Segment Information

12 Months Ended

Oct. 31, 2012

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 ("SMBs"), and large enterprises, including customers in the government, health and education sectors. HP's 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 ("IT") infrastructure, including enterprise storage and server technology, networking products and solutions, IT management software, information management solutions and security intelligence/risk management solutions.

        HP's operations are organized into seven reportable business segments for financial reporting purposes: Personal Systems (formerly known as the Personal Systems Group or "PSG"), Printing (formerly known as the Imaging and Printing Group or "IPG"), Services, ESSN, 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 reportable business segments are based on this organizational structure and information reviewed by HP's management to evaluate the business segment results.

        As part of a realignment of the structure of HP's business in fiscal 2012, HP has structured the Personal Systems segment and the Printing segment beneath a newly formed Printing and Personal Systems Group ("PPS"). While PPS is not a financial reporting segment, HP sometimes provides financial data aggregating the segments within it in order to provide a supplementary view of its business.

        Effective November 1, 2012, HP created the Enterprise Group segment consisting of the business units within its ESSN segment and the TS business unit, which is a part of its existing Services segment. The remaining business units in HP's Services segment, ITO and ABS, will combine to comprise a new Enterprise Services segment.

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

Printing and Personal Systems Group's mission is to leverage the respective strengths of the Personal Systems business and the Printing business in creating a single, unified business that is customer-focused and poised to capitalize on rapidly shifting industry trends. Each of the business segments within PPS is described in detail below.

• •

  Personal Systems 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 Pavilion, HP Elite, Envy and Compaq Presario 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.

  •

  Printing provides consumer and commercial printer hardware, supplies, media and scanning devices. Printing is also focused on imaging solutions in the commercial markets. These solutions range from managed print services to 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). It includes single-function and all-in-one inkjet printers targeted toward consumers and SMBs, as well as Snapfish and ePrintCenter. LaserJet and Enterprise Solutions delivers products, services and solutions to the SMB 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, support 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) and supplies, Indigo digital presses and supplies, inkjet high-speed production solutions and supplies, speciality printing systems and graphics services. Graphic Solutions targets print service providers, architects, engineers, designers, photofinishers and industrial solution providers.

  •

  Services provides technology consulting, outsourcing and support services across infrastructure, applications and business process domains. Services is divided into three main areas: Infrastructure Technology Outsourcing, Technology Services and Application and Business Services. Infrastructure Technology Outsourcing delivers comprehensive services that encompass the data center, IT security, Cloud-based computing, workplace technology, network, unified communications, and enterprise service management. Technology Services provides technology consulting and support services for transforming IT, and converging and supporting IT infrastructure. The technology consulting portfolio includes strategic IT advisory services, cloud consulting services, unified communications solutions, data center transformation services and education consulting services. In addition to warranty support across HP's product lines, support services includes HP Foundation Care, the portfolio of reactive hardware and software support services; HP Proactive Care, which includes advanced remote system-monitoring tools, continuous onsite rapid response and direct access to HP's technical experts and resources; HP Datacenter Care for flexible customer support for HP and multivendor systems; and Lifecycle Event services, which are event-based services offering HP's technology expertise and consulting for each phase of the technology life cycle. Application and Business Services helps clients develop, revitalize and manage their applications and information assets. This full application life cycle approach encompasses application development, testing, modernization, system integration, maintenance and management for both packaged and custom-built applications. The Application and Business Services portfolio also includes intellectual property-based industry solutions, services and technologies to help clients better manage critical business processes. HP also offer services for customer relationship management, finance and administration, human resources, payroll and document processing.

  •

  Enterprise Servers, Storage and Networking provides server, storage, networking and, when combined with HP's Cloud Service Automation software suite, the HP CloudSystem. The CloudSystem enables infrastructure, platform and software-as-a-service in private, public or hybrid environments. Industry Standard Servers offers ProLiant servers, running primarily Windows, Linux and virtualization platforms from Microsoft Corporation, VMware, Inc. and other major vendors and leveraging Intel Corporation and Advanced Micro Devices, Inc. x86 processors. The business spans a range of server product lines, including pedestal-tower, traditional rack, density-optimized rack, HP's BladeSystem family of server blades and solutions for large distributed computing companies (Hyperscale class) who buy and deploy compute nodes at a massive scale. Business Critical Systems offers HP Integrity servers based on the Intel Itanium-based processor, HP Integrity NonStop solutions and scale-up x86 ProLiant Servers for scalability of systems with more than four industry standard processors. HP's storage offerings include storage area networks, network attached storage, storage management software and virtualization technologies, StoreOnce data deduplication solutions, tape drives and tape libraries. HP's networking portfolio includes switches and routers that span the data center, campus and branch environments and deliver network management and unified communications. HP's wireless networking offerings include wireless LAN access points and controllers/switches.

  •

  Software provides enterprise information management solutions for both structured and unstructured data, IT management software and security intelligence/risk management solutions. Solutions are delivered in the form of traditional software licenses, software-as-a-service, hybrid or appliance deployment models. Augmented by support and professional services, HP software solutions allow IT organizations to gain customer insight and optimize infrastructure, operations, application life cycles, application quality, security, IT services and business processes. 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, the webOS business and certain business incubation projects. Business intelligence solutions enable business to standardize on consistent data management schemes, connect and share data across the enterprise and apply analytics.

  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, impairment and amortization of purchased intangible assets, impairment of goodwill, 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.

        Segment revenue includes revenues from sales to external customers and intersegment revenues that reflect transactions between the segments that are carried out at an arm's-length transfer price. Intersegment revenues primarily consist of sales of hardware and software that are sourced internally and, in the majority of the cases, are structured through HPFS as operating leases. HP's Consolidated Net Revenue is derived and reported after elimination of intersegment revenues for such arrangements in accordance with U.S. GAAP.

        To provide improved visibility and comparability, HP has reclassified segment operating results for fiscal 2011 and 2010 to conform to certain fiscal 2012 organizational realignments. The realignment resulted in transfer of revenue and operating profit among Services, Printing, ESSN, Software and Corporate Investments. In addition, revenue was transferred among the business units within Services. These realignments include:

• •

  The transfer of Indigo and Scitex support and the LaserJet and enterprise solutions trade support business from the TS business unit within Services to the Commercial Hardware business unit within Printing;

  •

  The transfer of the TippingPoint business from the Networking business unit within ESSN to Software;

  •

  The transfer of the business intelligence services business from Corporate Investments to a newly formed ABS business unit within Services;

  •

  The consolidation of the Application Services, Business Process Outsourcing and Other Services business units within Services into the new ABS business unit; and

  •

  The transfer of the information management services business from Software to the new ABS business unit within Services.

        These changes had no impact on the previously reported financial results for Personal Systems or HPFS. In addition, none of these changes impacted HP's previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.

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

	Printing and Personal Systems
	Personal Systems		Printing		Services		Enterprise Servers, Storage and Networking(1)		Software(2)		HP Financial Services		Corporate Investments(3)			Total
2012
Net revenue	$	34,699	$	24,266	$	34,365	$	19,379	$	3,757	$	3,784	$	107		$	120,357
Intersegment net revenue and other		951		221		557		1,112		303		35		1			3,180
Total segment net revenue	$	35,650	$	24,487	$	34,922	$	20,491	$	4,060	$	3,819	$	108		$	123,537
Earnings (loss) from operations	$	1,706	$	3,585	$	4,095	$	2,132	$	827	$	388	$	(238	)	$	12,495
2011
Net revenue	$	38,368	$	25,874	$	35,333	$	20,778	$	3,128	$	3,568	$	196		$	127,245
Intersegment net revenue and other		1,206		302		369		1,286		239		28		12			3,442
Total segment net revenue	$	39,574	$	26,176	$	35,702	$	22,064	$	3,367	$	3,596	$	208		$	130,687
Earnings (loss) from operations	$	2,350	$	3,927	$	5,203	$	2,997	$	722	$	348	$	(1,619	)	$	13,928
2010
Net revenue	$	40,003	$	25,941	$	35,169	$	19,068	$	2,602	$	3,037	$	214		$	126,033
Intersegment net revenue and other		738		235		107		1,178		210		10		—			2,479
Total segment net revenue	$	40,741	$	26,176	$	35,276	$	20,246	$	2,812	$	3,047	$	214		$	128,512
Earnings (loss) from operations	$	2,032	$	4,357	$	5,714	$	2,814	$	787	$	281	$	(358	)	$	15,627

⁽¹⁾

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

⁽²⁾

Includes the results of ArcSight and Autonomy from the dates of acquisition in October 2010 and October 2011, respectively.

⁽³⁾

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:

	2012			2011			2010
	In millions
Earnings before taxes:
Total segment earnings from operations	$	12,495		$	13,928		$	15,627
Corporate and unallocated costs and eliminations		(790	)		(314	)		(614	)
Unallocated costs related to certain stock-based compensation expense		(632	)		(618	)		(613	)
Amortization of purchased intangible assets		(1,784	)		(1,607	)		(1,484	)
Impairment of goodwill and purchased intangible assets		(18,035	)		(885	)		—
Acquisition-related charges		(45	)		(182	)		(293	)
Restructuring charges		(2,266	)		(645	)		(1,144	)
Interest and other, net		(876	)		(695	)		(505	)
Total HP consolidated (loss) earnings before taxes	$	(11,933	)	$	8,982		$	10,974

        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:

	2012		2011		2010
	In millions
Personal Systems	$	12,752	$	15,781	$	16,548
Printing		11,169		11,939		12,514
Printing and Personal Systems Group		23,921		27,720		29,062
Services		31,234		40,614		41,989
Enterprise Servers, Storage and Networking		16,000		17,539		18,262
Software		12,264		21,028		9,979
HP Financial Services		12,924		13,543		12,123
Corporate Investments		248		517		1,619
Corporate and unallocated assets		12,177		8,556		11,469
Total HP consolidated assets	$	108,768	$	129,517	$	124,503

        Assets allocated to the Personal Systems segment decreased 19% in fiscal 2012 driven largely by the recording of an impairment charge to purchased intangible assets related to a change in the branding strategy impacting the "Compaq" trade name as described further in Note 7. Assets allocated to the Services segment decreased 23% due primarily to the recording of an impairment charge to goodwill related to the ES reporting unit as described further in Note 7. In addition, assets allocated to the Software segment decreased 42% due primarily to the recording of an impairment charge to goodwill and purchased intangible assets related to the Autonomy reporting unit as described further in Note 7.

        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 the Software segment 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 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:

	2012		2011		2010
	In millions
Net revenue:
U.S.	$	42,140	$	44,111	$	44,542
Non-U.S.		78,217		83,134		81,491
Total HP consolidated net revenue	$	120,357	$	127,245	$	126,033

        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, 2012, 2011 and 2010, 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, 2012, the United States, the Cayman Islands and Ireland each had 10% or more of HP's total consolidated net assets. At October 31, 2011, the United States and the Netherlands each 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.

        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:

	2012		2011		2010
	In millions
Net property, plant and equipment:
U.S.	$	5,894	$	6,126	$	6,479
U.K.		1,195		1,195		1,085
Other countries		4,865		4,971		4,199
Total HP consolidated net property, plant and equipment	$	11,954	$	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:

	2012			2011			2010
	In millions
Net revenue:
Notebooks	$	18,830		$	21,319		$	22,602
Desktops		13,888			15,260			15,519
Workstations		2,148			2,216			1,786
Other		784			779			834
Personal Systems		35,650			39,574			40,741
Supplies		16,151			17,154			17,249
Commercial Hardware		5,895			6,183			5,981
Consumer Hardware		2,441			2,839			2,946
Printing		24,487			26,176			26,176
Printing and Personal Systems Group		60,137			65,750			66,917
Infrastructure Technology Outsourcing		14,692			15,224			14,974
Technology Services		10,463			10,542			10,270
Application and Business Services		9,767			9,936			10,032
Services		34,922			35,702			35,276
Industry Standard Servers		12,582			13,521			12,574
Storage(1)		3,815			4,056			3,785
Business Critical Systems		1,612			2,095			2,292
Networking(2)		2,482			2,392			1,595
Enterprise Servers, Storage and Networking		20,491			22,064			20,246
Software(3)		4,060			3,367			2,812
HP Financial Services		3,819			3,596			3,047
Corporate Investments(4)		108			208			214
Total segments		123,537			130,687			128,512
Eliminations of inter-segment net revenue and other		(3,180	)		(3,442	)		(2,479	)
Total HP consolidated net revenue	$	120,357		$	127,245		$	126,033

⁽¹⁾

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

⁽²⁾

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

⁽³⁾

Includes the results of ArcSight and Autonomy from the dates of acquisition in October 2010 and October 2011, respectively.

⁽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.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Quarterly Summary
(Unaudited)
(In millions, except per share amounts)

	Three-month periods ended in fiscal 2012
	January 31			April 30			July 31			October 31
Net revenue	$	30,036		$	30,693		$	29,669		$	29,959
Cost of sales(1)		23,313			23,541			22,820			22,711
Research and development		786			850			854			909
Selling, general and administrative		3,367			3,540			3,366			3,227
Amortization of purchased intangible assets		466			470			476			372
Impairment of goodwill and purchased intangible assets		—			—			9,188			8,847
Restructuring charges		40			53			1,795			378
Acquisition-related charges		22			17			3			3
Total costs and expenses		27,994			28,471			38,502			36,447
Earnings (loss) from operations		2,042			2,222			(8,833	)		(6,488	)
Interest and other, net		(221	)		(243	)		(224	)		(188	)
Earnings (loss) before taxes		1,821			1,979			(9,057	)		(6,676	)
(Provision) benefit for taxes		(353	)		(386	)		200			(178	)
Net earnings (loss)	$	1,468		$	1,593		$	(8,857	)	$	(6,854	)
Net earnings (loss) per share:(2)
Basic	$	0.74		$	0.80		$	(4.49	)	$	(3.49	)
Diluted	$	0.73		$	0.80		$	(4.49	)	$	(3.49	)
Cash dividends paid per share	$	0.12		$	0.12		$	0.13		$	0.13
Range of per share stock prices on the New York Stock Exchange
Low	$	25.02		$	22.85		$	17.73		$	13.80
High	$	28.88		$	30.00		$	25.40		$	20.26

	Three-month periods ended in fiscal 2011
	January 31			April 30			July 31			October 31
Net revenue	$	32,302		$	31,632		$	31,189		$	32,122
Cost of sales(1)(3)		24,381			23,832			23,901			25,304
Research and development		798			815			812			829
Selling, general and administrative(3)		3,117			3,425			3,430			3,605
Amortization of purchased intangible assets		425			413			358			411
Impairment of goodwill and purchased intangible assets		—			—			—			885
Restructuring charges		158			158			150			179
Acquisition-related charges		29			21			18			114
Total costs and expenses		28,908			28,664			28,669			31,327
Earnings from operations		3,394			2,968			2,520			795
Interest and other, net		(97	)		(76	)		(121	)		(401	)
Earnings before taxes		3,297			2,892			2,399			394
Provision for taxes		(692	)		(588	)		(473	)		(155	)
Net earnings	$	2,605		$	2,304		$	1,926		$	239
Net earnings per share:(2)
Basic	$	1.19		$	1.07		$	0.94		$	0.12
Diluted	$	1.17		$	1.05		$	0.93		$	0.12
Cash dividends paid per share	$	0.08		$	0.08		$	0.12		$	0.12
Range of per share stock prices on the New York Stock Exchange
Low	$	40.77		$	37.60		$	33.95		$	21.50
High	$	47.83		$	49.39		$	41.74		$	35.50

⁽¹⁾

Cost of products, cost of services and financing interest.

⁽²⁾

EPS for each quarter is computed using the weighted-average number of shares outstanding during that quarter, while EPS for the fiscal year is computed using the weighted-average number of shares outstanding during the year. Thus, the sum of the EPS for each of the four quarters may not equal the EPS for the fiscal year.

⁽³⁾

In connection with organizational realignments implemented in the first quarter of fiscal 2012, certain costs previously reported as cost of sales have been reclassified as selling, general and administrative expenses to better align those costs with the functional areas that benefit from those expenditures.