Segment Information

6 Months Ended

Apr. 30, 2020

As described in Note 1, "Overview and Summary of Significant Accounting Policies", effective at the beginning of the first quarter of fiscal 2020, the Company implemented certain organizational changes to align its segment financial reporting more closely with its current business structure. Hewlett Packard Enterprise's operations are now organized into seven segments for financial reporting purposes: Compute, HPC & MCS, Storage, A & PS, Intelligent Edge, 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"), who is the Chief Executive Officer ("CEO"), uses to evaluate, view and run the Company's business operations, which include, but are not limited to, customer base and homogeneity of products and technology. The seven segments are based on this organizational structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results. A summary description of each segment follows.

Compute. HPE's compute portfolio offers both general purpose servers for multi-workload computing and workload optimized servers. HPE's general purpose servers include 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. The Company's workload optimized server portfolio includes HPE Cloudline for cloud data centers. Compute offerings also include operational services, transformation projects, professional services and support services. The Compute support team is also a provider of on-premises flexible consumption models, such as HPE GreenLake.

High Performance Compute & Mission-Critical Systems. HPE's HPC & MCS portfolio offers workload-optimized servers designed to support specific use cases. The HPC portfolio includes the HPE Apollo and Cray products that are sold as supercomputing systems to support data-intensive workloads for high performance computing, data analytics and artificial intelligence applications. The MCS portfolio includes the HPE Superdome Flex, HPE Nonstop and HPE Integrity product lines for critical applications such as payments and transaction processing that require high availability, fault-tolerant computing infrastructure. The HPC & MCS segment also includes the Edge Compute business which consists of the HPE Moonshot and HPE Edgeline products for computing at the network edge. HPC & MCS offerings also include operational services, transformation projects, professional services and support services. HPC & MCS products can also be purchased through on-premises flexible consumption models, such as HPE GreenLake.

Storage. HPE provides workload optimized storage product and service offerings that are AI-driven and built for cloud environments with GreenLake as-a-service consumption and flexible investment options. Powered by HPE InfoSight advanced analytics and machine learning and HPE Cloud Volumes data mobility, HPE delivers intelligent storage for hybrid cloud environments. Key solutions include an intelligent hyperconverged infrastructure (“HCI”) portfolio with HPE Nimble Storage dHCI, a disaggregated HCI solution for the enterprise data center and HPE SimpliVity, a hyperconverged platform for virtualization. The portfolio also includes HPE Primera, HPE Nimble Storage and HPE 3PAR Storage for mission-critical workloads and general purpose workloads, respectively, and big data solutions running on HPE Apollo Servers along with BlueData and MapR technology for expertise in artificial intelligence, machine learning and analytics data management. Storage also provides comprehensive data protection with HPE StoreOnce and HPE Recovery Manager Central, solutions for secondary workloads and traditional tape, storage networking and disk products, such as HPE Modular Storage Arrays ("MSA") and HPE XP.

Advisory and Professional Services provides consultative-led services, expertise and advice, implementation services as well as complex solution engagement capabilities. A & PS experts advise their customers through their digital transformation. A & PS is also a provider of on-premises flexible consumption models, such as HPE GreenLake, that enable IT agility, simplify operations, and align cost to value.

Intelligent Edge is comprised of a portfolio of secure edge-to-cloud solutions operating under the Aruba brand that includes wired and wireless local area network "(LAN"), campus and data center switching, software-defined wide-area-networking, security, and associated services to enable secure connectivity for businesses of any size. The primary business drivers for Intelligent Edge solutions are mobility and the Internet of Things ("IoT").

The HPE Aruba product portfolio includes wired and wireless LAN hardware products such as Wi-Fi access points, switches, routers, sensors. The HPE Aruba software and services portfolio includes software products for cloud-based management, network management, network access control, analytics and assurance, location services software and professional and support services, as well as as-a Service ("aaS") and consumption models for the Intelligent Edge portfolio of products.

Financial Services provides flexible investment solutions, such as leasing, financing, IT consumption, and utility programs and asset management services, for customers that facilitate unique technology deployment models and the acquisition of complete IT solutions, including hardware, software and services from Hewlett Packard Enterprise and others. FS also supports financial solutions for on-premise flexible consumption models, such as HPE GreenLake. In order to provide flexible services and capabilities that support the entire IT life cycle, FS partners with customers globally to help build investment strategies. 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 which is responsible for research and development and also hosts certain business incubations projects, and the Communications and Media Solutions ("CMS") business.

Segment Policy

There have been no significant changes to the Company's segment accounting policies disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2019, except for the organizational changes described in Note 1, "Overview and Summary of Significant Accounting Policies".

Hewlett Packard Enterprise does not allocate to its segments certain operating expenses, which it manages at the corporate level. These unallocated operating costs include certain corporate costs and eliminations, stock-based compensation

expense related to corporate and certain global functions, amortization of initial direct costs, amortization of intangible assets, impairment of goodwill, transformation costs, disaster charges (recovery), acquisition, disposition and other related charges.

Segment Operating Results

Segment net revenue and segment operating results were as follows:


	Compute		HPC & MCS		Storage		A & PS		Intelligent Edge		Financial Services		Corporate Investments		Total
	In millions
Three months ended April 30, 2020
Net revenue	$	2,534	$	564	$	1,060	$	236	$	661	$	830	$	124	$	6,009
Intersegment net revenue	106		25		26		1		4		3		—		165
Total segment net revenue	$	2,640	$	589	$	1,086	$	237	$	665	$	833	$	124	$	6,174
Segment earnings (loss) from operations	$	125	$	33	$	145	$	2	$	73	$	75	$	(28)	$	425
Three months ended April 30, 2019
Net revenue	$	3,193	$	696	$	1,303	$	258	$	681	$	894	$	125	$	7,150
Intersegment net revenue	125		25		15		2		4		2		—		173
Total segment net revenue	$	3,318	$	721	$	1,318	$	260	$	685	$	896	$	125	$	7,323
Segment earnings (loss) from operations	$	307	$	92	$	244	$	(14)	$	36	$	77	$	(29)	$	713
Six months ended April 30, 2020
Net revenue	$	5,497	$	1,380	$	2,295	$	478	$	1,376	$	1,687	$	245	$	12,958
Intersegment net revenue	154		32		41		2		9		5		—		243
Total segment net revenue	$	5,651	$	1,412	$	2,336	$	480	$	1,385	$	1,692	$	245	$	13,201
Segment earnings (loss) from operations	$	411	$	82	$	371	$	—	$	143	$	148	$	(55)	$	1,100
Six months ended April 30, 2019
Net revenue	$	6,702	$	1,424	$	2,640	$	497	$	1,387	$	1,810	$	243	$	14,703
Intersegment net revenue	191		76		34		4		3		5		—		313
Total segment net revenue	$	6,893	$	1,500	$	2,674	$	501	$	1,390	$	1,815	$	243	$	15,016
Segment earnings (loss) from operations	$	647	$	190	$	498	$	(46)	$	60	$	154	$	(57)	$	1,446

The reconciliation of segment operating results to Hewlett Packard Enterprise Condensed Consolidated Financial statements was as follows:


	Three Months Ended April 30,						Six Months Ended April 30,
	2020		2019		2020		2019
	In millions
Net Revenue:
Total segments	$	6,174	$	7,323	$	13,201	$	15,016
Eliminations of intersegment net revenue	(165)		(173)		(243)		(313)
Total Hewlett Packard Enterprise condensed consolidated net revenue	$	6,009	$	7,150	$	12,958	$	14,703
(Loss) earnings before taxes:
Total segment earnings from operations	$	425	$	713	$	1,100	$	1,446
Unallocated corporate costs and eliminations	(48)		(64)		(100)		(114)
Unallocated stock-based compensation expense	(12)		(15)		(33)		(29)
Amortization of initial direct costs	(3)		—		(6)		—
Amortization of intangible assets	(84)		(69)		(204)		(141)
Impairment of goodwill	(865)		—		(865)		—
Transformation costs	(200)		(54)		(289)		(132)
Disaster (charges) recovery	(22)		7		(22)		7
Acquisition, disposition and other related charges	(25)		(84)		(67)		(147)
Interest and other, net	(68)		(18)		(87)		(69)
Tax indemnification adjustments	(35)		4		(56)		223
Non-service net periodic benefit credit	36		17		73		33
(Loss) earnings from equity interests	(10)		3		23		18
Total Hewlett Packard Enterprise consolidated (loss) earnings before taxes	$	(911)	$	440	$	(533)	$	1,095

Total assets by segment and the reconciliation of segment assets to Hewlett Packard Enterprise consolidated total assets were as follows:


	As of
	April 30, 2020		October 31, 2019
	In millions
Compute⁽¹⁾	$	15,884	$	14,066
HPC & MCS⁽²⁾	6,006		6,819
Storage	7,137		7,214
A & PS	491		440
Intelligent Edge	3,537		3,318
Financial Services	14,702		14,700
Corporate Investments	505		461
Corporate and unallocated assets	6,253		4,785
Total Hewlett Packard Enterprise consolidated assets	$	54,515	$	51,803

(1) As of April 30, 2020, Compute segment asset increase was due primarily to a higher inventory and higher cash allocated from the issuance of Hewlett Packard Enterprise Senior Notes. For more information on Hewlett Packard Enterprise Senior Notes, see Note 12 “Borrowings”.

(2) HPC & MCS segment asset decrease was due primarily to a partial goodwill impairment charge recorded in the second quarter of fiscal 2020, as it was determined that the fair value of the HPC & MCS reporting unit was below the carrying value of its net assets. For more information on the impairment of goodwill, see Note 9 “Goodwill”.

The Company’s net revenue by geographic region was as follows:


	Three Months Ended April 30,						Six Months Ended April 30,
	2020		2019		2020		2019
	In millions
Americas:
United States	$	1,906	$	2,184	$	4,224	$	4,685
Americas excluding U.S.	410		483		878		987
Total Americas	2,316		2,667		5,102		5,672
Europe, Middle East and Africa	2,198		2,727		4,758		5,637
Asia Pacific and Japan	1,495		1,756		3,098		3,394
Total Hewlett Packard Enterprise consolidated net revenue	$	6,009	$	7,150	$	12,958	$	14,703