competitive position may be harmed, and our business and reputation may be adversely impacted.
Current wording
We believe the proliferation of AI, especially as it relates to our products and solutions that enable AI workloads, has had a significant impact on customer preferences and market dynamics in our industry, and our ability to effectively compete in this space has been and will remain critical to our financial performance. We incorporate AI capabilities into certain product and service offerings and internal operations, and this technology will increasingly become a more significant element of our business and certain of our partners’ businesses. As with many developing technologies, AI presents risks and challenges and may result in unintended consequences that could affect its further development, adoption, and use, and therefore our business and our overall strategy. We manufacture hardware designed to support AI capabilities, and our research into and continued development of such capabilities and manufacturing processes remain ongoing. We have invested, and expect to continue to invest, significant resources to use, acquire, build, and support the development of these capabilities and manufacturing processes, and if our AI-related offerings fail to operate as anticipated or as well as competing offerings or otherwise do not meet customer needs or if we are unable to bring AI-related offerings to market as effectively as our competitors, we may fail to recoup our investments in AI, our competitive position may be harmed, and our business and reputation may be adversely impacted. We may also be exposed to these and other risks through the increased use of AI by our manufacturers, suppliers, and other business partners. Reliance on AI by these third parties could introduce operational vulnerabilities, disrupt our supply chain management, increase cybersecurity risks, and impact our relationships with customers, partners, and suppliers.
Showing the first 40 of 79 pairs. Open the source sections for the rest.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
To successfully execute our strategy in a rapidly evolving market, we must maintain effective planning, forecasting, and management processes to enable us to continue to improve cost structures, align sales coverage with strategic goals, improve channel execution, and strengthen our capabilities in our areas of strategic focus, while continuing to pursue new product innovation in areas such as edge computing, hybrid cloud, AI, high performance computing, and networking. We must also make sufficient long-term investments in strategic growth areas to develop, obtain, and protect our intellectual property, and commit to transition significant research and development (“R&D”) and other resources before knowing whether our projections will align with customer demand for our solutions.
Current report — wording carried from elsewhere
Additional impacts from cybersecurity incidents have included and could include reimbursement of remediation costs to our customers, suppliers, or distributors; lost revenue resulting from the unauthorized use of proprietary information or the failure to retain or attract business partners following an incident; increased insurance premiums; and damage to our competitiveness, reputation, stock price, and long-term shareholder value. To the extent we carry insurance coverage for such possibilities, we cannot be certain that any such coverage will be adequate or otherwise protect us with respect to claims, expenses, fines, penalties, business loss, data loss, litigation, regulatory actions, or other impacts arising from security breaches or incidents, or that such coverage will continue to be available on acceptable terms or at all.
Current report — wording carried from elsewhere
•In order to complete a business combination and investment transaction, we may (1) issue common stock, potentially creating dilution for our existing stockholders, (2) enter into financing arrangements, which could affect our liquidity and financial condition, or (3) incur early retirement costs, employee benefit costs, charges from the elimination of duplicative facilities and contracts, inventory adjustments, assumed litigation and other liabilities, legal, accounting and financial advisory fees, and required payments to executive officers and key employees under retention plans.
Current report — wording carried from elsewhere
While we review proposed implementations and use cases ahead of deployment, we may not always identify the risks or deficiencies of an AI capability or offering and the market may respond differently than we anticipate, potentially impacting our results of operations. AI algorithms and training methodologies may be flawed. Ineffective or inadequate AI development or deployment practices by us or others could result in incidents that impair the acceptance of AI solutions or cause harm to individuals or society. These deficiencies and other failures of AI systems could subject us to competitive harm, regulatory action, legal liability, and brand or reputational harm. If we enable or offer AI solutions that are controversial because of their impact on human rights, privacy, employment, or other social, economic, or political issues, we may experience competitive, brand, or reputational harm or legal and/or regulatory action.
Current report — wording carried from elsewhere
We are subject to various US (federal, state, and local), and foreign laws, regulations, executive orders and policies affecting the sale of our products and services in a number of areas. Laws and regulations may change in ways that will require us to modify our business model and objectives or affect our returns on investments by restricting existing activities and products, subjecting them to escalating costs or prohibiting them outright.
Current report — wording carried from elsewhere
If we were to violate or become liable or subject to enforcement action under laws or regulations associated with any of the above laws or regulations, we could incur substantial costs or be exposed to potential regulatory fines, civil or criminal sanctions, third-party claims, and reputational damage. Our actual or perceived failure to comply with applicable laws and regulations or other obligations relating to these topics could subject us to liability to our customers, data subjects, suppliers, business partners, employees, and others; give rise to legal and/or regulatory action; could damage our reputation; could limit or restrict our ability to sell to government customers in the U.S. and abroad; or could otherwise materially harm our business, any of which could have an adverse effect on our business, operating results, and financial condition.
Rearranged previous paragraphs (7)
Previous report — wording carried elsewhere
•integrating financial forecasting and controls, procedures and reporting cycles;
Previous report — wording carried elsewhere
•consolidating and integrating corporate, information technology, finance and administrative infrastructures;
Previous report — wording carried elsewhere
•coordinating sales and marketing efforts to effectively position our capabilities;
Previous report — wording carried elsewhere
•coordinating and integrating operations, including in countries in which we have not previously operated; and
Previous report — wording carried elsewhere
•integrating employees and related human capital management systems and benefits, maintaining employee morale and retaining key employees.
Previous report — wording carried elsewhere
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. 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:
Previous report — wording carried elsewhere
•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.