Segment Information

HP is a leading global provider of personal computing and other access devices, imaging and printing products, and related technologies, solutions and services. HP sells to individual consumers, small and medium-sized businesses (“SMBs”) and large enterprises, including customers in the government, health and education sectors.

HP’s operations are organized into three segments for financial reporting purposes: Personal Systems, Printing and Corporate Investments. HP’s organizational structure is based on a number of factors that the chief operating decision maker uses to evaluate, view and run its 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 HP’s chief operating decision maker to evaluate segment results. The chief operating decision maker uses several metrics to evaluate the performance of the overall business, including earnings from operations, and uses these results to allocate resources to each of the segments.

A summary description of each segment is as follows:

Personal Systems provides Commercial and Consumer desktop and notebook personal computers (“PCs”), workstations, thin clients, Commercial mobility devices, retail point-of-sale systems, displays and other related accessories, software, support and services for the commercial and consumer markets. HP groups Commercial notebooks, Commercial desktops, Commercial services, Commercial mobility devices, Commercial detachables and convertibles, Workstations, retail point-of-sale systems and thin clients into Commercial PCs and Consumer notebooks, Consumer desktops, Consumer services and Consumer detachables into Consumer PCs when describing performance in these markets. Described below are HP’s global business capabilities within Personal Systems:


•	Commercial PCs are optimized for use by customers, including enterprise and SMBs, with a focus on robust designs, security, serviceability, connectivity, reliability and manageability in networked environments. Additionally, HP offers a range of services and solutions to enterprise and SMBs to help them manage the lifecycle of their PC and mobility installed base.


•	Consumer PCs are optimized for consumer usage, focusing on multi-media consumption, online browsing, gaming and light productivity.

Personal Systems groups its global business capabilities into Notebooks, Desktops, Workstations and Other when reporting business performance.


•	Notebooks consists of Consumer notebooks, Commercial notebooks, Mobile workstations and Commercial mobility devices;


•	Desktops includes Consumer desktops, Commercial desktops, thin clients, and retail point-of-sale systems;


•	Workstations consists of Desktop Workstations and accessories; and


•	Other consists of Consumer and Commercial services as well as other Personal Systems capabilities.

Printing provides Consumer and Commercial printer hardware, Supplies, solutions and services, as well as scanning devices. Printing is also focused on imaging solutions in the commercial and industrial markets. Described below are HP’s global business capabilities within Printing:

•

Office Printing Solutions delivers HP’s office printers, supplies, services, and solutions to SMBs and large enterprises. It also includes Samsung Electronics Co., Ltd (“Samsung”)-branded and Original Equipment Manufacturer (“OEM”) hardware, supplies and solutions. HP goes to market through its extensive channel network and directly with HP sales. Ongoing key initiatives include design and deployment of A3 products and solutions for the copier and multifunction printer market, printer security solutions, PageWide solutions and award-winning JetIntelligence LaserJet products.

•

Home Printing Solutions delivers innovative printing products and solutions for the home and home business or small and micro business customers utilizing both HP’s Ink and Laser technologies. Initiatives such as Instant Ink and Continuous Ink Supply System provide business model innovation to benefit and expand HP’s existing customer base, while new technologies like Photo Lifestyle products drive print relevance for a mobile generation.


•	Graphics Solutions delivers large-format, commercial and industrial solutions to print service providers and packaging converters through the largest portfolio of printers and presses (HP DesignJet, HP Latex, HP Scitex, HP Indigo and HP PageWide Web Presses).


•	3D Printing delivers HP’s Multi-Jet Fusion 3D Printing Solution designed for prototyping and production of functional parts and functioning on an open platform facilitating the development of new 3D printing materials.

Printing groups its global business capabilities into the following business units when reporting business performance:


•	Commercial Hardware consists of Office Printing Solutions, Graphics Solutions and 3D Printing, excluding supplies;


•	Consumer Hardware includes Home Printing Solutions, excluding supplies; and


•	Supplies comprises a set of highly innovative consumable products, ranging from Ink and Laser cartridges to media, graphics supplies, 3D Printing supplies and Samsung-branded A4 and A3 supplies and OEM supplies, for recurring use in Consumer and Commercial Hardware.

Corporate Investments includes HP Labs and certain business incubation projects.

The accounting policies HP uses to derive segment results are substantially the same as those used in preparing these financial statements. HP derives the results of the business segments directly from its internal management reporting system.

HP does not allocate certain operating expenses, which it manages at the corporate level, to its segments. These unallocated amounts include certain corporate governance costs and market-related retirement credits, stock-based compensation expense, restructuring and other charges, acquisition-related charges, amortization of intangible assets, defined benefit plan settlement charges.

Realignment

Effective at the beginning of its first quarter of fiscal year 2018, HP implemented an organizational change to align its segment and business unit financial reporting more closely with its current business structure. The organizational change resulted in the transfer of long life consumables from Commercial to Supplies within the Printing segment. Certain revenues related to service arrangements, which are being eliminated for the purposes of reporting HP’s consolidated net revenue, have now been reclassified from Other to segments. HP has reflected this change to its segment and business unit information in prior reporting periods on an as-if basis. The reporting change had no impact on previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.

Segment Operating Results from Operations



	Personal Systems		Printing		Corporate Investments			Total Segments		Other			Total
	In millions
Three months ended July 31, 2018
Net revenue	$	9,395	$	5,188	$	1		$	14,584	$	2		$	14,586
Earnings (loss) from operations	$	365	$	832	$	(22	)	$	1,175
Three months ended July 31, 2017
Net revenue	$	8,385	$	4,677	$	2		$	13,064	$	(4	)	$	13,060
Earnings (loss) from operations	$	313	$	807	$	(20	)	$	1,100
Nine months ended July 31, 2018
Net revenue	$	27,597	$	15,505	$	3		$	43,105	$	1		$	43,106
Earnings (loss) from operations	$	1,033	$	2,472	$	(62	)	$	3,443
Nine months ended July 31, 2017
Net revenue	$	24,254	$	13,869	$	7		$	38,130	$	(1	)	$	38,129
Earnings (loss) from operations	$	869	$	2,341	$	(69	)	$	3,141

The reconciliation of segment operating results to HP consolidated results was as follows:



	Three months ended July 31						Nine months ended July 31
	2018			2017			2018			2017
	In millions
Net Revenue:
Total segments	$	14,584		$	13,064		$	43,105		$	38,130
Other	2			(4		)	1			(1		)
Total net revenue	$	14,586		$	13,060		$	43,106		$	38,129
Earnings before taxes:
Total segment earnings from operations	$	1,175		$	1,100		$	3,443		$	3,141
Corporate and unallocated costs and other	(6		)	(13		)	26			(17		)
Stock-based compensation expense	(55		)	(46		)	(203		)	(169		)
Restructuring and other charges	(4		)	(46		)	(92		)	(249		)
Acquisition-related charges	(10		)	(40		)	(97		)	(76		)
Amortization of intangible assets	(20		)	—			(60		)	(1		)
Interest and other, net	(62		)	(56		)	(1,011		)	(201		)
Total earnings before taxes	$	1,018		$	899		$	2,006		$	2,428

Net revenue by segment and business unit was as follows:



	Three months ended July 31					Nine months ended July 31
	2018		2017			2018		2017
	In millions
Notebooks	$	5,634	$	5,008		$	16,382	$	14,391
Desktops	2,869		2,566			8,576		7,477
Workstations	588		530			1,669		1,516
Other	304		281			970		870
Personal Systems	9,395		8,385			27,597		24,254
Supplies	3,405		3,145			10,190		9,368
Commercial Hardware	1,170		940			3,426		2,715
Consumer Hardware	613		592			1,889		1,786
Printing	5,188		4,677			15,505		13,869
Corporate Investments	1		2			3		7
Total segment net revenue	14,584		13,064			43,105		38,130
Other	2		(4		)	1		(1		)
Total net revenue	$	14,586	$	13,060		$	43,106	$	38,129