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 goes to market through its extensive channel network and direct sales.
HP’s operations are organized into three reportable segments: Personal Systems, Printing, and Corporate Investments. HP’s organizational structure is based on many factors that the chief operating decision maker (“CODM”) uses to evaluate, view and run the 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 CODM to evaluate segment results. The CODM 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 offers commercial and consumer desktop and notebook personal computers (“PCs”), workstations, thin clients, commercial mobility devices, retail point-of-sale (“POS”) systems, displays and peripherals, software, support and services. HP groups commercial notebooks, commercial desktops, commercial services, commercial mobility devices, commercial detachables and convertibles, workstations, retail POS systems and thin clients into commercial PCs and consumer notebooks, consumer desktops, consumer services and consumer detachables into consumer PCs when describing performance in these markets. Described below are HP’s global business capabilities within Personal Systems:
•Commercial PCs are optimized for use by enterprise, public sector which includes education, and SMB customers, with a focus on robust designs, security, serviceability, connectivity, reliability and manageability in the customer’s environment. Additionally, HP offers a range of services and solutions to enterprise, public sector which includes education, and SMB customers to help them manage the lifecycle of their PC and mobility installed base.
•Consumer PCs are optimized for consumer usage, focusing on gaming, learning and working remotely, consuming multi-media for entertainment, managing personal life activities, staying connected, sharing information, getting things done for work including creating content and staying informed and secure.
Personal Systems groups its global business capabilities into the following business units when reporting business performance:
•Notebooks consists of consumer notebooks, commercial notebooks, mobile workstations, peripherals, and commercial mobility devices;
• Desktops includes consumer desktops, commercial desktops, thin clients, displays, peripherals, and retail POS systems;
• Workstations consists of desktop workstations, displays, and peripherals; and
• Other consists of consumer and commercial services as well as other Personal Systems capabilities.
Printing provides consumer and commercial printer hardware, supplies, services and solutions. Printing is also focused on imaging solutions in the commercial and industrial 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. It also includes OEM hardware and solutions, and some Samsung-branded supplies.
•Home Printing Solutions delivers innovative printing products, supplies, services and solutions for the home, home business and micro business customers utilizing both HP’s Ink and Laser technologies. It also includes some Samsung-branded supplies.
•Graphics Solutions delivers large-format, commercial and industrial solutions and supplies to print service providers and packaging converters through a wide portfolio of printers and presses (HP DesignJet, HP Latex, HP Indigo and HP PageWide Web Presses).
•3D Printing & Digital Manufacturing offers a portfolio of additive manufacturing solutions and supplies to help customers succeed in their additive and digital manufacturing journey. HP offers complete solutions in collaboration with an ecosystem of partners.
Printing groups its global business capabilities into the following business units when reporting business performance:
•Commercial consists of office printing solutions, graphics solutions and 3D printing & digital manufacturing, excluding supplies;
•Consumer consists of home printing solutions, excluding supplies; and
•Supplies comprises a set of highly innovative consumable products, ranging from ink and laser cartridges to media, graphics supplies and 3D printing & digital manufacturing supplies, for recurring use in consumer and commercial hardware.
Corporate Investments includes HP Labs and certain business incubation and investment 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.
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 infrastructure investments, stock-based compensation expense, restructuring and other charges, acquisition-related charges and amortization of intangible assets.
Segment Operating Results from Operations and the reconciliation to HP consolidated results were as follows:
| ||Three months ended July 31||Nine months ended July 31|
| ||In millions|
|Notebooks||$||7,328 ||$||7,304 ||$||22,183 ||$||18,361 |
|Desktops||2,246 ||2,221 ||6,871 ||7,553 |
|Workstations||388 ||428 ||1,177 ||1,461 |
|Other||444 ||407 ||1,333 ||1,190 |
|Personal Systems||10,406 ||10,360 ||31,564 ||28,565 |
|Supplies||3,092 ||2,573 ||9,575 ||8,455 |
|Commercial||1,070 ||732 ||3,112 ||2,616 |
|Consumer||720 ||628 ||2,562 ||1,744 |
|Printing||4,882 ||3,933 ||15,249 ||12,815 |
|Corporate Investments||— ||1 ||1 ||2 |
|Total segment net revenue||15,288 ||14,294 ||46,814 ||41,382 |
|Other||1 ||— ||(2)||(1)|
|Total net revenue||$||15,289 ||$||14,294 ||$||46,812 ||$||41,381 |
| || |
|Earnings before taxes: |
|Personal Systems||$||869 ||$||570 ||$||2,337 ||$||1,784 |
|Printing||857 ||480 ||2,806 ||1,782 |
|Total segment earnings from operations||1,706 ||1,035 ||5,061 ||3,524 |
|Corporate and unallocated costs and other||(134)||(108)||(378)||(304)|
|Stock-based compensation expense||(69)||(49)||(260)||(221)|
|Restructuring and other charges||(56)||(59)||(216)||(431)|
|Amortization of intangible assets||(42)||(29)||(103)||(84)|
|Interest and other, net||(55)||(28)||(106)||(15)|
|Total earnings before taxes||$||1,326 ||$||751 ||$||3,958 ||$||2,455 |