Segment Information

Hewlett Packard Enterprise's operations are organized into three segments for financial reporting purposes: the Enterprise Group ("EG"), Financial Services ("FS") and Corporate Investments. Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker ("CODM"), the Chief Executive Officer ("CEO"), uses to evaluate, view and run business operations, which include, but are not limited to, customer base and homogeneity of products and technology. The segments are based on this organizational structure and information reviewed by the Company's CODM to evaluate segment results.

A summary description of each segment follows.

The Enterprise Group provides secure, software-defined technology and services that enable customers to move data seamlessly across their hybrid IT environments and power the intelligent edge that runs campus, branch and IoT applications. Described below are Hewlett Packard Enterprise's business units and capabilities within EG.

•

Servers offers both Industry Standard Servers ("ISS") as well as Mission-Critical Servers ("MCS") to address the full array of the Company's customers' computing needs. ISS provides a range of products, from entry level servers through premium HPE ProLiant, secure and versatile rack and tower servers; HPE BladeSystem, a modular infrastructure that converges server, storage and networking; and HPE Synergy, a composable infrastructure for traditional and cloud-native applications. For the most mission-critical workloads, HPE delivers HPE Apollo for high performance computing and artificial intelligence, HPE Cloudline for cloud data centers, HPE Edgeline for computing at the network edge, HPE Integrity for mission-critical applications, and HPE SimpliVity, a hyper-converged platform for virtualization.

•

Storage offers Converged Storage solutions and traditional storage offerings for enterprise and SMB environments. HPE's key products include Nimble Storage and the 3PAR StoreServ Storage Platform, which are designed for virtualization, cloud and IT-as-a-service. Converged Storage solutions include 3PAR StoreServe, StoreOnce and StoreVirtual products. Traditional storage includes tape, storage networking and legacy external disk products such as EVA and XP.


•	Networking offers HPE and Aruba branded software-defined switches, routers, wireless local area network, network virtualization, security, location-based services and network management products that deliver open, scalable, secure, agile and consistent solutions that span data centers, campus and branch environments.

•

Technology Services creates preferred IT experiences that power a digital business. The Technology Services team and the Company's extensive partner network provide value across the IT life cycle delivering advice, transformation projects, professional services, support services, and operational services for Hybrid IT and the Intelligent Edge. Technology Services is also a provider of on-premises flexible consumption models that enable IT agility, simplify operations and align costs to business value. Technology Services offerings comprise HPE Pointnext, which includes Data Center Care, Proactive Care and Technology Consulting, as well as Aruba Services, and Communications and Media Solutions ("CMS").

Financial Services provides flexible investment solutions, such as leasing, financing, IT consumption, and utility programs and asset management services, for customers to enable the creation of unique technology deployment models and acquire complete IT solutions, including hardware, software and services from Hewlett Packard Enterprise and others. Providing flexible services and capabilities that support the entire IT life cycle, FS partners with customers globally to help build investment strategies that enhance their business agility and support their business transformation. FS offers a wide selection of investment solution capabilities for large enterprise customers and channel partners, along with an array of financial options to SMBs and educational and governmental entities.

Corporate Investments includes Hewlett Packard Labs and certain cloud-related business incubation projects.

Segment Policy

Hewlett Packard Enterprise derives the results of its business segments directly from its internal management reporting system. The accounting policies that Hewlett Packard Enterprise uses to derive segment results are substantially the same as those the consolidated company uses. The CODM measures the performance of each segment based on several metrics, including earnings from operations. The CODM uses these results, in part, to evaluate the performance of, and to allocate resources to each of the segments.

Segment revenue includes revenues from sales to external customers and intersegment revenues that reflect transactions between the segments on an arm's-length basis. Intersegment revenues primarily consist of sales of hardware and software that are sourced internally and, in the majority of the cases, are financed as operating leases by FS to our customers. Hewlett Packard Enterprise's consolidated net revenue is derived and reported after the elimination of intersegment revenues from such arrangements.

Hewlett Packard Enterprise periodically engages in intercompany advanced royalty payment and licensing arrangements that may result in advance payments between subsidiaries. Revenues from these intercompany arrangements are deferred and recognized as earned over the term of the arrangement by the Hewlett Packard Enterprise legal entities involved in such transactions; however, these advanced payments are eliminated from revenues as reported by Hewlett Packard Enterprise and its business segments. As disclosed in Note 8, "Taxes on Earnings", Hewlett Packard Enterprise executed intercompany advanced royalty payment arrangements resulting in advanced payments of $439 million and $3.7 billion during fiscal 2017 and 2016, respectively. In these transactions, the payments were received in the U.S. from a foreign consolidated affiliate, with a deferral of intercompany revenues over the term of the arrangements, approximately 15 years and 5 years, respectively. The impact of these intercompany arrangements is eliminated from both Hewlett Packard Enterprise's consolidated and segment net revenues.

Financing interest in the Consolidated and Combined Statements of Earnings reflects interest expense on borrowing- and funding-related activity associated with FS and its subsidiaries, and debt issued by Hewlett Packard Enterprise for which a portion of the proceeds benefited FS.

Hewlett Packard Enterprise does not allocate to its segments certain operating expenses which it manages at the corporate level. These unallocated costs include certain corporate governance costs, stock-based compensation expense, restructuring charges, transformation costs, amortization of intangible assets, acquisition and other related charges, separation costs, disaster charges, defined benefit plan settlement charges and remeasurement benefit and the gain on H3C and MphasiS divestitures.

Segment Organizational Changes

As of April 1, 2017 and September 1, 2017, with the completion of the Everett and Seattle Transactions, respectively, the Company reclassified the historical net (loss) earnings from the former ES and Software segments, to Net loss from discontinued operations in its Consolidated and Combined Statements of Earnings.

Effective at the beginning of the first quarter of fiscal 2017, the Company implemented organizational changes to align its segment financial reporting more closely with its current business structure. These organizational changes resulted in: (i) within the Enterprise Group segment, primarily, the transfer of the big data storage product group previously reported within the Servers business unit to the Storage business unit; the transfer of the Aruba services capabilities previously reported within the Networking business unit to the Technology Services ("TS") business unit; and (ii) the transfer of the CMS product group previously reported within the former ES segment to the TS business unit within the Enterprise Group segment.

The Company reflected these changes to its segment information retrospectively to the earliest period presented, which resulted in: (i) within the Enterprise Group segment, primarily, the transfer of net revenue from the big data storage product group previously reported within the Servers business unit to the Storage business unit; the transfer of net revenue from the Aruba services capabilities previously reported within the Networking business unit to the TS business unit; and (ii) the transfer of net revenue, related eliminations of intersegment revenues and operating profit from the CMS product group previously reported within the former ES segment to the Technology Services business unit within the Enterprise Group segment.

Effective at the beginning of the second quarter of fiscal 2017 and prior to the completion of the Everett Transaction, the Company transferred the historical net revenue and operating profit from the previously divested MphasiS product group, which was reported within the former ES segment, to the Corporate Investments segment.

The changes within the Enterprise Group segment had no impact on Hewlett Packard Enterprise's previously reported Enterprise Group segment net revenue and earnings from operations. The change between the former ES segment and the Enterprise Group segment had no impact on Hewlett Packard Enterprise's previously reported consolidated net revenue, earnings from continuing operations, net earnings from continuing operations or net earnings per share from continuing operations.

Segment Operating Results



	Enterprise Group		Financial Services		Corporate Investments			Total
	In millions
2017
Net revenue	$	25,294	$	3,574	$	3		$	28,871
Intersegment net revenue and other⁽¹⁾	917		28		—			945
Total segment net revenue	$	26,211	$	3,602	$	3		$	29,816
Segment earnings (loss) from operations	$	2,707	$	304	$	(142	)	$	2,869
2016
Net revenue	$	26,592	$	3,097	$	591		$	30,280
Intersegment net revenue and other⁽¹⁾	1,187		93		—			1,280
Total segment net revenue	$	27,779	$	3,190	$	591		$	31,560
Segment earnings (loss) from operations	$	3,569	$	336	$	(240	)	$	3,665
2015
Net revenue	$	27,193	$	3,200	$	684		$	31,077
Intersegment net revenue and other⁽¹⁾	1,318		16		—			1,334
Total segment net revenue	$	28,511	$	3,216	$	684		$	32,411
Segment earnings (loss) from operations	$	3,999	$	349	$	(271	)	$	4,077


(1)	For the periods presented above, the amounts include the elimination of pre-separation intercompany sales to the former ES and Software segments, which are included within Net loss from discontinued operations in the Consolidated and Combined Statements of Earnings.

The reconciliation of segment operating results to Hewlett Packard Enterprise consolidated and combined results was as follows:



	For the fiscal years ended October 31,
	2017			2016			2015
	In millions
Net Revenue:
Total segments	$	29,816		$	31,560		$	32,411
Elimination of intersegment net revenue and other	(945		)	(1,280		)	(1,334		)
Total Hewlett Packard Enterprise consolidated and combined net revenue	$	28,871		$	30,280		$	31,077
Earnings before taxes:
Total segment earnings from operations	$	2,869		$	3,665		$	4,077
Unallocated corporate costs and eliminations	(310		)	(619		)	(469		)
Stock-based compensation expense	(357		)	(367		)	(362		)
Amortization of intangible assets	(321		)	(272		)	(229		)
Restructuring charges	(417		)	(417		)	(197		)
Transformation costs	(359		)	—			—
Disaster charges	(93		)	—			—
Acquisition and other related charges	(203		)	(145		)	(84		)
Separation costs	(248		)	(362		)	(797		)
Defined benefit plan settlement charges and remeasurement (benefit)	64			—			7
Gain on H3C and MphasiS divestitures	—			2,420			—
Interest and other, net	(327		)	(284		)	(9		)
Tax indemnification adjustments	(3		)	317			—
Loss from equity interests	(23		)	(76		)	(2		)
Total Hewlett Packard Enterprise consolidated and combined earnings from continuing operations before taxes	$	272		$	3,860		$	1,935

Segment Assets

Hewlett Packard Enterprise allocates assets to its business segments based on the segments primarily benefiting from the assets. Total assets by segment and the reconciliation of segment assets to Hewlett Packard Enterprise consolidated assets were as follows:



	As of October 31,
	2017		2016
	In millions
Enterprise Group	$	28,950	$	26,430
Financial Services	13,489		13,594
Corporate Investments	172		161
Corporate and unallocated assets	18,795		19,991
Current and non-current assets of discontinued operations	—		19,453
Total Hewlett Packard Enterprise consolidated assets⁽¹⁾	$	61,406	$	79,629


(1)	During the first quarter of fiscal 2017, the Company adopted ASU 2015-03, which simplifies the presentation of debt issuance costs by requiring debt issuance to be presented as a deduction from the corresponding debt liability rather than an asset that is amortized. The Company adopted the standard retrospectively for the prior period presented.

•Assets allocated to the EG segment in fiscal 2017 increased as compared to fiscal 2016 due primarily to business acquisitions during fiscal 2017.

•Corporate and unallocated assets in fiscal 2017 decreased as compared to fiscal 2016 due primarily to a decrease in cash and cash equivalents, partially offset by an increase in deferred tax assets.

Major Customers

No single customer represented 10% or more of Hewlett Packard Enterprise's total net revenue in any fiscal year presented.

Geographic Information

Net revenue by country is based upon the sales location that predominately represents the customer location. For each of the fiscal years of 2017, 2016 and 2015, other than the U.S., no country represented more than 10% of Hewlett Packard Enterprise's net revenue.

Net revenue by country in which Hewlett Packard Enterprise operates was as follows:



	For the fiscal years ended October 31,
	2017		2016		2015
	In millions
U.S.	$	9,913	$	10,333	$	9,589
Other countries	18,958		19,947		21,488
Total net revenue	$	28,871	$	30,280	$	31,077

Net property, plant and equipment by country in which Hewlett Packard Enterprise operates was as follows:



	As of October 31,
	2017		2016
	In millions
U.S.	$	2,673	$	2,981
Other countries	3,596		3,394
Total net property, plant and equipment	$	6,269	$	6,375

Net revenue by segment and business unit was as follows:



	For the fiscal years ended October 31,
	2017			2016			2015
	In millions
Servers	$	12,674		$	13,813		$	14,202
Technology Services	7,882			7,911			8,266
Storage	3,144			3,235			3,180
Networking	2,511			2,820			2,863
Enterprise Group	26,211			27,779			28,511
Financial Services	3,602			3,190			3,216
Corporate Investments	3			591			684
Total segment net revenue	29,816			31,560			32,411
Eliminations of intersegment net revenue and other	(945		)	(1,280		)	(1,334		)
Total net revenue	$	28,871		$	30,280		$	31,077