Acquisitions and Divestitures

12 Months Ended

Oct. 31, 2016

Business Combinations [Abstract]

Acquisitions and Divestitures

Acquisitions and Divestitures

Divestitures and Acquisitions in Fiscal 2016

Divestitures

In fiscal 2016, the Company completed five divestitures, which resulted in $3.4 billion of net proceeds, of which $25 million represents a deposit that was received in the fourth quarter of fiscal 2015. These divestitures primarily represent the sale of the Company's controlling interest in H3C and MphasiS, which are discussed further below, and the sale of the TippingPoint business, which was previously reported within the Software segment. The gains associated with the sale of the Company's controlling interest in H3C and MphasiS are included in Gain on H3C and MphasiS divestitures in the Consolidated and Combined Statements of Earnings. The gains associated with all other divestitures were included in Selling, general and administrative expense in the Consolidated and Combined Statements of Earnings.

In May 2016, the Company executed its joint partnership agreement with Tsinghua Holdings to bring together the Chinese enterprise technology assets of the Company and Tsinghua University to create a Chinese business provider of technology infrastructure. Under the definitive agreement, Tsinghua Holdings' subsidiary, Unisplendour Corporation, purchased 51% of the new business named H3C for $2.6 billion, which includes purchase consideration adjustments. H3C is comprised of the Company's former H3C Technologies and China-based server, storage and technology services businesses ("H3C disposal group"), which were previously reported within the EG segment until the time of the sale. As a result of the H3C divestiture, the Company recognized a gain of $2.2 billion. The Company's remaining China subsidiary maintains 100% ownership of its existing China-based Enterprise Services, Software and Helion Cloud businesses. The new H3C is the exclusive provider of the Company's server and storage portfolio, as well as the Company's exclusive hardware support services provider in China, customized for that market.

The results of the H3C disposal group, which represented 100% of the Company's H3C Technologies and China-based server, storage and technology services businesses, were reflected in the Company's Consolidated and Combined Financial Statements through the date of closing. The pre-tax earnings for the fiscal years ended October 31, 2016, 2015 and 2014 were $182 million, $286 million and $406 million, respectively. Subsequently, the Company's remaining 49% ownership is accounted for under the equity method of accounting, and its proportionate share of H3C’s earnings are included in Loss from equity interests in the Consolidated and Combined Statements of Earnings. See Note 20, "Equity Method Investments" for additional information.

In April 2016, the Company signed a definitive agreement with The Blackstone Group to sell the Company's equity stake in MphasiS Limited, an IT services provider headquartered in Bangalore, India, which was previously reported within the Services segment, for Indian Rupees ("INR") 430 per share. On September 1, 2016, the Company closed the MphasiS divestiture by selling its full equity stake, which was valued at $824 million at the purchase price of INR 430 per share. As a result of the MphasiS divestiture, the Company recognized a gain of $253 million.

Acquisitions

In fiscal 2016, the Company completed two acquisitions. In connection with these acquisitions, the Company recorded approximately $12 million of goodwill and $11 million of intangible assets.

The purchase price allocation for acquisitions may reflect various preliminary fair value estimates and analysis, including preliminary work performed by third-party valuation specialists, which are subject to change within the measurement period as valuations are finalized. The primary areas of the preliminary purchase price allocation that are subject to change relate to the fair values of certain tangible assets and liabilities acquired, the valuation of intangible assets acquired, certain legal matters, income and income based taxes, and residual goodwill. Measurement period adjustments are recorded in the reporting period in which the estimates are finalized and adjustment amounts are determined.

During the fiscal year ended October 31, 2016, $260 million of purchase price adjustments were recorded, primarily for provisional tax-related items recorded in conjunction with the acquisition of Aruba Networks, Inc. ("Aruba"), and as such impacted goodwill in the EG segment.

In August 2016, the Company entered into a definitive agreement to acquire Silicon Graphics International Corp. ("SGI"), a global leader in high-performance solutions for compute, data analytics and data management, for $7.75 per share in cash, a transaction valued at approximately $275 million, net of cash and debt, as of the date of the agreement. SGI’s results of operations will be included within the EG segment. The transaction closed on November 1, 2016.

Divestitures and Acquisitions in Prior Years

Divestitures

In fiscal 2015, the Company completed four divestitures, which resulted in $140 million of proceeds. These divestitures include the sale of its LiveVault and iManage businesses, which were previously reported within the Software segment. The gains associated with these divestitures were included in Selling, general and administrative expense in the Combined Statement of Earnings.

Acquisitions

In fiscal 2015, the Company completed five acquisitions. The purchase price allocation for these acquisitions is shown in the table below. Pro forma results of operations for these acquisitions are not presented, as these acquisitions were not material to the Company's consolidated and combined results of operations, either individually or in the aggregate. Goodwill is not deductible for tax purposes.

The following table presents the aggregate purchase price allocation, including those items that were preliminary allocations, for the Company's acquisitions for the fiscal year ended October 31, 2015:

	In millions
Goodwill	$	1,987
Amortizable intangible assets	704
In-process research and development	159
Net assets assumed	221
Total fair value of consideration	$	3,071

The Company's largest acquisition in fiscal 2015 was Aruba, which was completed in May 2015. The Company reports the financial results of Aruba's business in the Networking business unit within the EG segment. The acquisition date fair value of consideration of $2.8 billion consisted of cash paid for outstanding common stock, vested in-the-money stock awards and the estimated fair value of earned unvested stock awards assumed by the Company. In connection with this acquisition, the Company recorded approximately $1.8 billion of goodwill, $643 million of intangible assets and $153 million of in-process research and development. The Company is amortizing intangible assets on a straight-line basis over an estimated weighted-average life of six years.

In fiscal 2014, the Company completed two acquisitions with a combined purchase price of $55 million, of which $12 million was recorded as goodwill and $25 million was recorded as intangible assets.