Note 3: Segment Information

HP is a leading global provider of personal computing and other access devices, imaging and printing products, and related technologies, solutions and services. HP sells to individual consumers, small- and medium-sized businesses ("SMBs") and large enterprises, including customers in the government, health and education sectors.

HP's operations are organized into three segments for financial reporting purposes: Personal Systems, Printing and Corporate Investments. HP's organizational structure is based on a number of factors that the chief operating decision maker 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 chief operating decision maker to evaluate segment results. The chief operating decision maker uses several metrics to evaluate the performance of the overall business, including earnings from operations, and uses these results to allocate resources to each of the segments.

A summary description of each segment follows.

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, commercial detachables, workstations, retail point-of-sale systems and thin clients into commercial clients and consumer notebooks, consumer desktops, consumer services, consumer tablets and consumer detachables 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. Additionally, HP offers a range of services and solutions to enterprise and SMB customers to help them manage the lifecycle of their PC and mobility installed base.

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, solutions and services, as well as scanning devices. Printing is also focused on imaging solutions in the commercial markets. HP groups LaserJet, graphics and PageWide printers into Commercial Hardware and 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 printers, supplies and solutions to SMBs and large enterprises. HP goes to market through its extensive channel network and directly with HP sales. Ongoing key initiatives include printer security solutions, PageWide Enterprise solutions, and award-winning JetIntelligence products.

Inkjet and Printing Solutions deliver HP's consumer, SMB, and PageWide 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 PageWide Presses), supplies and services to print service providers and design and rendering customers.

Print Solutions provide end-to-end services and software, as well as core platforms to develop and deploy services across printing systems. HP's focus includes driving customer value through managed print services, providing support solutions for new and existing customers and innovative software solutions for augmented reality, contact center analytics, customer communications management and digital experience management.

Corporate Investments include HP Labs and certain business incubation projects among others.

The accounting policies HP uses to derive segment results are substantially the same as those used by the Company in preparing these financial statements. HP derives the results of the business segments directly from its internal management reporting system. Segment net revenue includes revenues from sales to external customers and intersegment revenues that reflect transactions between the segments on an arm's-length basis. 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 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 7, "Taxes on Earnings", in fiscal 2015, HP executed an intercompany advanced royalty payment arrangement which resulted in advanced payments of $3.8 billion, with a deferral of intercompany revenues over the term of the arrangements, which is approximately 5 years. The payments were received in the U.S. from a foreign consolidated affiliate, with a deferral of intercompany revenues over the term of the arrangement, as disclosed above. The impact of these intercompany arrangements is eliminated from both HP consolidated and segment net revenues.

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, restructuring charges, amortization of intangible assets and non-operating retirement-related credits.

Segment Realignment and Reporting Changes

Effective at the beginning of its first quarter of fiscal 2016, HP implemented an organizational change to align its segment financial reporting more closely with its current business structure. In addition, HP implemented a reporting change to provide better transparency to its segment operating results. This reporting change resulted in the exclusion of certain market-related factors such as interest cost, expected return on plan assets, amortized actuarial gains/losses, and impacts from other market-related factors related to its defined benefit pension and post-retirement benefit plans from its segment operating results ("Non-operating retirement-related credits"). This change also resulted in the exclusion of certain plan curtailments, settlements and special termination benefits related to its defined benefit pension and post-retirement benefit plans from HP's segment operating results. Segment operating results will continue to include service costs and amortization of prior service costs associated with HP's defined benefit pension and post-retirement benefit plans. The organizational and reporting changes had an immaterial impact to previously reported segment net revenue and earnings from operations. These changes had no impact on HP's previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.

Segment Operating Results from Continuing Operations

	Personal Systems		Printing		Corporate Investments			Total Segments		Intersegment Eliminations and Other(1)			Total
	In millions
Three months ended January 31, 2016
Net revenue	$	7,467	$	4,642	$	3		$	12,112	$	134		$	12,246


Earnings (loss) from operations	$	229	$	787	$	(23	)	$	993


Three months ended January 31, 2015
Net revenue	$	8,562	$	5,596	$	12		$	14,170	$	(312	)	$	13,858


Earnings (loss) from operations	$	303	$	1,050	$	(5	)	$	1,348


(1)	Other includes adjustments for sales to entities which, prior to the Separation, were included in intersegment eliminations. For the three months ended January 31, 2016, the amount includes the recognition of revenue previously deferred in relation to sales to the pre-Separation finance entity. For the three months ended January 31, 2015, the amount includes the elimination of intercompany sales to the pre-Separation finance entity, which is included in discontinued operations. The related cost adjustments are reflected in the reconciliation of the segment earnings to HP's consolidated earnings as included below.

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

	Three months ended January 31
	2016			2015
	In millions
Net revenue:
Total segments	$	12,112		$	14,170
Intersegment net revenue eliminations and other		134			(312	)

Total HP consolidated net revenue	$	12,246		$	13,858


Earnings from continuing operations before taxes:
Total segment earnings from operations	$	993		$	1,348
Corporate and unallocated costs and eliminations		(16	)		(196	)
Stock-based compensation expense		(61	)		(51	)
Amortization of intangible assets		(8	)		(27	)
Restructuring charges		(20	)		(14	)
Non-operating retirement-related credits		40			58
Interest and other, net		(94	)		(121	)

Total HP consolidated earnings from continuing operations before taxes	$	834		$	997

Net revenue by segment and business unit was as follows:

	Three months ended January 31
	2016		2015
	In millions
Notebooks	$	4,205	$	4,724
Desktops		2,527		2,949
Workstations		444		526
Other		291		363

Personal Systems		7,467		8,562

Supplies		3,101		3,601
Commercial Hardware		1,219		1,394
Consumer Hardware		322		601

Printing		4,642		5,596

Corporate Investments		3		12

Total segment net revenue		12,112		14,170

Intersegment net revenue eliminations and other		134		(312	)

Total net revenue	$	12,246	$	13,858

Except for the separation of Hewlett Packard Enterprise, there have been no material changes to the total assets of HP's individual segments since October 31, 2015.