Note 2: Segment Information

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 the following:


	•	personal computing and other access devices;
	•	imaging- and printing-related products and services;
	•	enterprise information technology ("IT") infrastructure, including enterprise server and storage technology, networking products and solutions, and technology support and maintenance;
	•	multi-vendor customer services, including technology consulting, outsourcing and support services across infrastructure, applications and business process domains; and
	•	software products and solutions, including application testing and delivery, big data analytics, enterprise security, information governance, IT operations management and marketing optimization.

HP's operations are organized into seven segments for financial reporting purposes: Personal Systems, Printing, Enterprise Group ("EG"), Enterprise Services ("ES"), 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 and homogeneity of products and technology. The 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 may provide financial data aggregating the Personal Systems and the Printing segments in order to provide a supplementary view of its business.

A summary description of each 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 organization 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 systems, calculators and other related accessories, software, support and services for the commercial and consumer markets. HP groups commercial notebooks, commercial desktops, commercial services, commercial tablets, workstations and thin clients into commercial clients and consumer notebooks, consumer desktops, consumer services and consumer tablets into consumer clients when describing performance in these markets. Described below are HP's global business capabilities within Personal Systems.


	•	Commercial PCs are optimized for use by customers, including enterprise and SMB customers, and for connectivity, reliability and manageability in networked environments.
	•	Consumer PCs include multi-media notebooks, desktops, hybrids, and tablets.

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 printers and commercial inkjet printers into Commercial Hardware and consumer inkjet printers into Consumer Hardware when describing performance in these markets. Described below are HP's global business capabilities within Printing.


	•	LaserJet and Enterprise Solutions deliver HP's LaserJet and enterprise products, services and solutions to SMBs and large enterprises. Managed Print Services provides printing equipment, supplies, support, workflow optimization and security services for SMBs and enterprise customers around the world, utilizing proprietary HP tools and fleet management solutions as well as third-party software.
	•	Inkjet and Printing Solutions deliver HP's consumer and SMB inkjet solutions (hardware, supplies, media, and web-connected hardware and services). Ongoing initiatives and programs such as Ink in the Office and Ink Advantage and newer initiatives such as Instant Ink provide innovative printing solutions to consumers and SMBs.
	•	Graphics Solutions deliver large format printers (Designjet, Large Format Production, and Scitex Industrial), specialty printing, digital press solutions (Indigo and Inkjet Webpress), supplies and services to print service providers and design and rendering customers.
	•	Software and Web Services delivers a suite of solutions and services, including photo storage, printing offerings such as Snapfish and web-connected printing services.

The Enterprise Group provides servers, storage, networking and technology services that, when combined with HP's cloud solutions, enable 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 a range of products from entry-level servers through premium ProLiant servers, which run primarily Windows, Linux and virtualization platforms from software providers such as Microsoft Corporation ("Microsoft") and VMware, Inc. ("VMware") and open sourced software from other major vendors while leveraging x86 processors from Intel Corporation ("Intel") and Advanced Micro Devices, Inc. ("AMD").
	•	Business Critical Systems offers HP Integrity servers based on the Intel® Itanium® and x86 processors, 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 and StoreVirtual products.
	•	Networking offers wireless local area network, mobility and security software, switches, routers and network management products that span data centers, campus and branch environments and deliver software-defined networking and unified communications capabilities.
	•	Technology Services provides support services and technology consulting to integrate and optimize EG's hardware platforms, and focuses on cloud, mobility and big data. 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 comprised of the Infrastructure Technology Outsourcing ("ITO") and the Application and Business Services ("ABS") business units.


	•	Infrastructure Technology Outsourcing delivers comprehensive services that encompass the management of data centers, IT security, cloud computing, workplace technology, networks, unified communications and enterprise service management.
	•	Application and Business Services helps clients develop, revitalize and manage their applications and information assets.

Software provides application testing and delivery, big data analytics, enterprise security, information governance, IT operations management, and marketing optimization solutions for businesses and enterprises of all sizes. HP's software offerings include licenses, support, professional services and software-as-a-service.

HP Financial Services provides flexible investment solutions, such as leasing, financing, utility programs and asset management services, for customers to enable the creation of unique technology deployment models and acquire complete IT solutions, including hardware, software and services from HP and others. Providing flexible services and capabilities that support the entire IT lifecycle, HPFS partners with customers globally to help build investment strategies that enhance their business agility and support their business transformation. HPFS offers a wide selection of investment solution capabilities for large enterprise customers and channel partners, along with an array of financial options to SMBs and educational and governmental entities.

Corporate Investments includes HP Labs and certain cloud-related business incubation projects amongst others.

Segment Policy

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 allocate resources to, each of the segments.

Segment revenue includes revenues from sales to external customers and intersegment revenues that reflect transactions between the segments on an arm's-length basis. Intersegment revenues primarily consist of sales of hardware and software that are sourced internally and, in the majority of the cases, are financed as operating leases by HPFS. HP's consolidated net revenue is derived and reported after the elimination of intersegment revenues from such arrangements.

HP periodically engages in intercompany advanced royalty payment and licensing arrangements that may result in advance payments between subsidiaries. Revenues from these intercompany arrangements are deferred and recognized as earned over the term of the arrangement by the HP legal entities involved in such transactions; however, these advanced payments are eliminated from revenues as reported by HP and its business segments. As disclosed in Note 6, in the first quarter of fiscal 2015, HP executed an intercompany advanced royalty payment arrangement resulting in advanced payments of $8.2 billion, while during fiscal 2014 HP executed a multi-year intercompany licensing arrangement and intercompany advanced royalty payment arrangement which resulted in combined advanced payments of $11.5 billion. In these transactions, the payments were received in the U.S. from a foreign consolidated affiliate, with a deferral of intercompany revenues over the term of the arrangements, approximately 5 years and 15 years, respectively. The impact of these intercompany arrangements is eliminated from both HP consolidated and segment revenues.

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, acquisition-related charges, separation costs, defined benefit plan settlement charges and impairment of data center assets.

Segment Realignment

Effective at the beginning of its first quarter of fiscal 2015, HP implemented an organizational change to align its segment financial reporting more closely with its current business structure. This organizational change resulted in the transfer of third-party multi-vendor support arrangements from the Technology Services ("TS") business unit within the EG segment to the ITO business unit within the ES segment.

HP has reflected this change to its segment information retrospectively to the earliest period presented, which has resulted in the removal of intersegment revenue from the TS business unit within the EG segment and the related corporate intersegment revenue eliminations, and the transfer of operating profit from the TS business unit within the EG segment to the ITO business unit within the ES segment. This change had no impact on HP's previously reported consolidated net revenue, earnings from operations, net earnings or net EPS.

In connection with the acquisition of Aruba Networks, Inc. ("Aruba") in the third quarter of fiscal 2015, HP recorded approximately $1.8 billion of goodwill, $628 million of intangible assets and $149 million of in-process research and development. HP reports the financial results of Aruba's business in the Networking business unit within the EG segment. As of July 31, 2015, other than the EG segment, there have been no material changes to the total assets of HP's other individual segments since October 31, 2014.

Segment Operating Results

	Personal Systems and Printing Group
	Personal Systems		Printing		Enterprise Group		Enterprise Services		Software		HP Financial Services		Corporate Investments			Total
	In millions
Three months ended July 31, 2015
Net revenue	$	7,246	$	5,042	$	6,680	$	4,773	$	821	$	783	$	4		$	25,349
Intersegment net revenue and other		245		66		327		203		79		23		—			943

Total segment net revenue	$	7,491	$	5,108	$	7,007	$	4,976	$	900	$	806	$	4		$	26,292


Earnings (loss) from operations	$	222	$	910	$	912	$	297	$	185	$	87	$	(148	)	$	2,465


Three months ended July 31, 2014
Net revenue	$	8,368	$	5,514	$	6,666	$	5,328	$	873	$	833	$	3		$	27,585
Intersegment net revenue and other		281		76		206		262		86		22		—			933

Total segment net revenue	$	8,649	$	5,590	$	6,872	$	5,590	$	959	$	855	$	3		$	28,518


Earnings (loss) from operations	$	346	$	1,026	$	963	$	231	$	203	$	79	$	(115	)	$	2,733


Nine months ended July 31, 2015
Net revenue	$	23,046	$	15,911	$	19,683	$	14,179	$	2,452	$	2,348	$	22		$	77,641
Intersegment net revenue and other		729		193		866		607		211		66		—			2,672

Total segment net revenue	$	23,775	$	16,104	$	20,549	$	14,786	$	2,663	$	2,414	$	22		$	80,313


Earnings (loss) from operations	$	770	$	2,973	$	2,952	$	639	$	502	$	262	$	(416	)	$	7,682


Nine months ended July 31, 2014
Net revenue	$	24,638	$	17,063	$	19,852	$	16,054	$	2,610	$	2,534	$	297		$	83,048
Intersegment net revenue and other		717		176		623		833		236		58		—			2,643

Total segment net revenue	$	25,355	$	17,239	$	20,475	$	16,887	$	2,846	$	2,592	$	297		$	85,691


Earnings (loss) from operations	$	915	$	3,145	$	2,923	$	439	$	534	$	279	$	(92	)	$	8,143

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

	Three months ended July 31						Nine months ended July 31
	2015			2014			2015			2014
	In millions
Net Revenue:
Total segments	$	26,292		$	28,518		$	80,313		$	85,691
Elimination of intersegment net revenue and other		(943	)		(933	)		(2,672	)		(2,643	)

Total HP consolidated net revenue	$	25,349		$	27,585		$	77,641		$	83,048


Earnings before taxes:
Total segment earnings from operations	$	2,465		$	2,733		$	7,682		$	8,143
Corporate and unallocated costs and eliminations		(128	)		(265	)		(462	)		(637	)
Stock-based compensation expense		(160	)		(132	)		(476	)		(432	)
Amortization of intangible assets		(242	)		(227	)		(685	)		(774	)
Restructuring charges		(25	)		(649	)		(426	)		(1,015	)
Acquisition-related charges(1)		(47	)		(2	)		(70	)		(8	)
Separation costs		(401	)		—			(750	)		—
Defined benefit plan settlement charges		(114	)		—			(114	)		—
Impairment of data center assets		(136	)		—			(136	)		—
Interest and other, net		(108	)		(145	)		(421	)		(482	)

Total HP consolidated earnings before taxes	$	1,104		$	1,313		$	4,142		$	4,795


(1)	Acquisition-related charges in the current period primarily include a non-cash inventory fair value adjustment charge as well as professional service and legal fees associated with the acquisition of Aruba.

Net revenue by segment and business unit was as follows:

	Three months ended July 31						Nine months ended July 31
	2015			2014			2015			2014
	In millions
Notebooks	$	3,993		$	4,359		$	12,887		$	12,671
Desktops		2,700			3,395			8,411			10,012
Workstations		507			579			1,546			1,660
Other		291			316			931			1,012

Personal Systems		7,491			8,649			23,775			25,355

Supplies		3,455			3,660			10,740			11,321
Commercial Hardware		1,250			1,401			3,870			4,150
Consumer Hardware		403			529			1,494			1,768

Printing		5,108			5,590			16,104			17,239

Total Printing and Personal Systems Group		12,599			14,239			39,879			42,594

Industry Standard Servers		3,335			3,097			9,860			9,104
Technology Services		1,881			2,074			5,800			6,282
Storage		784			796			2,361			2,438
Networking		823			672			1,941			1,960
Business Critical Systems		184			233			587			691

Enterprise Group		7,007			6,872			20,549			20,475

Infrastructure Technology Outsourcing		3,036			3,494			9,039			10,592
Application and Business Services		1,940			2,096			5,747			6,295

Enterprise Services		4,976			5,590			14,786			16,887

Software		900			959			2,663			2,846
HP Financial Services		806			855			2,414			2,592
Corporate Investments		4			3			22			297

Total segment net revenue		26,292			28,518			80,313			85,691

Eliminations of intersegment net revenue and other		(943	)		(933	)		(2,672	)		(2,643	)

Total net revenue	$	25,349		$	27,585		$	77,641		$	83,048