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Hewlett Packard Enterprise

Hewlett Packard EnterpriseHPEEarnings & Financial Report

NYSE · Information Technology · Technology Hardware, Storage & Peripherals

The Hewlett Packard Enterprise Company (HPE) is an American multinational information technology company based in Spring, Texas. It is a business-focused organization which works in servers, storage, networking, containerization software and consulting and support. HPE was ranked No. 107 in the 2018 Fortune 500 list of the largest United States corporations by total revenue.

What changed in Hewlett Packard Enterprise's 10-K — 2022 vs 2023

Top changes in Hewlett Packard Enterprise's 2023 10-K

612 paragraphs added · 566 removed · 426 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

120 edited+39 added−31 removed81 unchanged
Schultz; Executive Vice President, Chief Operating and Legal Officer Mr. Schultz has served as our Executive Vice President, Chief Operating and Legal Officer since July 2020. Prior to that, he served as Executive Vice President, Chief Legal and Administrative Officer and Secretary from December 2017 to July 2020. Mr.
Schultz has served as our Executive Vice President, Chief Operating and Legal Officer since July 2020. Prior to that, he served as Executive Vice President, Chief Legal and Administrative Officer and Secretary from December 2017 to July 2020. Mr.
Hotard has served as Executive Vice President and General Manager of our HPC & AI global business group, including Hewlett Packard Enterprise Labs, our applied research group, since March 2022 and Senior Vice President and General Manager of the same group from March 2021 to March 2022.
Hotard has served as Executive Vice President and General Manager of our HPC & AI global business, including Hewlett Packard Enterprise Labs, our applied research group, since March 2022, and as Senior Vice President and General Manager of the same group from March 2021 to March 2022.
Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available on our website at http://investors.hpe.com, as soon as reasonably practicable after we electronically file such reports with, or furnish those reports to, the Securities and Exchange Commission.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available on our website at http://investors.hpe.com, as soon as reasonably practicable after we electronically file such reports with, or furnish those reports to, the Securities and Exchange Commission.
Our customers are organized by commercial and large enterprise groups, including business and public sector enterprises, and purchases of our products, solutions and services may be fulfilled directly by us or indirectly through a variety of partners, including: • resellers that sell our products and services, frequently with their own value-added products or services, to targeted customer groups; • distribution partners that supply our solutions to resellers; • original equipment manufacturers ("OEMs") that integrate our products and services with their own products and services, and sell the integrated solution; • independent software vendors that provide their clients with specialized software products and often assist us in selling our products and services to clients purchasing their products; • systems integrators that provide expertise in designing and implementing custom IT solutions and often partner with us to extend their expertise or influence the sale of our products and services; and • advisory firms that provide various levels of management and IT consulting, including some systems integration work, and typically partner with us on client solutions that require our unique products and services.
Our customers are organized by commercial and large enterprise groups, including business and public sector enterprises, and purchases of our products, solutions and services may be fulfilled directly by us or indirectly through a variety of partners, including: • resellers that sell our products and services, frequently with their own value-added products or services, to targeted customer groups; • distribution partners that supply our solutions to resellers; • original equipment manufacturers (“OEMs”) that integrate our products and services with their own products and services, and sell the integrated solution; • independent software vendors that provide their clients with specialized software products and often assist us in selling our products and services to clients purchasing their products; • systems integrators that provide expertise in designing and implementing custom IT solutions and often partner with us to extend their expertise or influence the sale of our products and services; and • advisory firms that provide various levels of management and IT consulting, including some systems integration work, and typically partner with us on client solutions that require our unique products and services.
Customers can store and serve their data with speed and high availability to applications, secure and protect their data across hybrid clouds from ransomware and cyber threats, and gain data mobility across private cloud, public cloud, and multi-cloud environments.
Customers can store and serve their data with speed and high availability to applications, further secure and protect their data across hybrid clouds from ransomware and cyber threats, and gain data mobility across private cloud, public cloud, and multi-cloud environments.
The HPC portfolio of products includes HPE Cray, HPE Apollo, and Converged Edge Systems (formerly known as Edge Compute) hardware, software, and data management appliances that are often sold as supercomputing systems, including exascale supercomputers (systems that can process 10 18 floating point calculations per second), that support data-intensive simulations and large-scale AI applications.
The HPC portfolio of products includes HPE Cray EX, HPE Cray XD (formerly known as HPE Apollo), and Converged Edge Systems (formerly known as Edge Compute) hardware, software, and data management appliances that are often sold as supercomputing systems, including exascale supercomputers (systems that can process 10 18 floating point calculations per second), that support data-intensive simulations and large-scale AI applications.
Our HPE GreenLake edge-to-cloud platform provides open cloud application programming interfaces ("APIs") to our partners, enabling them to better offer their unique solutions to customers. • Custom financial solutions.
Our HPE GreenLake edge-to-cloud platform provides open cloud application programming interfaces to our partners, enabling them to better offer their unique solutions to customers. • Custom financial solutions.
Our vast intellectual property portfolio and global research and development capabilities are part of a broader innovation roadmap designed to help organizations take advantage of the expanding amount of data available and leverage the latest technology developments such as cloud, artificial intelligence, supercomputing, and cybersecurity to drive business outcomes now and in the future.
Our vast intellectual property portfolio and global research and development capabilities are part of a broader innovation roadmap designed to help organizations take advantage of the expanding amount of data available and leverage the latest technology developments such as cloud, artificial intelligence, supercomputing, and cybersecurity to drive business transformations now and in the future.
Our customers range from small-and-medium-sized businesses ("SMBs") to large global enterprises and governmental entities. Our legacy dates back to a partnership founded in 1939 by William R. Hewlett and David Packard, and we strive every day to uphold and enhance that legacy through our dedication to providing innovative technological solutions to our customers.
Our customers range from small-and-medium-sized businesses (“SMBs”) to large global enterprises and governmental entities. Our legacy dates back to a partnership founded in 1939 by William R. Hewlett and David Packard, and we strive every day to uphold and enhance that legacy through our dedication to providing innovative technological solutions to our customers.
Patents Our general policy is to seek patent protection for those inventions likely to be incorporated into our products and services or where obtaining such proprietary rights will improve our competitive position. As of October 31, 2022, our worldwide patent portfolio included approximately 13,000 issued and pending patents.
Patents Our general policy is to seek patent protection for those inventions likely to be incorporated into our products and services or where obtaining such proprietary rights will improve our competitive position. As of October 31, 2023, our worldwide patent portfolio included approximately 13,000 issued and pending patents.
Through our Financial Services segment, we help customers create investment capacity to accelerate their transformations by helping them free up capital, capture value from older assets, achieve sustainability goals, invest in new technologies as-a-service, and weather financial volatility.
Through our FS segment, we help customers create investment capacity to accelerate their transformations by helping them free up capital, capture value from older assets, achieve sustainability goals, invest in new technologies as-a-service, and weather financial volatility.
Financial Services Financial Services ("FS") provides flexible investment solutions, such as leasing, financing, IT consumption, utility programs, and asset management services for customers that facilitate unique technology deployment models and the acquisition of complete IT solutions, including hardware, software, and services from Hewlett Packard Enterprise and others.
Financial Services Financial Services (“FS”) provides flexible investment solutions, such as leasing, financing, IT consumption, utility programs, and asset management services for customers that facilitate unique technology deployment models and the acquisition of complete IT solutions, including hardware, software, and services from Hewlett Packard Enterprise and others.
Our primary competitors are compute technology vendors that can design and build solutions that deliver performance scalability and connectivity necessary to handle super-compute and AI workloads, including Dell Technologies Inc., Lenovo Group Ltd., IBM, Fujitsu Network Communications, Inc., and Atos Information Technology Incorporated.
Our primary competitors are compute technology vendors that can design and build solutions that deliver performance scalability and connectivity necessary to handle super-compute and AI workloads, including Dell Technologies Inc., Super Micro Computer, Inc,, Lenovo Group Ltd., IBM, Fujitsu Network Communications, Inc., and Atos Information Technology Incorporated.
Environmental Sustainability Living Progress - Living Progress is our business strategy for creating sustainable IT solutions that meet the technology demands of the future, while advancing the way people live and work. This strategy underpins our commitment to the environmental, social, and governance ("ESG") factors most important to stakeholders.
Environmental Sustainability Living Progress - Living Progress is our business strategy for creating sustainable IT solutions that meet the technology demands of the future, while advancing the way people live and work. This strategy underpins our commitment to the environmental, social, and governance (“ESG”) factors most important to stakeholders.
Financial Services. In our financing business, our primary competitors are captive financing companies, such as IBM Global Financing, Dell Financial Services, and Cisco Capital, as well as banks and other financial institutions. Our primary IT Asset Disposition ("ITAD") competitors are ERI, Ingram Micro, Sage Sustainable Electronics, and Sims Recycling Solutions.
Financial Services. In our financing business, our primary competitors are captive financing companies, such as IBM Global Financing, Dell Financial Services, and Cisco Capital, as well as banks and other financial institutions. Our primary IT Asset Disposition (“ITAD”) competitors are ERI, Ingram Micro, Sage Sustainable Electronics, and Sims Recycling Solutions.
May served as Vice President, Human Resources for Boeing Defense, Space and Security at Boeing from June 2010 to April 2013 and as Vice President, Compensation, Benefits and Strategy at Boeing from August 2007 to June 2010. Mr. May has also held senior human resources roles at Cerberus Capital Management and PepsiCo.
May served as Vice President, Human Resources for Boeing Defense, Space and Security at Boeing from June 2010 to April 2013 and as Vice President, Compensation, Benefits and Strategy at Boeing from August 2007 to June 2010. Mr. May has also served in senior human resources roles at Cerberus Capital Management and PepsiCo.
Our competitive advantages include our deep expertise and capabilities designing and delivering these solutions, broad end-to-end solutions portfolio, supported by our strong intellectual property portfolio and research and development capabilities, coupled with our global reach and partner ecosystem.
Our competitive advantages include our deep expertise and capabilities designing and delivering these solutions, broad end-to-end heterogeneous and open solutions portfolio, supported by our strong intellectual property portfolio and research and development capabilities, coupled with our global reach and partner ecosystem.
Philip J. Mottram; Executive Vice President, General Manager of Intelligent Edge Mr. Mottram has served as Executive Vice President and General Manager of our Intelligent Edge business since March 2022. Previously, he served as the President of our Intelligent Edge business from June 2021 to March 2022. Prior to that, Mr.
Mottram; Executive Vice President, General Manager of Intelligent Edge Mr. Mottram has served as Executive Vice President and General Manager of our Intelligent Edge business since March 2022. Previously, he served as the President of our Intelligent Edge business from June 2021 to March 2022. Prior to that, Mr.
Material Government Regulations Our business activities are subject to various federal, state, local, and foreign laws and our products and services are governed by a number of rules and regulations. Costs and accruals incurred to comply with these governmental regulations are presently not material to our capital expenditures, results of operations and competitive position.
Material Government Regulations Our business activities are subject to various federal, state, local, and foreign laws and our products and services are governed by a number of rules and regulations. Costs and accruals incurred to comply with these governmental regulations are 12 Table of Content presently not material to our capital expenditures, results of operations and competitive position.
FS is also an enabler of our consumption-based IT models by helping spread our upfront solution costs over the duration of the customer contract. Through Financial Services' Technology Renewal Centers, we are helping customers achieve their own sustainability goals by recovering over 3 million IT assets in fiscal 2021 and refurbishing more than 85% for reuse. • Experienced leadership team.
FS is also an enabler of our consumption-based IT models by helping spread our upfront solution costs over the duration of the customer contract. Through Financial Services' Technology Renewal Centers, we are helping customers achieve their own sustainability goals by recovering over 3 million IT assets in fiscal 2022 and refurbishing more than 82% for reuse. • Experienced leadership team.
Neri's experience includes more than 25 years combined at HPE and Hewlett-Packard Company ("HP Co.") in various leadership positions. Our senior management team has many years of experience in our industry and possesses extensive knowledge of and experience in the enterprise IT business and the markets in which we compete.
Neri's experience includes more than 25 years combined at HPE and Hewlett-Packard Company (“HP Co.”) in various leadership positions. Our senior management team has many years of experience in our industry and possesses extensive knowledge of and experience in the enterprise IT business and the markets in which we compete.
Intelligent Edge operates in the highly competitive networking and connectivity infrastructure market, which is characterized by rapid and ongoing technological innovation and price competition. Our primary competitors are technology vendors, such as Cisco Systems, Inc., Extreme Networks, Inc., Juniper Networks, Inc., and Arista Networks Inc.
Intelligent Edge operates in the highly competitive networking and connectivity infrastructure market, which is characterized by rapid and ongoing technological innovation and price competition. Our primary competitors are technology vendors, such as Cisco Systems, Inc., Extreme Networks, Inc., Arista Networks Inc, Palo Alto Networks, Fortinet, and Juniper Networks, Inc.
A discussion of certain factors potentially affecting our operations is set forth in Item 1A, "Risk Factors." Compute Our Compute portfolio consists of both general-purpose servers for multi-workload computing and workload-optimized servers to deliver the best performance and value for demanding applications.
A discussion of certain factors potentially affecting our operations is set forth in Item 1A, “Risk Factors.” Compute Our Compute portfolio consists of both general-purpose servers for multi-workload computing and workload-optimized servers to deliver the best performance and value for demanding applications.
The HPE Aruba software and services portfolio includes cloud-based management, network management, network access control, analytics and assurance, location services software, and professional and support services, as well as as-a-service and consumption models through the HPE GreenLake edge-to-cloud platform for the Intelligent Edge portfolio of products. 5 Table of Conten t We also offer Aruba ESP (or Edge Services Platform), which takes a cloud-native approach to helping customers meet their connectivity, security, and financial requirements across campus, branch, data center, and remote worker environments, covering all aspects of wired, wireless LAN, and wide area networking.
The HPE Aruba Networking software and services portfolio includes cloud-based management, network management, network access control, software-defined wide-area networking, network security, analytics and assurance, location services software, and professional and support services, as well as aaS and consumption models through the HPE GreenLake edge-to-cloud platform for the Intelligent Edge portfolio of products. 5 Table of Content We also offer Aruba ESP (or Edge Services Platform), which takes a cloud-native approach to helping customers meet their connectivity, security, and financial requirements across campus, branch, data center, and remote worker environments, covering all aspects of wired, wireless LAN, and wide-area networking.
Consumption-based IT offers solutions to these challenges by providing greater agility, which empowers people to shift from managing infrastructure to driving innovation by leveraging insights from their data, while also eliminating capital and operating expenses tied to infrastructure over-provisioning. HPE is distinctly differentiated in delivering a true consumption-based IT experience. • Open platforms.
Consumption-based IT offers solutions to these challenges by providing greater agility, which empowers people to shift from managing infrastructure to driving innovation by leveraging insights from their data, while also eliminating 6 Table of Content capital and operating expenses tied to infrastructure over-provisioning. HPE is distinctly differentiated in delivering a true consumption-based IT experience. • Open platforms.
It offers true pay per use consumption so customers only pay for what they use, and they can have the entire hybrid cloud experience managed for them through our HPE GreenLake managed services offering. • Comprehensive portfolio. We have a distinctive and industry leading portfolio of edge-to-cloud solutions and unique capabilities to help accelerate our customers' digital transformations.
It offers true pay per use consumption so customers only pay for what they use, and they can have the entire hybrid cloud experience managed for them through our HPE Managed Services offerings. • Comprehensive portfolio. We have a distinctive and industry leading portfolio of edge-to-cloud solutions and capabilities to help accelerate our customers' digital transformations.
See "Risk Factors—We depend on third-party suppliers, and our financial results could suffer if we fail to manage our supplier relationships properly" in Item 1A. As a result of the pandemic, worldwide demand for electronic components spiked in many different technology sectors, causing industry-wide shortages for many electronic components.
See “Risk Factors—We depend on third-party suppliers, and our financial results could suffer if we fail to manage our supplier relationships properly” in Item 1A. As a result of the pandemic, worldwide demand for electronic components spiked in many different technology sectors, causing industry-wide shortages for many electronic components.
Most product life cycles are relatively short, and to remain competitive we must develop new products and services, continuously enhance our existing products and services and compete effectively on the basis of the factors listed above, among others.
Most product life cycles are relatively short, and to 10 Table of Content remain competitive we must develop new products and services, continuously enhance our existing products and services and compete effectively on the basis of the factors listed above, among others.
We also have a strong balance sheet and liquidity profile that provide the financial flexibility and speed to take advantage of acquisition opportunities. 6 Table of Conten t • Global distribution and partner ecosystem. We are experts in delivering innovative technological solutions to our customers in complex multi-country, multi-vendor and/or multi-language environments.
We also have a strong balance sheet and liquidity profile that provide the financial flexibility and speed to take advantage of acquisition opportunities. • Global distribution and partner ecosystem. We are experts in delivering innovative technological solutions to our customers in complex multi-country, multi-vendor, and/or multi-language environments.
International Our products and services are available worldwide. We believe geographic diversity allows us to meet demand on a worldwide basis for our customers, draws on business and technical expertise from a worldwide workforce, provides stability to our operations, provides revenue streams that may offset geographic economic trends, and offers us an opportunity to access new markets for maturing products.
We believe geographic diversity allows us to meet demand on a worldwide basis for our customers, draws on business and technical expertise from a worldwide workforce, provides stability to our operations, provides revenue streams that may offset geographic economic trends, and offers us an opportunity to access new markets for maturing products.
Hewlett Packard Enterprise's Corporate Governance Guidelines, Board of Directors' committee charters (including the charters of the Audit Committee, Finance and Investment Committee, HR and Compensation Committee, Technology Committee, and Nominating, Governance and Social Responsibility Committee) and code of ethics entitled "Standards of Business Conduct" are also available at that same location on our website.
Hewlett Packard Enterprise's Corporate Governance Guidelines, Board of Directors' committee charters (including the charters of the Audit Committee, Finance and Investment Committee, HR and Compensation Committee, Technology Committee, and Nominating, Governance and Social Responsibility Committee) and code of ethics entitled “Standards of Business Conduct” are also available at that same location on our website.
Work That Fits Your Life: This global initiative, which was launched in 2019, is an important example of how HPE is investing in our culture and creating a team member experience that makes HPE a destination of choice for the best talent in the industry.
Work That Fits Your Life - This global initiative, which was launched in 2019, is an important example of how HPE is investing in our culture and creating a team member experience that aims to make HPE a destination of choice for the best talent in the industry.
The primary business drivers for Intelligent Edge solutions are work from anywhere environments, mobility, and internet-of-things ("IoT"). The insights from data generated at the edge are key to driving new business outcomes and experiences. The HPE Aruba product portfolio includes hardware products, such as Wi-Fi access points, switches, and gateways.
The primary business drivers for Intelligent Edge solutions are work from anywhere environments, mobility, and connectivity for internet-of-things (“IoT”) devices. The insights from data generated at the edge are key to driving new business outcomes and experiences. The HPE Aruba Networking product portfolio includes hardware products, such as Wi-Fi access points, switches, and gateways.
Stockholders may request free printed copies of these documents from: Hewlett Packard Enterprise Company Attention: Investor Relations 1701 East Mossy Oaks Road, Spring, Texas 77389 http://investors.hpe.com/financial/requested-printed-reports Table of Conten t
Stockholders may request free printed copies of these documents from: Hewlett Packard Enterprise Company Attention: Investor Relations 1701 East Mossy Oaks Road, Spring, Texas 77389 http://investors.hpe.com/financial/requested-printed-reports 16 Table of Content
Intelligent Edge The Intelligent Edge business is comprised of a portfolio of secure edge-to-cloud solutions operating under the Aruba brand that include wired and wireless local area network ("LAN"), campus and data center switching, software-defined wide area networking, network security, and associated services to enable secure connectivity for businesses of any size.
Intelligent Edge The Intelligent Edge business is comprised of a portfolio of secure edge-to-cloud solutions operating under the Aruba brand that includes wired and wireless local area network (“LAN”), campus, branch, and data center switching, software-defined wide-area networking, network security, and associated services that enable secure connectivity for businesses of any size.
Research and Development Innovation is a key element of our culture and critical to our success. Our research and development efforts ("R&D") are focused on designing and developing products, services, and solutions that anticipate customers' changing needs and desires and emerging technological trends.
Research and Development Innovation is a key element of our culture and critical to our success. Our research and development efforts (“R&D”) are focused on designing and developing products, services, and solutions that anticipate customers' changing needs and desires and emerging technological trends.
Our solutions across connectivity, cloud and data are delivered as-a-service through the HPE GreenLake edge-to-cloud platform across our Intelligent Edge, Compute, High Performance Computing & Artificial Intelligence ("HPC & AI"), and Storage business segments. Financial Services complements our solution offerings by helping customers unlock financial capacity.
Our solutions across connectivity, cloud, and data are delivered as-a-service (“aaS”) through the HPE GreenLake edge-to-cloud platform across our Intelligent Edge, Compute, High Performance Computing & Artificial Intelligence (“HPC & AI”), and Storage business segments. Financial Services complements our solution offerings by helping customers unlock financial capacity.
We build products to order to maximize manufacturing and logistics efficiencies by producing 7 Table of Conten t high volumes of basic product configurations. Alternatively, configuring products to order enables units to match a customer's particular hardware and software customization requirements.
We build products to order to maximize manufacturing and logistics efficiencies by producing high volumes of basic product configurations. Alternatively, configuring products to order enables units to match a customer's particular hardware and software customization requirements.
For a discussion of certain risks attendant to these competitive environments, see "Risk Factors—We operate in an intensely competitive industry, and competitive pressures could harm our business and financial performance" in Item 1A.
For a discussion of certain risks attendant to these competitive environments, see “Risk Factors—We operate in an intensely competitive industry, and competitive pressures could harm our business and financial performance” in Item 1A.
For a discussion of risks attendant to intellectual property rights, see "Risk Factors—Our financial performance may suffer if we cannot continue to develop, license or enforce the intellectual property rights on which our businesses depend" and "—Our products and services depend in part on intellectual property and technology licensed from third parties" in Item 1A.
For a discussion of risks attendant to intellectual property rights, see “Risk Factors—Our financial performance may suffer if we cannot continue to develop, license or enforce the intellectual property rights on which our businesses depend” and “—Our products and services depend in part on intellectual property and technology licensed from third parties” in Item 1A.
Prior to that, he served as Senior Vice President and General Manager of the Compute Solutions group of the then Hybrid IT business 14 Table of Conten t segment, from November 2018 to February 2020. Mr. MacDonald previously served as Vice President and General Manager of BladeSystem from August 2015 to October 2018, having first joined HP Co. in 1996.
Prior to that, he served as Senior Vice President and General Manager of the Compute Solutions group of the then Hybrid IT business segment, from November 2018 to February 2020. Mr. MacDonald previously served as Vice President and General Manager of BladeSystem from August 2015 to October 2018, having first joined HP Co. in 1996. Philip J.
Building a Vibrant Culture: We have identified four key cultural beliefs that guide how we lead on a daily basis: belief in accelerating what’s next, bold moves, the “power of yes we can”, and being a force for good. We embed these beliefs in a deep-rooted DNA that puts customers first, enabling us to partner, innovate and act with integrity.
We have identified four key cultural beliefs that guide how we lead on a daily basis: accelerating what’s next, bold moves, the “power of yes we can,” and being a force for good. We embed these beliefs in a deep-rooted DNA that puts customers first, enabling us to partner, innovate, and act with integrity.
We maintain policies to promote equal pay, and we regularly review our global pay practices with an aim to ensure that team members in similar roles and locations are paid commensurately with their experience and responsibilities.
We maintain policies to promote equal pay, and we regularly review our global pay practices with an aim to pay team members in similar roles and locations commensurately with their experience and responsibilities.
This portfolio of products includes our secure and versatile HPE ProLiant rack and tower servers and HPE Synergy, a composable infrastructure for traditional and cloud-native applications. HPE ProLiant servers are the compute foundation for the fastest growing workloads in the industry including hyperconverged infrastructure ("HCI"), virtual workspaces, data management, transcoding and visualization.
This portfolio of products includes our secure and versatile HPE ProLiant rack and tower servers and HPE Synergy, a composable infrastructure for traditional and cloud-native applications. HPE ProLiant servers are the compute foundation for the fastest growing workloads in the industry including AI Inferencing, hyperconverged infrastructure (“HCI”), virtual workspaces, and data management.
We are also subject to legislation in an increasing number of jurisdictions that makes producers of electrical goods, including servers and networking equipment, financially responsible for specified collection, recycling, treatment, and disposal of past and future covered products (sometimes referred to as "product take-back legislation").
We are also subject to legislation in an increasing number of jurisdictions that makes producers of electrical goods, including servers and networking equipment, subject to certain repairability requirements or financially responsible for specified collection, recycling, treatment, and disposal of past and future covered products (sometimes referred to as “product take-back legislation”).
Environment Our products and operations are, or may in the future be, subject to various federal, state, local, and foreign laws and regulations concerning the environment, including, among others, laws addressing the discharge of pollutants into the air and water; the management, movement, and disposal of hazardous substances and wastes and the clean-up of contaminated sites; product safety, such as chemical composition, packaging and labeling; energy consumption of our products and services; and the manufacture and distribution of chemical substances.
Environment Our products and operations are, or may in the future be, subject to various federal, state, local, and foreign laws and regulations concerning the environment, including, among others, laws addressing the discharge of pollutants into the air and water; supply chain due diligence, and sustainability, environment and emissions-related reporting; the management, movement, and disposal of hazardous substances and wastes and the clean-up of contaminated sites; product compliance and safety, such as repairability, chemical composition, packaging and labeling; energy consumption of our products and services; and the manufacture and distribution of chemical substances.
Our efforts also are focused on identifying the areas where we believe we can make a unique contribution and where partnering with other leading technology companies will leverage our cost structure and maximize our customers' experiences. Expenditures for R&D we re $2.0 billion in fiscal 2022, $2.0 billion in fiscal 2021 and $1.9 billion in fiscal 2020.
Our efforts also are focused on identifying the areas where we believe we can make a unique contribution and where partnering with other leading technology companies will leverage our cost structure and maximize our customers' experiences. Expenditures for R&D were $2.3 billion in fiscal 2023 and $2.0 billion in fiscal 2022 and 2021, respectively.
Our Living Progress strategy and sustainability programs are key to our lasting relationships with our customers, and our sustainability credentials provide us with a competitive advantage in the market, support talent acquisition and retention, and ensure ongoing access to global markets.
Our Living Progress strategy and sustainability programs are key to our lasting relationships with our customers, and our sustainability credentials 11 Table of Content provide us with a competitive advantage in the market, support talent acquisition and retention, and enable ongoing access to global markets.
Neri has served as a director of Elevance Health, Inc. (formerly Anthem, Inc.), a health insurance provider in the U.S. From March 2012 to February 2013, he served as a director of MphasiS Limited, an India-based technology company. Tarek Robbiati; Executive Vice President and Chief Financial Officer Mr.
Neri has served as a director of Elevance Health, Inc. (formerly Anthem, Inc.), a health insurance provider in the U.S. From March 2012 to February 2013, he served as a director of MphasiS Limited, an India-based technology company. John F. Schultz; Executive Vice President, Chief Operating and Legal Officer Mr.
We encounter strong competition in all areas of our business. We compete primarily on the basis of technology, innovation, performance, price, quality, reliability, brand, reputation, distribution, range of products and services, ease of use of our products, account relationships, customer training, service and support, security, and the availability of our IT infrastructure offerings.
We compete primarily on the basis of technology, innovation, performance, price, quality, reliability, brand, reputation, distribution, range of products and services, ease of use of our products, account relationships, customer training, service and support, security, and the availability of our IT infrastructure offerings.
Previously, he served as Executive Vice President and General Manager of our Enterprise Group from November 2015 to June 2017. Prior to that, Mr. Neri served in a similar role for HP Co.'s Enterprise Group from October 2014 to November 2015. Mr.
Neri has served as our President and Chief Executive Officer since June 2017 and February 2018, respectively. Previously, he served as Executive Vice President and General Manager of our Enterprise Group from November 2015 to June 2017. Prior to that, Mr. Neri served in a similar role for HP Co.'s Enterprise Group from October 2014 to November 2015. Mr.
Prior to that, Mr. Karros served in a similar role at HP Co., leading its Treasury and Investor Relations from May 2015 to October 2015. He also has served as the Executive Chairman of H3C Technologies since August 2022. Mr.
Previously, he served as our Senior Vice President, Finance and Treasurer from November 2015 to May 2022. Prior to that, Mr. Karros served in a similar role at HP Co., leading its Treasury and Investor Relations from May 2015 to October 2015. He also has served as the Executive Chairman of H3C Technologies since August 2022. Mr.
In 2022, we enhanced our climate ambitions and committed to becoming a net-zero enterprise by 2040, with intermediate targets set across our value chain for 2030. These climate targets are approved by the Science Based Target initiative and align with the latest climate science.
HPE has committed to becoming a net-zero enterprise by 2040, with intermediate targets set across our value chain for 2030. These climate targets are approved by the Science Based Target initiative and align with the latest climate science.
As a result of our efforts, we are proud to report that our 2021 pay equity review demonstrated that we have achieved pay parity for base compensation and bonus targets between male and female team members in the U.S. (including among underrepresented ethnicities), U.K., and India, when accounting for job title, time-in-role, experience, and location.
As a result of our efforts, our most recent pay equity review demonstrated that we have achieved pay parity for base compensation and bonus targets between male and female team 3 Table of Content members in the U.S. (including among underrepresented ethnicities), U.K., and India, when accounting for job title, time-in-role, experience, and location.
The HPE Board of Directors and all of its committees provide oversight of our ESG strategy, risks, practices, policies, and disclosures, to ensure integration with our core business strategy. Sustainable Value Creation - Sustainability performance is a core business discipline within HPE.
The HPE Board of Directors, including through its committees, provides oversight of our ESG strategy, risks, practices, policies, and disclosures, to support integration with our core business strategy. Sustainable Value Creation - Sustainability performance is a core business discipline within HPE.
Our primary competitors are technology vendors, such as Dell Technologies Inc., Cisco Systems, Inc., Lenovo Group Ltd., International Business Machines Corporation ("IBM"), and NetApp Inc. In certain regions, we also experience competition from local companies and from generically branded or "white-box" manufacturers.
Our primary competitors are technology vendors, such as Dell Technologies Inc., Super Micro Computer, Inc., Cisco Systems, Inc., Lenovo Group Ltd., International Business Machines Corporation (“IBM”), and NetApp Inc. In certain regions, we also experience competition from local companies and from generically branded or “white-box” manufacturers.
In those countries where we have a direct sales presence, we typically assign an account manager to manage relationships across our business with large enterprise customers as well as with large public sector accounts. The account manager is supported by a team of specialists with product and services expertise.
Also, we typically assign an account manager to manage relationships across our business with large enterprise customers as well as with large public sector accounts. The account manager is supported by a team of specialists with product and services expertise.
HPE’s strong and healthy culture is critical to accelerating what’s next for our customers and partners – and the success of our company. Our team is energized and more engaged than ever and will enable our ability to pivot and grow, which will, in turn, power the next chapter at Hewlett Packard Enterprise.
HPE’s strong and healthy culture is critical to accelerating what’s next for our customers and partners – and the success of our company. We believe that a workforce that is energized and more engaged will fuel our ability to pivot and grow, which will, in turn, power the next chapter at Hewlett Packard Enterprise.
Karros previously served as a director of InnerWorkings, Inc. from August 2019 to October 2020, as a director of PMC-Sierra, a semiconductor company, from August 2013 to May 2015, and as Principal and Managing Director of Research for Relational Investors LLC, an investment fund, from 2001 to May 2015.
Karros previously served as a director of InnerWorkings, Inc. from August 2019 to October 2020, as a director of PMC-Sierra, a semiconductor company, from August 2013 to May 2015, and as Principal and Managing Director of Research for Relational Investors LLC, an investment fund, from 2001 to May 2015. Available Information Our website is located at www.hpe.com.
Jeremy K. Cox; Senior Vice President, Controller, Chief Tax Officer and Principal Account Officer Mr. Cox has served as our Senior Vice President, Controller, Chief Tax Officer and Principal Accounting Officer since July 2022. Previously, he served as Senior Vice President, Global Tax and Head of Products and Services Finance from May 2021 to July 2022. Prior to that, Mr.
Prior to that, he served as our Senior Vice President, Corporate Controller, Chief Tax Officer, and Principal Accounting Officer from July 2022 to August 2023. Previously, he served as Senior Vice President, Global Tax and Head of Products and Services Finance from May 2021 to July 2022. Prior to that, Mr.
Prior to joining HP Inc. in 2008, Mr. Cox was Senior Tax Counsel for Electronic Data Systems. Kirt P. Karros; Senior Vice President, Treasurer and Investor Relations Mr. Karros has served as our Senior Vice President, Treasurer and Investor Relations since May 2022. Previously, he served as our Senior Vice President, Finance and Treasurer from November 2015 to May 2022.
Prior to joining HP Inc. in 2008, Mr. Cox was Senior Tax Counsel for Electronic Data Systems. 15 Table of Content Kirt P. Karros; Senior Vice President, Treasurer and Investor Relations Mr. Karros has served as our Senior Vice President, Treasurer and Investor Relations since May 2022.
Our company has always been an engine of innovation, and our approximately 60,200 employees as of October 31, 2022, are proud of the ways our technology enables our customers to achieve meaningful outcomes like curing disease, modernizing farming to cure world-hunger and democratizing transportation through autonomous vehicles.
Our company always strives to be an engine of innovation, and our approximately 62,000 employees as of October 31, 2023, are proud of the ways our technology enables our customers to achieve meaningful outcomes like curing disease, modernizing farming, addressing world-hunger, and democratizing transportation through autonomous vehicles.
We have also been committed to advancing transparency, by publicly disclosing further information and data on diversity, equity, and inclusion at HPE, including the Equal Employment Opportunity report (EEO-1) data, since 2018. Talent: We invest in attracting, developing, and retaining the best talent.
We have also been committed to advancing transparency, by publicly disclosing further information and data on diversity, equity, and inclusion at HPE, including the Equal Employment Opportunity report data, since 2018. Talent - We invest heavily in an effort to attract, develop, and retain the best talent.
We believe a diverse supply chain and equity in sourcing not only creates opportunities for underrepresented and underserved communities, but also contributes to the resiliency of our supply chain and of our communities.
Our commitment to diversity, equity, and inclusion extends beyond our workforce and to our suppliers, as well. We believe a diverse supply chain and equity in sourcing not only creates opportunities for underrepresented and underserved communities, but also contributes to the resiliency of our supply chain and of our communities.
We support this commitment with a comprehensive environmental, health and safety policy; a strict environmental management of our operations and worldwide 12 Table of Conten t environmental programs and services; an extensive supply chain responsibility program; and an approach to ethical standards and strong governance that are the foundations of our business.
We support this commitment with a range of comprehensive policies, including relating to environmental, health and safety, climate, water, and electronic waste; a strict environmental management of our operations and worldwide environmental programs and services; an extensive supply chain responsibility program; and an approach to ethical standards and strong governance that are the foundations of our business.
Additionally, we offer a hybrid work environment for the majority of our team members, allowing them substantial flexibility to determine the number of days in the office that work best for them. Total Rewards: HPE requires a uniquely talented workforce and is committed to providing total rewards that are market-competitive and performance based, driving innovation and operational excellence.
Additionally, we offer a hybrid work environment for the majority of our team members, encouraging two days in the office per week for collaboration. Total Rewards - HPE requires a uniquely talented workforce and is committed to providing total rewards that are market-competitive and performance based, designed to drive innovation and operational excellence.
However, the pandemic resulted in a temporary disruption to the seasonal fluctuation of our business. See "Risk Factors—Our uneven sales cycle and supply chain disruptions make planning and inventory management difficult and future financial results less predictable" in Item 1A. Competition We have a broad technology portfolio of enterprise IT infrastructure products, solutions, and services which includes our as-a-service offerings.
See “Risk Factors—Our uneven sales cycle and supply chain disruptions make planning and inventory management difficult and future financial results less predictable” in Item 1A. Competition We have a broad technology portfolio of enterprise IT infrastructure products, solutions, and services which includes our as-a-service offerings. We encounter strong competition in all areas of our business.
Approximately 67% of our overall net revenue in fiscal 2022 came from sales outside the United States. 8 Table of Conten t For a discussion of certain risks attendant to our international operations, see "Risk Factors—Due to the international nature of our business, political or economic changes and the laws and regulatory regimes applying to international transactions or other factors could harm our future revenue, costs and expenses, and financial condition," and "Risk Factors—We are exposed to fluctuations in foreign currency exchange rates" in Item 1A, "Quantitative and Qualitative Disclosure about Market Risk" in Item 7A of Part II and Note 13, "Financial Instruments", to our Consolidated Financial Statements in Item 8 of Part II.
For a discussion of certain risks attendant to our international operations, see “Risk Factors—Due to the international nature of our business, political or economic changes and the laws and regulatory regimes applying to international transactions or other factors could harm our future revenue, costs and expenses, and financial condition,” and “Risk Factors—We are exposed to fluctuations in foreign currency exchange rates” in Item 1A of Part I, “Quantitative and Qualitative Disclosure about Market Risk” in Item 7A of Part II, and Note 13, “Financial Instruments,” to our Consolidated Financial Statements in Item 8 of Part II.
It includes an industry-leading paid parental leave program (minimum 6 months), part-time work opportunities for new parents or team members transitioning to retirement, and "Wellness Fridays" encouraging team members to leave work early one Friday per month to focus on their well-being.
It includes an industry-leading paid parental leave program (minimum 6 months), part-time work opportunities for new parents or team members transitioning to retirement, and “Wellness Fridays” that allows team members a full Friday off four times per year to focus on their well-being.
In 2022, the majority of our greenhouse gas emissions ("GHG") resulted from our customers' use of our products and solutions. We recognize the opportunity to innovate technologies for a carbon-constrained world and are committed to delivering products and services that empower our customers to operate sustainably and efficiently while also gaining maximum productivity from their IT investments and reducing costs.
We recognize the opportunity to innovate technologies for a carbon-constrained world and are committed to delivering products and services that empower our customers to reduce the carbon footprints of their IT estates while also gaining maximum productivity from their IT investments and reducing costs.
These include a software stack to train AI models using our open-source machine learning platform. HPC & AI offerings also include operational and support services, whether sold with our systems or as standalone services. We also offer most of our solutions as-a-service through the HPE GreenLake edge-to-cloud platform.
HPC & AI offerings also include operational and support services, whether sold with our systems or as standalone services. We also offer most of our solutions aaS through the HPE GreenLake edge-to-cloud platform, including HPE GreenLake for LLMs.
In Hewlett Packard Labs, in addition to the aforementioned HPC & AI-related work, we are focused on disruptive innovation and applied research in collaboration with other HPE business groups to deliver differentiated intellectual property ("IP").
In Hewlett Packard Labs, in addition to the aforementioned HPC & AI-related work, we are focused on disruptive innovation and applied research in collaboration with other HPE business groups to deliver differentiated intellectual property. Our innovation agenda is focused on developing technologies in the areas of system architecture, networking, AI, accelerators, quantum computing, silicon photonics, and sustainability.
Black and Hispanic executive headcounts by 2027, from 2020 levels. At the close of fiscal 2022, the representation of worldwide female executives in our workforce had increased 1.5 percentage points since the prior year, with increased representation at every level worldwide. We also increased our representation of all underrepresented minorities in the U.S. by 1.3 percentage points overall.
At the close of fiscal 2023, the representation of worldwide female executives in our workforce had increased 1.9 percentage points since the prior year, with increased representation at every level in worldwide female team members. We also increased our year-over-year representation of underrepresented minorities in the U.S. by 2.3 percentage points overall.
Our Strengths We believe that we possess a number of competitive advantages that distinguish us from our competitors, including: • Edge-to-cloud strategy and solutions uniquely solve customer challenges.
Beginning in the first quarter of fiscal 2024, we will report our results under the realigned six reportable segments. Our Strengths We believe that we possess a number of competitive advantages that distinguish us from our competitors, including: • Edge-to-cloud strategy and solutions uniquely solve customer challenges.
HPE has intensified its focus on embedding these values into a vibrant culture that creates a superior team member experience and a highly engaged workforce, driving improvements across our communications, our reward programs, and our work environment. Through such efforts, we aim to foster a collaborative, inclusive and inspiring experience for all our team members.
HPE has remained committed to its focus on internalizing these values into a vibrant culture that creates a superior team member experience and a highly engaged workforce, driving improvements across our communications, our reward programs, our talent/performance programs, and our work environment.
We have shifted our mix of products and services, and how we deliver that mix to customers. 2 Table of Conten t HPE has evolved to a platform-based model, fueled by a portfolio richer in software and services.
Our vision to be the edge-to-cloud company has led us to innovate our solutions across connectivity, cloud, and data. We have shifted our mix of products and services, and how we deliver that mix to customers. HPE has evolved to a platform-based model, fueled by a portfolio richer in software and services.
Corporate Investments and Other Corporate Investments and Other includes the Advisory and Professional Services ("A & PS") business, which primarily offers consultative-led services, HPE and partner technology expertise and advice, implementation services, and complex solution engagement capabilities; the Communications and Media Solutions ("CMS") business, which primarily offers software and related services to the telecommunications industry; the HPE Software business, which offers the HPE Ezmeral Container Platform and HPE Ezmeral Data Fabric; and Hewlett Packard Labs, which is responsible for research and development.
Corporate Investments and Other Corporate Investments and Other includes the Advisory and Professional Services (“A & PS”) business, which primarily offers consultative-led services, HPE and partner technology expertise and advice, implementation services as well as complex solution engagement capabilities; the Communications and Media Solutions business (“CMS”), which primarily offers software and related services to the telecommunications industry and includes Athonet, which provides private mobile core networks to enterprises and communication services providers; the HPE Software business, which offers the HPE Ezmeral Software Container Platform and HPE Ezmeral Software Data Fabric; OpsRamp which provides a software-as-a-service platform for managed service providers and enterprise IT teams to monitor and manage their cloud and on-premises (“hybrid”) infrastructure; and Hewlett Packard Labs, which is responsible for research and development.
We are committed to delivering on our focus on equity, as well, by taking a data-led approach at various points across the team member lifecycle to evaluate and improve our diversity, equity, and inclusion efforts. In the U.S., the HPE Voice of the Workforce Employee Engagement Index is 81%.
We are committed to delivering on our focus on equity, as well, by taking a data-led approach at various points across the team member lifecycle to evaluate and improve our diversity, equity, and inclusion efforts. The DEI index within our annual global engagement survey continued to reveal strong engagement scores across our ethnically diverse team members .
We do this by communicating a clear purpose and strategy, setting transparent goals, driving accountability, continuously assessing, developing, and advancing talent, and advancing a leadership-driven talent strategy. The dynamism of our industry and our company enables team members to grow in their current roles and build new skills.
We are committed to developing team members at all stages of their careers, and we do this by communicating a clear purpose and strategy; setting transparent goals; driving accountability; continuously assessing, developing, and advancing talent; and advancing a leadership-driven talent strategy.
A summary of our domestic and international results is set forth in Note 2, "Segment Information", to our Consolidated Financial Statements in Item 8 of Part II.
A summary of our domestic and international results is set forth in Note 2, “Segment Information,” to our Consolidated Financial Statements in Item 8 of Part II. Approximately 64% of our overall net revenue in fiscal 2023 came from sales outside the United States.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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It is difficult to predict the impact of such events on us, our third-party partners or customers or economic markets more broadly, which have been and will continue to be highly dependent upon the actions of governments and businesses in response to macroeconomic events, and the effectiveness of those actions.
It is difficult to predict the impact of such events on us, our third-party partners, our customers, or economic markets more broadly, which have been and will continue to be highly dependent upon the actions of governments and businesses in response to macroeconomic events, and the effectiveness of those actions.
Our contracts with federal, state, provincial, and local governmental customers are subject to various government procurement laws and regulations, required contract provisions, and other requirements relating to contract formation, administration, and performance, as well as manufacturing content and security requirements.
Our contracts with federal, state, provincial, and local governmental customers are subject to various government procurement laws and regulations, required contract provisions, and other requirements relating to contract formation, administration, and performance, as well as local content, manufacturing, and security requirements.
See also the risk factors below under the heading "Risks Related to Prior Separations." Risks associated with business combination and investment transactions include the following, any of which could adversely affect our financial results, including our effective tax rate: • We may not successfully combine product or service offerings or fully realize all of the anticipated benefits of any particular business combination and investment transaction, which may result in (1) failure to retain employees, customers, distributors, and suppliers; (2) increase in unanticipated delays or failure to meet contractual obligations which may cause financial results to differ from expectations; and (3) significant increase in costs and expenses, including those related to severance pay, early retirement costs, employee benefit costs, charges from the elimination of duplicative facilities and contracts, inventory adjustments, assumed litigation and other liabilities, legal, accounting and financial advisory fees, and required payments to executive officers and key employees under retention plans. • Our ability to conduct due diligence with respect to business combination and investment transactions, and our ability to evaluate the results of such due diligence, is dependent upon the veracity and completeness of statements and disclosures made or actions taken by third parties or their representatives.
See also the risk factors below under the heading “Risks Related to Prior Separations.” Risks associated with business combination and investment transactions include the following, any of which could adversely affect our financial results, including our effective tax rate: • We may not successfully combine product or service offerings or fully realize all of the anticipated benefits of any particular business combination and investment transaction, which may result in (1) failure to retain employees, customers, distributors, and suppliers; (2) increase in unanticipated delays or failure to meet contractual obligations which may cause financial results to differ from expectations; and (3) significant increase in costs and expenses, including those related to severance pay, early retirement costs, employee benefit costs, charges from the elimination of duplicative facilities and contracts, inventory adjustments, assumed litigation and other liabilities, legal, accounting and financial advisory fees, and required payments to executive officers and key employees under retention plans. • Our ability to conduct due diligence with respect to business combination and investment transactions, and our ability to evaluate the results of such due diligence, is dependent upon the veracity and completeness of statements and disclosures made or actions taken by third parties or their representatives.
We may fail to identify significant issues with the acquired company's product quality, financial disclosures, accounting practices or internal control deficiencies or all of the factors necessary to estimate reasonably accurate costs, timing and other matters. • In order to complete a business combination and investment transaction, we may issue common stock, potentially creating dilution for our existing stockholders or we may enter into financing arrangements, which could affect our liquidity and financial condition. • For an acquisition or other combination, the acquisition partner may have differing or inadequate cybersecurity and data protection controls, which could impact our exposure to data security incidents and potentially increase anticipated costs or time to integrate the business. • Business combination and investment transactions may lead to litigation, which could impact our financial condition and results of operations. • We have incurred and will incur additional depreciation and amortization expense over the useful lives of certain assets acquired in connection with business combination and investment transactions and, to the extent that the value of goodwill or intangible assets acquired in connection with a business combination and investment transaction becomes impaired, we may be required to incur additional material charges relating to the impairment of those assets. • For a divestiture, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, or we may dispose of a business at a price or on terms that are less desirable than we had anticipated. • The impact of divestitures on our revenue growth may be larger than projected, as we may experience greater dis-synergies than expected.
We may fail to identify significant issues with the acquired company’s product quality, financial disclosures, accounting practices or internal control deficiencies or all of the factors necessary to estimate reasonably accurate costs, timing and other matters. • In order to complete a business combination and investment transaction, we may issue common stock, potentially creating dilution for our existing stockholders or we may enter into financing arrangements, which could affect our liquidity and financial condition. • For an acquisition or other combination, the acquisition partner may have differing or inadequate cybersecurity and data protection controls, which could impact our exposure to data security incidents and potentially increase anticipated costs or time to integrate the business. 20 Table of Content • Business combination and investment transactions may lead to litigation, which could impact our financial condition and results of operations. • We have incurred and will incur additional depreciation and amortization expense over the useful lives of certain assets acquired in connection with business combination and investment transactions and, to the extent that the value of goodwill or intangible assets acquired in connection with a business combination and investment transaction becomes impaired, we may be required to incur additional material charges relating to the impairment of those assets. • For a divestiture, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, or we may dispose of a business at a price or on terms that are less desirable than we had anticipated. • The impact of divestitures on our revenue growth may be larger than projected, as we may experience greater dis-synergies than expected.
These third-party software components may become obsolete, defective, or incompatible with future versions of our products, or our relationship with the third party may deteriorate, or our agreements with the third party may expire or be terminated. We may face legal or business disputes with licensors that may threaten or lead to the disruption of inbound licensing relationships.
These third-party software components may become obsolete, defective, or incompatible with future versions of our products, our relationship with the third party may deteriorate or cease, or our agreements with the third party may expire or be terminated. We may face legal or business disputes with licensors that may threaten or lead to the disruption of inbound licensing relationships.
In connection with our separation from HP Inc. on November 1, 2015 (the "Separation"), Hewlett Packard Enterprise and HP Inc. entered into several agreements that determine the allocation of assets and liabilities between the companies following the Separation and include any necessary indemnifications related to liabilities and obligations.
In connection with our separation from HP Inc. on November 1, 2015 (the “Separation”), Hewlett Packard Enterprise and HP Inc. entered into several agreements that determine the allocation of assets and liabilities between the companies following the Separation and include any necessary indemnifications related to liabilities and obligations.
Incidents involving our cyber or physical security measures or the accidental loss, inadvertent disclosure, or unapproved dissemination of proprietary information, sensitive, confidential, or personal data about us, our clients, or our customers, including the potential loss or disclosure of such information or data as a result of fraud, trickery, or other forms of deception, could expose us, our customers or the individuals affected to a risk of loss or misuse of this information, result in regulatory fines, litigation, and potential liability for us, damage our brand and reputation, or otherwise harm our business.
Incidents involving our cyber or physical security measures or the accidental loss, inadvertent disclosure, or unapproved dissemination of proprietary information, intellectual property, or sensitive, confidential, or personal data about us, our clients, or our customers, including the potential loss or disclosure of such data as a result of fraud, trickery, or other forms of deception, could expose us, our customers, or the individuals affected to a risk of loss or misuse of this information; result in regulatory fines, litigation, and potential liability for us; damage our brand and reputation; or otherwise harm our business.
Notwithstanding the opinions of counsel, the Internal Revenue Service (the "IRS") could determine that either or both of the distributions should be treated as a taxable transaction if it determines that any of the facts, assumptions, representations, statements or undertakings upon which the relevant opinion of counsel was based are false or have been violated, or if it disagrees with the conclusions in the opinion of counsel.
Notwithstanding the opinions of counsel, the Internal Revenue Service (the “IRS”) could determine that either or both of the distributions should be treated as a taxable transaction if it determines that any of the facts, assumptions, representations, statements or undertakings upon which the relevant opinion of counsel was based are false or have been violated, or if it disagrees with the conclusions in the opinion of counsel.
This collective amount of debt could have important adverse consequences to us and our investors, including: • requiring a substantial portion of our cash flow from operations to make principal and interest payments; • making it more difficult to satisfy other obligations; • increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; • increasing our vulnerability to general adverse economic and industry conditions; • reducing the cash flows available to fund capital expenditures and other corporate purposes and to grow our business; • limiting our flexibility in planning for, or reacting to, changes in our business and industry; and 26 Table of Conten t • limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase our common stock.
This collective amount of debt could have important adverse consequences to us and our investors, including requiring a substantial portion of our cash flow from operations to make principal and interest payments; making it more difficult to satisfy other obligations; increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; increasing our vulnerability to general adverse economic and industry conditions; reducing the cash flows available to fund capital expenditures and other corporate purposes and to grow our business; limiting our flexibility in planning for, or reacting to, changes in our business and industry; and limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase our common stock.
If we are unable to determine the cause, find an appropriate solution or offer a temporary fix (or "patch") to address quality issues with our products, we may delay shipment to customers, which could delay revenue recognition and receipt of customer payments and could adversely affect our revenue, cash flows, and profitability.
If we are unable to determine the cause, find an appropriate solution or offer a temporary fix (or “patch”) to address quality issues with our products, we may delay shipment to customers, which could delay revenue recognition and receipt of customer payments and could adversely affect our revenue, cash flows, and profitability.
As a result, we may invest less in certain areas of our business than our competitors do, and our competitors may have greater financial, technical, and marketing resources available to them compared to the resources allocated to our products and services that compete against their products and services.
As a result, we may invest less in certain areas of our business than our competitors do, and our competitors may have greater financial, technical, and marketing resources available to them compared to the resources allocated to our products and services that compete against theirs.
The manufacture of product components, the final assembly of our products and other critical operations are concentrated in certain geographic locations, including the United States, Puerto Rico, Czech Republic, Mexico, China, Malaysia, Taiwan, and Singapore.
The manufacture of product components, the final assembly of our products and other critical operations are concentrated in certain geographic locations, including the United States, Puerto Rico, Czech Republic, Mexico, China, Malaysia, Taiwan, South Korea, and Singapore.
In order to secure components for our products or services, at times we may make advance payments to suppliers or enter into long term agreements, non-cancelable commitments, or other inventory management arrangements with vendors.
In order to secure components for our products or services, at times we may make advance payments to suppliers or enter into long term agreements, non-cancellable commitments, or other inventory management arrangements with vendors.
In particular, we face an increasingly complex regulatory environment as we adjust to new and future requirements relating to the security of our offerings. The increase in as-a-service offerings may also be impacted by data localization and international data transfer requirements under various privacy laws, including those arising from the Schrems II ruling in Europe.
In particular, we face an increasingly complex regulatory environment as we adjust to new and future requirements relating to the security of our offerings. The increase in aaS offerings may also be impacted by data localization and international data transfer requirements under various privacy laws, including those arising from the Schrems II ruling in Europe.
As a result of this continuing shared use of the legacy branding there is a risk that conduct or events adversely affecting the reputation of HP Inc. could also adversely affect the reputation of Hewlett Packard Enterprise. General Risks Our stock price has fluctuated and may continue to fluctuate, which may make future prices of our stock difficult to predict.
As a result of this continuing shared use of the legacy branding there is a risk that conduct or events adversely affecting the reputation of HP Inc. could also adversely affect our reputation. General Risks Our stock price has fluctuated and may continue to fluctuate, which may make future prices of our stock difficult to predict.
If the distribution of Everett SpinCo or Seattle SpinCo, as applicable, together with certain related transactions, failed to qualify as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of the Code, in general, we would recognize taxable gain as if we had sold the stock of Everett SpinCo or Seattle SpinCo, as applicable, in a taxable sale for its fair market value, and our stockholders who receive Everett SpinCo shares or Seattle SpinCo 29 Table of Conten t shares in the relevant distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.
If the distribution of Everett SpinCo or Seattle SpinCo, as applicable, together with certain related transactions, failed to qualify as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) of 30 Table of Content the Code, in general, we would recognize taxable gain as if we had sold the stock of Everett SpinCo or Seattle SpinCo, as applicable, in a taxable sale for its fair market value, and our stockholders who receive Everett SpinCo shares or Seattle SpinCo shares in the relevant distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.
Because the availability and cost of licenses from third parties depends upon the willingness of third parties to deal with us on the terms we request, there is a risk that third parties who license to our competitors will either refuse to license us at all, or refuse to license us on terms equally favorable to those granted to our competitors.
Because the availability and cost of licenses from third parties depends upon the willingness of third parties to deal with us on the terms we request, there is a risk that third parties who license to our competitors will either refuse to license us at all, or 26 Table of Content refuse to license us on terms equally favorable to those granted to our competitors.
If we commit to purchasing components or services for prices in excess of the then-current market price, we may be at a disadvantage to competitors who have access to components or services at lower prices, our gross margin could suffer, and we could incur additional charges relating to inventory obsolescence.
If we commit to purchasing components or services for prices in excess of the then-current market price, we may be at a disadvantage to competitors who have access to components or services at lower prices, our gross margin could suffer, and we could incur charges relating to inventory obsolescence. • Contingent workers .
As part of our strategy, we may acquire businesses, divest businesses or assets, enter into strategic alliances and joint ventures, and make investments to further our business (collectively, "business combination and investment transactions"), and also handle any post-closing issues, such as integration.
As part of our strategy, we may acquire businesses, divest businesses or assets, enter into strategic alliances and joint ventures, and make investments to further our business (collectively, “business combination and investment transactions”), and also handle any post-closing issues, such as integration.
Interest and other expenses could vary materially from expectations depending on changes in interest rates, borrowing costs, currency exchange rates, and costs of hedging activities and the fair value of derivative instruments. For example, in response to increasing inflation, the U.S.
Interest and other expenses have varied, and could continue to vary, materially from expectations depending on changes in interest rates, borrowing costs, currency exchange rates, costs of hedging activities and the fair value of derivative instruments. For example, in response to increasing inflation, the U.S.
These risks to attracting and retaining the necessary talent may be exacerbated by recent labor constraints and inflationary pressures on employee wages and benefits. 22 Table of Conten t Failure to meet ESG expectations or standards or achieve our ESG goals could adversely affect our business, results of operations, financial condition, or stock price.
These risks to attracting and retaining the necessary talent may be exacerbated by recent labor constraints and inflationary pressures on employee wages and benefits. Failure to meet ESG expectations or standards or achieve our ESG goals could adversely affect our business, results of operations, financial condition, or stock price.
Our cash flows, results of operations, and financial condition may be adversely affected by these and other industry-wide pricing pressures. Because our business model is based on providing innovative and high-quality products and services, we may spend a proportionately greater amount of our revenues on research and development than some of our competitors.
Our cash flows, results of operations, and financial condition may be adversely affected by these and other industry-wide pricing pressures. Because our business model is based on providing innovative and high-quality products and services, we may spend a proportionately greater amount of our revenues on R&D than some of our competitors.
Further, ongoing U.S. federal government spending priorities may limit demand for our products, services, and solutions from organizations that receive funding from the U.S. government, and could negatively affect macroeconomic conditions in the United States, which could further reduce demand for our products, services, and solutions.
Further, reduced U.S. federal government spending may limit demand for our products, services, and solutions from organizations that receive funding from the U.S. government, and could negatively affect macroeconomic conditions in the United States, which could further reduce demand for our products, services, and solutions.
Depending on when they occur in a quarter, developments such as a systems failure, component pricing movements, component shortages, or global logistics disruptions, could adversely impact our inventory levels and results of operations in a manner that is disproportionate to the number of days in the quarter affected.
Depending on when they occur in a quarter, developments such as a systems failure, component pricing movements, component shortages, or global logistics disruptions, have in the past adversely impacted, and could in the future adversely impact, our inventory levels and results of operations in a manner that is disproportionate to the number of days in the quarter affected.
Malicious parties may compromise our manufacturing supply chain and the systems or networks of other third parties on whom we rely, and as such, may embed malicious software or hardware in our products for use in compromising our customers.
Malicious parties may compromise our manufacturing supply chain and the systems or networks of other third parties on whom we rely, and as such, may embed malicious software or hardware in our products, thereby compromising our customers.
In addition, if our pricing and other facets of our offerings are not sufficiently competitive, or if there is an adverse reaction to our product 23 Table of Conten t decisions, we may lose market share in certain areas, which could adversely affect our financial performance and business prospects.
In addition, if our pricing and other facets of our offerings are not sufficiently competitive, or if there is an adverse reaction to our product decisions, we may lose market share in certain areas, which could adversely affect our financial performance and business prospects.
We experience some seasonal trends in the sale of our products that also may produce variations in our quarterly results and financial condition. Many of the factors that create and affect seasonal trends are beyond our control.
We experience some seasonal trends in the sale of our products that also have produced, and may in the future produce, variations in our quarterly results and financial condition. Many of the factors that create and affect seasonal trends are beyond our control.
Third-party claims of intellectual property infringement, including patent infringement, are commonplace in the IT industry and successful third-party claims may limit or disrupt our ability to sell our products and services. Third parties may claim that we or customers indemnified by us are infringing upon their intellectual property rights.
Third-party claims of intellectual property infringement, including patent infringement, are commonplace in our industry and successful third-party claims may limit or disrupt our ability to sell our products and services. Third parties may claim that we or customers indemnified by us are infringing upon or otherwise violating their intellectual property rights.
If we do not satisfy pre-closing conditions and necessary regulatory and governmental 19 Table of Conten t approvals on acceptable terms, it may prevent us from completing the transaction. Dispositions may also involve continued financial involvement in the divested business, such as through continuing equity ownership, guarantees, indemnities or other financial obligations.
If we do not satisfy pre-closing conditions and necessary regulatory and governmental approvals on acceptable terms, it may prevent us from completing the transaction. Dispositions may also involve continued financial involvement in the divested business, such as through continuing equity ownership, guarantees, indemnities or other financial obligations.
While these measures have been taken to shorten lead times to deliver products to customers, they may 27 Table of Conten t also result in excess or obsolete components in the future if the demand for our products is less than we anticipate, which could adversely affect our business and financial performance.
While these measures have been taken to shorten lead times to deliver products to customers, they may also result in excess or obsolete components in the future if the demand for our products is less than we anticipate, which could adversely affect our business and financial performance.
Our worldwide operations and supply chain could be disrupted by natural or human-induced disasters including, but not limited to, earthquakes; tsunamis; floods; hurricanes, cyclones or typhoons; fires; other extreme weather conditions; power or water shortages; telecommunications failures; materials scarcity and price volatility; terrorist acts, civil unrest, conflicts or wars; and medical epidemics or pandemics.
Our worldwide operations and supply chain could be disrupted by natural or human-induced disasters including, but not limited to, earthquakes; tsunamis; floods; hurricanes, cyclones or typhoons; fires; other extreme weather conditions; power or 19 Table of Content water shortages; telecommunications failures; materials scarcity and price volatility; terrorist acts, civil unrest, conflicts or wars; and health epidemics or pandemics.
In addition, our ongoing efforts to optimize the efficiency of our supply chain could cause supply disruptions and be more expensive, time-consuming and resource-intensive than expected. Furthermore, certain of our suppliers may decide to discontinue conducting business with us.
In addition, our ongoing efforts to optimize the efficiency of our supply chain could cause supply disruptions and be more expensive, time-consuming, and resource-intensive than expected. Furthermore, certain of our suppliers have at times decided, and may in the future decide, to discontinue conducting business with us.
Our failure to successfully hire executives and key employees or the loss of any executives and key employees could have a significant impact on our operations.
Our failure to successfully hire executives and key employees or the loss of any executives and key employees could have a significant impact on our operations and our ability to execute our strategy.
We compete primarily on the basis of our technology, innovation, performance, price, quality, reliability, brand, reputation, distribution, product range and ease of use, account relationships, customer training, service and support, and security of our offerings.
We compete primarily on the basis of our technology, innovation, performance, price, quality, reliability, brand, reputation, distribution, portfolio of products, ease of use, account relationships, customer training, service and support, and security of our offerings.
Market trends, industry shifts, competitive pressures, commoditization of products, increased component or shipping costs, regulatory impacts, and other factors may result in reductions in revenue or pressure on gross margins of certain segments in a given period, which may lead to adjustments to our operations.
Market trends, industry shifts, competitive pressures, commoditization of products, increased component or shipping costs, regulatory impacts, and other factors have from time to time resulted in, and may in the future result in, reductions in revenue or pressure on gross margins of certain segments in a given period, which may lead to adjustments to our operations.
With our business increasingly providing as-a-service offerings, malicious parties could target such services, potentially resulting in an increased risk of compromise of customer data and regulatory exposure.
With our business increasingly providing aaS offerings, malicious parties could target such services, potentially resulting in an increased risk of compromise of customer data and regulatory exposure.
Furthermore, the relationship between China and the U.S., and any subsequent action that may be taken by either country, may negatively impact our operations and financial performance. There could be additional uncertainty surrounding the enforceability of contract obligations, as well as the timing and form of payments from China.
Furthermore, the relationship between China and the U.S., and any subsequent action that may be taken by either country, may significantly vary the results our operations and financial performance from that region. There could be additional uncertainty surrounding the enforceability of contract obligations, as well as the timing and form of payments from China.
Our most critical accounting estimates are described in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." In addition, as discussed in Note 1, "Overview and Summary of Significant Accounting Policies—Use of Estimates" and Note 17, "Litigation and Contingencies," to our Consolidated Financial Statements in Item 8 of Part II, we make certain estimates, including decisions related to provisions for legal proceedings and other contingencies.
Our most critical accounting estimates are described in the section entitled “Management's Discussion and Analysis of Financial Condition and Results of Operations.” In addition, as discussed in Note 1, “Overview and Summary of Significant Accounting Policies—Use of Estimates” and Note 17, “Litigation and Contingencies,” to our Consolidated Financial Statements in Item 8 of Part II, we make certain estimates, including decisions related to provisions for legal proceedings and other contingencies.
Although some of these attacks have caused disruptions or exposure of information, so far, these attacks have not resulted in material losses to HPE, nor have any of HPE's consumers, customers, or employees informed HPE that these attacks resulted in material harm to them.
Although some of these attacks have caused disruptions or exposure of information, so far, these attacks have not resulted in material impacts to HPE, nor have any of HPE’s consumers, customers, or employees informed HPE that these 18 Table of Content attacks resulted in material harm to them.
Volatility in the price of our securities could result in the filing of securities class action litigation matters, which could result in substantial costs and the diversion of management time and resources. 30 Table of Conten t ITEM 1B. Unresolved Staff Comments. None.
Volatility in the price of our securities could result in the filing of securities class action litigation matters, which could result in substantial costs and the diversion of management time and resources. 31 Table of Content ITEM 1B. Unresolved Staff Comments. None.
Further, as customer demand for our software consumption-based business model offerings increases, we will experience differences in the timing of revenue recognition between our traditional offerings (for which revenue is generally recognized at the time of delivery) and our as-a-service offerings (for which revenue is generally recognized ratably over the term of the arrangement).
As customer demand for our software consumption-based offerings increases, we will experience differences in the timing of revenue recognition between our traditional offerings (for which revenue is generally recognized at the time of delivery) and our aaS offerings (for which revenue is generally recognized ratably over the term of the arrangement).
General or industry specific market conditions or stock market performance or domestic or international macroeconomic and geopolitical factors unrelated to Hewlett Packard Enterprise's performance also may affect the price of Hewlett Packard Enterprise's stock.
General or industry specific market conditions or stock market performance or domestic or international macroeconomic and geopolitical factors unrelated to our performance also may affect the price of our stock.
In addition, currency variations can adversely affect margins on sales of our products in countries outside of the United States and margins on sales of products that include components obtained from suppliers located outside of the United States.
In addition, currency variations can adversely affect our ability to implement price increases, margins on sales of our products in countries outside of the United States and margins on sales of products that include components obtained from suppliers located outside of the United States.
As a leading technology firm, we are exposed to attacks from criminals, nation state actors and activist hackers (collectively, "malicious parties") who have been able to circumvent or bypass our cyber security measures.
As a leading technology firm, we are exposed to attacks from criminals, nation state actors, malicious insiders, and activist hackers (collectively, “malicious parties”) who have at times been able to circumvent or bypass our cyber security measures.
We use a variety of distribution methods to sell our products and services around the world, including both direct and indirect (distributors and resellers) sales to enterprise accounts and consumers. Successfully managing the interaction of our direct and indirect channel efforts to reach various potential customer segments for our products and services is a complex process.
We use a variety of distribution methods to sell our products and services around the world, including both direct and indirect sales to end-users. Successfully managing the interaction of our direct and indirect channel efforts to reach various potential customer segments for our products and services is a complex process.
Evolving stakeholder expectations and our efforts and ability to manage these issues, provide updates on them, and accomplish our goals, commitments, and targets present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which may be outside of our control or could have a material adverse impact on our business, including on our reputation and stock price.
Evolving stakeholder expectations and our efforts and ability to manage these issues and accomplish our goals, commitments, and targets present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which may be outside of our control or could have adverse impacts on our business, including on our stock price.
However, any of our intellectual property rights could be challenged, invalidated, infringed, or circumvented, or such intellectual property rights may not be sufficient to permit us to take advantage of current market trends or to otherwise provide competitive advantages.
However, from time to time our intellectual property rights have been challenged, infringed, or circumvented, and any of such rights could be further challenged, invalidated, infringed, or circumvented or such intellectual property rights may not be sufficient to permit us to take advantage of current market trends or to otherwise provide competitive advantages.
Separately, supply chain shortages and constraints have, in some instances, resulted in increases to the costs of production of our hardware products that we may not be able to pass on to our customers.
Separately, periodic supply chain shortages and constraints have, in some instances, resulted in, and may result in, increases to the costs of production of our hardware products that we have, at times, not been able to, and may, in the future, not be able to pass on to our customers.
The following risk factors should be read in conjunction with Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operation" and the Consolidated Financial Statements and related notes in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K.
The following risk factors should be read in conjunction with Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operation” and the Consolidated Financial Statements and related notes in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.
Such actions may impact our ability, desire, or the timing of seeking funding for various investment opportunities. Economic downturns also may lead to restructuring actions and associated expenses.
Such 24 Table of Content actions have impacted, and may further impact our ability, desire, or the timing of seeking funding for various investment opportunities. Economic downturns also may lead to restructuring actions and associated expenses.
We will also continue to provide our hardware and software in a capital expenditure and license-based model, ultimately giving our customers choices in consuming HPE products and services in a traditional or as-a-service offering.
We will also continue to provide our hardware and software in a capital expenditure and license-based model, giving our customers choices in consuming HPE products and services.
Any delay in the development, production or marketing of a new product, service or solution, including new features of the HPE GreenLake edge-to-cloud platform, could result in our offerings being late to reach the market, which could further harm our competitive position.
Our HPE GreenLake edge-to-cloud platform faces competition from peer companies with their own cloud platform offerings, and any delay in the development, production, or marketing of a new product, service or solution, including new features of the HPE GreenLake edge-to-cloud platform, could result in our offerings being late to reach the market, which could further harm our competitive position.
Other supplier problems that we could face include component shortages, excess supply, and contractual, relational and labor risks, each of which is described below. • Component shortages.
Other supplier problems that we have faced, and could again face in the future, include component shortages, excess supply, and contractual, relational, and labor risks, each of which is described below. • Component shortages .
The completed separations and mergers of our former Enterprise Services business with DXC Technology Company ("DXC") (the "Everett Transaction" or "Everett") and our Software Segment with Micro Focus International plc ("Micro Focus") (the "Seattle Transaction" or "Seattle") were conditioned upon the receipt of an opinion from outside counsel regarding the qualification of (i) the relevant distribution and related transactions as a "reorganization" within the meaning of Sections 368(a), 361 and 355 of the Internal Revenue Code of 1986 (the "Code"); and (ii) the relevant merger as a "reorganization" within the meaning of Section 368(a) of the Code.
The completed separations and mergers of our former Enterprise Services business with DXC Technology Company (“DXC”) (the “Everett Transaction” or “Everett”) and our Software Segment with Micro Focus International plc (“Micro Focus”) (the “Seattle Transaction” or “Seattle”) were conditioned upon the receipt of an opinion from outside counsel regarding the qualification of (i) the relevant distribution and related transactions as a “reorganization” within the meaning of Sections 368(a), 361 and 355 of the Internal Revenue Code of 1986 (the “Code”) and (ii) the relevant merger as a “reorganization” within the meaning of Section 368(a) of the Code.
Variations in fixed cost structure and gross margins across business units and product portfolios may lead to significant operating profit volatility on a quarterly or annual basis.
Variations in our fixed cost structure and gross margins across business units and product portfolios, have from time to time led to, and may lead to significant operating profit volatility on a quarterly or annual basis in the future.
In addition, other ESG-related laws, regulations, treaties, and similar initiatives and programs are being proposed, adopted, and implemented throughout the world (including, but not limited to, the European Commission’s proposal on Corporate Sustainability Due Diligence).
In addition, other ESG-related laws, regulations, treaties, and similar initiatives and programs are being proposed, adopted, and implemented throughout the world (including, but not limited to the EU Corporate Sustainability Reporting Directive, the EU Taxonomy, and the proposed EU Corporate Sustainability Due Diligence Directive).
Given the wide variety of solutions that we offer, the large and diverse distribution of our suppliers and contract manufacturers, and the long lead times required to manufacture, assemble and deliver certain solutions, problems could arise in production, planning and inventory management that could seriously harm our business.
Given the wide variety of solutions that we 17 Table of Content offer, the large and diverse distribution of our suppliers and contract manufacturers, and the long lead times required to manufacture, assemble, and deliver certain solutions, problems have, from time to time in the past, arisen, and could in the future arise, in production, planning, and inventory management that could harm our business.
Economic weakness and uncertainty could cause our expenses to vary materially from our expectations. Any financial turmoil affecting the banking system and financial markets or any significant financial services institution failures could negatively impact our treasury operations, as the financial condition of such parties may deteriorate rapidly and without notice in times of market volatility and disruption.
Any financial turmoil affecting the banking system and financial markets, or any significant financial services institution failures could negatively impact our treasury operations, as the financial condition of such parties may deteriorate rapidly and without notice in times of market volatility and disruption.
Much of our business and many of our products rely on key technologies developed or licensed by third parties. For example, many of our software offerings are developed using software components or other intellectual property licensed from third parties, including through both proprietary and open source licenses.
For example, many of our software offerings are developed using software components or other intellectual property licensed from third parties, including through both proprietary and open source licenses.
Our ability to manage the size of, and costs associated with, the contingent workforce may be subject to additional constraints imposed by local laws. • Single-source suppliers. We obtain certain components from single-source suppliers due to technology, availability, price, quality, scale or customization needs.
We may be subject to shortages, oversupply or fixed contractual terms relating to contingent workers. Our ability to manage the size and cost of our contingent workforce may be subject to additional constraints imposed by local laws. • Single-source suppliers . We obtain certain components from single-source suppliers due to technology, availability, price, quality, scale, or customization needs.
Geopolitical tensions or conflicts, such as the ongoing conflict between Russia and Ukraine, may create a heightened risk of such cyberattacks or exacerbate system vulnerabilities, especially in light of our hybrid work environment.
Geopolitical tensions or conflicts, such as the ongoing conflicts between Russia and Ukraine or Israel and Hamas, may create a heightened risk of such cyberattacks or exacerbate system vulnerabilities, considering our continued hybrid work environment.
If we cannot proportionately decrease our cost structure (apart from research and development expenses) on a timely basis in response to competitive price pressures, our gross margin and, therefore, our profitability could be adversely affected.
If we cannot proportionately decrease our cost structure (apart from R&D expenses) on a timely basis in response to competitive price pressures, our profitability could be adversely affected.
Sales outside the United States constituted approximately 67% of our net revenue in fiscal 2022.
Sales outside the United States constituted approximately 64% of our net revenue in fiscal 2023.
This uneven sales pattern makes predicting revenue, earnings, cash flow from operations, and working capital for each financial period difficult, increases the risk of unanticipated variations in our quarterly results and financial condition, and places pressure on our inventory management and logistics systems. If predicted demand is substantially greater than orders, there may be excess inventory.
This uneven sales pattern makes predicting revenue, earnings, cash flow from operations, and working capital for each financial period difficult, increases the risk of unanticipated variations in our quarterly results and financial condition, and places pressure on our inventory management and logistics systems.
We currently incorporate AI capabilities into certain of our offerings, and our research into and continued development of such capabilities remain ongoing. As with many innovations, AI presents risks, challenges, and unintended consequences that could affect its adoption, and therefore our business. AI algorithms may be flawed. Datasets may be insufficient or contain 21 Table of Conten t biased information.
We currently incorporate AI capabilities into certain of our offerings, and our research into and continued development of such capabilities remain ongoing. As with many innovations, AI presents risks, challenges, and unintended consequences that could affect its adoption, and therefore our business. AI algorithms and training methodologies may be flawed.
Accordingly, our business and financial performance could suffer if we lose time-sensitive sales, incur additional freight costs or are unable to pass on price increases to our customers. If we cannot adequately address supply issues, we might have to reengineer some product or service offerings, which could result in further costs and delays. • Excess supply.
Accordingly, our business and financial performance could suffer from a loss of time-sensitive sales, additional freight costs incurred, or the inability to pass on price increases to our customers. If we cannot adequately address supply issues, we may have to reengineer some product or service offerings, which could result in further costs and delays. • Excess supply .
Federal Reserve, along with central banks around the world, have been raising interest rates and signaled expectations of additional rate increases.
Federal Reserve, along with central banks around the world, have been raising interest rates, signaled expectations of additional rate increases, and have indicated these rates may remain higher for longer.
But in many foreign countries, particularly in those with developing economies, people may engage in business practices prohibited by anti-corruption laws. Our employees and third parties we work with may take actions in violation of our policies, and those actions could have an adverse effect on our business and reputation. We are exposed to fluctuations in foreign currency exchange rates.
Foreign Corrupt Practices Act and the U.K. Bribery Act. But in many foreign countries, particularly in those with developing economies, people may engage in business practices prohibited by anti-corruption laws. Our employees and third parties we work with may take actions in violation of our policies, and those actions could have an adverse effect on our business and reputation.
Regulatory Risks Our business is subject to various federal, state, local and foreign laws and regulations that could result in costs or other sanctions that adversely affect our business and results of operations. We are subject to various federal, state, local, and foreign laws and regulations such as those concerning environmental protection.
Regulatory and Government Risks 28 Table of Content Our business is subject to various federal, state, local and foreign laws and regulations that could result in costs or other sanctions that adversely affect our business and results of operations. We are subject to various federal, state, local, and foreign laws and regulations.
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) into law, which includes a new corporate alternative minimum tax (the "Corporate AMT"), beginning in fiscal 2024, of 15% on the adjusted financial statement income (“AFSI”) of corporations with average AFSI exceeding $1.0 billion over a three-year period and an excise tax of 1% tax on the fair market value of net stock repurchases made after December 31, 2022.
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) into law, which includes a new corporate alternative minimum tax (the “Corporate AMT”), beginning in fiscal 2024, of 15% on the adjusted financial statement income (“AFSI”) of corporations with average AFSI exceeding $1.0 billion over a three-year period.
As a consequence of inflation and higher supply chain and manufacturing costs, we have been increasing the prices of many of our products and services to maintain or improve our revenue and gross margin.
As a consequence of inflation and higher supply chain and manufacturing costs, we have in the past increased the prices of many of our products and services to maintain or improve our revenue and gross margin, and may do so again in the future.
The carrying value of our deferred tax assets is dependent on our ability to generate future taxable income. The Organisation for Economic Co-operation and Development, an international association of 34 countries including the United States, has proposed changes to numerous long-standing tax principles.
The carrying value of our deferred tax assets is dependent on our ability to generate future taxable income. The Organisation for Economic Co-operation and Development, an international association of 38 countries including the United States, has proposed changes to numerous long-standing tax principles, namely, its Pillar Two framework, which imposes a global minimum corporate tax rate of 15%.
Our reputation also may be harmed by the perceptions that our stakeholders have about our action or inaction on ESG-related issues.
Our reputation also may be harmed by the perceptions that our stakeholders have about our action or inaction on certain ESG-related issues, or because they may disagree with our goals and initiatives.
Management's attention or other resources may be diverted during business combination and investment transactions and further impacted if we fail to successfully complete or integrate business combination and investment transactions that further our strategic objectives.
Management’s attention or other resources may be diverted during business combination and investment transactions and further impacted if we fail to successfully complete or integrate business combination and investment transactions that further our strategic objectives. If we fail to manage the distribution of our products and services properly, our business and financial performance could suffer.
Having developed an edge-to-cloud platform product in HPE GreenLake, we must be able to continue to scale quickly while also managing costs and preserving margins. To accomplish this, we must accurately forecast volumes, mixes of products and configurations that meet customer requirements, and we may not succeed at doing so within a given product's life cycle or at all.
Having developed a cloud platform product in HPE GreenLake, we must be able to continue to scale quickly, while also managing costs and preserving margins, which means accurately forecasting volumes, mixes of products, and configurations that meet customer requirements, which we may not succeed at doing.
U.S. government trade policy has resulted in, and could result in more, U.S. trading partners adopting responsive trade policy making it more difficult or costly for us to export our products to those countries. Similarly, changes in regulations relating to exports could prevent us from exporting products to certain locations or customers entirely.
Additionally, U.S. trading partners may adopt their own trade policies making it more difficult or costly for us to export our products to those countries. Similarly, changes in regulations relating to exports could prevent us from exporting products to certain locations or customers entirely.
Any changes to current environmental legal requirements, such as the EU's Restriction of Hazardous Substances Directive, the EU's Waste Electrical and Electronic Equipment Directive, China's regulation on Management Methods for Controlling Pollution Caused by Electronic Information Products, the EU's Lot 9 regulation on product energy efficiency, and India's regulation on e-waste collection and recycling, among others, may increase our cost of doing business internationally and impact our hardware revenues from the EU, China, India and/or other countries proposing or adopting similar environmental legal requirements.
Any changes to current environmental legal requirements, such as the EU's Restriction of Hazardous Substances Directive, the EU's Waste Electrical and Electronic Equipment Directive, China's Administrative Measure on the Control of Pollution Caused by Electronic Information Products, the EU's Ecodesign Directive and product-specific implementing measures (including Lot 9 on servers and online data storage products), the evolving EU and US right to repair legal landscape, and India's regulation on e-waste collection and recycling, among others, may increase our cost of doing business internationally and impact our hardware revenues from the EU, U.S., China, India and/or other countries proposing or adopting similar environmental legal requirements.
As shortages or delays persist, the price of certain components has increased, and we may be exposed to quality issues and delivery delays. We may not be able to secure enough components at reasonable prices or of acceptable quality to build products or provide services in a timely manner in the quantities needed or according to our specifications.
We may not be able to secure enough components at reasonable prices, of acceptable quality, or at all, to build products or provide services in a timely manner in the quantities needed or according to our specifications.
Industry Risks We operate in an intensely competitive industry, and competitive pressures could harm our business and financial performance. We encounter aggressive competition from numerous and varied competitors in all areas of our business, and our competitors have targeted and are expected to continue targeting our key market segments.
We encounter aggressive competition from numerous and varied competitors in all areas of our business, and our competitors have targeted and are expected to continue targeting our key market segments.
Our long-term strategy is focused on leveraging our portfolio of hardware, software and services as we deliver global edge-to-cloud platform as-a-service to help customers accelerate outcomes by unlocking value from all of their data, everywhere.
Our long-term strategy is focused on leveraging our portfolio of hardware, software, and services as we deliver global edge-to-cloud platform as-a-service to help customers accelerate outcomes by unlocking value from all of their data, everywhere. We continue our transition to an aaS company, to provide our entire portfolio through a range of subscription and consumption-based, pay-per-use, and aaS offerings.

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Item 2. Properties

Properties — owned and leased real estate

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Product Development, Services and Manufacturing The location of our major product development, services, manufacturing, and Hewlett Packard Labs facilities are as follows: Americas Puerto Rico— Aguadilla United States— Alpharetta, Andover, Chippewa Falls, Colorado Springs, Fort Collins, Houston, Milpitas, Roseville, Santa Clara, Spring, Sunnyvale Europe, Middle East, Africa United Kingdom —Erskine Asia Pacific China —Beijing India —Bangalore Japan —Tokyo Singapore — Singapore Taiwan — Taipei
Product Development, Services and Manufacturing The location of our major product development, services, manufacturing, and Hewlett Packard Labs facilities are as follows: Americas Puerto Rico— Aguadilla United States— Alpharetta, Andover, Chippewa Falls, Colorado Springs, Fort Collins, Houston, Milpitas, Roseville, Santa Clara, Spring, Sunnyvale Europe, Middle East, Africa United Kingdom —Erskine Asia Pacific China —Beijing India —Bangalore Japan —Tokyo Singapore — Singapore Taiwan — Taipei ITEM 3.
ITEM 2. Properties. As of October 31, 2022, we owned or leased approximately 12 million square feet of space worldwide, which included 3 million square feet of vacated space. A summary of the Company's operationally utilized space is provided below.
ITEM 2. Properties. As of October 31, 2023, we owned or leased approximately 11 million square feet of space worldwide, which included 3 million square feet of vacated space. A summary of the Company's operationally utilized space is provided below.
As of October 31, 2022 Owned Leased Total (Square feet in millions) Administration and support 2 5 7 (Percentage) 29 % 71 % 100 % Core data centers, manufacturing plants, research and development facilities, and warehouse operations 1 1 2 (Percentage) 50 % 50 % 100 % Total 3 6 9 (Percentage) 33 % 67 % 100 % We believe that our existing properties are in good condition and are suitable for the conduct of our business.
As of October 31, 2023 Owned Leased Total (Square feet in millions) Administration and support 2 4 6 (Percentage) 33 % 67 % 100 % Core data centers, manufacturing plants, research and development facilities, and warehouse operations 1 1 2 (Percentage) 50 % 50 % 100 % Total 3 5 8 (Percentage) 37 % 63 % 100 % We believe that our existing properties are in good condition and are suitable for the conduct of our business.
Principal Executive Offices Our principal executive offices, including our global headquarters, are located at 1701 East Mossy Oaks Road, Spring, Texas, 77389, United States of America.
Substantially all of our properties are utilized in whole or in part by our Compute, HPC & AI, Storage, and Intelligent Edge segments. Principal Executive Offices Our principal executive offices, including our global headquarters, are located at 1701 East Mossy Oaks Road, Spring, Texas, 77389, United States of America.
Removed
Substantially all of our properties are utilized in whole or in part by our Compute, HPC & AI, Storage, and Intelligent Edge segments. In connection with the transformation programs, we continue to anticipate changes in our real estate portfolio over the next year. These changes may include reductions in overall space.
Added
Legal Proceedings. Information with respect to this item may be found in Note 17, “Litigation and Contingencies,” to the Consolidated Financial Statements in Item 8 of Part II, which is incorporated herein by reference. ITEM 4. Mine Safety Disclosures. Not applicable. 32 Table of Content PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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This graph covers the period from October 31, 2017 through October 31, 2022. This graph assumes the investment of $100 in the stock or the index on October 31, 2017 (and the reinvestment of dividends thereafter).
This graph covers the period from October 31, 2018 through October 31, 2023. This graph assumes the investment of $100 in the stock or the index on October 31, 2018 (and the reinvestment of dividends thereafter).
Dividends During fiscal 2022, we paid a quarterly dividend of $0.12 per share to our shareholders. On November 29, 2022 we declared a quarterly dividend of $0.12 per share, payable on January 13, 2023, to stockholders of record as of the close of business on December 14, 2022.
Dividends During fiscal 2023, we paid a quarterly dividend of $0.12 per share to our shareholders. On November 28, 2023 we declared a quarterly dividend of $0.13 per share, payable on January 11, 2024, to stockholders of record as of the close of business on December 13, 2023.
As of October 31, 2022, the Company had a remaining authorization of $1.4 billion for future share repurchases. 32 Table of Conten t Stock Performance Graph and Cumulative Total Return The graph below shows a comparison of cumulative total stockholder return, the S&P 500 Index, and the S&P Information Technology Index.
As of October 31, 2023, the Company had a remaining authorization of approximately $1.0 billion for future share repurchases. 33 Table of Content Stock Performance Graph and Cumulative Total Return The graph below shows a comparison of cumulative total stockholder return, the S&P 500 Index, and the S&P Information Technology Index.
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information The common stock of Hewlett Packard Enterprise is listed on the New York Stock Exchange ("NYSE") with the ticker symbol "HPE". Holders As of December 1, 2022, there were 48,316 stockholders of record of Hewlett Packard Enterprise common stock.
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information The common stock of Hewlett Packard Enterprise is listed on the New York Stock Exchange (“NYSE”) with the ticker symbol “HPE.” Holders As of December 11, 2023, there were 45,876 stockholders of record of Hewlett Packard Enterprise common stock.
Issuer Purchases of Equity Securities Fourth Quarter of Fiscal 2022 Total Number of Shares Purchased and Settled Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs In thousands, except per share amounts Month 1 (August 2022) 3,074 $ 14.47 3,074 $ 1,468,188 Month 2 (September 2022) 3,220 $ 12.96 3,220 $ 1,426,457 Month 3 (October 2022) 3,223 $ 12.85 3,223 $ 1,385,018 Total 9,517 $ 13.41 9,517 On October 13, 2015, the Company's Board of Directors approved a share repurchase program with a $3.0 billion authorization, which was refreshed with additional share repurchase authorizations of $3.0 billion, $5.0 billion and $2.5 billion on May 24, 2016, October 16, 2017 and February 21, 2018, respectively.
Issuer Purchases of Equity Securities Fourth Quarter of Fiscal 2023 Total Number of Shares Purchased and Settled Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs In thousands, except per share amounts Month 1 (August 2023) 1,054 $ 17.24 1,054 $ 1,001,632 Month 2 (September 2023) 927 17.21 927 985,676 Month 3 (October 2023) 1,302 16.26 1,302 $ 964,514 Total 3,283 $ 16.84 3,283 On October 13, 2015, the Company's Board of Directors approved a share repurchase program with a $3.0 billion authorization, which was refreshed with additional share repurchase authorizations of $3.0 billion, $5.0 billion and $2.5 billion on May 24, 2016, October 16, 2017 and February 21, 2018, respectively.
The comparisons in the graph below are based on historical data and are not indicative of, or intended to forecast, future performance of our common stock. 10/2017 10/2018 10/2019 10/2020 10/2021 10/2022 Hewlett Packard Enterprise $ 100.00 $ 112.11 $ 124.34 $ 68.23 $ 119.68 $ 120.41 S&P 500 Index $ 100.00 $ 107.33 $ 122.70 $ 134.60 $ 192.33 $ 164.18 S&P Information Technology Index $ 100.00 $ 112.29 $ 137.63 $ 185.07 $ 271.91 $ 216.82 ITEM 6. [Reserved] 33 Table of Conten t
The comparisons in the graph below are based on historical data and are not indicative of, or intended to forecast, future performance of our common stock. 10/2018 10/2019 10/2020 10/2021 10/2022 10/2023 Hewlett Packard Enterprise $ 100.00 $ 110.91 $ 60.86 $ 106.76 $ 107.41 $ 119.28 S&P 500 Index $ 100.00 $ 114.32 $ 125.40 $ 179.19 $ 152.98 $ 168.46 S&P Information Technology Index $ 100.00 $ 122.57 $ 164.82 $ 242.15 $ 193.09 $ 252.65 ITEM 6. [Reserved] 34 Table of Content

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

140 edited+91 added−67 removed46 unchanged
Non-service net periodic benefit credit Non-service net periodic benefit credit represents the components of net periodic pension benefit costs, other than service cost, for the Hewlett Packard Enterprise defined benefit pension and post-retirement benefit plans such as interest cost, expected return on plan assets, and the amortization of prior plan amendments and actuarial gains or losses.
Non-service net periodic benefit (cost) credit Non-service net periodic benefit (cost) credit represents the components of net periodic pension benefit costs, other than service cost, for the Hewlett Packard Enterprise defined benefit pension and post-retirement benefit plans such as interest cost, expected return on plan assets, and the amortization of prior plan amendments and actuarial gains or losses.
We estimate the fair value of our reporting units using a weighting of fair values derived mostly from the income approach and, to a lesser extent, the market approach, with the exception of the Software reporting unit which uses a weighting derived mostly from the market approach.
We estimate the fair value of our reporting units using a weighting of fair values derived mostly from the income approach and, to a lesser extent, the market approach, with the exception of the Software reporting unit which uses a weighting derived solely from the market approach.
An analysis and discussion of changes in our cash flows, financial condition, liquidity, and cash requirements and commitments. • GAAP to Non-GAAP Reconciliation . Each non-GAAP financial measure has been reconciled to the most directly comparable GAAP financial measure therein.
An analysis and discussion of changes in our cash flows, financial condition, liquidity, and cash requirements and commitments. • GAAP to Non-GAAP Reconciliation . Each non-GAAP financial measure has been reconciled to the most directly comparable GAAP financial measure.
The segments are based on this organizational structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results. A description of the products and services for each segment, along with other pertinent information related to Segments can be found in Note 2, "Segment Information", to the Consolidated Financial Statements in Item 8 of Part II.
The segments are based on this organizational structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results. A description of the products and services for each segment, along with other pertinent information related to Segments can be found in Note 2, “Segment Information,” to the Consolidated Financial Statements in Item 8 of Part II.
For further discussion on taxes on earnings, refer to Note 6, "Taxes on Earnings", to the Consolidated Financial Statements in Item 8 of Part II. Goodwill We review goodwill for impairment at the reporting unit level annually on the first day of the fourth quarter, or whenever events or circumstances indicate the carrying amount of goodwill may not be recoverable.
For further discussion on taxes on earnings, refer to Note 6, “Taxes on Earnings,” to the Consolidated Financial Statements in Item 8 of Part II. Goodwill We review goodwill for impairment at the reporting unit level annually on the first day of the fourth quarter, or whenever events or circumstances indicate the carrying amount of goodwill may not be recoverable.
Transaction price is adjusted for variable consideration which may be offered in contracts with customers, partners, and distributors and may include rebates, volume-based discounts, cooperative marketing, price protection, and other incentive programs. Significant judgment is applied in determining the transaction price as we may be required to estimate variable consideration at the time of revenue recognition.
Transaction price is adjusted for variable consideration which may be offered in contracts with customers, partners, and distributors and may include rebates, volume-based discounts, price protection, and other incentive programs. Significant judgment is applied in determining the transaction price as we may be required to estimate variable consideration at the time of revenue recognition.
These amounts primarily included: • $150 million of income tax benefits related to releases of foreign valuation allowances, • $99 million of income tax benefits related to transformation costs and acquisition, disposition and other related charges, • $43 million of income tax benefits related to the settlement of U.S. tax audit matters, • $42 million of income tax benefits related to the release of U.S. passive foreign tax credit valuation allowance, • $30 million of income tax benefits related to the change in pre-separation tax liabilities, primarily those for which the Company shared joint and several liability with HP Inc. and for which the Company was indemnified by HP Inc. • $27 million of income tax benefits related to the utilization of capital losses which had a full valuation allowance, • $12 million of income tax benefits as a result of the fiscal 2021 U.S. tax return filing primarily from the decrease in Global Intangible Low Taxed Income, and • $11 million of net income tax benefits related to settlements and ongoing discussions in foreign tax audit matters.
These amounts primarily included: • $150 million of income tax benefits related to releases of foreign valuation allowances, • $99 million of income tax benefits related to transformation costs and acquisition, disposition and other related charges, • $43 million of income tax benefits related to the settlement of U.S. tax audit matters, • $42 million of income tax benefits related to the release of U.S. passive foreign tax credit valuation allowance, • $30 million of income tax benefits related to the change in pre-separation tax liabilities, primarily those for which we shared joint and several liability with, and for which we were indemnified by, HP Inc., • $27 million of income tax benefits related to the utilization of capital losses which had a full valuation allowance, • $12 million of income tax benefits as a result of the fiscal 2021 U.S. tax return filing primarily from the decrease in Global Intangible Low Taxed Income, and • $11 million of net income tax benefits related to settlements and ongoing discussions in foreign tax audit matters.
Based on a further assessment of business risks and needs, in June 2022, we determined that it is no longer tenable to maintain operations in Russia and Belarus and have been proceeding with an orderly, managed exit of our remaining business in these countries.
Based on a further assessment of business risks and needs, in June 2022, we determined that it was no longer tenable to maintain our operations in Russia and Belarus and have been proceeding with an orderly, managed exit of our remaining business in these countries.
Tax indemnification and related adjustments in fiscal 2022 resulted from changes in certain pre-separation tax liabilities, for which we partially shared joint and several liability with HP Inc. and for which we were indemnified under the Termination and Mutual Release Agreement, and changes to certain pre-divestiture tax liabilities and tax receivables.
In fiscal 2022, Tax indemnification and other adjustments resulted from changes in certain pre-separation tax liabilities, for which we partially shared joint and several liability with HP Inc. and for which we were indemnified under the Termination and Mutual Release Agreement, and changes to certain pre-divestiture tax liabilities and tax receivables.
Amounts held outside of the U.S. are generally utilized to support our non-U.S. liquidity needs. Repatriations of amounts held outside the U.S. generally will not be taxable from a U.S. federal tax perspective, but may be subject to state income or foreign withholding tax.
Amounts held outside of the U.S. are generally utilized to support our non-U.S. liquidity needs. Repatriations of amounts held outside the U.S. generally should not be taxable from a U.S. federal tax perspective, but may be subject to state income or foreign withholding tax.
Our weighted-average interest rate reflects the average effective rate on our borrowings prevailing during the period and reflects the impact of interest rate swaps. For more information on our interest rate swaps, see Note 13, "Financial Instruments", to the Consolidated Financial Statements in Item 8 of Part II.
Our weighted-average interest rate reflects the average effective rate on our borrowings prevailing during the period and reflects the impact of interest rate swaps. For more information on our interest rate swaps, see Note 13, “Financial Instruments,” to the Consolidated Financial Statements in Item 8 of Part II.
Our tax rate for fiscal 2022 also included the effects of the non-deductible goodwill impairment. The jurisdictions with favorable tax rates that had the most significant impact on our effective tax rate in the periods presented include Puerto Rico and Singapore. In fiscal 2022, we recorded $454 million of net income tax benefits related to items discrete to the year.
Our tax rate for fiscal 2022 also included the effects of the non-deductible goodwill impairment. The jurisdictions with favorable tax rates that had the most significant impact on our effective tax rate in the periods presented include Puerto Rico and Singapore. In fiscal 2023, we recorded $131 million of net income tax benefits related to items discrete to the year.
For more information on our leases, see Note 8, "Accounting for Leases as a Lessee", to the Consolidated Financial Statements in Item 8 of Part II. Unconditional purchase obligations Our unconditional purchase obligations are related principally to inventory purchases, software maintenance and support services and other items. Unconditional purchase obligations exclude agreements that are cancellable without penalty.
For more information on our leases, see Note 8, “Accounting for Leases as a Lessee,” to the Consolidated Financial Statements in Item 8 of Part II. Unconditional purchase obligations Our unconditional purchase obligations are related principally to inventory purchases, software maintenance and support services and other items. Unconditional purchase obligations exclude agreements that are cancellable without penalty.
As of October 31, 2022, future interest payments relating to our long-term debt is estimated to be approximately $3.6 billion, of which $0.5 billion is expected to be due within one year.
As of October 31, 2023, future interest payments relating to our long-term debt is estimated to be approximately $3.5 billion, of which $0.6 billion is expected to be due within one year.
Payments for restructuring activities are not considered as contractual obligations, because they do not represent contractual cash outflows and there is uncertainty as to the timing of these payments. For more information on our restructuring activities, see Note 3, "Transformation Programs", to the Consolidated Financial Statements in Item 8 of Part II.
Payments for restructuring activities are not considered as contractual obligations, because they do not represent contractual cash outflows and there is uncertainty as to the timing of these payments. For more information on our restructuring activities, see Note 3, “Transformation Programs,” to the Consolidated Financial Statements in Item 8 of Part II.
Generally Accepted Accounting Principles ("GAAP"), which requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, net revenue and expenses, and the disclosure of contingent liabilities.
Generally Accepted Accounting Principles (“GAAP”), which requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, net revenue and expenses, and the disclosure of contingent liabilities.
For more information on our third-party revolving short-term financing arrangements, see Note 7, "Balance Sheet Details", to the Consolidated Financial Statements in Item 8 of Part II. 53 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) GAAP TO NON-GAAP RECONCILIATIONS The following tables provide a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure for the periods presented: Reconciliation of GAAP gross profit and gross profit margin to non-GAAP gross profit and gross profit margin.
For more information on our third-party revolving short-term financing arrangements, see Note 7, “Balance Sheet Details,” to the Consolidated Financial Statements in Item 8 of Part II. 54 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) GAAP TO NON-GAAP RECONCILIATIONS The following tables provide a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure for the periods presented: Reconciliation of GAAP gross profit and gross profit margin to non-GAAP gross profit and gross profit margin.
Debt benefiting FS totaled $11.5 billion and $11.9 billion at October 31, 2022 and 2021, respectively, and was determined by applying an assumed debt-to-equity ratio, which management believes to be comparable to that of other similar financing companies. FS equity at October 31, 2022 and 2021, was $1.6 billion and $1.7 billion, respectively.
Debt benefiting FS totaled $11.6 billion and $11.5 billion at October 31, 2023 and 2022, respectively, and was determined by applying an assumed debt-to-equity ratio, which management believes to be comparable to that of other similar financing companies. FS equity at October 31, 2023 and 2022, was $1.7 billion and $1.6 billion, respectively.
For more information on our retirement and post-retirement benefit plans, see Note 4, "Retirement and Post-Retirement Benefit Plans", to the Consolidated Financial Statements in Item 8 of Part II.
For more information on our retirement and post-retirement benefit plans, see Note 4, “Retirement and Post-Retirement Benefit Plans,” to the Consolidated Financial Statements in Item 8 of Part II.
We are subject to income taxes in the U.S. and approximately 90 other countries, and we are subject to routine corporate income tax audits in many of these jurisdictions.
We are subject to income taxes in the U.S. and approximately 85 other countries, and we are subject to routine corporate income tax audits in many of these jurisdictions.
Non-GAAP gross profit and non-GAAP gross profit margin is defined to exclude charges related to the amortization of initial direct costs, stock-based compensation expense and disaster charges.
Non-GAAP gross profit and non-GAAP gross profit margin are defined to exclude charges related to the amortization of initial direct costs, stock-based compensation expense, and disaster charges.
Russia/Ukraine Conflict T he conflict between Russia and Ukraine and the related sanctions imposed by the U.S., European Union ("EU"), and other countries in response have negatively impacted our operations in both countries and increased economic and political uncertainty across the world.
Russia/Ukraine Conflict The conflict between Russia and Ukraine and the related sanctions imposed by the U.S., European Union and other countries in response have negatively impacted our operations in both countries and increased economic and political uncertainty across the world.
In connection with the share repurchase program previously authorized by our Board of Directors, during fiscal 2022, we repurchased and settled an aggregate amount of $0.5 billion. As of October 31, 2022, we had a remaining authorization of $1.4 billion for future share repurchases.
In connection with the share repurchase program previously authorized by our Board of Directors, during fiscal 2023, we repurchased and settled an aggregate amount of $0.4 billion. As of October 31, 2023, we had a remaining authorization of approximately $1.0 billion for future share repurchases.
Litigation is inherently unpredictable. However, we believe we have valid defenses with respect to legal matters pending against us. Nevertheless, cash flows or results of operations could be materially affected in any particular period by the resolution of one or more of these contingencies.
However, we believe we have valid defenses with respect to legal matters pending against us. Nevertheless, cash flows or results of operations could be materially affected in any particular period by the resolution of one or more of these contingencies.
A summary of significant accounting policies and a summary of recent accounting pronouncements applicable to our Consolidated Financial Statements are included in Note 1, "Overview and Summary of Significant Accounting Policies", to the Consolidated Financial Statements in Item 8 of Part II.
A summary of significant accounting policies and a summary of recent accounting pronouncements applicable to our Consolidated Financial Statements are included in Note 1, “Overview and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements in Item 8 of Part II.
ARR represents the annualized revenue of all net HPE GreenLake edge-to-cloud platform services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-service, software consumption revenue, and other as-a-service offerings, recognized during a quarter and multiplied by four. We use ARR as a performance metric.
ARR represents the annualized revenue of all net HPE GreenLake edge-to-cloud platform services revenue, related financial services revenue (which includes rental income from operating leases and interest income from finance leases), and software-as-a-service, software consumption revenue, and other aaS offerings, recognized during a quarter and multiplied by four.
FS bad debt expense includes charges to general reserves, specific reserves and write-offs for sales-type, direct-financing and operating leases. FS recorded net bad debt expense of $82 million, $95 million and $93 million in fiscal 2022, 2021 and 2020, respectively.
FS bad debt expense includes charges to general reserves, specific reserves and write-offs for sales-type, direct-financing and operating leases. FS recorded net bad debt expense of $59 million, $82 million and $95 million in fiscal 2023, 2022 and 2021, respectively.
For more information on our uncertain tax positions, see Note 6, "Taxes on Earnings", to the Consolidated Financial Statements in Item 8 of Part II.
For more information on our uncertain tax positions, see Note 6, “Taxes on Earnings,” to the Consolidated Financial Statements in Item 8 of Part II.
Intelligent Edge earnings from operations as a percentage of net revenue decreased 0.5 percentage points primarily due to an increase in cost of products and services as a percentage of net revenue partially offset by a decrease in operating expenses as a percentage of net revenue.
Compute earnings from operations as a percentage of net revenue decreased 0.5 percentage points primarily due to an increase in operating expenses as a percentage of net revenue partially offset by a decrease in the cost of products and services as a percentage of net revenue.
The GAAP measure most directly comparable to non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue) is operating profit margin (earnings from operations as a percentage of net revenue). The GAAP measure most directly comparable to non-GAAP net earnings is net earnings.
The GAAP measure most directly comparable to non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue) is operating profit margin (earnings from operations as a percentage of net revenue). The GAAP measure most directly comparable to non-GAAP income tax rate is income tax rate.
Some of the limitations in relying on these non-GAAP financial measures are that they can have a material impact on the equivalent GAAP earnings measures and cash flows, they may be calculated differently by other companies and may not reflect the full economic effect of the loss in value of certain assets.
Some of the limitations in relying on these non- GAAP financial measures are that they can have a material impact on the equivalent GAAP earnings measures and cash flows, they may be calculated differently by other companies (limiting the usefulness of those measures for comparative purposes) and may not reflect the full economic effect of the loss in value of certain assets.
For more information on our available borrowing resources and the impact of operating assets and liabilities to cash flows, see Note 14, "Borrowings", and Note 7, "Balance Sheet Details", respectively, to the Consolidated Financial Statements in Item 8 of Part II.
For more information on our available borrowing resources and the impact of operating assets and liabilities to cash flows, see Note 14, “Borrowings,” and Note 7, “Balance Sheet Details,” respectively, to the Consolidated Financial Statements in Item 8 of Part II.
As of October 31, 2022, operating lease obligations, net of sublease rental income totaled $1.1 billion, of which $171 million is due within one year. These amounts included uncommenced operating leases as of October 31, 2022, and did not reflect imputed interest adjustments.
As of October 31, 2023, operating lease obligations, net of sublease rental income totaled $1.6 billion, of which $216 million is due within one year. These amounts included uncommenced operating leases as of October 31, 2023, and did not reflect imputed interest adjustments.
Discussions of fiscal 2020 items and year-to-year comparisons between fiscal 2021 and fiscal 2020 that are not included in this Form 10-K can be found in "Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2021, as filed with the SEC on December 10, 2021, which is available on the SEC's website at www.sec.gov.
Discussions of fiscal 2021 items and year-to-year comparisons between fiscal 2022 and fiscal 2021 that are not included in this Form 10-K can be found in “Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations” of the Company's Annual Report on Form 10-K for the fiscal year October 31, 2022, as filed with the SEC on December 8, 2022, which is available on the SEC's website at www.sec.gov.
Capital Resources Debt Levels As of October 31, 2022 2021 2020 In millions Short-term debt $ 4,612 $ 3,552 $ 3,755 Long-term debt $ 7,853 $ 9,896 $ 12,186 Weighted-average interest rate 4.0 % 2.9 % 3.2 % We maintain debt levels that we establish through consideration of a number of factors, including cash flow expectations, cash requirements for operations, investment plans (including acquisitions), share repurchase activities, our cost of capital, and targeted capital structure.
Capital Resources Debt Levels As of October 31, 2023 2022 2021 Dollars in millions Short-term debt $ 4,868 $ 4,612 $ 3,552 Long-term debt $ 7,487 $ 7,853 $ 9,896 Weighted-average interest rate 5.4 % 4.0 % 2.9 % We maintain debt levels that we establish through consideration of a number of factors, including cash flow expectations, cash requirements for operations, investment plans (including acquisitions), share repurchase activities, our cost of capital, and targeted capital structure.
Our cash balances are held in numerous locations throughout the world, with a substantial amount held outside the U.S as of October 31, 2022. We utilize a variety of planning and financing strategies in an effort to ensure that our worldwide cash is available when and where it is needed.
Our cash balances are held in numerous locations throughout the world, with a substantial amount held outside the U.S as of October 31, 2023. We utilize a variety of planning and financing strategies in an effort to provide availability of our worldwide cash when and where it is needed.
The decline in the fair value of the HPC & AI reporting unit below its carrying value resulted from changes in expected future cash flows as compared to our fiscal 2021 long-term plan due to the continuation of supply chain constraints, and other operational challenges as well as an increase in cost of capital.
The decline in the fair value of the HPC & AI reporting unit in fiscal 2022 below its carrying value resulted from changes in expected future cash flows due to the continuation of supply chain constraints, and other operational challenges as well as an increase in cost of capital.
For the fiscal years ended October 31, 2022 2021 In millions Net cash provided by operating activities $ 4,593 $ 5,871 Litigation judgment, net of taxes paid — (2,172) Net cash provided by operating activities, excluding litigation judgment, net of taxes paid 4,593 3,699 Investment in property, plant and equipment (3,122) (2,502) Proceeds from sale of property, plant and equipment 602 354 Effect of exchange rate changes on cash, cash equivalents, and restricted cash (279) — Free cash flow $ 1,794 $ 1,551 55 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Non-GAAP financial measures The non-GAAP financial measures presented are net revenue on a constant currency basis, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP earnings from operations, non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue), non-GAAP net earnings, non-GAAP diluted net earnings per share, and free cash flow.
For the fiscal years ended October 31, 2023 2022 2021 In millions Net cash provided by operating activities $ 4,428 $ 4,593 $ 5,871 Litigation judgment, net of taxes paid — — (2,172) Net cash provided by operating activities, excluding litigation judgment, net of taxes paid 4,428 4,593 3,699 Investment in property, plant and equipment (2,828) (3,122) (2,502) Proceeds from sale of property, plant and equipment 602 602 354 Effect of exchange rate changes on cash, cash equivalents, and restricted cash 36 (279) — Free cash flow $ 2,238 $ 1,794 $ 1,551 56 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Use of Non-GAAP Financial Measures The non-GAAP financial measures presented are net revenue on a constant currency basis (including at the business segment level), non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP earnings from operations, non-GAAP tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share, and FCF.
Cash Requirements and Commitments Long-term debt and interest payments on debt As of October 31, 2022, future principal payment obligations on our long-term debt including asset-backed debt securities totaled $11.9 billion, of which $3.9 billion is due within one year.
Cash Requirements and Commitments Long-term debt and interest payments on debt As of October 31, 2023, future principal payment obligations on our long-term debt including asset-backed debt securities totaled $11.7 billion of which $4.0 billion is due within one year.
Uncertain Tax Positions As of October 31, 2022, we had approximately $297 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions. These liabilities and related interest and penalties include $29 million expected to be paid within one year.
Uncertain Tax Positions As of October 31, 2023, we had approximately $224 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions. These liabilities and related interest and penalties include $9 million expected to be paid within one year.
As of October 31, 2022, our finance lease obligations, including interest, was $55 million, of which $7 million is to be due within one year. For more information on our debt, see Note 14, "Borrowings", to the Consolidated Financial Statements in Item 8 of Part II.
As of October 31, 2023, our finance lease obligations, including interest, was $48 million, of which $6 million is to be due within one year. For more information on our debt, see Note 14, “Borrowings,” to the Consolidated Financial Statements in Item 8 of Part II.
For the fiscal years ended October 31, 2022 2021 Dollars % of Revenue Dollars % of Revenue In millions GAAP earnings from operations $ 782 2.7 % $ 1,132 4.1 % Non-GAAP adjustments: Amortization of initial direct costs 4 — % 8 — % Amortization of intangible assets 293 1.0 % 354 1.3 % Impairment of goodwill 905 3.2 % — — % Transformation costs 473 1.6 % 930 3.4 % Disaster charges (1) 159 0.6 % 16 0.1 % Stock-based compensation expense 391 1.4 % 372 1.3 % Acquisition, disposition and other related charges 19 0.1 % 36 0.1 % Non-GAAP earnings from operations $ 3,026 10.6 % $ 2,848 10.3 % 54 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Reconciliation of GAAP net earnings and diluted net earnings per share to non-GAAP net earnings and diluted net earnings per share.
For the fiscal years ended October 31, 2023 2022 Dollars % of Revenue Dollars % of Revenue In millions GAAP earnings from operations $ 2,089 7.2 % $ 782 2.7 % Non-GAAP adjustments: Amortization of initial direct costs — — % 4 — % Amortization of intangible assets 288 1.0 % 293 1.0 % Impairment of goodwill — — % 905 3.2 % Transformation costs 283 1.0 % 473 1.6 % Disaster (recovery) charges (12) — % 159 0.6 % Stock-based compensation expense 428 1.5 % 391 1.4 % Acquisition, disposition and other related charges 69 0.2 % 19 0.1 % Non-GAAP earnings from operations $ 3,145 10.8 % $ 3,026 10.6 % 55 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Reconciliation of GAAP net earnings and diluted net earnings per share to non-GAAP net earnings and diluted net earnings per share.
If the global macroeconomic or geopolitical conditions worsen, projected revenue growth rates or operating margins decline, weighted average cost of capital increases, or if we have significant or sustained decline in our stock price, it is possible our estimates about the HPC & AI reporting unit's ability to successfully address the current challenges may change, which could result in the carrying value of the HPC & AI reporting unit exceeding its estimated fair value and potential impairment charges.
If the global macroeconomic or geopolitical conditions worsen, projected revenue growth rates or projected operating margins are not achieved, weighted average cost of capital increases, or if we have a significant sustained decline in our stock price, it is possible our estimates about the Compute, HPC & AI, or our other reporting units’ ability to successfully address the current challenges may change, which could result in the carrying value for our reporting units exceeding their estimated fair value resulting in potential impairment charges.
The increase was primarily driven by higher financing associated with third-party product sales and related service offerings, partially offset by unfavorable currency fluctuations and lower financing of HPE product sales and related service offerings.
The increase was primarily driven by higher financing of HPE product sales and services, partially offset by lower financing of third-party product sales and services and unfavorable currency fluctuations.
Restructuring Plans As of October 31, 2022, we expect future cash payments of approximately $460 million in connection with our approved restructuring plans, which includes $330 million expected to be paid in fiscal 2023 and $130 million expected to be paid thereafter.
Restructuring Plans As of October 31, 2023, we expect future cash payments of approximately $360 million in connection with our approved restructuring plans, which includes $240 million expected to be paid in fiscal 2024 and $120 million expected to be paid thereafter.
The change was primarily due to a combinaton of lower payments in connection with business acquisitions of $0.5 billion, lower cash utilized in net financial collateral activities of $0.3 billion and higher proceeds from the sale of investments, net of purchases of $0.3 billion, partially offset by higher cash utilized for investment in property, plant and equipment, net of sales proceeds of $0.4 billion, as compared to the prior-year period.
The increase was primarily due to payments made in connection with business acquisitions of $0.8 billion, higher cash utilized in net financial collateral activities of $0.5 billion, lower proceeds from maturities and sales of investments, net of purchases of $0.2 billion, offset by lower investment in property, plant and equipment of $0.3 billion, as compared to the prior-year period.
Our working capital metrics and cash conversion impacts were as follows: As of October 31, 2022 2021 2020 Days of sales outstanding in accounts receivable ("DSO") 47 49 42 Days of supply in inventory ("DOS") 88 82 48 Days of purchases outstanding in accounts payable ("DPO") (149) (128) (97) Cash conversion cycle (14) 3 (7) The cash conversion cycle is the sum of DSO and DOS less DPO.
Our working capital metrics and cash conversion impacts were as follows: As of October 31, 2023 2022 2021 Days of sales outstanding in accounts receivable (“DSO”) 43 47 49 Days of supply in inventory (“DOS”) 87 88 82 Days of purchases outstanding in accounts payable (“DPO”) (134) (149) (128) Cash conversion cycle (4) (14) 3 The cash conversion cycle is the sum of DSO and DOS less DPO.
Results of operations in dollars and as a percentage of net revenue were as follows: For the fiscal years ended October 31, 2022 2021 2020 Dollars % of Revenue Dollars % of Revenue Dollars % of Revenue Dollars in millions Net revenue $ 28,496 100.0 % $ 27,784 100.0 % $ 26,982 100.0 % Cost of sales 18,990 66.6 % 18,408 66.3 % 18,513 68.6 % Gross profit 9,506 33.4 % 9,376 33.7 % 8,469 31.4 % Research and development 2,045 7.2 % 1,979 7.1 % 1,874 6.9 % Selling, general and administrative 4,941 17.3 % 4,929 17.7 % 4,624 17.2 % Amortization of intangible assets 293 1.0 % 354 1.3 % 379 1.4 % Impairment of goodwill 905 3.2 % — — % 865 3.2 % Transformation costs 473 1.7 % 930 3.3 % 950 3.5 % Disaster charges 48 0.2 % 16 0.1 % 26 0.1 % Acquisition, disposition and other related charges 19 0.1 % 36 0.1 % 80 0.3 % Earnings (loss) from operations 782 2.7 % 1,132 4.1 % (329) (1.2) % Interest and other, net (188) (0.7) % (211) (0.8) % (215) (0.8) % Tax indemnification and related adjustments (67) (0.2) % 65 0.2 % (101) (0.4) % Non-service net periodic benefit credit 134 0.5 % 70 0.3 % 136 0.5 % Litigation judgment — — % 2,351 8.5 % — — % Earnings from equity interests 215 0.8 % 180 0.6 % 67 0.3 % Earnings (loss) before taxes 876 3.1 % 3,587 12.9 % (442) (1.6) % (Provision) benefit for taxes (8) (0.1) % (160) (0.6) % 120 0.4 % Net earnings (loss) $ 868 3.0 % $ 3,427 12.3 % $ (322) (1.2) % 41 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Fiscal 2022 compared with fiscal 2021 Net revenue In fiscal 2022, total net revenue of $28.5 billion, increased by $0.7 billion, or 2.6% (increased 5.1% on a constant currency basis).
Results of operations in dollars and as a percentage of net revenue were as follows: For the fiscal years ended October 31, 2023 2022 2021 Dollars % of Revenue Dollars % of Revenue Dollars % of Revenue Dollars in millions Net revenue $ 29,135 100.0 % $ 28,496 100.0 % $ 27,784 100.0 % Cost of sales 18,896 64.9 % 18,990 66.6 % 18,408 66.3 % Gross profit 10,239 35.1 % 9,506 33.4 % 9,376 33.7 % Research and development 2,349 8.1 % 2,045 7.2 % 1,979 7.1 % Selling, general and administrative 5,160 17.7 % 4,941 17.3 % 4,929 17.7 % Amortization of intangible assets 288 1.0 % 293 1.0 % 354 1.3 % Impairment of goodwill — — % 905 3.2 % — — % Transformation costs 283 1.0 % 473 1.7 % 930 3.3 % Disaster charges 1 — % 48 0.2 % 16 0.1 % Acquisition, disposition and other related charges 69 0.1 % 19 0.1 % 36 0.1 % Earnings from operations 2,089 7.2 % 782 2.7 % 1,132 4.1 % Interest and other, net (156) (0.5) % (188) (0.7) % (211) (0.8) % Tax indemnification and other adjustments 55 0.2 % (67) (0.2) % 65 0.2 % Non-service net periodic benefit (cost) credit (3) — % 134 0.5 % 70 0.3 % Litigation judgment — — % — — % 2,351 8.5 % Earnings from equity interests 245 0.8 % 215 0.8 % 180 0.6 % Earnings before taxes 2,230 7.7 % 876 3.1 % 3,587 12.9 % Provision for taxes (205) (0.7) % (8) (0.1) % (160) (0.6) % Net earnings $ 2,025 7.0 % $ 868 3.0 % $ 3,427 12.3 % 42 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Fiscal 2023 compared with fiscal 2022 Net revenue In fiscal 2023, total net revenue of $29.1 billion represented an increase of $639 million, or 2.2% (increased 5.5% on a constant currency basis).
Our liquidity is subject to various risks including the risks identified in the section entitled "Risk Factors" in Item 1A and market risks identified in the section entitled "Quantitative and Qualitative Disclosures about Market Risk" in Item 7A.
Our liquidity is subject to various risks including the risks identified in the section entitled “Risk Factors” in Item 1A and market risks identified in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A.
The tables below represent the way in which management reviews cash flows: For the fiscal years ended October 31, 2022 2021 2020 In millions Net cash provided by operating activities $ 4,593 $ 5,871 $ 2,240 Net cash used in investing activities (2,087) (2,796) (2,578) Net cash (used in) provided by financing activities (1,796) (3,364) 883 Effect of exchange rate changes on cash, cash equivalents, and restricted cash (279) — — Net increase (decrease) in cash, cash equivalents, and restricted cash $ 431 $ (289) $ 545 Operating Activities Net cash provided by operating activities decrease d by $1.3 billion for fiscal 2022, as compared to fiscal 2021.
The tables below represent the way in which management reviews cash flows: For the fiscal years ended October 31, 2023 2022 2021 In millions Net cash provided by operating activities $ 4,428 $ 4,593 $ 5,871 Net cash used in investing activities (3,284) (2,087) (2,796) Net cash used in financing activities (1,362) (1,796) (3,364) Effect of exchange rate changes on cash, cash equivalents, and restricted cash 36 (279) — Net (decrease) increase in cash, cash equivalents and restricted cash $ (182) $ 431 $ (289) Free Cash Flow $ 2,238 $ 1,794 $ 1,551 Operating Activities Net cash provided by operating activities decrease d by $165 million for fiscal 2023, as compared to fiscal 2022.
For the fiscal years ended October 31, 2022 2021 Dollars % of Revenue Dollars % of Revenue In millions GAAP Net revenue $ 28,496 100.0 % $ 27,784 100.0 % GAAP Cost of sales 18,990 66.6 % 18,408 66.3 % GAAP gross profit $ 9,506 33.4 % $ 9,376 33.7 % Non-GAAP adjustments Amortization of initial direct costs 4 — % 8 — % Stock-based compensation expense 46 0.1 % 40 0.2 % Disaster charges (1) 111 0.4 % — — % Non-GAAP gross profit $ 9,667 33.9 % $ 9,424 33.9 % Reconciliation of GAAP earnings from operations and operating profit margin to non-GAAP earnings from operations and operating profit margin.
For the fiscal years ended October 31, 2023 2022 Dollars % of Revenue Dollars % of Revenue In millions GAAP Net revenue $ 29,135 100.0 % $ 28,496 100.0 % GAAP Cost of sales 18,896 64.9 % 18,990 66.6 % GAAP gross profit $ 10,239 35.1 % $ 9,506 33.4 % Non-GAAP adjustments Amortization of initial direct costs — — % 4 — % Stock-based compensation expense 47 0.2 % 46 0.1 % Disaster (recovery) charges (13) — % 111 0.4 % Non-GAAP gross profit $ 10,273 35.3 % $ 9,667 33.9 % Reconciliation of GAAP earnings from operations and operating profit margin to non-GAAP earnings from operations and operating profit margin.
Corporate Investments and Other loss from operations as a percentage of net revenue increased 0.3 percentage points due primarily to lower cost of services as a percentage of net revenue and an increase in operating expenses as a percentage of net revenue.
Corporate Investments and Other loss from operations as a percentage of net revenue increased 6.5 percenta ge points primarily due to an increase in cost of services and operating expense as a percentage of net revenue.
Items which may cause the cash conversion cycle in a particular period to differ include, but are not limited to, changes in business mix, changes in payment terms (including extended payment terms to customers or from suppliers), early or late invoice payments from customers or to suppliers, the 50 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) extent of receivables factoring, seasonal trends, the timing of sales and inventory purchases within the period, the impact of commodity costs and acquisition activity.
Items which may cause the cash conversion cycle in a particular period to differ include, but are not limited to, changes in business mix, changes in payment terms (including extended payment terms to customers or from suppliers), early or late invoice payments from customers or to suppliers, the extent of receivables factoring, seasonal trends, the timing of revenue recognition and inventory purchases within the period, the impact of commodity costs and acquisition activity.
The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously included in our income tax provision and, therefore, could have a material impact on our (Provision) benefit for taxes, Net earnings (loss) and cash flows.
Determining the income tax provision for these potential assessments and recording the related effects requires management judgments and estimates. The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously included in our income tax provision and, therefore, could have a material impact on our Provision for taxes, Net earnings and cash flows.
We also record changes to certain pre-separation and pre-divestiture tax liabilities and tax receivables for which we remain liable on behalf of the separated or divested business, but which may not be subject to indemnification. We recorded Tax indemnification and related adjustments expense of $67 million and income of $65 million in fiscal 2022 and 2021, respectively.
Tax indemnification and other adjustments We record changes in certain pre-separation and pre-divestiture tax liabilities and tax receivables for which we remain liable on behalf of the separated or divested business, but which may not be subject to indemnification.
We compensate for these limitations on the use of non-GAAP financial measures by relying primarily on our GAAP results and using non-GAAP financial measures only as a supplement. We also provide a reconciliation of each non-GAAP financial measure to its most directly comparable GAAP measure.
We compensate for these limitations on the use of non-GAAP financial measures by relying primarily on our GAAP results and using non-GAAP financial measures only as a supplement.
Non-GAAP earnings from operations and non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue) consist of earnings from operations excluding any charges related to the amortization of initial direct costs, amortization of intangible assets, impairment of goodwill, transformation costs, disaster charges, stock-based compensation expense and acquisition, disposition and other related charges.
Non-GAAP earnings from operations and non-GAAP operating profit margin consist of earnings from operations or earnings from operations as a percentage of net revenue excluding the items mentioned above and charges relating to the amortization of intangible assets, goodwill impairment, transformation costs and acquisition, disposition and other related charges.
When the SSP is not directly observable, we estimate SSP based on management judgment by considering available data, such as internal margin objectives, pricing strategies, market/competitive conditions, historical profitability data, as well as other observable inputs. We establish SSP ranges for our products and services and reassesses them periodically.
For products and services sold as a bundle, the SSP is generally not directly observable and requires the Company to estimate SSP based on management judgment by considering available data such as internal margin objectives, pricing strategies, market/competitive conditions, historical profitability data, as well as other observable inputs.
The impact of our outstanding interest rate swaps as of October 31, 2022 was factored into the calculation of the future interest payments on long-term debt. 52 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Operating lease obligations We enter into various leases as a lessee for assets including office buildings, data centers, vehicles, and aviation.
The impact of our outstanding interest rate swaps as of October 31, 2023 was factored into the calculation of the future interest payments on long-term debt. Operating lease obligations We enter into various leases as a lessee for assets including office buildings, data centers, vehicles, and aviation.
When performing the goodwill impairment test, we compare the fair value of each reporting unit to its carrying amount. An impairment exists if the fair value of the reporting unit is less than its carrying amount. Estimating the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions.
When performing the goodwill impairment test, we compare the fair value of each reporting unit to its carrying amount. An impairment exists if the fair value of the reporting unit is less than its carrying amount.
The GAAP measure most directly comparable to net revenue on a constant currency basis is net revenue. The GAAP measure most directly comparable to non-GAAP gross profit is gross profit. The GAAP measure most directly comparable to non-GAAP gross profit margin is gross profit margin. The GAAP measure most directly comparable to non-GAAP earnings from operations is earnings from operations.
The GAAP measure most directly comparable to non-GAAP gross profit margin is gross profit margin. The GAAP measure most directly comparable to non-GAAP earnings from operations is earnings from operations.
RESULTS OF OPERATIONS Revenue from our international operations has historically represented, and we expect will continue to represent, a majority of our overall net revenue. As a result, our revenue growth has been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates.
As a result, our revenue growth has been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates.
We also consider the customers' right of return in determining the transaction price, where applicable. 38 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) To recognize revenue for the products and services for which control has been transferred, we allocate the transaction price for the contract among the performance obligations on a relative standalone selling price ("SSP") basis.
We also consider the customers' right of return in determining the transaction price, where applicable. To recognize revenue for the products and services for which control has been transferred, we allocate the transaction price for the contract among the performance obligations on a relative standalone selling price (“SSP”) basis.
Based on our experience, we believe that any damage amounts claimed in the specific litigation and contingency matters further discussed in Note 17, "Litigation and Contingencies", to the Consolidated Financial Statements in Item 8 of Part II, are 40 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) not a meaningful indicator of our potential liability.
Based on our experience, we believe that any damage amounts claimed in the specific litigation and contingency matters further discussed in Note 17, “Litigation and Contingencies,” to the Consolidated Financial Statements in Item 8 of Part II, are not a meaningful indicator of our potential liability. Litigation is inherently unpredictable.
Storage earnings from operations as a percentage of net revenue decr eased 1.8 perce ntage points as cost of products and services as a percentage of net revenue remained unchanged and operating expenses as a percentage of net revenue increased.
Storage services revenue remained relatively flat. Storage earnings from operations as a percentage of net revenue decr eased 4.2 perce ntage points due to increases in cost of products and services as a percentage of net revenue and operating expenses as a percentage of net revenue.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. For purposes of this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") section, we use the terms "Hewlett Packard Enterprise", "HPE", "the Company", "we", "us", and "our" to refer to Hewlett Packard Enterprise Company.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. For purposes of this Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) section, we use the terms “Hewlett Packard Enterprise,” “HPE,” “the Company,” “we,” “us,” and “our” to refer to Hewlett Packard Enterprise Company.
The increase in cost of product and services as a percentage of net revenue was primarily due to supply chain constraints and related costs and unfavorable currency fluctuations. Operating expenses as a percentage of net revenue decreased primarily due to lower variable compensation expense and an increase in the scale of net revenue.
The increase in cost of services as a percentage of net revenue was primarily due to unfavorable currency fluctuations, higher services delivery costs and higher variable compensation expense.
The platform will be available through HPE GreenLake Central and includes a new data services cloud console and a suite of software subscription services that simplifies and automates global infrastructure at scale.
On the innovation front, we announced a transformative new data storage services platform that brings our cloud operations model to wherever data lives by unifying data operations. The platform will be available through HPE GreenLake Central and includes a new data services cloud console and a suite of software subscription services that simplifies and automates global infrastructure at scale.
The challenges are primarily related to supply chain constraints and other operational challenges impacting our ability to achieve certain customer acceptance milestones required for revenue recognition and resulting cost increases associated with fulfilling contracts over longer than originally anticipated timelines. We currently believe these challenges will be successfully addressed when supply chain constraints ease.
The HPC & AI business continues to face challenges related to supply chain constraints of key components and other operational challenges impacting our ability to achieve certain customer acceptance milestones required for revenue recognition and resulting cost increases associated with fulfilling contracts over longer than originally anticipated timelines.
The increase in cost of products and services as a percentage of net revenue was due primarily to higher operational costs, supply chain constraints and related cost increases, and lower revenue from higher-margin services.
The decrease in cost of product and services as a percentage of net revenue was primarily due to lower supply chain costs, moderating the decrease was a lower mix of higher-margin support services revenue.
For more information on the impact from operating assets and liabilities to cash flows, see Note 7, "Balance Sheet Details", to the Consolidated Financial Statements in Item 8 of Part II.
For more information on our FCF, refer to the section entitled “GAAP to non-GAAP Reconciliations” included in this MD&A. For more information on the impact from operating assets and liabilities to cash flows, see Note 7, “Balance Sheet Details,” to the Consolidated Financial Statements in Item 8 of Part II.
U.S. net revenue increased by $0.6 billion or 6.5% to $9.4 billion, while net revenue from outside of the U.S. increased by $0.1 billion or 0.7% to $19.1 billion.
U.S. net revenue increased by $944 million, or 10.0% to $10.4 billion, and net revenue from outside of the U.S. decreased by $305 million, or 1.6%, to $18.7 billion.
Investing Activities Net cash used in investing activities decreased by $0.7 billion in fiscal 2022, as compared to fiscal 2021.
Investing Activities Net cash used in investing activities increased by $1.2 billion in fiscal 2023, as compared to fiscal 2022.
As of October 31, 2022, our reporting units with goodwill are consistent with the reportable segments identified in Note 2, "Segment Information" to the Consolidated Financial Statements in Item 8 of Part II, with the exception of Corporate Investments and Other which contains three reporting units, Software, CMS and A & PS.
As of October 31, 2023, our reporting units with goodwill are consistent with the reportable segments identified in Note 2, “Segment Information” to the Consolidated Financial Statements in Item 8 of Part II, with the exception of Corporate Investments and Other which contains five reporting units: Advisory and Professional Services, Athonet, legacy Communications and Media Solutions business, OpsRamp and Software.
Management believes excluding these items facilitates a more meaningful evaluation of our current operating performance in comparison to our peers. These non-GAAP financial measures have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.
Compensation for Limitations With Use of Non-GAAP Financial Measures These non-GAAP financial measures have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.
Financing Volume For the fiscal years ended October 31, 2022 2021 2020 Dollars in millions Financing volume $ 6,252 $ 6,168 $ 6,005 47 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Financing volume, which represents the amount of financing provided to customers for equipment and related software and services, including intercompany activity, increased by 1.4% in fiscal 2022 as compared to the prior-year period.
Financing Volume For the fiscal years ended October 31, 2023 2022 2021 In millions Financing volume $ 6,412 $ 6,252 $ 6,168 Financing volume, which represents the amount of financing provided to customers for equipment and related software and services, including intercompany activity, increased by 2.6% in fiscal 2023 as compared to the prior-year period.
The increase in operating expenses as a percentage of net revenue was due primarily to the scale of the net revenue decline partially offset by lower variable compensation expense. LIQUIDITY AND CAPITAL RESOURCES Current Overview We use cash generated by operations as our primary source of liquidity.
The increase in operating expenses as a percentage of net revenue was primarily due to higher variable compensation expense. 49 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) LIQUIDITY AND CAPITAL RESOURCES Current Overview We use cash generated by operations as our primary source of liquidity.
Recent U.S. Tax Legislation On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) into law. The Inflation Reduction Act includes a new corporate alternative minimum tax (the “Corporate AMT”) of 15% on the adjusted financial statement income (“AFSI”) of corporations with average AFSI exceeding $1.0 billion over a three-year period.
The Inflation Reduction Act includes a new corporate alternative minimum tax (the “Corporate AMT”) of 15% on the adjusted financial statement income (“AFSI”) of corporations with average AFSI exceeding $1.0 billion over a three-year period. The Corporate AMT is effective for the Company beginning in fiscal 2024.
The Capital Resources and, Cash Requirements and Commitments sections present information as of October 31, 2022, unless otherwise noted.
The following Executive Overview, Results of Operations and Liquidity discussions and analysis compare fiscal 2023 to fiscal 2022 , unless otherwise noted. The Capital Resources and, Cash Requirements and Commitments sections present information as of October 31, 2023, unless otherwise noted.
We generated $4.6 billion of cash flow from operations and $1.8 billion of free cash flows primarily due to improved working capital management. 36 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Financial Results The following table summarizes our consolidated GAAP financial results: For the fiscal years ended October 31, 2022 2021 Change In millions, except per share amounts Net revenue $ 28,496 $ 27,784 2.6% Gross profit $ 9,506 $ 9,376 1.4% Gross profit margin 33.4 % 33.7 % (0.3)pts Earnings from operations $ 782 $ 1,132 (30.9)% Operating profit margin 2.7 % 4.1 % (1.4)pts Net earnings $ 868 $ 3,427 (74.7)% Diluted net earnings per share $ 0.66 $ 2.58 $(1.92) Cash flow from operations $ 4,593 $ 5,871 (21.8)% The following table summarizes our consolidated non-GAAP financial results: For the fiscal years ended October 31, 2022 2021 Change In millions, except per share amounts Net revenue adjusted for currency $ 29,213 $ 27,784 5.1% Non-GAAP gross profit $ 9,667 $ 9,424 2.6% Non-GAAP gross profit margin 33.9 % 33.9 % —pts Non-GAAP earnings from operations $ 3,026 $ 2,848 6.3% Non-GAAP operating profit margin 10.6 % 10.3 % 0.3pts Non-GAAP net earnings $ 2,664 $ 2,602 2.4% Non-GAAP diluted net earnings per share $ 2.02 $ 1.96 $0.06 Free cash flow $ 1,794 $ 1,551 $243 Each non-GAAP financial measure has been reconciled to the most directly comparable GAAP financial measure herein.
Financial Results The following table summarizes our consolidated GAAP financial results: For the fiscal years ended October 31, 2023 2022 Change In millions, except per share amounts Net revenue $ 29,135 $ 28,496 2.2% Gross profit $ 10,239 $ 9,506 7.7% Gross profit margin 35.1 % 33.4 % 1.7pts Earnings from operations $ 2,089 $ 782 167.1% Operating profit margin 7.2 % 2.7 % 4.5pts Net earnings $ 2,025 $ 868 133.3% Diluted net earnings per share $ 1.54 $ 0.66 $0.88 Cash flow from operations $ 4,428 $ 4,593 $(165) The following table summarizes our consolidated non-GAAP financial results: For the fiscal years ended October 31, 2023 2022 Change In millions, except per share amounts Net revenue in constant currency $ 30,077 $ 28,496 5.5% Non-GAAP gross profit $ 10,273 $ 9,667 6.3% Non-GAAP gross profit margin 35.3 % 33.9 % 1.4pts Non-GAAP earnings from operations $ 3,145 $ 3,026 3.9% Non-GAAP operating profit margin 10.8 % 10.6 % 0.2pts Non-GAAP net earnings $ 2,832 $ 2,664 6.3% Non-GAAP diluted net earnings per share $ 2.15 $ 2.02 $0.13 Free cash flow $ 2,238 $ 1,794 $444 37 Table of Contents HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Each non-GAAP financial measure has been reconciled to the most directly comparable GAAP financial measure herein.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+2 added−2 removed8 unchanged
We have performed sensitivity analyses as of October 31, 2022 and 2021, using a modeling technique that measures the change in the fair values arising from a hypothetical 10% adverse movement in the levels of foreign currency exchange rates relative to the U.S. dollar, with all other variables held constant.
We have performed sensitivity analyses as of October 31, 2023 and 2022, using a modeling technique that measures the change in the fair values arising from a hypothetical 10% adverse movement in the levels of foreign currency exchange rates relative to the U.S. dollar, with all other variables held constant.
We transact business in approximately 40 currencies worldwide, of which the most significant foreign currencies to our operations for fiscal 2022 were the euro, Japanese yen, and British pound.
We transact business in approximately 40 currencies worldwide, of which the most significant foreign currencies to our operations for fiscal 2023 were the euro, Japanese yen, and British pound.
The analyses cover all of our foreign currency derivative contracts offset by underlying exposures. The foreign currency exchange rates we used in performing the sensitivity analysis were based on market rates in effect at October 31, 2022 and 2021.
The analyses cover all of our foreign currency derivative contracts offset by underlying exposures. The foreign currency exchange rates we used in performing the sensitivity analysis were based on market rates in effect at October 31, 2023 and 2022, respectively.
We have performed sensitivity analyses as of October 31, 2022 and 2021, using a modeling technique that measures the change in the fair values arising from a hypothetical 10% adverse movement in the levels of interest rates across the entire yield curve, with all other variables held constant. The analyses cover our debt, investments, financing receivables, and interest rate swaps.
We have performed sensitivity analyses as of October 31, 2023 and 2022, using a modeling technique that measures the change in the fair values arising from a hypothetical 10% adverse movement in the levels of interest rates across the entire yield curve, with all other variables held constant.
The swap transactions generally involve the exchange of fixed for floating interest payments. However, in circumstances where we believe additional fixed-rate debt would be beneficial, we may choose to terminate a previously executed swap, or swap certain floating interest payments to fixed.
However, in circumstances where we believe additional fixed-rate debt would be beneficial, we may choose to terminate a previously executed swap, or swap certain floating interest payments to fixed.
The sensitivity analyses indicated that a hypothetical 10% adverse movement in interest rates would result in a loss in the fair values of our debt, investments and financing receivables, net of interest rate swaps, of $32 million and $58 million at October 31, 2022 and 2021, respectively. 57 Table of Contents
The sensitivity analyses indicated that a hypothetical 10% adverse movement in interest rates would result in a loss in the fair values of our debt, debt investments and net portfolio assets, net of interest rate swaps, of $41 million and $32 million at October 31, 2023 and 2022, respectively.
The analyses use actual or approximate maturities for the debt, investments, financing receivables, and interest rate swaps. The discount rates used were based on the market interest rates in effect at October 31, 2022 and 2021.
The analyses cover our debt, debt investments, net portfolio assets, and interest rate swaps. The analyses use actual or approximate maturities for the debt, debt investments, net portfolio assets, and interest rate swaps. The discount rates used were based on the market interest rates in effect at October 31, 2023 and 2022, respectively.
We issue long-term debt in either U.S. dollars or foreign currencies based on market conditions at the time of financing. We often use interest rate and/or currency swaps to modify the market risk exposures in connection with the debt to achieve U.S. dollar based floating or fixed interest expense.
We often use interest rate and/or currency swaps to modify the market risk exposures in connection with the debt to achieve U.S. dollar based floating or fixed interest expense. The swap transactions generally involve the exchange of fixed for floating interest payments.
The sensitivity analyses indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would result in a foreign exchange fair value loss of $49 million and $35 million at October 31, 2022 and 2021, respectively. Interest rate risk We also are exposed to interest rate risk related to debt we have issued, our investment portfolio and financing receivables.
The sensitivity analyses indicated that a hypothetical 10% adverse movement in foreign currency exchange rates would result in a foreign exchange fair value loss of $48 million and $49 million at October 31, 2023 and 2022, respectively.
Removed
In order to hedge the fair value of certain fixed-rate investments, we may enter into interest rate swaps that convert fixed interest returns into variable interest returns.
Added
Interest rate risk We also are exposed to interest rate risk related to debt we have issued, our debt investment portfolio and net portfolio assets of our Financial Services segment. We issue long-term debt in either U.S. dollars or foreign currencies based on market conditions at the time of financing.
Removed
We may use cash flow hedges to hedge the variability of interest income received on certain variable-rate investments, by entering into interest rate swaps that convert variable rate interest returns into fixed-rate interest returns.
Added
For more information about our debt, use of derivative instruments, forward contracts and investments, Refer to Note 1, “Overview and Summary of Significant Accounting Policies”, Note 13, Financial Instruments”, and Note 14, “Borrowings”, of the Notes to the Consolidated Financial Statements section included in this report. 60 Table of Contents

Other HPE 10-K year-over-year comparisons