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Restructuring Charges
6 Months Ended
Apr. 30, 2011
Restructuring Charges.  
Restructuring Charges

Note 6: Restructuring Charges

        HP records restructuring charges associated with management-approved restructuring plans to either reorganize one or more of HP's business segments, or to remove duplicative headcount and infrastructure associated with one or more business acquisitions. Restructuring charges can include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations, and contract cancellation costs. Restructuring charges are recorded based upon planned employee termination dates and site closure and consolidation plans. The timing of associated cash payments is dependent upon the type of restructuring charge and can extend over a multi-year period. HP records the short-term portion of the restructuring liability in Accrued restructuring and the long-term portion in Other liabilities in the Consolidated Condensed Balance Sheets.

  • Fiscal 2010 Acquisitions

        In connection with the acquisitions of Palm, Inc ("Palm") and 3Com Corporation ("3Com") in fiscal 2010, HP's management approved and initiated plans to restructure the operations of the acquired companies, including severance for employees, contract cancellation costs, costs to vacate duplicative facilities and other items. The total expected combined cost of the plans is $88 million. As of April 30, 2011, HP had recorded the majority of the remaining costs of the plans based upon the anticipated timing of planned terminations and facility closure costs. With respect to the Palm integration plan, no further restructuring charges are anticipated, and the majority of the remaining costs are expected to be paid out by the third quarter of fiscal 2011. The remaining costs pertaining to the 3Com plan are expected to be paid out through fiscal 2016 as fixed lease payments are made.

  • Fiscal 2010 ES Restructuring Plan

        On June 1, 2010, HP's management announced a plan to restructure its Enterprise Services business, which includes its Infrastructure Technology Outsourcing, Business Process Outsourcing and Application Services business units. The multi-year restructuring program includes plans to consolidate commercial data centers, tools and applications. The total expected cost of the plan that will be recorded as restructuring charges is approximately $1 billion, including severance costs to eliminate approximately 9,000 positions and infrastructure charges. HP recorded net restructuring charges of $63 million and $160 million, for the three and six months ended April 30, 2011. As of April 30, 2011, HP had recorded the majority of the severance costs. HP expects to record the majority of the infrastructure charges through fiscal 2012. The timing of the charges is based upon planned termination dates and site closure and consolidation plans. The majority of the associated cash payments are expected to be paid out through the second quarter of fiscal 2012. As of April 30, 2011, approximately 4,400 positions had been eliminated.

  • Fiscal 2009 Restructuring Plan

        In May 2009, HP's management approved and initiated a restructuring plan to structurally change and improve the effectiveness of the Imaging and Printing Group ("IPG"), Personal Systems Group ("PSG") and ESSN businesses. The total expected cost of the plan is $292 million in severance-related costs associated with the planned elimination of approximately 4,400 positions. As of April 30, 2011, all planned eliminations had occurred and the majority of the restructuring costs had been paid out.

  • Fiscal 2008 HP/EDS Restructuring Plan

        In connection with the acquisition of Electronic Data Systems Corporation ("EDS") on August 26, 2008, HP's management approved and initiated a restructuring plan to combine and align HP's services businesses, eliminate duplicative overhead functions and consolidate and vacate duplicative facilities. The restructuring plan is expected to be implemented over four years from the acquisition date at a total expected cost of $3.4 billion.

        The restructuring plan includes severance costs to eliminate approximately 25,000 positions. As of April 30, 2011, all planned eliminations had occurred and the vast majority of the associated severance costs had been paid out. The infrastructure charges in the restructuring plan include facility closure and consolidation costs and the costs associated with early termination of certain contractual obligations. HP expects to record the majority of these costs through fiscal 2011 based upon the execution of site closure and consolidation plans. The associated cash payments are expected to be paid out through fiscal 2016 as fixed lease payments are made.

        Approximately $1.5 billion of the expected costs were associated with pre-acquisition EDS and were reflected in the purchase price of EDS. These costs are subject to change based on the actual costs incurred. The remaining costs are primarily associated with HP and will be recorded as a restructuring charge.

  • Summary of Restructuring Plans

        The adjustments to the accrued restructuring expenses related to all of HP's restructuring plans described above for the six months ended April 30, 2011 were as follows:

 
   
  Three
months
ended
April 30,
2011
charges
  Six
months
ended
April 30,
2011
charges
   
   
   
  As of April 30, 2011  
 
  Balance,
October 31,
2010
  Cash
payments
  Non-cash
settlements
and other
adjustments
  Balance,
April 30,
2011
  Total costs
and
adjustments
to date
  Total
expected
costs and
adjustments
 
 
  In millions
 

Fiscal 2010 acquisitions

  $ 44   $ 16   $ 16   $ (23 ) $   $ 37   $ 80   $ 88  

Fiscal 2010 ES Plan:

                                                 
 

Severance

  $ 620   $ 33   $ 118   $ (135 ) $ 38   $ 641   $ 748   $ 761  
 

Infrastructure

    4     30     42     (42 )   (4 )       62     231  
                                   
 

Total ES Plan

  $ 624   $ 63   $ 160   $ (177 ) $ 34   $ 641   $ 810   $ 992  

Fiscal 2009 Plan

  $ 57   $   $   $ (43 ) $ (1 ) $ 13   $ 292   $ 292  

Fiscal 2008 HP/EDS Plan:

                                                 
 

Severance

  $ 75   $ 9   $ 23   $ (87 ) $ (11 ) $   $ 2,169   $ 2,169  
 

Infrastructure

    408     70     117     (174 )   14     365     810     1,225  
                                   
 

Total HP/EDS Plan

  $ 483   $ 79   $ 140   $ (261 ) $ 3   $ 365   $ 2,979   $ 3,394  
                                   

Total restructuring plans

  $ 1,208   $ 158   $ 316   $ (504 ) $ 36   $ 1,056   $ 4,161   $ 4,766  
                                   

        At April 30, 2011 and October 31, 2010, HP included the long-term portion of the restructuring liability of $175 million and $297 million, respectively, in Other liabilities, and the short-term portion in Accrued restructuring in the accompanying Consolidated Condensed Balance Sheets.