v3.8.0.1
Segment Information
 6 Months Ended
Apr. 30, 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 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 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 units and capabilities within Hybrid IT.
•
Hybrid IT Product includes Compute, Storage and Data Center Networking ("DC Networking").

◦
Compute offers both Industry Standard Servers ("ISS") as well as Mission-Critical Servers ("MCS") to address the full array of the Company's customers' computing needs. ISS provides a range of products, from entry level servers through premium HPE ProLiant servers. For the most mission-critical workloads, HPE delivers Integrity servers based on the Intel® Itanium® processor, HPE Integrity NonStop solutions and mission-critical x86 ProLiant servers.
◦
Storage offers Converged Storage solutions and traditional storage. Converged Storage solutions include All-Flash Arrays and hybrid storage solutions like HPE Nimble Storage, 3PAR StoreServe, StoreOnce, Big Data, StoreVirtual, and Software Defined and Cloud Group storage products. Traditional storage includes tape, storage networking and legacy external disk products such as MSA and 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 a 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. HPE Pointnext is also a provider of on-premises flexible consumption models that enable IT agility, simplify operations and align costs to business value. HPE Pointnext offerings includes Operational Services, Advisory and Professional Services, and Communications and Media Solutions ("CMS").

Intelligent Edge offers unified, software-defined Aruba Mobile First architecture solutions for connectivity in the campus and branch environments, including wireless local area network equipment, mobility and security software, switches, routers, network management products, and associated customer support, as well as industrial IoT solutions.
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 HPE and others. Providing 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
There have been no significant changes to the Company's segment accounting policies disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2017, except as described in the 'Segment Realignment' section below.
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. Hewlett Packard Enterprise executed intercompany advanced royalty payment arrangements resulting in advanced payments of $439 million during the first six months of fiscal 2017. 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 15 years. The impact of these intercompany arrangements is eliminated from both Hewlett Packard Enterprise's consolidated and segment net revenues.
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, acquisition and other related charges, restructuring charges, separation costs and defined benefit plan settlement charges and remeasurement (benefit).
Segment Realignment
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 business 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 products businesses, which include wireless local area network, campus and branch switching and edge compute within the former 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 as described above.
The Company also implemented certain changes to its allocation methodology for stock-based compensation expense and certain corporate costs, which align 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 from Continuing Operations
 
Hybrid IT
 
Intelligent Edge
 
Financial
Services
 
Corporate
Investments
 
Total
 
In millions
Three months ended April 30, 2018
 

 
 

 
 

 
 

 
 

Net revenue
$
5,851

 
$
703

 
$
914

 
$
—

 
$
7,468

Intersegment net revenue and other
172

 
7

 
2

 
—

 
181

Total segment net revenue
$
6,023

 
$
710

 
$
916

 
$
—

 
$
7,649

Segment earnings (loss) from operations
$
621

 
$
46

 
$
72

 
$
(22
)
 
$
717

Three months ended April 30, 2017
 

 
 

 
 

 
 

 
 

Net revenue
$
5,348

 
$
595

 
$
865

 
$
—

 
$
6,808

Intersegment net revenue and other(1)
289

 
11

 
7

 
—

 
307

Total segment net revenue
$
5,637

 
$
606

 
$
872

 
$
—

 
$
7,115

Segment earnings (loss) from operations
$
457

 
$
46

 
$
77

 
$
(28
)
 
$
552

Six months ended April 30, 2018
 

 
 

 


 
 

 
 

Net revenue
$
12,027

 
$
1,316

 
$
1,800

 
$
(1
)
 
$
15,142

Intersegment net revenue and other
327

 
14

 
4

 
—

 
345

Total segment net revenue
$
12,354

 
$
1,330

 
$
1,804

 
$
(1
)
 
$
15,487

Segment earnings (loss) from operations
$
1,229

 
$
64

 
$
144

 
$
(43
)
 
$
1,394

Six months ended April 30, 2017
 

 
 

 
 

 
 

 
 

Net revenue
$
10,884

 
$
1,157

 
$
1,669

 
$
—

 
$
13,710

Intersegment net revenue and other(1)
508

 
19

 
26

 
—

 
553

Total segment net revenue
$
11,392

 
$
1,176

 
$
1,695

 
$
—

 
$
14,263

Segment earnings (loss) from operations
$
1,190

 
$
62

 
$
153

 
$
(61
)
 
$
1,344

 
(1)
For the three and six months ended April 30, 2017, the amounts include the elimination of pre-separation intercompany sales to the former Enterprise Services and Software segments, which are included within Net loss from discontinued operations in the Condensed Consolidated Statements of Earnings.
The reconciliation of segment operating results to Hewlett Packard Enterprise condensed consolidated results was as follows:
 
Three Months Ended
April 30,
 
Six Months Ended
April 30,
 
2018
 
2017
 
2018
 
2017
 
In millions
Net Revenue:
 
 
 

 
 

 
 

Total segments
$
7,649

 
$
7,115

 
$
15,487

 
$
14,263

Elimination of intersegment net revenue and other
(181
)
 
(307
)
 
(345
)
 
(553
)
Total Hewlett Packard Enterprise condensed consolidated net revenue
$
7,468

 
$
6,808

 
$
15,142

 
$
13,710

Earnings before taxes:
 

 
 

 
 

 
 

Total segment earnings from operations
$
717

 
$
552

 
$
1,394

 
$
1,344

Unallocated corporate costs and eliminations
(54
)
 
(124
)
 
(108
)
 
(220
)
Unallocated stock-based compensation expense
(20
)
 
(24
)
 
(50
)
 
(67
)
Amortization of intangible assets
(72
)
 
(72
)
 
(150
)
 
(138
)
Restructuring charges
(9
)
 
(69
)
 
(12
)
 
(152
)
Transformation costs
(123
)
 
—

 
(368
)
 
—

Acquisition and other related charges
(16
)
 
(50
)
 
(46
)
 
(94
)
Separation costs
(26
)
 
(30
)
 
(2
)
 
(41
)
Defined benefit plan settlement (charges) and remeasurement benefit
—

 
12

 
—

 
16

Interest and other, net
(78
)
 
(86
)
 
(99
)
 
(164
)
Tax indemnification adjustments
(425
)
 
7

 
(1,344
)
 
(11
)
(Loss) earnings from equity interests
(10
)
 
(3
)
 
12

 
(25
)
Total Hewlett Packard Enterprise condensed consolidated (loss) earnings from continuing operations before taxes
$
(116
)
 
$
113

 
$
(773
)
 
$
448


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 condensed consolidated assets were as follows:
 
As of
 
April 30, 2018
 
October 31, 2017
 
In millions
Hybrid IT
$
26,488

 
$
25,923

Intelligent Edge
3,042

 
3,002

Financial Services
13,560

 
13,470

Corporate Investments
160

 
161

Corporate and unallocated assets
16,626

 
18,850

Total Hewlett Packard Enterprise condensed consolidated assets
$
59,876

 
$
61,406


For the six months ended April 30, 2018, the decrease in Corporate and unallocated assets was due primarily to a decrease in cash and cash equivalents.
Net revenue by segment and business unit was as follows:
 
Three Months Ended
April 30,
 
Six Months Ended
April 30,
 
2018
 
2017
 
2018
 
2017
 
In millions
Hybrid IT
 
 
 
 
 
 
 
Hybrid IT Product
 
 
 
 
 
 
 
Compute
$
3,213

 
$
3,033

 
$
6,705

 
$
6,176

Storage
912

 
734

 
1,860

 
1,498

DC Networking
46

 
45

 
108

 
94

Total Hybrid IT Product
4,171

 
3,812

 
8,673

 
7,768

HPE Pointnext
1,852

 
1,825

 
3,681

 
3,624

Total Hybrid IT
6,023

 
5,637

 
12,354

 
11,392

Intelligent Edge
 
 
 
 
 
 
 
HPE Aruba Product
635

 
538

 
1,184

 
1,041

HPE Aruba Services
75

 
68

 
146

 
135

Total Intelligent Edge
710

 
606

 
1,330

 
1,176

Financial Services
916

 
872

 
1,804

 
1,695

Corporate Investments
—

 
—

 
(1
)
 
—

Total segment net revenue
7,649

 
7,115

 
15,487

 
14,263

Eliminations of intersegment net revenue and other        
(181
)
 
(307
)
 
(345
)
 
(553
)
Total Hewlett Packard Enterprise condensed consolidated net revenue
$
7,468

 
$
6,808

 
$
15,142

 
$
13,710