Segment Information

12 Months Ended

Oct. 31, 2011

Segment Information

Segment Information

Note 19: Segment Information

• Description of Segments

        HP is a leading global provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses ("SMB"), and large enterprises, including customers in the government, health and education sectors. Our offerings span personal computing and other access devices; multi-vendor customer services, including infrastructure technology and business process outsourcing, technology support and maintenance, application development and support services and consulting and integration services; imaging and printing-related products and services; and enterprise information technology infrastructure, including enterprise storage and server technology, networking products and solutions, IT management software, information management solutions and security intelligence/risk management solutions.

        HP and its operations are organized into seven business segments for financial reporting purposes: the Personal Systems Group ("PSG"), Services, the Imaging and Printing Group ("IPG"), Enterprise Servers, Storage and Networking ("ESSN"), HP Software, HP Financial Services ("HPFS") and Corporate Investments. HP's organizational structure is based on a number of factors that management uses to evaluate, view and run its business operations, which include, but are not limited to, customer base, homogeneity of products and technology. The business segments are based on this organizational structure and information reviewed by HP's management to evaluate the business segment results.

        HP has reclassified segment operating results for fiscal 2010 and fiscal 2009 to conform to certain fiscal 2011 organizational realignments. None of the changes impacts HP's previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share. Future changes to this organizational structure may result in changes to the business segments disclosed.

        A description of the types of products and services provided by each business segment follows.

• •

  Personal Systems Group provides commercial PCs, consumer PCs, workstations, calculators and other related accessories, software and services for the commercial and consumer markets. Commercial PCs are optimized for commercial uses, including enterprise and SMB customers, and for connectivity and manageability in networked environments. Commercial PCs include the HP ProBook and HP EliteBook lines of notebooks and the Compaq Pro, Compaq Elite, HP Pro and HP Elite lines of business desktops, as well as the All-in-One Touchsmart and Omni PCs, HP Mini-Note PCs, retail POS systems, HP Thin Clients, and HP Slate Tablet PCs. Consumer PCs include the HP and Compaq series of multi-media consumer notebooks, desktops and mini notebooks, including the TouchSmart line of touch-enabled all-in-one notebooks and desktops. HP's workstations are designed for users demanding enhanced performance, such as computer animation, engineering design and other programs requiring high-resolution graphics, and run on both Windows and Linux-based operating systems.

  •

  Services provides consulting, outsourcing and technology services across infrastructure, applications and business process domains. Services is divided into four main business units: Infrastructure Technology Outsourcing, Technology Services, Applications Services and Business Process Outsourcing. Infrastructure Technology Outsourcing delivers comprehensive services that encompass the data center and the workplace (desktop); network and communications; security, compliance and business continuity; and enterprise managed services. Technology Services provides consulting and support services, including mission critical services, converged infrastructure services, networking services, data center transformation services and infrastructure services for storage, server and unified communication environments, as well as warranty support across HP's product lines. Applications Services helps clients revitalize and manage their applications assets through flexible, project-based consulting services and longer-term outsourcing contracts. These full life cycle services encompass application development, testing, modernization, system integration, maintenance and management. Business Process Outsourcing provides a broad array of enterprise shared services, customer relationship management services, financial process management services and administrative services.

  •

  Imaging and Printing Group provides consumer and commercial printer hardware, supplies, media and scanning devices. IPG is also focused on imaging solutions in the commercial markets. These solutions range from managed print services and capturing high-value pages in areas such as industrial applications, outdoor signage, and the graphic arts business. Inkjet and Web Solutions delivers HP's consumer and SMB inkjet solutions (hardware, supplies, media, web-connected hardware and services) and develops HP's retail publishing and web businesses. It includes single function and all-in-one inkjet printers targeted toward consumers and SMBs, as well as retail publishing solutions, Snapfish and ePrintCenter. LaserJet and Enterprise Solutions delivers products, services and solutions to the medium-sized business and enterprise segments, including LaserJet printers and supplies, multi-function devices, scanners, web-connected hardware and services and enterprise software solutions, such as Exstream Software and Web Jetadmin. Managed Enterprise Solutions include managed print service products and solutions delivered to enterprise customers partnering with third-party software providers to offer workflow solutions in the enterprise environment. Graphics solutions include large format printing (Designjet and Scitex), large format supplies, WebPress supplies, Indigo printing, specialty printing systems and inkjet high-speed production solutions. HP's printer supplies offerings include LaserJet toner and inkjet printer cartridges, graphic solutions ink products and other printing-related media.

  •

  Enterprise Servers, Storage and Networking provides server, storage, networking and, when combined with HP Software's Cloud Service Automation software suite, HP's CloudSystem. The CloudSystem enables infrastructure, platform and software-as-a-service in private, public or hybrid environments. Industry Standard Servers offers primarily entry-level and mid-range ProLiant servers, which run primarily Windows, Linux and Novell operating systems and leverage Intel and AMD processors. The business spans a range of product lines, including pedestal-tower servers, density-optimized rack servers and HP's BladeSystem family of server blades. Business Critical Systems offers HP Integrity servers based on the Intel Itanium-based processor as well as HP Integrity NonStop solutions. Business Critical Systems also offers scale-up x86 ProLiant Servers for scalability of systems with more than four industry standard processors. HP's Storage business offers a broad range of products including storage area networks, network attached storage, storage management software and virtualization technologies, StoreOnce data deduplication solutions, tape drives and tape libraries. HP's networking offerings include switch, router, wireless LAN and TippingPoint network security products.

  •

  HP Software provides enterprise IT management software, information management solutions, and security intelligence/risk management solutions. Solutions are delivered in the form of traditional software licenses or as software-as-a-service. Augmented by support and professional services, HP Software solutions allow large IT organizations to manage infrastructure, operations, application life cycles, application quality and security, IT services, business processes, and structured and unstructured data. In addition, these solutions help businesses proactively safeguard digital assets, comply with corporate and regulatory policies, and control internal and external security risks.

  •

  HP Financial Services supports and enhances HP's global product and services solutions, providing a broad range of value-added financial life cycle management services. HPFS enables HP's worldwide customers to acquire complete IT solutions, including hardware, software and services. HPFS offers leasing, financing, utility programs, and asset recovery services, as well as financial asset management services, for large global and enterprise customers. HPFS also provides an array of specialized financial services to SMBs and educational and governmental entities. HPFS offers innovative, customized and flexible alternatives to balance unique customer cash flow, technology obsolescence and capacity needs.

  •

  Corporate Investments includes business intelligence solutions, HP Labs, webOS software, and certain business incubation projects. Business intelligence solutions enable businesses to standardize on consistent data management schemes, connect and share data across the enterprise and apply analytics. This segment also derives revenue from licensing specific HP technology to third parties.

• Segment Data

        HP derives the results of the business segments directly from its internal management reporting system. The accounting policies HP uses to derive business segment results are substantially the same as those the consolidated company uses. Management measures the performance of each business segment based on several metrics, including earnings from operations. Management uses these results, in part, to evaluate the performance of, and to assign resources to, each of the business segments. HP does not allocate to its business segments certain operating expenses, which it manages separately at the corporate level. These unallocated costs include primarily restructuring charges and any associated adjustments related to restructuring actions, amortization of purchased intangible assets, impairment of goodwill and purchased intangible assets, stock-based compensation expense related to HP-granted employee stock options, PRUs, restricted stock awards and the employee stock purchase plan, certain acquisition-related charges and charges for purchased IPR&D, as well as certain corporate governance costs.

        Selected operating results information for each business segment was as follows for the following fiscal years ended October 31:

	Total Net Revenue						Earnings (Loss) from Operations
	2011		2010(1)		2009(1)		2011			2010(1)			2009(1)
	In millions
Personal Systems Group	$	39,574	$	40,741	$	35,305	$	2,350		$	2,032		$	1,661
Services		35,954		35,529		35,380		5,149			5,661			5,102
Imaging and Printing Group		25,783		25,764		24,011		3,973			4,412			4,310
Enterprise Servers, Storage and Networking(2)		22,241		20,356		16,121		3,026			2,825			1,657
HP Software(3)		3,217		2,729		2,655		698			782			731
HP Financial Services		3,596		3,047		2,673		348			281			206
Corporate Investments(4)		322		346		191		(1,616	)		(366	)		(300	)
Segment total	$	130,687	$	128,512	$	116,336	$	13,928		$	15,627		$	13,367

⁽¹⁾

Certain fiscal 2011 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. In fiscal 2010 and fiscal 2009, the reclassifications resulted in the transfer of revenue and operating profit among ESSN, HP Software, Services and Corporate Investments. Reclassifications between segments included the transfer of the networking business from Corporate Investments to ESSN, the transfer of the communications and media solutions business from HP Software to Services, and the transfer of the business intelligence business from HP Software to Corporate Investments. There was no impact on the previously reported financial results for PSG, HPFS or IPG.

⁽²⁾

Includes the results of 3Com and 3PAR from the dates of acquisition in April 2010 and September 2010, respectively.

⁽³⁾

Includes the results of ArcSight from the date of acquisition in October 2010.

⁽⁴⁾

Includes the results of Palm from the date of acquisition in July 2010 and the impact of the decision to wind down the webOS device business during the quarter ended October 31, 2011.

        The reconciliation of segment operating results information to HP consolidated totals was as follows for the following fiscal years ended October 31:

	2011			2010			2009
	In millions
Net revenue:
Segment total	$	130,687		$	128,512		$	116,336
Elimination of intersegment net revenue and other		(3,442	)		(2,479	)		(1,784	)
Total HP consolidated net revenue	$	127,245		$	126,033		$	114,552
Earnings before taxes:
Total segment earnings from operations	$	13,928		$	15,627		$	13,367
Corporate and unallocated costs and eliminations		(314	)		(614	)		(219	)
Unallocated costs related to certain stock-based compensation expense		(618	)		(613	)		(552	)
Amortization of purchased intangible assets		(1,607	)		(1,484	)		(1,578	)
Impairment of goodwill and purchased intangible assets		(885	)		—			—
Acquisition-related charges		(182	)		(293	)		(242	)
Restructuring charges		(645	)		(1,144	)		(640	)
Interest and other, net		(695	)		(505	)		(721	)
Total HP consolidated earnings before taxes	$	8,982		$	10,974		$	9,415

        HP allocates its assets to its business segments based on the primary segments benefiting from the assets. Total assets by segment and the reconciliation of segment assets to HP consolidated total assets were as follows at October 31:

	2011		2010		2009
	In millions
Personal Systems Group	$	15,781	$	16,548	$	15,767
Services		40,614		41,989		41,189
Imaging and Printing Group		11,939		12,514		12,173
Enterprise Servers, Storage and Networking		17,539		18,262		12,185
HP Software		21,028		9,979		8,546
HP Financial Services		13,543		12,123		10,842
Corporate Investments		517		1,619		391
Corporate and unallocated assets		8,556		11,469		13,706
Total HP consolidated assets	$	129,517	$	124,503	$	114,799

        The total assets allocated to the Corporate Investments segment decreased 68% in fiscal 2011 mostly due to an impairment charge to goodwill and certain purchased intangible assets associated with the Palm acquisition following the decision to wind down the webOS device business. Assets allocated to HP software increased by 111% in fiscal 2011 due to the acquisition of Autonomy. In addition, in connection with certain fiscal 2011 organizational realignments, HP reclassified total assets of its networking business from Corporate Investments to ESSN and total assets of the communications and media solutions business from HP Software to Services. There have been no other material changes to the total assets of HP's segments since October 31, 2010.

• Major Customers

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

• Geographic Information

        Net revenue, classified by the major geographic areas in which HP operates, was as follows for the following fiscal years ended October 31:

	2011		2010		2009
	In millions
Net revenue:
U.S.	$	44,111	$	44,542	$	41,314
Non-U.S.		83,134		81,491		73,238
Total HP consolidated net revenue	$	127,245	$	126,033	$	114,552

        Net revenue by geographic area is based upon the sales location that predominately represents the customer location. For each of the years ended October 31, 2011, 2010 and 2009, other than the United States, no country represented more than 10% of HP's total consolidated net revenue. HP reports revenue net of sales taxes, use taxes and value-added taxes directly imposed by governmental authorities on HP's revenue producing transactions with its customers.

        At October 31, 2011, the United States and the Netherlands had 10% or more of HP's total consolidated net assets. At October 31, 2010, no single country other than the United States had 10% or more of HP's total consolidated net assets. At October 31, 2009, Belgium and the United States held 10% or more of HP's total consolidated net assets.

        No single country other than the United States had more than 10% of HP's total consolidated net property, plant and equipment in any period presented. HP's long-lived assets other than goodwill and purchased intangible assets are composed principally of net property, plant and equipment.

        Net property, plant and equipment, classified by major geographic areas in which HP operates, was as follows for the following fiscal years ended October 31:

	2011		2010
	In millions
Net property, plant and equipment:
U.S.	$	6,126	$	6,479
Non-U.S.		6,166		5,284
Total HP consolidated net property, plant and equipment	$	12,292	$	11,763

• Net revenue by segment and business unit

        The following table provides net revenue by segment and business unit for the following fiscal years ended October 31:

		2011			2010(1)			2009(1)
		In millions
Net revenue:
	Notebooks	$	21,319		$	22,602		$	20,223
	Desktops		15,260			15,519			12,892
	Workstations		2,216			1,786			1,261
	Other(2)		779			834			929
Personal Systems Group			39,574			40,741			35,305
	Infrastructure Technology Outsourcing		15,189			14,942			14,563
	Technology Services		10,879			10,627			10,665
	Application Services		6,852			6,792			6,926
	Business Process Outsourcing		2,672			2,872			2,977
	Other		362			296			249
Services			35,954			35,529			35,380
	Supplies		17,154			17,249			16,532
	Commercial Hardware		5,790			5,569			4,778
	Consumer Hardware		2,839			2,946			2,701
Imaging and Printing Group			25,783			25,764			24,011
	Industry Standard Servers		13,521			12,574			9,296
	Storage(3)		4,056			3,785			3,473
	Business Critical Systems		2,095			2,292			2,590
	HP Networking(4)		2,569			1,705			762
Enterprise Servers, Storage and Networking			22,241			20,356			16,121
HP Software(5)			3,217			2,729			2,655
HP Financial Services			3,596			3,047			2,673
Corporate Investments(6)			322			346			191
	Total segments		130,687			128,512			116,336
Eliminations of inter-segment net revenue and other			(3,442	)		(2,479	)		(1,784	)
	Total HP consolidated net revenue	$	127,245		$	126,033		$	114,552

⁽¹⁾

Certain fiscal 2011 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. In fiscal 2010 and fiscal 2009, the reclassifications resulted in the transfer of revenue and operating profit among ESSN, HP Software, Services and Corporate Investments. Reclassifications between segments included the transfer of the networking business from Corporate Investments to ESSN, the transfer of the communications and media solutions business from HP Software to Services, and the transfer of the business intelligence business from HP Software to Corporate Investments. Revenue was also transferred among the business units within Services and within PSG. In addition, net revenue reported for the Infrastructure Technology Outsourcing business unit and eliminations of inter-segment net revenue have both been reduced to reflect a change in inter-segment reporting model. There was no impact on the previously reported financial results for HPFS and IPG or for the business units within IPG.

⁽²⁾

The Handhelds business unit, which includes devices that run on Windows Mobile software, was realigned into the Other business unit within PSG in fiscal 2011.

⁽³⁾

Includes the results of 3PAR from the date of acquisition in September 2010.

⁽⁴⁾

The networking business was added to ESSN in fiscal 2011. Also includes the results of 3Com from the date of acquisition in April 2010.

⁽⁵⁾

The Business Technology Optimization and Other Software business units were consolidated into a single business unit within the HP Software segment in fiscal 2011. Also includes the results of ArcSight from the date of acquisition in October 2010.

⁽⁶⁾

Includes the results of Palm from the date of acquisition in July 2010 and the impact of the decision to wind down the webOS device business during the quarter ended October 31, 2011.