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Segment Information
 6 Months Ended
Apr. 30, 2017
Segment Reporting [Abstract]  
Segment Information
Segment Information
HP is a leading global provider of personal computing and other access devices, imaging and printing products, and related technologies, solutions and services. HP sells to individual consumers, small and medium-sized businesses (“SMBs”) and large enterprises, including customers in the government, health and education sectors.
HP’s operations are organized into three segments for financial reporting purposes: Personal Systems, Printing and Corporate Investments. HP’s organizational structure is based on a number of factors that the chief operating decision maker 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 HP’s chief operating decision maker to evaluate segment results. The chief operating decision maker uses several metrics to evaluate the performance of the overall business, including earnings from operations, and uses these results to allocate resources to each of the segments.
A summary description of each segment is as follows:
Personal Systems provides Commercial and Consumer personal computers (“PCs”), Workstations, thin clients, Commercial tablets and mobility devices, retail point-of-sale systems, displays and other related accessories, software, support and services for the commercial and consumer markets. HP groups Commercial notebooks, Commercial desktops, Commercial services, Commercial tablets and mobility devices, Commercial detachables, Workstations, retail point-of-sale systems and thin clients into commercial clients and Consumer notebooks, Consumer desktops, Consumer services and Consumer detachables into consumer clients when describing performance in these markets. Described below are HP’s global business capabilities within Personal Systems:
•
Commercial PCs are optimized for use by customers including enterprise and SMBs, with a focus on robust designs, security, serviceability, connectivity, reliability and manageability in networked environments. Additionally, HP offers a range of services and solutions to enterprise and SMBs to help them manage the lifecycle of their PC and mobility installed base.
•
Consumer PCs are Notebooks, Desktops and hybrids that are optimized for consumer usage, focusing on multi-media consumption, online browsing, gaming and light productivity.
Printing provides Consumer and Commercial printer hardware, supplies, media, solutions and services, as well as scanning devices. Printing is also focused on imaging solutions in the commercial markets. HP groups Office, Graphics and 3D printers into Commercial Hardware and Home printers into Consumer Hardware when describing performance in these markets. Described below are HP’s global business capabilities within Printing:
•
Office Printing Solutions delivers HP’s office printers, supplies, services, and solutions to SMBs and large enterprises. HP goes to market through its extensive channel network and directly with HP sales. Ongoing key initiatives include design and deployment of A3 products and solutions for the copier and multifunction printer market, printer security solutions, PageWide solutions and award-winning JetIntelligence LaserJet products.
•
Home Printing Solutions delivers a compelling set of innovative printing products and solutions for the home and home business or small office customers utilizing both HP’s Ink and Laser technologies. Initiatives such as Instant Ink and Continuous Ink Supply System provide business model innovation to benefit and expand HP’s existing customer base, while new innovations like Sprocket drive print relevance for a mobile generation.
•
Graphics Solutions is reinventing the graphics industry by offering large-format, commercial and industrial solutions to print service providers and packaging converters through the largest portfolio of printers and presses (HP DesignJet, HP Latex Printers, HP Scitex, HP Indigo and HP PageWide Presses).
•
3D Printing delivers HP’s Multi-Jet Fusion 3D Printing Solution designed for prototyping and production of functional parts and functioning on an open platform facilitating the development of new 3D printing materials.
Corporate Investments include HP Labs and certain business incubation projects.
The accounting policies HP uses to derive segment results are substantially the same as those used by HP in preparing these financial statements. HP derives the results of the business segments directly from its internal management reporting system. Segment net revenue includes revenues from sales to external customers and certain revenues related to managed print services arrangements, which are eliminated for the purposes of reporting HP’s consolidated net revenue.
HP does not allocate certain operating expenses, which it manages at the corporate level, to its segments. These unallocated amounts include certain corporate governance costs and market-related retirement credits, stock-based compensation expense, restructuring and other charges, acquisition-related charges, amortization of intangible assets, defined benefit plan settlement charges and net revenue eliminations, primarily related to managed print services.
Business Unit Realignment
Effective at the beginning of its first quarter of fiscal year 2017, HP implemented an organizational change to align its business unit financial reporting more closely with its current business structure. The organizational change resulted in the transfer of a portion of LaserJet printers from Commercial to Consumer within the Printing segment. HP reflected this change to its business unit information in prior reporting periods on an as-is basis that resulted in the reclassification of revenues between the Commercial and Consumer business units of Printing. The reporting change had no impact to previously reported segment net revenue, consolidated net revenue, earnings from continuing operations, net earnings or net earnings per share.
Segment Operating Results from Continuing Operations
 
Personal
Systems
 
Printing
 
Corporate
Investments
 
Total
Segments
 
Eliminations
and Other
 
Total
 
In millions
Three months ended April 30, 2017
 

 
 

 
 

 
 

 
 

 
 
 

Net revenue
$
7,662

 
$
4,743

 
$
3

 
$
12,408

 
$
(23
)
 
 
$
12,385

Earnings (loss) from operations
$
244

 
$
825

 
$
(26
)
 
$
1,043

 
 

 
 
 

Three months ended April 30, 2016
 

 
 

 
 

 
 

 
 

 
 
 

Net revenue
$
6,990

 
$
4,637

 
$
3

 
$
11,630

 
$
(42
)
 
 
$
11,588

Earnings (loss) from operations
$
242

 
$
801

 
$
(8
)
 
$
1,035

 
 

 
 
 

Six months ended April 30, 2017
 

 
 

 
 

 
 

 
 

 
 
 

Net revenue
$
15,886

 
$
9,226

 
$
5

 
$
25,117

 
$
(48
)
 
 
$
25,069

Earnings (loss) from operations
$
557

 
$
1,541

 
$
(49
)
 
$
2,049

 
 

 
 
 

Six months ended April 30, 2016
 

 
 

 
 

 
 

 
 

 
 
 

Net revenue
$
14,457

 
$
9,279

 
$
6

 
$
23,742

 
$
92

(1) 
 
$
23,834

Earnings (loss) from operations
$
471

 
$
1,588

 
$
(31
)
 
$
2,028

 
 

 
 
 


(1) 
For the six months ended April 30, 2016, the amount includes the recognition of revenue previously deferred in relation to sales to the pre-Separation finance entity.
The reconciliation of segment operating results to HP consolidated results was as follows:
 
Three months ended April 30
 
Six months ended April 30
 
2017
 
2016
 
2017
 
2016
 
In millions
Net Revenue:
Total segments
$
12,408

 
$
11,630

 
$
25,117

 
$
23,742

Net revenue eliminations and other
(23
)
 
(42
)
 
(48
)
 
92

Total net revenue
$
12,385

 
$
11,588

 
$
25,069

 
$
23,834

Earnings from continuing operations before taxes:
 

 
 

 
 

 
 

Total segment earnings from operations
$
1,043

 
$
1,035

 
$
2,049

 
$
2,028

Corporate and unallocated costs and eliminations
(13
)
 
(48
)
 
(9
)
 
(24
)
Stock-based compensation expense
(48
)
 
(40
)
 
(123
)
 
(101
)
Restructuring and other charges
(140
)
 
(100
)
 
(203
)
 
(120
)
Acquisition-related charges
(20
)
 
—

 
(36
)
 
—

Amortization of intangible assets
(1
)
 
(6
)
 
(1
)
 
(14
)
Defined benefit plan settlement charges
(3
)
 
—

 
(3
)
 
—

Interest and other, net
(64
)
 
(5
)
 
(145
)
 
(99
)
Total earnings from continuing operations before taxes          
$
754

 
$
836

 
$
1,529

 
$
1,670


Net revenue by segment and business unit was as follows:
 
Three months ended April 30
 
Six months ended April 30
 
2017
 
2016
 
2017
 
2016
 
In millions
Notebooks
$
4,493

 
$
3,838

 
$
9,383

 
$
8,043

Desktops
2,377

 
2,402

 
4,911

 
4,929

Workstations
495

 
461

 
986

 
905

Other
297

 
289

 
606

 
580

Personal Systems
7,662

 
6,990

 
15,886

 
14,457

Supplies
3,157

 
3,099

 
6,164

 
6,200

Commercial Hardware
982

 
957

 
1,868

 
1,921

Consumer Hardware
604

 
581

 
1,194

 
1,158

Printing
4,743

 
4,637

 
9,226

 
9,279

Corporate Investments
3

 
3

 
5

 
6

Total segment net revenue
12,408

 
11,630

 
25,117

 
23,742

Net revenue eliminations and other
(23
)
 
(42
)
 
(48
)
 
92

Total net revenue
$
12,385

 
$
11,588

 
$
25,069

 
$
23,834