Transformation Programs

12 Months Ended

Oct. 31, 2021

Restructuring and Related Activities [Abstract]

Transformation programs are comprised of the cost optimization and prioritization plan and the HPE Next initiative. During the third quarter of fiscal 2020, the Company launched the cost optimization and prioritization plan which focuses on realigning the workforce to areas of growth, a new hybrid workforce model called Edge-to-Office, real estate strategies and simplifying and evolving our product portfolio strategy. The implementation period of the cost optimization and prioritization plan is through fiscal 2023. During this time the Company expects to incur transformation costs predominantly related to labor restructuring, non-labor restructuring, IT investments, design and execution charges and real estate initiatives.

During the third quarter of fiscal 2017, the Company launched an initiative called HPE Next to put in place a purpose-built company designed to compete and win in the markets where it participates. Through this program the Company is simplifying the operating model, streamlining our offerings, business processes and business systems to improve our execution. The implementation period of the HPE Next initiative is extended through fiscal 2023. During the remaining implementation period, the Company expects to incur transformation costs predominantly related to IT infrastructure costs for streamlining, upgrading and simplifying back-end operations, and real estate initiatives. These costs are expected to be partially offset by gains from real estate sales.

Cost Optimization and Prioritization Plan

During fiscal 2021 and 2020, the Company incurred $695 million and $384 million, respectively, of charges related to the cost optimization and prioritization plan of which $690 million and $384 million were recorded within Transformation costs, and $5 million in fiscal 2021 was recorded with in Non-service net periodic benefit credit in the Consolidated Statements of Earnings, the components of which were as follows:


	For the fiscal years ended October 31,
	2021		2020
	In millions
Program management	$	83	$	55
IT costs	14		—
Restructuring charges	598		329



Total	$	695	$	384

HPE Next

During fiscal 2021, 2020 and 2019, the Company incurred $240 million, $569 million and $462 million, respectively, in net charges associated with HPE Next. For fiscal 2021, 2020 and 2019, $240 million, $566 million and $453 million were recorded within Transformation costs, and $3 million and $9 million were recorded within Non-service net periodic benefit credit in the Consolidated Statements of Earnings for fiscal 2020 and 2019, respectively.

The components of costs relating to HPE Next were as follows:


	For the fiscal years ended October 31,
	2021		2020		2019
	In millions
Program management	$	14	$	35	$	29
IT costs	174		100		134
Restructuring charges	22		440		219
Gains on real estate sales	(3)		(45)		(7)
Impairment on real estate assets	4		10		47
Other	29		29		40
Total	$	240	$	569	$	462

Restructuring Plan

On May 19, 2020, the Company's Board of Directors approved a restructuring plan in connection with the cost optimization and prioritization plan. As of October 31, 2021, the Company estimates that it will incur aggregate charges of approximately $1.3 billion through fiscal 2023 in connection with the cost optimization and prioritization plan which relates to labor restructuring and non-labor restructuring, primarily relating to real estate site exits. The changes to the workforce will vary by country, based on business needs, local legal requirements and consultations with employee works councils and other employee representatives, as appropriate.

On October 16, 2017, the Company's Board of Directors approved a restructuring plan in connection with the HPE Next (the "HPE Next Plan") and on September 20, 2018, the Company's Board of Directors approved a revision to that restructuring plan. As of October 31, 2020, the headcount exits under the HPE Next Plan were complete. The Company estimates that it will incur charges through fiscal 2023, relating to non-labor restructuring, primarily from real estate site exits.

Restructuring activities related to the Company's employees and infrastructure under the cost optimization and prioritization plan and HPE Next Plan, are presented in the table below:


	Cost Optimization and Prioritization Plan				HPE Next Plan
	Employee Severance		Infrastructure and other		Employee Severance		Infrastructure and other
	In millions				In millions
Liability as of October 31, 2018	$	—	$	—	$	291	$	33
Charges	—		—		154		65
Cash payments	—		—		(256)		(37)
Non-cash items	—		—		(11)		(19)
Liability as of October 31, 2019	$	—	$	—	$	178	$	42
Charges	230		99		341		99
Cash payments	(18)		(3)		(383)		(50)
Non-cash items	(2)		(28)		8		(39)
Liability as of October 31, 2020	$	210	$	68	$	144	$	52
Charges	277		321		—		22
Cash payments	(255)		(127)		(101)		(37)
Non-cash items	(4)		(73)		1		(4)
Liability as of October 31, 2021	$	228	$	189	$	44	$	33
Total costs incurred to date as of October 31, 2021	$	507	$	420	$	1,261	$	247
Total expected costs to be incurred as of October 31, 2021	$	700	$	600	$	1,261	$	255

The current restructuring liability related to the transformation programs, reported in Consolidated Balance Sheets as of October 31, 2021 and 2020, was $287 million and $359 million, respectively, in accrued restructuring, and $27 million and $24 million, respectively, in Other accrued liabilities. The non-current restructuring liability related to the transformation programs, reported in Other non-current liabilities in the Consolidated Balance Sheets as of October 31, 2021 and 2020 was $180 million and $91 million, respectively.