Divestitures

9 Months Ended

Jul. 31, 2016

Discontinued Operations and Disposal Groups [Abstract]

Divestitures

Discontinued Operations

On November 1, 2015, HP completed the Separation of Hewlett Packard Enterprise. After the Separation, HP does not beneficially own any shares of Hewlett Packard Enterprise common stock.

In connection with the Separation, HP and Hewlett Packard Enterprise have entered into a separation and distribution agreement as well as various other agreements that provide a framework for the relationships between the parties, including among others a tax matters agreement, an employee matters agreement, a transition service agreement, a real estate matters agreement, a master commercial agreement and an information technology service agreement. These agreements provided for the allocation between HP and Hewlett Packard Enterprise of assets, employees, liabilities and obligations (including investments, property, employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after the Separation and govern certain relationships between HP and Hewlett Packard Enterprise after the Separation.

After the Separation, HP no longer consolidates the financial results of Hewlett Packard Enterprise within its financial results of continuing operations. For all the periods prior to the Separation, the financial results of Hewlett Packard Enterprise are presented as net earnings from discontinued operations in the Consolidated Condensed Statements of Earnings and assets and liabilities from discontinued operations in the Consolidated Condensed Balance Sheets. For all the periods after the Separation, discontinued operations includes separation costs primarily related to third-party consulting, contractor fees and other costs.

The following table presents the financial results of HP's discontinued operations:

	Three months ended July 31						Nine months ended July 31
	2016			2015			2016			2015
	In millions, except per share amounts
Net revenue	$	—		$	12,987		$	—		$	38,444
Cost of revenue(1)	—			9,281			—			27,609
Expenses(2)	30			3,501			158			9,394
Interest and other, net(3)(4)	(174		)	18			(157		)	132
Earnings (loss) from discontinued operations before taxes	144			187			(1		)	1,309
Provision for taxes(4)	(204		)	(33		)	(148		)	(281		)
(Loss) earnings from discontinued operations, net of taxes	$	(60	)	$	154		$	(149	)	$	1,028

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⁽¹⁾  Cost of products, cost of services and financing interest.

⁽²⁾  Expenses for the three and nine months ended July 31, 2016 were primarily related to separation costs.

⁽³⁾  In fiscal 2015, allocation of interest to Hewlett Packard Enterprise was based on the average effective interest rate of the debt assumed by Hewlett Packard Enterprise and the debt repaid as part of the Separation.

⁽⁴⁾  In connection with the tax matters agreement (the "TMA"), Interest and other, net for the three and nine months ended July 31, 2016 includes $174 million and $157 million, respectively, of net tax indemnification amounts and Provision for taxes for the three and nine months ended July 31, 2016 includes $172 million and $156 million, respectively, of the tax impact relating to the above amounts. For more information on tax indemnifications and the TMA, see Note 7, "Taxes on Earnings".

There were no significant non-cash items or any capital expenditures of discontinued operations for the three and nine months ended July 31, 2016. For the three and nine months ended July 31, 2015, significant non-cash items and capital expenditures of discontinued operations are outlined below:

	Three months ended July 31, 2015		Nine months ended July 31, 2015
	In millions
Depreciation and amortization	$	925	$	2,750
Purchases of property, plant and equipment	$	768	$	2,215

The following table presents assets and liabilities that were transferred to Hewlett Packard Enterprise as of November 1, 2015 and presented as discontinued operations in the Consolidated Condensed Balance Sheets as of October 31, 2015:

	In millions
Cash and cash equivalents	$	9,849
Accounts receivable	8,538
Financing receivables	2,918
Inventory	2,197
Other current assets	7,090
Total current assets of discontinued operations	$	30,592
Property, plant and equipment	$	9,598
Goodwill	27,261
Long-term financing receivables and other non-current assets	9,472
Total non-current assets of discontinued operations	$	46,331
Notes payable and short-term borrowings	$	691
Accounts payable	5,762
Employee compensation and benefits	2,861
Taxes on earnings	587
Deferred revenue	5,148
Other accrued liabilities	6,472
Total current liabilities of discontinued operations	$	21,521
Long-term debt	$	15,103
Other non-current liabilities	7,346
Total non-current liabilities of discontinued operations	$	22,449

Subsequent to the Separation, HP made a final net cash transfer of $526 million to Hewlett Packard Enterprise.

Divestitures

During fiscal 2016, HP entered into agreements to divest certain technology assets, including licensing and distribution rights, for certain software offerings to Open Text Corporation, an enterprise information management company for $475 million. These divestitures were completed in most countries by the end of the third quarter of fiscal 2016 with the remaining jurisdictions anticipated to be completed during the fourth quarter of fiscal 2016, subject to customary closing conditions. The technology assets sold were previously reported within the Commercial Hardware business unit within the Printing segment. The gain recognized from the divestiture announced in the second quarter was $56 million and $103 million for the three and nine months ended July 31, 2016, respectively. The gain recognized from the divestiture announced in the third quarter was $280 million for the three and nine months ended July 31, 2016. The gains associated with these divestitures were included in Selling, general and administrative expenses in the Consolidated Condensed Statements of Earnings.