Transformations Programs

6 Months Ended

Apr. 30, 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, including a new hybrid workforce model called Edge-to-Office, real estate strategies and simplifying and evolving our product portfolio strategy. 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. 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, and streamlining our offerings, business processes and business systems to improve our execution. The implementation period of the HPE Next initiative is through fiscal 2023. As of October 31, 2020, the headcount exits under HPE Next Plan are complete. 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.

Transformation Costs

During the three and six months ended April 30, 2021, the Company incurred $153 million and $405 million, respectively, of charges related to the cost optimization and prioritization plan of which $151 million and $403 million were recorded within Transformation costs, and $2 million and $2 million, respectively, was recorded within Non-service net periodic benefit credit in the Condensed Consolidated Statements of Earnings, the components of which were as follows:


	Three months ended April 30, 2021		Six months ended April 30, 2021
	In millions
Program management	$	18	$	55
IT Costs	3		3
Restructuring charges	132		347

Total transformation costs	$	153	$	405

During the three and six months ended April 30, 2021, the Company incurred $58 million and $117 million, respectively, of net charges associated with HPE Next which were recorded within Transformation costs in the Condensed Consolidated Statements of Earnings. During the three and six months ended April 30, 2020, the Company incurred $200 million and $289 million, respectively, of net charges associated with HPE Next which were recorded within Transformation costs in the Condensed Consolidated Statements of Earnings. The components of Transformation costs relating to HPE Next were as follows:


	Three months ended April 30,				Six months ended April 30,
	2021		2020		2021		2020
	In millions
Program management	$	3	$	7	$	5	$	18
IT costs	46		18		72		46
Restructuring charges	2		164		19		248
(Gain) loss on real estate sales	(2)		4		(3)		(37)
Impairment on real estate assets	4		—		4		—
Other	5		7		20		14
Total transformation costs	$	58	$	200	$	117	$	289

Restructuring Plan

Restructuring activities related to the Company's employees and infrastructure under the cost optimization and prioritization plan and HPE Next Plan, were 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
Liability as of October 31, 2020	$	210	$	68	$	144	$	52
Charges	105		242		—		19
Cash payments	(172)		(49)		(81)		(20)
Non-cash items	3		(63)		4		(3)
Liability as of April 30, 2021	$	146	$	198	$	67	$	48
Total costs incurred to date, as of April 30, 2021	$	335	$	341	$	1,261	$	244
Total expected costs to be incurred as of April 30, 2021	$	700	$	610	$	1,261	$	248

The current restructuring liability related to the transformation programs, reported in Condensed Consolidated Balance Sheets as of April 30, 2021 and October 31, 2020, was $227 million and $359 million, respectively, in accrued restructuring, and $32 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 Condensed Consolidated Balance Sheets as of April 30, 2021 and October 31, 2020, was $200 million and $91 million, respectively.