Acquisitions and Divestitures

Acquisitions

During the first nine months of fiscal 2016, the Company completed two acquisitions. In connection with these acquisitions, the Company recorded approximately $12 million of goodwill and $11 million of intangible assets.

The purchase price allocation for previous acquisitions may reflect various preliminary fair value estimates and analysis, including preliminary work performed by third-party valuation specialists, certain tangible assets and liabilities acquired, the valuation of intangible assets acquired, certain legal matters, income and income based taxes, and residual goodwill; which are subject to change within the measurement period as valuations are finalized. Measurement period adjustments are recorded in the reporting period in which the estimates are finalized and adjustment amounts are determined.

During the nine months ended July 31, 2016, $260 million of purchase price adjustments were recorded which impacted goodwill in the EG segment. These measurement period adjustments are primarily provisional tax related items recorded in conjunction with the acquisition of Aruba Networks, Inc. ("Aruba").

In August 2016, the Company entered into a definitive agreement to acquire Silicon Graphics International Corp. ("SGI"), a global leader in high-performance solutions for compute, data analytics and data management, for $7.75 per share in cash, a transaction valued at approximately $275 million, net of cash and debt. The transaction is expected to close in the first quarter of fiscal 2017, subject to approval by SGI’s stockholders, regulatory approvals and other customary closing conditions. SGI’s results of operations will be included within the EG segment upon the close of the transaction.

Divestitures

During the nine months ended July 31, 2016, the Company completed four divestitures, which resulted in $2.8 billion of net proceeds, of which $25 million represents a deposit that was received in the fourth quarter of fiscal 2015. These divestitures primarily represent the sale of the Company's controlling interest in H3C, which is discussed further below, the sale of the TippingPoint business, which was previously reported within the Software segment, and the sale of a business which was previously reported within the ES segment. The gain associated with the sale of the Company's controlling interest in H3C is included in Gain on H3C divestiture in the Condensed Consolidated and Combined Statements of Earnings. The gains associated with all other divestitures were included in Selling, general and administrative expense in the Condensed Consolidated and Combined Statements of Earnings.

In May 2016, the Company executed its joint partnership agreement with Tsinghua Holdings to bring together the Chinese enterprise technology assets of the Company and Tsinghua University to create a Chinese business provider of technology infrastructure. Under the definitive agreement, Tsinghua Holdings' subsidiary, Unisplendour Corporation, purchased 51% of the new business named H3C for $2.6 billion, which includes purchase consideration adjustments. H3C is comprised of the Company's former H3C Technologies and China-based server, storage and technology services businesses ("H3C disposal group"), which were previously reported within the EG segment until the time of the sale. As a result of the H3C divestiture, the Company recognized a gain of $2.2 billion. The Company's remaining China subsidiary maintains 100% ownership of its existing China-based Enterprise Services, Software and Helion Cloud businesses. The new H3C will be the exclusive provider of the Company's server and storage portfolio, as well as the Company's exclusive hardware support services provider in China, customized for that market.

The results of the H3C disposal group, which represented 100% of the Company's H3C Technologies and China-based server, storage and technology services businesses, were reflected in our Condensed Consolidated and Combined Financial Statements through the date of closing. There were no pre-tax earnings for the three months ended July 31, 2016. The pre-tax earnings for the nine months ended July 31, 2016 were $182 million. The pre-tax earnings for the three and nine months ended July 31, 2015 were $55 million and $207 million, respectively. Subsequently, our remaining 49% ownership is accounted for under the equity method of accounting, and our proportionate share of H3C’s earnings are included in Loss from equity interests in the Condensed Consolidated and Combined Statements of Earnings. See Note 19, "Equity Method Investments" for additional information.

Assets and Liabilities Held for Sale

The Company classifies its long-lived assets or disposal groups to be sold as held for sale in the period in which all of the held for sale criteria are met. The Company initially measures a long-lived asset or disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset or disposal group until the date of sale. The Company assesses the fair value of a long-lived asset or disposal group less any costs to sell at each reporting period and until the asset or disposal group is no longer is classified as held for sale.

In April 2016, the Company signed a definitive agreement with The Blackstone Group to sell at least 84% and up to 100% of the Company's equity stake in MphasiS Limited ("MphasiS" or “MphasiS disposal group”), an IT services provider headquartered in Bangalore, India for Indian Rupees ("INR") 430 per share. The actual amount that The Blackstone Group could acquire was subject to the outcome of a mandatory tender offer to MphasiS' public shareholders during the period between signing and closing. On September 1, 2016, the Company closed the MphasiS divestiture. Based on the outcome of the tender offer, the Company sold its full equity stake in MphasiS which was valued at $824 million at the purchase price of INR 430 per share.

The financial results of MphasiS are reported within the ES segment. During the fiscal quarter ended July 31, 2016, the transaction met all of the held for sale criteria. No loss was recognized on the related assets and liabilities, as the fair value less any costs to sell exceeded their carrying value.

The following table presents information related to the major classes of assets and liabilities that were reclassified as held for sale in the Condensed Consolidated Balance Sheet at July 31, 2016. The assets and liabilities reclassified as held for sale are 100% of the MphasiS disposal group.



	As of July 31, 2016
	In millions
Cash and cash equivalents	$	277
Accounts receivable	151
Other current assets	288
Goodwill	90
Other assets	100
Total assets held for sale	$	906
Notes payable and short-term borrowings	$	22
Deferred revenue	21
Other current liabilities	119
Long-term debt	21
Other liabilities	14
Total liabilities held for sale	$	197