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 and IT Operations Management.

HP's operations are organized into seven segments for financial reporting purposes: Personal Systems, Printing, the 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.

As a result of the Separation, beginning November 1, 2015, HP will report three segments as part of continuing operations: Personal Systems, Printing and Corporate Investments.

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 enterprise and SMB customers, with a focus on robust designs, serviceability, connectivity, reliability and manageability in networked environments.
	•	Consumer PCs are notebooks, desktops, and hybrids that are optimized for consumer usage, focusing on multi-media consumption, online browsing, and light productivity.

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 and web-connected printing services.
	•	Marketing Optimization focuses on delivering solutions that help businesses engage audiences, reach new customer segments and markets and deliver compelling content across channels. The group provides solutions for augmented reality, contact center analytics, customer communications management and digital experience management.

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 for the new style of IT. 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 big data analytics and applications, enterprise security, application testing and delivery management and IT Operations Management solutions for businesses and other enterprises of all sizes. These software offerings include licenses, support, professional services and software-as-a-service.

HP Financial Services provides flexible investment solutions, such as leasing, financing, IT consumption and 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 enterprise-related business incubation projects and venture focused minority investments among 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, during fiscal 2015, HP executed an intercompany advanced royalty payment arrangement resulting in advanced payments of $8.8 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 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 and other related charges, separation costs, defined benefit plan settlement charges and impairment of data center assets.

Segment Realignment

Effective at the beginning of the 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.

In connection with the Separation, effective at the beginning of the fourth quarter of fiscal 2015, HP implemented an organizational change which resulted in the transfer of marketing optimization solutions business from the Software segment to the Commercial Hardware business unit within the Printing segment. HP has reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the transfer of net revenue from the Software segment to the Commercial Hardware business unit within the Printing segment. This change also resulted in the transfer of operating profit from the Software segment to the Commercial Hardware business unit within the Printing segment. In addition, this change resulted in the reclassification of $512 million of goodwill from the Software segment to the Printing segment.

These changes had no impact on HP's previously reported consolidated net revenue, earnings from operations, net earnings or net EPS.

Segment Operating Results

	Printing and Personal Systems
	Personal Systems		Printing		Enterprise Group		Enterprise Services		Software		HP Financial Services		Corporate Investments			Total
	In millions
2015
Net revenue	$	30,438	$	20,938	$	26,670	$	19,009	$	3,142	$	3,131	$	27		$	103,355
Intersegment net revenue and other		1,031		294		1,237		797		316		85		—			3,760

Total segment net revenue	$	31,469	$	21,232	$	27,907	$	19,806	$	3,458	$	3,216	$	27		$	107,115


Earnings (loss) from operations	$	1,064	$	3,865	$	3,981	$	1,051	$	760	$	349	$	(565	)	$	10,505


2014
Net revenue	$	33,304	$	22,951	$	26,809	$	21,297	$	3,375	$	3,416	$	302		$	111,454
Intersegment net revenue and other		999		260		914		1,101		326		82		—			3,682

Total segment net revenue	$	34,303	$	23,211	$	27,723	$	22,398	$	3,701	$	3,498	$	302		$	115,136


Earnings (loss) from operations	$	1,270	$	4,229	$	3,995	$	816	$	828	$	389	$	(199	)	$	11,328


2013
Net revenue	$	31,232	$	23,917	$	27,045	$	23,041	$	3,469	$	3,570	$	24		$	112,298
Intersegment net revenue and other		947		211		958		1,020		320		59		—			3,515

Total segment net revenue	$	32,179	$	24,128	$	28,003	$	24,061	$	3,789	$	3,629	$	24		$	115,813


Earnings (loss) from operations	$	980	$	3,953	$	4,245	$	693	$	848	$	399	$	(316	)	$	10,802

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

	For the fiscal years ended October 31
	2015			2014			2013
	In millions
Net Revenue:
Total segments	$	107,115		$	115,136		$	115,813
Elimination of intersegment net revenue and other		(3,760	)		(3,682	)		(3,515	)

Total HP consolidated net revenue	$	103,355		$	111,454		$	112,298


Earnings before taxes:
Total segment earnings from operations	$	10,505		$	11,328		$	10,802
Corporate and unallocated costs and eliminations		(724	)		(953	)		(786	)
Stock-based compensation expense		(709	)		(560	)		(500	)
Amortization of intangible assets		(931	)		(1,000	)		(1,373	)
Restructuring charges		(1,017	)		(1,619	)		(990	)
Acquisition and other related charges		(90	)		(11	)		(22	)
Separation costs		(1,259	)		—			—
Defined benefit plan settlement charges		(168	)		—			—
Impairment of data center assets		(136	)		—			—
Interest and other, net		(739	)		(628	)		(621	)

Total HP consolidated earnings before taxes	$	4,732		$	6,557		$	6,510

Segment Assets

HP allocates assets to its business segments based on the segments primarily benefiting from the assets. Total assets by segment and the reconciliation of segment assets to HP consolidated assets were as follows:

	As of October 31
	2015		2014
	In millions
Personal Systems	$	9,534	$	12,104
Printing		8,994		10,666

Printing and Personal Systems Group		18,528		22,770

Enterprise Group(1)		33,499		27,236
Enterprise Services		14,354		13,472
Software		11,226		10,972
HP Financial Services		13,093		13,529
Corporate Investments		56		34
Corporate and unallocated assets		16,126		15,193

Total HP consolidated assets	$	106,882	$	103,206


(1)	In connection with the acquisition of Aruba Networks, Inc. ("Aruba") in fiscal 2015, HP recorded approximately $1.8 billion of goodwill, $643 million of intangible assets and $153 million of IPR&D. HP reports the financial results of Aruba's business in the Networking business unit within the EG segment.

Major Customers

No single customer represented 10% or more of HP's total net revenue in any fiscal year presented.

Geographic Information

Net revenue by country is based upon the sales location that predominately represents the customer location. For each of the fiscal years of 2015, 2014 and 2013, other than the U.S., no country represented more than 10% of HP's net revenue.

Net revenue by country in which HP operates was as follows:

	For the fiscal years ended October 31
	2015		2014		2013
	In millions
U.S.	$	37,679	$	38,805	$	40,284
Other countries		65,676		72,649		72,014

Total net revenue	$	103,355	$	111,454	$	112,298

As of October 31, 2015, the U.S. and Netherlands each represented more than 10% of net assets. As of October 31, 2014, the U.S., Netherlands and Ireland each represented 10% or more of net assets.

Net property, plant and equipment by country in which HP operates was as follows:

	As of October 31
	2015		2014
	In millions
U.S.	$	5,501	$	5,668
United Kingdom.		955		1,053
Other countries		4,634		4,619

Total net property, plant and equipment	$	11,090	$	11,340

Net revenue by segment and business unit was as follows:

	For the fiscal years ended October 31
	2015			2014			2013
	In millions
Notebooks	$	17,271		$	17,540		$	16,029
Desktops		10,941			13,197			12,844
Workstations		2,018			2,218			2,147
Other		1,239			1,348			1,159

Personal Systems		31,469			34,303			32,179

Supplies		13,979			14,917			15,716
Commercial Hardware		5,378			5,949			5,976
Consumer Hardware		1,875			2,345			2,436

Printing		21,232			23,211			24,128

Total Printing and Personal Systems Group		52,701			57,514			56,307

Industry Standard Servers		13,412			12,474			12,102
Technology Services		7,662			8,375			8,710
Storage		3,180			3,316			3,475
Networking		2,846			2,629			2,526
Business Critical Systems		807			929			1,190

Enterprise Group		27,907			27,723			28,003

Infrastructure Technology Outsourcing		12,107			14,038			15,223
Application and Business Services		7,699			8,360			8,838

Enterprise Services		19,806			22,398			24,061

Software		3,458			3,701			3,789
HP Financial Services		3,216			3,498			3,629
Corporate Investments		27			302			24

Total segment net revenue		107,115			115,136			115,813

Eliminations of intersegment net revenue and other		(3,760	)		(3,682	)		(3,515	)

Total net revenue	$	103,355		$	111,454		$	112,298