Note 16: 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; imaging and printing-related products and services; multi-vendor customer services, including infrastructure technology and business process outsourcing, application development and support services, and consulting and integration services; enterprise information technology ("IT") infrastructure, including enterprise storage and server technology, networking products and solutions, and technology support and maintenance; and 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, Printing, the Enterprise Group, Enterprise Services, 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.

The Personal Systems segment and the Printing segment are structured beneath a broader 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.

HP has implemented certain organizational realignments. As a result of these realignments, HP re-evaluated its segment financial reporting structure and, effective in the first quarter of fiscal 2013, created two new financial reporting segments, the EG segment and the ES segment, and eliminated two other financial reporting segments, the ESSN segment and the Services segment. The EG segment consists of the business units within the former ESSN segment and most of the services offerings of the TS business unit, which was previously a part of the former Services segment. The ES segment consists of the ABS and ITO business units from the former Services segment, along with the end-user workplace support services business that was previously a part of the TS business unit.

Also as a result of these realignments, the financial results of the Personal Systems commercial products support business, which were previously reported as part of the TS business unit, are now reported as part of the Other business unit within the Personal Systems segment, and the financial results of the portion of the business intelligence services business that had continued to be reported as part of the Corporate Investments segment following the implementation of prior realignment actions are now reported as part of the ABS business unit. In addition, the end-user workplace support business, which, as noted above, was previously a part of the TS business unit and is now a part of the ES segment, is reported as part of the ITO business unit within that segment.

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

The 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, thin clients, tablets, retail POS systems, calculators and other related accessories, software, support and services for the commercial and consumer markets. HP groups commercial notebooks, commercial desktops and workstations into commercial PC's and consumer notebooks and consumer desktops into consumer PC's when describing its performance in these markets. Described below are HP's global business capabilities within Personal Systems.

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Commercial PCs are optimized for commercial uses, including enterprise and SMB customers, and for connectivity, reliability and manageability in networked environments. Commercial PCs include the HP ProBook and HP EliteBook lines of notebooks; the HP Compaq Pro, HP Compaq Elite, HP Pro and HP Elite lines of business desktops and all-in-ones, retail POS systems, HP Thin Clients and HP ElitePad Tablet PCs.

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Consumer PCs include the HP Spectre, HP ENVY, HP Pavilion and Compaq Presario series of multi-media consumer notebooks, desktops, including the TouchSmart line of touch-enabled notebooks and all-in-one desktops.

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Workstations are designed and optimized to reliably operate in high performance and demanding application environments, such as computer animation, graphic design, video and audio production, software development, financial trading, engineering design and analysis, architectural engineering, image analysis and energy exploration. HP offers Z desktop workstations, Z all-in-ones and EliteBook mobile workstations.

Printing provides consumer and commercial printer hardware, supplies, media, software and services, as well as scanning devices. Printing is also focused on imaging solutions in the commercial markets. HP groups laserjet, large format and Indigo printers into commercial hardware and inkjet printers into consumer hardware when describing our performance in these markets. Described below are HP's global business capabilities within Printing.

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Inkjet and Printing Solutions delivers HP's consumer and SMB inkjet solutions (hardware, supplies, media, and web-connected hardware and services). It includes single-function and all-in-one inkjet printers targeted toward consumers and SMBs, as well as ePrintCenter.

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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. HP Managed Solutions include managed service products, support and solutions delivered to enterprise customers partnering with third-party software providers to offer workflow solutions in the enterprise environment.

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Graphics Solutions include large format printing (Designjet and Scitex) and supplies, Indigo digital presses and supplies, inkjet high-speed production solutions and supplies, specialty printing systems and graphics services. Graphic Solutions targets print service providers, architects, engineers, designers, photofinishers and industrial solution providers.

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Software and Web Services delivers a robust platform and a suite of offerings, including photo-storage and printing offerings, such as Snapfish, document storage, entertainment services, web-connected printing, and PC back-up and related services.

The Enterprise Group provides servers, storage, networking, technology services 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. Described below are HP's business units and capabilities within EG.

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Industry Standard Servers offers ProLiant servers, running primarily Windows, Linux and virtualization platforms from software providers, such as Microsoft Corporation and VMware, Inc., and open sourced software from other major vendors while 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, blades and solutions for large, distributed computing companies (Hyperscale class) who buy and deploy compute nodes at a massive scale. HP recently launched its new HP Moonshot servers that deliver reductions in cost, space, energy and complexity.

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Business Critical Systems offers HP Integrity servers based on the Intel Itanium-based processor, HP Integrity NonStop solutions and scale-up x86 ProLiant Servers.

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Storage offers traditional storage and converged storage solutions. Traditional storage includes tape, storage networking and legacy external disk products such as EVA and XP. Converged storage solutions include 3PAR, StoreOnce, StoreVirtual and StoreAll products.

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Networking offers 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.

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Technology Services differentiates the HP product experience for customers with consulting and support services focused on the data center. Support services includes Datacenter Care, Foundation Care, Proactive Care and Lifecycle Event services that help align support service levels to business needs, as well as warranty support across EG's product lines. Consulting services, which are tightly aligned and optimized for HP's enterprise product portfolio, include data center, network and storage consulting, and education services, as well as converged cloud, mobility and big data consulting services.

Enterprise Services provides technology consulting, outsourcing and support services across infrastructure, applications and business process domains. ES is divided into Infrastructure Technology Outsourcing and Application and Business Services.

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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.

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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 ABS portfolio also includes intellectual property-based industry solutions, services and technologies to help clients better manage critical business processes. HP also offers services for customer relationship management, finance and administration, human resources, payroll and document processing.

Software provides IT management, information management and security solutions for businesses and enterprises of all sizes. HP's IT management solutions help customers around the world deliver applications and services that perform to defined standards and automate and assure the underlying infrastructure, be it traditional, cloud or hybrid. HP's information management solutions include its Autonomy platform, which is designed to help customers get faster answers from all of their structured and unstructured information. HP's security solutions provide customers with security at all levels of the enterprise—from the infrastructure through applications and information. HP's Software offerings include licenses, support, professional services, and software-as-a-service in order to provide an end-to-end solution to customers.

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 HP Labs, the webOS business and certain business incubation projects.

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 restructuring charges and any associated adjustments related to restructuring actions, amortization of 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.

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 classified as operating leases within HPFS. 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 reflected the 2013 changes to its reporting structure in prior financial reporting periods on an as-if basis, which has resulted in the transfer of revenue and operating profit among the Personal Systems, EG, ES and Corporate Investments segments. These changes had no impact on the previously reported financial results for the Printing, Software or HPFS segments. 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 three months ended April 30:

	Printing and Personal Systems

	Personal Systems		Printing		Enterprise Group		Enterprise Services		Software		HP Financial Services		Corporate Investments			Total
2013
Net revenue	$	7,325	$	6,033	$	6,591	$	5,889	$	868	$	866	$	10		$	27,582
Intersegment net revenue and other		259		48		228		110		73		15		—			733

Total segment net revenue	$	7,584	$	6,081	$	6,819	$	5,999	$	941	$	881	$	10		$	28,315

Earnings (loss) from operations	$	239	$	958	$	1,082	$	156	$	180	$	97	$	(56	)	$	2,656

2012
Net revenue	$	9,231	$	6,068	$	7,171	$	6,362	$	892	$	962	$	7		$	30,693
Intersegment net revenue and other		239		64		375		127		78		6		—			889

Total segment net revenue	$	9,470	$	6,132	$	7,546	$	6,489	$	970	$	968	$	7		$	31,582

Earnings (loss) from operations	$	516	$	808	$	1,352	$	237	$	172	$	96	$	(48	)	$	3,133

Selected operating results information for each business segment was as follows for the six months ended April 30:

	Printing and Personal Systems

	Personal Systems		Printing		Enterprise Group		Enterprise Services		Software		HP Financial Services		Corporate Investments			Total
2013
Net revenue	$	15,365	$	11,917	$	13,412	$	11,681	$	1,740	$	1,812	$	14		$	55,941
Intersegment net revenue and other		423		90		391		237		127		26		—			1,294

Total segment net revenue	$	15,788	$	12,007	$	13,803	$	11,918	$	1,867	$	1,838	$	14		$	57,235

Earnings (loss) from operations	$	462	$	1,911	$	2,166	$	232	$	337	$	198	$	(121	)	$	5,185

2012
Net revenue	$	17,883	$	12,294	$	14,201	$	12,634	$	1,779	$	1,902	$	36		$	60,729
Intersegment net revenue and other		479		96		627		226		137		16		1			1,582

Total segment net revenue	$	18,362	$	12,390	$	14,828	$	12,860	$	1,916	$	1,918	$	37		$	62,311

Earnings (loss) from operations	$	975	$	1,569	$	2,681	$	382	$	334	$	187	$	(98	)	$	6,030

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

	Three months ended April 30						Six months ended April 30

	2013			2012			2013			2012
	In millions
Net revenue:
Segment total	$	28,315		$	31,582		$	57,235		$	62,311
Elimination of intersegment net revenue and other		(733	)		(889	)		(1,294	)		(1,582	)

Total HP consolidated net revenue	$	27,582		$	30,693		$	55,941		$	60,729

Earnings before taxes:
Total segment earnings from operations	$	2,656		$	3,133		$	5,185		$	6,030
Corporate and unallocated costs and eliminations		(179	)		(203	)		(288	)		(356	)
Unallocated costs related to stock-based compensation expense		(107	)		(168	)		(291	)		(342	)
Amortization of purchased intangible assets		(350	)		(470	)		(700	)		(936	)
Restructuring charges		(408	)		(53	)		(538	)		(93	)
Acquisition-related charges		(11	)		(17	)		(15	)		(39	)
Interest and other, net		(193	)		(243	)		(372	)		(464	)

Total HP consolidated earnings before taxes	$	1,408		$	1,979		$	2,981		$	3,800

In connection with certain fiscal 2013 organizational realignments, HP reclassified total assets between its EG and ES financial reporting segments. Following the realignments, the total assets of EG and ES were $32.9 billion and $18.8 billion, respectively, as of October 31, 2012. There have been no material changes to the total assets of HP's individual segments since October 31, 2012.

Net revenue by segment and business unit

	Three months ended April 30						Six months ended April 30

	2013			2012			2013			2012
	In millions
Net revenue:
Notebooks	$	3,718		$	4,900		$	7,846		$	9,842
Desktops		3,103			3,827			6,424			7,033
Workstations		521			537			1,056			1,072
Other		242			206			462			415

Personal Systems		7,584			9,470			15,788			18,362

Supplies		4,122			4,060			8,015			8,139
Commercial Hardware		1,398			1,479			2,752			2,968
Consumer Hardware		561			593			1,240			1,283

Printing		6,081			6,132			12,007			12,390

Printing and Personal Systems Group		13,665			15,602			27,795			30,752

Industry Standard Servers		2,806			3,186			5,800			6,258
Technology Services		2,272			2,335			4,515			4,599
Storage		857			990			1,690			1,945
Networking		618			614			1,226			1,200
Business Critical Systems		266			421			572			826

Enterprise Group		6,819			7,546			13,803			14,828

Infrastructure Technology Outsourcing		3,721			3,954			7,457			7,934
Application and Business Services		2,278			2,535			4,461			4,926

Enterprise Services		5,999			6,489			11,918			12,860

Software		941			970			1,867			1,916
HP Financial Services		881			968			1,838			1,918
Corporate Investments		10			7			14			37

Total segments		28,315			31,582			57,235			62,311

Eliminations of intersegment net revenue and other		(733	)		(889	)		(1,294	)		(1,582	)

Total HP consolidated net revenue	$	27,582		$	30,693		$	55,941		$	60,729