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Bourgon Frederic/Tina Tsai / Shirley Lu Dec., 2008

December ESS Business Interlocks Foxconn / hp Inventory concerns and actions on high valued parts Status update. Bourgon Frederic/Tina Tsai / Shirley Lu Dec., 2008. Summary. November results.

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Bourgon Frederic/Tina Tsai / Shirley Lu Dec., 2008

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  1. December ESS Business InterlocksFoxconn / hpInventory concerns andactions on high valued partsStatus update Bourgon Frederic/Tina Tsai / Shirley Lu Dec., 2008

  2. Summary • November results - Obsolescence Risk- Memory OBS decreased from $570K to $47K. CPU 300K returned to vendors in mid of Dec. - Inventory Level- FCST drop resulted in high DOI in NA. - Layering cost- good inventory management on the parts with price drop leading to 4 DOI.    • Open action items • Foxconn agreed to use HP RBUs’ current target DOI as new buffer level. • - Intel APJ CPU SOI hub will be launched in Mar’09.

  3. Hub V.S. ODM Locations Hub Original warehouse ODM site Amsterdam (Intel/AMD CPU) Brno (HDD RR Donnelly) Pardubice (FCZ) Dallas (AMD CPU) HDD RR Donnelley Foxconn China Houston Intel CPU FHS Costa Rica (Intel CPU 20% non hub parts ) HDD RR Donnelley Penang (Intel Chipset) AMD CPU Singapore Parts Buffered in hub

  4. Memory- supplier region warehouse Assumption: Parts available in warehouse

  5. Inventory Level - High DOI was caused by FCST drop

  6. Layering Cost • Nov.2008 CPU layering cost final update for raw materials ( price drop on Nov.15) - $378, 4 DOI ( HP owes to Foxconn ) 2008 CPU Layering trend

  7. Layering Cost • Microprocessor • CPU price keeps flat in Dec. No layering impact. • One AMD parts will have price break on Jan.16 - 469826-002 has $28 price gap (from $142 to $114). • Memory • Memory price keeps flat in Dec. No layering impact.

  8. Back up

  9. Questions from Sep. Interlock • DOI Calculation - DOI is in calendar days Provided by HP RBU according to expected service level & transportation lead time Formula: ODM QOH/(4 week FCST demand/30 days); FCST is provided by HP • Why CPU DOI target is different in NA and EMEA? - Target DOI is provided based on transportation lead time. Transportation Lead time is a function of ODM V.S. Hub location. • Need to be sure all regions are ok with target DOI - Yes, all regions are ok with target DOI. However, it may change in the future. • Include PCA, Chassis and PSU in inventory review ? - No, because of no layering impact on HP. Should be ODM focus

  10. Obsolescence Risk - CPU $441K$300K expect Intel RMA# in Dec. $141K evaluating rebalancing. - Memory $46K  Evaluating rebalancing.

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