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Segment Information | 12 Months Ended
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Oct. 31, 2018
Segment Reporting [Abstract] |
Segment Information | Segment Information Hewlett Packard Enterprise's operations are organized into four segments for financial reporting purposes: Hybrid IT, Intelligent Edge, Financial Services ("FS") and Corporate Investments. Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker ("CODM"), the Chief Executive Officer ("CEO"), uses to evaluate, view and run 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 Hewlett Packard Enterprise's management to evaluate segment results. A summary description of each segment follows. Hybrid IT provides a broad portfolio of services-led and software-enabled infrastructure and solutions including secure, software-defined servers, storage, data center networking and HPE Pointnext services, thereby combining HPE's hardware, software and services capabilities to make Hybrid IT simple for its customers. Described below are the business unit capabilities within Hybrid IT.
• | Hybrid IT Product includes Compute, Storage, and Data Center Networking ("DC Networking").
◦ | Compute offers both Industry Standard Servers ("ISS"), which are general purpose servers for multi-workload computing, as well as Mission Critical Servers ("MCS"), which are servers optimized for particular workloads, to address the full array of the customers' computing needs. HPE's general purpose servers include the HPE ProLiant, secure and versatile rack and tower servers; HPE BladeSystem, a modular infrastructure that converges server, storage and networking; and HPE Synergy, a composable infrastructure for traditional and cloud-native applications. The Company's workload optimized server portfolio includes the HPE Apollo for high performance computing and artificial intelligence, HPE Cloudline for cloud data centers, HPE Edgeline for computing at the network edge, HPE Integrity for mission-critical applications, and HPE SimpliVity, a hyperconverged platform for virtualization.
◦ | Storage. With storage offerings that are AI-driven and built for cloud environments with as-a-service consumption and flexible investment options, HPE provides the right workload optimized destinations for data. Powered by HPE InfoSight advanced analytics and machine learning and HPE Cloud Volumes data mobility, HPE delivers intelligent storage for hybrid cloud environments so that customers can unlock data’s full potential and derive business insights. Key solutions include HPE 3PAR Storage and HPE Nimble Storage all-flash arrays for mission critical workloads and general purpose workloads, respectively, and big data solutions running on HPE Apollo Servers. Storage also provides comprehensive data protection with HPE StoreOnce and HPE Recovery Manager Central, solutions for secondary workloads and traditional tape, storage networking and disk products, such as HPE MSA and HPE XP.
◦ | DC Networking offerings include top-of-rack switches, core switches, and open networking switches. The Company offers a full stack of networking solutions that deliver open, scalable, secure and agile solutions, by enabling programmable fabric, network virtualization, and network management products.
• | HPE Pointnext creates preferred IT experiences that power the digital business. The HPE Pointnext team and the Company's extensive partner network provide value across the IT life cycle delivering advice, transformation projects, professional services, support services and operational services for Hybrid IT and the Intelligent Edge. HPE Pointnext is also a provider of on-premises flexible consumption models, such as HPE GreenLake, that enable IT agility, simplify operations and align cost to business value. HPE Pointnext offerings includes Operational services, Advisory and Professional Services, and Communication and Media Solutions ("CMS").
The Intelligent Edge business is comprised of enterprise networking and security solutions for businesses of any size, offering secure connectivity for campus and branch environments, operating under the Aruba brand. The primary business drivers for Intelligent Edge solutions are mobility and the Internet of Things ("IoT").
◦ | HPE Aruba Product includes wired and wireless local area network hardware products such as Wi-Fi access points, switches, routers, sensors, and software products that include network management, network access control, analytics and assurance, and location services software.
◦ | HPE Aruba Services offers professional and support services for the Intelligent Edge portfolio of products.
Financial Services provides flexible investment solutions, such as leasing, financing, IT consumption, and utility programs and asset management services, for customers that facilitate unique technology deployment models and the acquisition of complete IT solutions, including hardware, software and services from Hewlett Packard Enterprise and others. In order to provide flexible services and capabilities that support the entire IT life cycle, FS partners with customers globally to help build investment strategies that enhance their business agility and support their business transformation. FS 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 Hewlett Packard Labs and certain business incubation projects. Segment Policy Hewlett Packard Enterprise derives the results of its business segments directly from its internal management reporting system. The accounting policies that Hewlett Packard Enterprise uses to derive segment results are substantially the same as those the consolidated company uses. The CODM measures the performance of each segment based on several metrics, including earnings from operations. The CODM 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 FS to our customers. Hewlett Packard Enterprise's consolidated net revenue is derived and reported after the elimination of intersegment revenues from such arrangements. Hewlett Packard Enterprise 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 Hewlett Packard Enterprise legal entities involved in such transactions; however, these advanced payments are eliminated from revenues as reported by Hewlett Packard Enterprise and its business segments. As disclosed in Note 8, "Taxes on Earnings", Hewlett Packard Enterprise executed intercompany advanced royalty payment arrangements resulting in advanced payments of $63 million and $439 million during fiscal 2018 and 2017, respectively. 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. The impact of these intercompany arrangements is eliminated from both Hewlett Packard Enterprise's consolidated and segment net revenues. Financing interest in the Consolidated Statements of Earnings reflects interest expense on borrowing and funding-related activity associated with FS and its subsidiaries, and debt issued by Hewlett Packard Enterprise for which a portion of the proceeds benefited FS. Hewlett Packard Enterprise does not allocate to its segments certain operating expenses, which it manages at the corporate level. These unallocated costs include certain corporate costs and eliminations, stock-based compensation expense related to corporate and certain global functions, transformation costs, amortization of intangible assets, impairment of goodwill, acquisition and other related charges, restructuring charges, separation costs, disaster charges, defined benefit plan settlement charges and remeasurement (benefit) and the gain on H3C and MphasiS divestitures. Segment Organizational Changes Effective at the beginning of the first quarter of fiscal 2018, the Company implemented organizational changes to align its segment financial reporting more closely with its current business structure. These organizational changes primarily include: (i) the transfer of the former Servers and Storage business units, the HPE Pointnext and CMS businesses within the former Technology Services business unit, and the Data Center Networking business within the former Networking businesses unit, all of which were previously reported within the former Enterprise Group ("EG") segment, to the newly formed Hybrid IT segment; (ii) the transfer of the remaining Networking business unit, and Aruba services within the former Technology Services business unit, all of which were previously reported within the former EG segment, to the newly formed Intelligent Edge segment; and (iii) the transfer of cloud-related activities previously reported within Corporate Investments to the Hybrid IT Segment. The Company reflected these changes to its segment information retrospectively to the earliest period presented, which primarily resulted in the transfer of net revenue, related eliminations of intersegment revenues and operating profit or loss from the former business units and segments to the newly formed business units and segments described above. The Company also implemented certain changes to its allocation methodology for stock-based compensation expense and certain corporate costs, which aligned to its segment financial reporting and are consistent with the manner in which the operating segments will be evaluated for performance on a prospective basis. The Company reflected these changes retrospectively to the earliest period presented, which resulted in: (i) the transfer of a portion of stock-based compensation expense, which under the prior allocation methodology was not allocated to the segments, to the Hybrid IT, Intelligent Edge, and Financial Services segments; and (ii) the transfer of certain corporate function costs previously allocated to the segments to unallocated corporate costs. These changes had no impact on Hewlett Packard Enterprise's previously reported net revenue, earnings from operations, net earnings, or net earnings per share. Segment Operating Results
| Hybrid IT |  | Intelligent Edge |  | Financial Services |  | Corporate Investments |  | Total
| In millions
2018 |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenue | $ | 24,285 |  |  | $ | 2,912 |  |  | $ | 3,656 |  |  | $ | (1 | ) |  | $ | 30,852 |
Intersegment net revenue and other | 748 |  |  | 17 |  |  | 15 |  |  | — |  |  | 780 |
Total segment net revenue | $ | 25,033 |  |  | $ | 2,929 |  |  | $ | 3,671 |  |  | $ | (1 | ) |  | $ | 31,632 |
Segment earnings (loss) from operations | $ | 2,654 |  |  | $ | 237 |  |  | $ | 290 |  |  | $ | (90 | ) |  | $ | 3,091 |
2017 |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenue | $ | 22,740 |  |  | $ | 2,554 |  |  | $ | 3,574 |  |  | $ | 3 |  |  | $ | 28,871 |
Intersegment net revenue and other(1) | 887 |  |  | 30 |  |  | 28 |  |  | — |  |  | 945 |
Total segment net revenue | $ | 23,627 |  |  | $ | 2,584 |  |  | $ | 3,602 |  |  | $ | 3 |  |  | $ | 29,816 |
Segment earnings (loss) from operations | $ | 2,274 |  |  | $ | 253 |  |  | $ | 299 |  |  | $ | (106 | ) |  | $ | 2,720 |
2016 |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenue | $ | 23,954 |  |  | $ | 2,635 |  |  | $ | 3,097 |  |  | $ | 594 |  |  | $ | 30,280 |
Intersegment net revenue and other(1) | 1,148 |  |  | 39 |  |  | 93 |  |  | — |  |  | 1,280 |
Total segment net revenue | $ | 25,102 |  |  | $ | 2,674 |  |  | $ | 3,190 |  |  | $ | 594 |  |  | $ | 31,560 |
Segment earnings (loss) from operations | $ | 3,182 |  |  | $ | 74 |  |  | $ | 338 |  |  | $ | (61 | ) |  | $ | 3,533 |
(1) | For the periods prior to the Everett and Seattle Transactions presented above, the amounts include the elimination of pre-separation intercompany sales to the former ES and Software segments, which are included within Net loss from discontinued operations in the Consolidated Statements of Earnings.
The reconciliation of segment operating results to Hewlett Packard Enterprise consolidated results was as follows:
| For the fiscal years ended October 31,
| 2018 |  | 2017 |  | 2016
| In millions
Net Revenue: |  |  |  |  |  |  |  |
Total segments | $ | 31,632 |  |  | $ | 29,816 |  |  | $ | 31,560 |
Elimination of intersegment net revenue and other | (780 | ) |  | (945 | ) |  | (1,280 | )
Total Hewlett Packard Enterprise consolidated net revenue | $ | 30,852 |  |  | $ | 28,871 |  |  | $ | 30,280 |
Earnings before taxes: |  |  |  |  |  |  |  |
Total segment earnings from operations | $ | 3,091 |  |  | $ | 2,720 |  |  | $ | 3,533 |
Unallocated corporate costs and eliminations | (240 | ) |  | (408 | ) |  | (720 | )
Unallocated stock-based compensation expense | (73 | ) |  | (110 | ) |  | (134 | )
Amortization of intangible assets | (294 | ) |  | (321 | ) |  | (272 | )
Impairment of goodwill | (88 | ) |  | — |  |  | — |
Restructuring charges | (19 | ) |  | (417 | ) |  | (417 | )
Transformation costs | (425 | ) |  | (359 | ) |  | — |
Disaster charges | — |  |  | (93 | ) |  | — |
Acquisition and other related charges | (82 | ) |  | (203 | ) |  | (145 | )
Separation costs | (12 | ) |  | (248 | ) |  | (362 | )
Defined benefit plan settlement charges and remeasurement (benefit) | — |  |  | 64 |  |  | — |
Gain on H3C and MphasiS divestitures | — |  |  | — |  |  | 2,420 |
Interest and other, net | (274 | ) |  | (327 | ) |  | (284 | )
Tax indemnification adjustments | (1,354 | ) |  | (3 | ) |  | 317 |
Earnings (loss) from equity interests | 38 |  |  | (23 | ) |  | (76 | )
Total Hewlett Packard Enterprise consolidated earnings from continuing operations before taxes | $ | 268 |  |  | $ | 272 |  |  | $ | 3,860 |
Segment Assets Hewlett Packard Enterprise 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 Hewlett Packard Enterprise consolidated assets were as follows:
| As of October 31,
| 2018 |  | 2017
| In millions
Hybrid IT | $ | 25,839 |  |  | $ | 25,923 |
Intelligent Edge | 2,990 |  |  | 3,002 |
Financial Services | 13,746 |  |  | 13,470 |
Corporate Investments | 170 |  |  | 161 |
Corporate and unallocated assets | 12,748 |  |  | 18,850 |
Total Hewlett Packard Enterprise consolidated assets | $ | 55,493 |  |  | $ | 61,406 |
Corporate and unallocated assets in fiscal 2018 decreased as compared to fiscal 2017 due primarily to a decrease in cash and cash equivalents and tax assets. Major Customers No single customer represented 10% or more of Hewlett Packard Enterprise's total net revenue in any fiscal year presented. Geographic Information Fiscal 2017 revenue was reclassified between the regions to conform with the current period presentation. Net revenue by country is based upon the sales location that predominately represents the customer location. For each of the fiscal years of 2018, 2017 and 2016, other than the U.S., no country represented more than 10% of Hewlett Packard Enterprise's net revenue. Net revenue by country in which Hewlett Packard Enterprise operates was as follows:
| For the fiscal years ended October 31,
| 2018 |  | 2017 |  | 2016
| In millions
U.S. | $ | 10,192 |  |  | $ | 10,022 |  |  | $ | 10,333 |
Other countries | 20,660 |  |  | 18,849 |  |  | 19,947 |
Total net revenue | $ | 30,852 |  |  | $ | 28,871 |  |  | $ | 30,280 |
Net property, plant and equipment by country in which Hewlett Packard Enterprise operates was as follows:
| As of October 31,
| 2018 |  | 2017
| In millions
U.S. | $ | 2,813 |  |  | $ | 2,673 |
Other countries | 3,325 |  |  | 3,596 |
Total net property, plant and equipment | $ | 6,138 |  |  | $ | 6,269 |
Net revenue by segment and business unit was as follows:
| For the fiscal years ended October 31,
| 2018 |  | 2017 |  | 2016
| In millions
Hybrid IT |  |  |  |  |  |  |  |
Hybrid IT Product |  |  |  |  |  |  |  |
Compute | $ | 13,823 |  |  | $ | 12,837 |  |  | $ | 13,994 |
Storage | 3,706 |  |  | 3,280 |  |  | 3,389 |
DC Networking | 225 |  |  | 214 |  |  | 407 |
Total Hybrid IT Product | 17,754 |  |  | 16,331 |  |  | 17,790 |
HPE Pointnext | 7,279 |  |  | 7,296 |  |  | 7,312 |
Total Hybrid IT | 25,033 |  |  | 23,627 |  |  | 25,102 |
Intelligent Edge |  |  |  |  |  |  |  |
HPE Aruba Product | 2,619 |  |  | 2,307 |  |  | 2,423 |
HPE Aruba Services | 310 |  |  | 277 |  |  | 251 |
Total Intelligent Edge | 2,929 |  |  | 2,584 |  |  | 2,674 |
Financial Services | 3,671 |  |  | 3,602 |  |  | 3,190 |
Corporate Investments | (1 | ) |  | 3 |  |  | 594 |
Total segment net revenue | 31,632 |  |  | 29,816 |  |  | 31,560 |
Eliminations of intersegment net revenue and other | (780 | ) |  | (945 | ) |  | (1,280 | )
Total net revenue | $ | 30,852 |  |  | $ | 28,871 |  |  | $ | 30,280 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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