Hewlett-Packard (HP) announced revenues of US$32.3 billion during the period from November of 2010 to January of 2011, lower than market watchers' expectations of US$32.9 billion, while its revenue forecast for the fiscal year of 2011 has also been reduced to US$130-131.5 billion from the original US$132-133.5 billion. HP's unsatisfactory performance is expected to affect its Taiwan-based upstream partners and relatively drag down their performance.

HP is currently outsourcing its notebook orders mainly to Taiwan-based Quanta Computer, Foxconn Electronics (Hon Hai Precision Industry) and Inventec, while desktops are handled by Foxconn and Pegatron Technology.

Since HP reducing its revenue forecast was not a result of dropping notebook or desktop sales, but rather dropping ASPs, its partners are likely to also see their profitability squeezed.

HP's recent action of phasing out its high-price ultra-thin Envy 13 notebook product line is an indication that demand for high-end products is turning weak and with its mainstream models also under pressure of price competition, despite HP working aggressively to cut into the software service industry, the company is currently facing serious issues bringing up its overall ASPs.

In addition, HP's dropping share in China's PC market is also impacting its sales, as China has already become a market with the strongest PC shipment growth. HP has recently been hosting several marketing activities in China hoping to bring up its share.