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Segment Information
 3 Months Ended
Jan. 31, 2014
Segment Information  
Segment Information

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 server and storage 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 segments for financial reporting purposes: Personal Systems, Printing, the Enterprise Group, Enterprise Services, Software, HP Financial Services 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 segments are based on this organizational structure and information reviewed by HP's management to evaluate 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 reportable segment, HP sometimes provides financial data aggregating the Personal Systems and the Printing segments within it in order to provide a supplementary view of its business.

        A description of the types of products and services provided by 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 by creating a unified business that is customer-focused and poised to capitalize on rapidly shifting industry trends. Each of the segments within PPS is described below.

        Personal Systems provides commercial personal computers ("PCs"), consumer PCs, workstations, thin clients, tablets, retail point-of-sale ("POS") systems, calculators and other related accessories, software, support and services for the commercial and consumer markets. HP groups commercial notebooks, commercial desktops, commercial tablets and workstations into commercial clients and consumer notebooks, consumer desktops and consumer tablets into consumer clients when describing its performance in these markets. Described below are HP's global business capabilities within Personal Systems.

  • •
    Commercial PCs are optimized for use by commercial customers, 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 Pro and HP Elite lines of business desktops and all-in-ones, retail POS systems, HP Thin Clients and HP ElitePad Tablet PCs. Commercial PCs also include Workstations that are designed and optimized to reliably operate in high performance and demanding application environments including Z desktop workstations, Z all-in-ones and Z mobile workstations.

    •
    Consumer PCs include the HP Spectre, HP ENVY, HP Pavilion, HP Chromebooks and HP Split series of multi-media consumer notebooks, consumer tablets, hybrids (detachable tablets), desktops, including the TouchSmart line of touch-enabled notebooks and all-in-one desktops. Consumer PCs also use the Compaq and Slate sub-brands for certain product offerings.

        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.

  • •
    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. Ongoing initiatives and programs such as Ink in the Office and Ink Advantage and newer initiatives such as Instant Ink are meant to provide innovative printing solutions to consumers and SMBs and include HP's Officejet Premium and Officejet Pro inkjet product portfolios.

    •
    LaserJet and Enterprise Solutions delivers HP's commercial and laserjet products, services and solutions to SMB and enterprise segments, including LaserJet printers and supplies (toner), multi-function devices, scanners, web-connected hardware and managed services, and enterprise software solutions, such as Web Jetadmin. Our Managed Print Services business provides printing equipment, supplies, support, workflow optimization and security services for SMB and enterprise customers around the world, utilizing proprietary HP tools and fleet management solutions as well as third-party software.

    •
    Graphics Solutions offers 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.

    •
    Software and Web Services delivers 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 and technology services that, when combined with HP's Cloud solutions, enable the customers to manage applications across public cloud, virtual private cloud, private cloud and traditional IT environments. Described below are HP's business units and capabilities within EG.

  • •
    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 x86 processors from Intel Corporation and Advanced Micro Devices, Inc. The business spans a range of server product lines, including microservers, towers, traditional rack, density-optimized rack and blades, as well as hyperscale solutions for large, distributed computing companies who buy and deploy nodes at a massive scale. The recently launched HP Moonshot servers, which operate on ARM-based, AMD-based and Intel® Atom™-based processors, offer reduced cost, space, energy and complexity compared to traditional servers.

    •
    Business Critical Systems offers HP Integrity servers based on the Intel® Itanium®-based processor, HP Integrity NonStop solutions and mission critical x86 ProLiant Servers.

    •
    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 StoreServ, StoreOnce, StoreVirtual, and StoreAll products.

    •
    Networking offers switches, routers, wireless local area network ("WLAN") and network management products that span the data center, campus and branch environments and deliver software-defined networking and unified communications capabilities. HP's unified wired and wireless networking offerings include both WLAN access points and controllers/switches.

    •
    Technology Services provides technology consulting and support service focused on cloud, mobility and big data and provides IT organizations with advice, design, implementation, migration and optimization of HP's Enterprise Group platforms: servers, storage, networking and converged infrastructure. Support services include Datacenter Care, Foundation Care, Proactive Care, Flexible Capacity services and Lifecycle Event services. These services are available in the form of service contracts, pre-packaged offerings or on a customized basis.

        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.

  • •
    Infrastructure Technology Outsourcing delivers comprehensive services that encompass the management of data centers, IT security, cloud computing, workplace technology, network, unified communications, and enterprise service management.

    •
    Application and Business Services helps clients develop, revitalize and manage their applications and information assets. The portfolio also includes intellectual property-based industry solutions along with technologies and related services, all of which help clients better manage their critical business processes for customer relationship management, finance and administration, human resources, payroll and document processing.

        Software provides IT management, information management, big data and security solutions for businesses and enterprises of all sizes to help them navigate the new style of IT. HP's IT management solutions help customers deliver applications and services that perform to defined standards and automate and assure the underlying infrastructure, be it traditional, cloud or hybrid. HP's big data solutions include the HP HAVEn Big Data platform, which, together with the Autonomy, Vertica, and security products, is designed to help customers manage their structured and unstructured information securely. HP's security solutions provide security from the infrastructure through applications and information.

        HP's software offerings include licenses, support, professional services and Software-as-a-Service ("SaaS"). Described below are HP's global business capabilities within Software.

  • •
    IT Operations Management, which is part of our IT Management offerings, provides software required to automate routine IT tasks and to pinpoint IT problems when they occur, helping enterprises to reduce operational costs and improve the reliability of applications running in a traditional, cloud or hybrid environment.

    •
    Application Delivery Management, which is part of our IT Management offerings, provides software that enables organizations to deliver high performance applications for the new style of IT by automating the processes required to ensure the quality and scalability of desktop, web, mobile and cloud-based applications.
    •
    Enterprise Security software is designed to disrupt fraud, hackers and cyber criminals by scanning software and websites for security vulnerabilities, improving network defenses and providing real-time warning of threats as they emerge.

    •
    HP Autonomy offers a wide-array of software that enable enterprises to monetize and protect their information such as video, audio and text documents through solutions for marketing optimization, information governance and e-discovery.

    •
    Vertica is HP's next-generation Big Data analytics software, designed to capture and analyze information at massive scale and speed while reducing costs by using open-system infrastructure.

        HP Financial Services acts as a strategic enabler for HP by providing financing for customers to purchase complete IT solutions, including hardware, software and services from HP. HPFS offers financial solutions to customers to manage to the lowest total cost of ownership—from planning and acquiring technology all the way to replacing or retiring it. HPFS offers leasing, financing, utility programs and asset management services for large enterprise customers. HPFS also helps customers to manage the risks of older or surplus IT equipment, which helps provide full life cycle coverage to HPFS customers.

        Corporate Investments includes HP Labs 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 segment results are substantially the same as those the consolidated company uses. Management measures the performance of each 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 segments.

        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 the elimination of intersegment revenues from such arrangements in accordance with U.S. GAAP.

        Financing interest in the Consolidated Condensed Statements of Earnings reflects interest expense on debt attributable to HPFS. Debt attributable to HPFS consists of intercompany equity that is treated as debt for segment reporting purposes, intercompany debt and borrowing and funding-related activity associated with HPFS and its subsidiaries.

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

        Effective at the beginning of its first quarter of fiscal 2014, HP implemented certain organizational changes to align its segment financial reporting more closely with its current business structure. These organizational changes include:

  • •
    transferring the HP Exstream business from the Commercial Hardware business unit within the Printing segment to the Software segment;

    •
    transferring the Personal Systems trade and warranty support business from the TS business unit within the EG segment to the Other business unit within the Personal Systems segment;

    •
    transferring the spare and replacement parts business supporting the Personal Systems and Printing segments from the TS business unit within the EG segment to the Other business unit within the Personal Systems segment and the Commercial Hardware business unit within the Printing segment, respectively;

    •
    transferring certain cloud-related incubation activities previously reported in Corporate and unallocated costs and eliminations and in the EG segment to the Corporate Investments segment.

        In addition, HP transferred certain intrasegment eliminations from the ES segment and the EG segment to corporate intersegment revenue eliminations.

        HP has reflected these changes to its segment information in prior periods on an as-if basis, which has resulted in the transfer of revenue among the Printing, Personal Systems, EG, ES and Software segments and the transfer of operating profit among the Printing, Personal Systems, EG, Software and Corporation Investments segments. These changes had no impact on the previously reported financial results for the HPFS segment. In addition, none of these changes impacted HP's previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share. The organizational changes did not have a material effect on segment assets.

        There have been no material changes to the total assets of HP's individual segments since October 31, 2013.

        Selected segment operating results were as follows:

 
   Personal Systems
and Printing		    
    
    
    
    
    
  
 
   Personal
Systems		   Printing   Enterprise
Group		   Enterprise
Services		   Software   HP
Financial
Services		   Corporate
Investments		   Total  
 
   In millions
  

Three months ended January 31, 2014

                                                  

Net revenue

   $ 8,310   $ 5,782   $ 6,791   $ 5,283   $ 846   $ 854   $ 288   $ 28,154  

Eliminations of intersegment net revenue and other

     220     33     202     312     70     16     —   $ 853  
                                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total segment net revenue

   $ 8,530   $ 5,815   $ 6,993   $ 5,595   $ 916   $ 870   $ 288   $ 29,007  
                                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                                   

Earnings from operations

   $ 279   $ 979   $ 1,006   $ 57   $ 145   $ 101   $ 121   $ 2,688  
                                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                                   

Three months ended January 31, 2013

                                                  

Net revenue

   $ 8,068   $ 5,904   $ 6,748   $ 5,792   $ 897   $ 946   $ 4   $ 28,359  

Eliminations of intersegment net revenue and other

     164     42     200     246     54     11     —     717  
                                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total segment net revenue

   $ 8,232   $ 5,946   $ 6,948   $ 6,038   $ 951   $ 957   $ 4   $ 29,076  
                                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                                   

Earnings (Loss) from operations

   $ 233   $ 967   $ 1,070   $ 76   $ 155   $ 101   $ (73 ) $ 2,529  
                                   
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
                                   

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

 
   Three months ended
January 31		  
 
   2014   2013  
 
   In millions
  

Net Revenue:

              

Total segment

   $ 29,007   $ 29,076  

Elimination of intersegment net revenue and other

     (853 )   (717 )
           
​ ​ ​ ​ ​ ​ ​ ​

Total HP consolidated

   $ 28,154   $ 28,359  
           
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
           

Earnings before taxes:

              

Total segment earnings from operations

   $ 2,688   $ 2,529  

Corporate and unallocated costs and eliminations

     (121 )   (109 )

Unallocated costs related to stock-based compensation

     (170 )   (184 )

Amortization of intangible assets

     (283 )   (350 )

Restructuring charges

     (114 )   (130 )

Acquisition-related charges

     (3 )   (4 )

Interest and other, net

     (163 )   (179 )
           
​ ​ ​ ​ ​ ​ ​ ​

Total HP consolidated

   $ 1,834   $ 1,573  
           
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​
           

        Net revenue by segment and business unit was as follows:

 
   Three months ended
January 31		  
 
   2014   2013  
 
   In millions
  

Notebooks

   $ 4,335   $ 4,128  

Desktops

     3,274     3,321  

Workstations

     533     535  

Other

     388     248  
           
​ ​ ​ ​ ​ ​ ​ ​

Personal Systems

     8,530     8,232  
           
​ ​ ​ ​ ​ ​ ​ ​

Supplies

     3,795     3,893  

Commercial Hardware

     1,347     1,374  

Consumer Hardware

     673     679  
           
​ ​ ​ ​ ​ ​ ​ ​

Printing

     5,815     5,946  
           
​ ​ ​ ​ ​ ​ ​ ​

Total Personal Systems and Printing

     14,345     14,178  
           
​ ​ ​ ​ ​ ​ ​ ​

Industry Standard Servers

     3,178     2,994  

Technology Services

     2,123     2,207  

Storage

     834     833  

Networking

     630     608  

Business Critical Systems

     228     306  
           
​ ​ ​ ​ ​ ​ ​ ​

Enterprise Group

     6,993     6,948  
           
​ ​ ​ ​ ​ ​ ​ ​

Infrastructure Technology Outsourcing

     3,501     3,855  

Application and Business Services

     2,094     2,183  
           
​ ​ ​ ​ ​ ​ ​ ​

Enterprise Services

     5,595     6,038  
           
​ ​ ​ ​ ​ ​ ​ ​

Software

     916     951  

HP Financial Services

     870     957  

Corporate Investments

     288     4  
           
​ ​ ​ ​ ​ ​ ​ ​

Total segment net revenue

     29,007     29,076  
           
​ ​ ​ ​ ​ ​ ​ ​

Eliminations of intersegment net revenue and other

     (853 )   (717 )
           
​ ​ ​ ​ ​ ​ ​ ​

Total HP consolidated net revenue

   $ 28,154   $ 28,359  
           
​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​