Equity Method Investments

6 Months Ended

Apr. 30, 2017

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments

Equity Method Investments

The Company includes investments which are accounted for using the equity method, under Investments in equity interests on the Company's Condensed Consolidated Balance Sheets. As of April 30, 2017 and October 31, 2016, the Company's Investments in equity interests primarily included $2.6 billion related to a 49% interest in H3C.

Investment in H3C

In May 2016, Tsinghua Holdings’ subsidiary, Unisplendour Corporation, purchased 51% of the new business named H3C, comprising Hewlett Packard Enterprise’s former H3C Technologies and China-based servers, storage and technology services business which were previously reported within the Enterprise Group segment. The Company retained a 49% interest in the new company, which it records as an equity method investment.

During the three and six months ended April 30, 2017, the Company recorded a Loss from equity interests of $3 million and $25 million, respectively, in the Condensed Consolidated Statements of Earnings. For the three months ended April 30, 2017, the loss comprised of $38 million in basis difference amortization expense, offset by $35 million which represented the Company's share of H3C net income. For the six months ended April 30, 2017, the loss comprised of $73 million in basis difference amortization expense, offset by $48 million which represented the Company's share of H3C net income. The loss from equity interests was reflected as a reduction in the carrying amount of Investments in equity interests in the Condensed Consolidated Balance Sheet as of April 30, 2017.

The Company also has commercial arrangements with H3C to buy and sell HPE branded servers, storage, networking and technology services. During the three and six months ended April 30, 2017, HPE recorded approximately $253 million and $513 million in sales to H3C and $66 million and $157 million in purchases from H3C. Net payables due to H3C as of April 30, 2017 and October 31, 2016 were approximately $57 million and $71 million, respectively.