Acquisitions and Divestitures

9 Months Ended

Jul. 31, 2015

Acquisitions and Divestitures

Acquisitions and Divestitures

Note 9: Acquisitions and Divestitures

Acquisitions

        During the nine months ended July 31, 2015, HP completed four acquisitions. The purchase price allocation for these acquisitions as set forth in the table below reflects various preliminary fair value estimates and analyses, including preliminary work performed by third-party valuation specialists, which are subject to change within the measurement period as valuations are finalized. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair values of certain tangible assets and liabilities acquired, the valuation of intangible assets acquired, certain legal matters, income and non-income based taxes, and residual goodwill. HP expects to continue to obtain information to assist it in determining the fair value of the net assets acquired at the acquisition date during the measurement period. Measurement period adjustments that HP determines to be material will be applied retrospectively to the period of acquisition in HP's consolidated financial statements and, depending on the nature of the adjustments, other periods subsequent to the period of acquisition could also be affected.

        Pro forma results of operations for these acquisitions have not been presented because they are not material to HP's consolidated results of operations, either individually or in the aggregate. Goodwill, which represents the excess of the purchase price over the net tangible and intangible assets acquired, is not deductible for tax purposes.

        The following table presents the aggregate purchase price allocation, including those items that are still preliminary allocations, for HP's acquisitions during the nine months ended July 31, 2015:

	In millions
Goodwill	$	1,959
Amortizable intangible assets		687
In-process research and development		155
Net assets assumed		240
Total fair value of consideration	$	3,041

Acquisition of Aruba

        HP's largest acquisition during the nine months ended July 31, 2015 was the acquisition of Aruba, which was completed in May 2015. Aruba is a leading provider of next-generation network access solutions for the mobile enterprise. HP reports the financial results of Aruba's business in the Networking business unit within the EG segment. The acquisition date fair value of consideration of $2.8 billion consisted of cash paid for outstanding common stock, vested in-the-money stock awards and the estimated fair value of earned unvested stock awards assumed by HP. In connection with this acquisition, HP recorded approximately $1.8 billion of goodwill, $628 million of intangible assets and $149 million of in-process research and development. HP is amortizing the intangible assets on a straight-line basis over an estimated weighted-average life of six years.

Divestitures

        During the third quarter of fiscal 2015, HP completed or was in the process of completing three divestitures which resulted in $156 million of proceeds. These divestitures included HP's sale of its web-based photo sharing and photo printing service, Snapfish, to digital imaging fulfillment services firm District Photo which was completed in a number of jurisdictions, including the United States. The sale is expected to be completed in remaining jurisdictions by the end of fiscal 2015, subject to customary closing conditions. Snapfish was previously reported within the Consumer Hardware business unit within the Printing segment. Additionally, HP completed the sale of its iManage business, which was previously reported within the Software segment. The gains associated with these divestitures were included in Selling, general and administrative expenses on the Consolidated Condensed Statements of Earnings.

        In May 2015, HP and Tsinghua Holdings jointly announced a partnership that will bring together the Chinese enterprise technology assets of HP and Tsinghua University to create a Chinese provider of technology infrastructure. Under the definitive agreement, Tsinghua Holdings subsidiary, Unisplendour Corporation, will purchase 51% of a new business called H3C, comprising HP's current H3C Technologies and China-based server, storage and technology services businesses, for approximately $2.3 billion. HP China will maintain 100% ownership of its existing China-based Enterprise Services, Software, HP Helion Cloud, Printing and Personal Systems businesses. Once the transaction closes, the new H3C will be the exclusive provider for HP's server, storage and networking portfolio, as well as HP's exclusive hardware support services provider in China, customized for that market. The transaction is expected to close near the end of calendar 2015, subject to regulatory approvals and other closing conditions.