What changed in this filing

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Item 1. Business

2021-12-10 compared with 2020-12-10 · 194 added, 149 removed, 282 unchanged (55% of the section changed)

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Since the Separation, we have operated as an independent, publicly-traded company.

On April 1, 2017, we completed the separation and merger of our Enterprise Services business with DXC Technology Company ("DXC", "the Everett Transaction" or "Everett").

On September 1, 2017, we completed the separation and merger of our Software business segment with Micro Focus International plc ("Micro Focus", "the Seattle Transaction" or "Seattle").

Transformation Programs

Cost Optimization and Prioritization Plan

During the third quarter of fiscal 2020, we launched a cost optimization and prioritization plan which focuses on realigning our workforce to areas of growth, including a new hybrid workforce model called Edge-to-Office, real estate strategies and simplifying and evolving our product portfolio strategy.

The implementation period for the cost optimization and prioritization plan is through fiscal 2023.

During this implementation period, we expect to incur transformation costs predominantly related to labor restructuring, non-labor restructuring, IT investments and design and execution charges.

During the third quarter of fiscal 2017, we launched an initiative called HPE Next to put in place a purpose-built company designed to compete and win in the markets where we participate.

Through this program, we are simplifying our operating model, streamlining our offerings, business processes and business systems to improve our execution.

The implementation period for HPE Next has been extended to fiscal 2023.

During the remaining implementation period we expect to incur transformation costs predominantly related to IT infrastructure costs for streamlining, upgrading and simplifying back-end operations, and real estate initiatives.

These costs are expected to be partially offset by gains from real estate sales.

Impacts of the COVID-19 Pandemic on HPE's Business

The outbreak of COVID-19 in 2020 resulted in a global slowdown of economic activity including worldwide travel restrictions, prohibitions of non-essential work activities, disruption and shutdown of businesses and greater uncertainty in global financial markets, all of which resulted in COVID-19 having an impact on our financial performance in fiscal 2020.

As this pandemic endures and continues to have an impact on global economic activity, the extent to which COVID-19 adversely impacts our future business operations, financial performance and results of operations is uncertain and will depend on many factors outside the Company's control.

For a further discussion of the risks, uncertainties and actions taken in response to COVID-19, refer to Item 1A "Risk Factors" and Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations".

The pace of technology disruption continues to accelerate.

The global pandemic has served as a catalyst making digital transformation a strategic imperative for enterprises.

Enterprises now require more resilient IT to ensure continuity in their operations.

They also need to deliver secure connectivity, remote work solutions, data analytics capabilities and mobile-first, cloud-like experiences to their employees and customers, while preserving liquidity to navigate the macro economic uncertainty and to adapt to the new world.

We are answering the call for transformation with our edge-to-cloud strategy and solutions that are aligned to the evolving needs of our customers.

We help enterprises transform and digitize their businesses so that they may accelerate their business outcomes by delivering new digital experiences and unlocking insights from their data.

We saw that the foundation of

every business would be edge-to-cloud and in response HPE brings industry-leading IT infrastructure, software, services, financing resources and as-a-service capabilities to meet this demand.

On April 1, 2017, the Company completed the separation and merger of our Enterprise Services business with DXC Technology Company ("DXC", "the Everett Transaction" or "Everett").

On September 1, 2017, the Company completed the separation and merger of our Software business segment with Micro Focus International plc ("Micro Focus", "the Seattle Transaction" or "Seattle" ).

COVID-19 Pandemic Update

While great progress has been made in the fight against the novel coronavirus pandemic ("COVID-19" or "pandemic"), it remains a global challenge.

In fiscal 2021, due to an unprecedented demand for electronic devices and related industry-wide supply constraints, the global economy encountered a challenging supply chain environment.

The pandemic continues to have an impact on our financial performance and we are currently unable to predict the extent to which it may adversely impact our future business operations, financial performance and results of operations.

For a further discussion of the risks, uncertainties and actions taken in response to COVID-19, see risks identified in the section entitled "Risk Factors" in Part I, Item 1A.

In 2021, COVID-19 vaccines were broadly distributed and administered, and beginning October 4, 2021, we adopted a policy to require proof of vaccination from HPE personnel, contingent workers, and guests in order to return to our sites, where permitted by local laws and regulations and on the timeline determined appropriate for the geography (as of end of fiscal 2021, the policy was operationalized only in the U.S.).

On October 20, 2021, we updated our vaccination policy to require vaccination as a condition of employment for all HPE personnel covered by President Biden's executive order, effective January 18, 2022.

We recognize that there are existing legal challenges to the executive order, and we will ensure that the timing and scope of the implementation of our vaccination requirement is consistent with the legal status of the executive order.

We are committed to help support costs for the vaccine through HPE health benefits or other programs, to the extent not covered by government programs, medical plans or other sources.

The pace of technology disruption continues to increase, and the pandemic has accelerated several megatrends.

First, data at the edge is increasing exponentially, driven by the proliferation of devices.

Secure connectivity is essential to enable the digital experiences we now rely on – and power new, engaging digital experiences in the future.

Second, enterprises need a cloud experience everywhere to manage data and workloads wherever they live across a distributed enterprise.

Third, data growth is creating countless new opportunities.

Enterprises need ways to generate insights from this data to build new business models.

Across these trends is the shift in how enterprises are consuming their technology.

Increasingly, customers want to digitally transform while preserving capital and eliminating operating expense by paying only for the IT they use.

Data insights are critical to deliver business outcomes, but extracting value from data is challenging.

Data is growing and evolving rapidly.

Its characteristics are shifting, as it becomes more unstructured, more time-sensitive and more distributed.

Frequently, data is siloed and spread across different multi-gen IT systems, often trapped in critical legacy architecture.

Many organizations cannot adequately extract insights from their data at the edge or face cloud migration challenges because of their legacy applications.

Customers need a data-first modernization approach across edge to data center to cloud.

We declared our vision to be the edge-to-cloud company.

Our HPE GreenLake platform accelerates multi-generation IT transformation through a unified cloud services experience that enables customers to access, control and maximize the value of all their workloads and data.

Our solutions across connectivity, cloud and data – which are increasingly being delivered as-a-service through HPE GreenLake – are complemented by HPE Pointnext services that provide unique transformation capabilities, as well as HPE Financial Services, which helps customers unlock financial capacity.

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Human Capital Resources

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We recognize the critical importance of talent and culture to the success of HPE and our ability to fulfill our purpose.

We are passionate about the values that have underpinned the success of the company over years.

This is why we believe in investing in our employees and communities where we live and work.

HPE has intensified its focus on creating a superior team member experience and a highly engaged workforce, driving improvements across our communications, our culture, our reward programs, and our work environment and fostering a collaborative, inclusive and inspiring experience for all our team members.

Our most recent global engagement survey shows how these intentional efforts are making a difference, with our overall Employee Engagement Index measuring 83%.

We are passionate about the values that drive our success, which is why we believe in investing in our employees and in the communities where we live and work.

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 are fostering a collaborative, inclusive and inspiring experience for all our team members.

Our most recent global engagement survey shows how these intentional efforts are making a difference, with our overall Employee Engagement Index increasing year-over-year and measuring 84%.

More than 85% of team members would recommend HPE as a great place to work, and 89% say they are proud to work for HPE.

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We have identified four key cultural beliefs that guide how we lead on a daily basis:

belief in accelerating what’s next, in bold moves, in the “power of yes”, and in being a force for good.

We embed these beliefs in an unshakable DNA that puts customers first, ensuring we partner, innovate and act with uncompromising integrity.

Our empowered and engaging culture is making HPE a destination for the best talent while driving innovation and excellence for our customers.

belief in accelerating what’s next, in bold moves, in the “power of yes we can”, and in 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.

Our empowered and engaging culture is making HPE a destination for talent while driving innovation and excellence for our customers.

Diversity, Equity and Inclusion:

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Annual goals are set to increase the representation of both women and ethnically diverse talent by at least 1 percentage point year-over-year.

In 2020, HPE increased our female workforce at every level worldwide, including technical and executive roles.

We also increased our representation of all underrepresented minorities in the U.S.

The leadership standards sponsored, clearly articulate that all people leaders are expected to continuously develop their inclusive leadership capabilities.

At the close of fiscal 2021, the representation of women in our workforce had increased 1 percentage point since the prior year, with increased representation at every level worldwide, exceeding the goals in both technical and executive roles.

We also increased our representation of all underrepresented minorities in the U.S., increasing such representation by 1.6 percentage points overall.

The leadership standards clearly articulate that all people leaders are expected to continuously develop their inclusive leadership capabilities.

Our Board, CEO and Executive Committee role model high standards for diversity, equity and inclusion and are leading sustainable change, with strong governance and oversight via our Inclusion and Diversity Council.

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Total direct compensation is generally positioned within a competitive range of the market median, with differentiation based on tenure, skills, proficiency, and performance to attract and retain key talent.

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HPE’s strong and healthy culture is critical to accelerating what’s next for our customers and partners – and the success of our company.

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Our Business Segments, Products and Services

Our operations are organized into seven business segments:

Compute, High Performance Compute and Mission Critical Systems ("HPC & MCS"), Storage, Advisory and Professional Services ("A & PS"), Intelligent Edge, Financial Services ("FS"), and Corporate Investments.

In October 2021, we renamed the segment previously known as High Performance Computing and Mission Critical Solutions ("HPC & MCS") to High Performance Computing and Artificial Intelligence ("HPC & AI").

Our operations are organized into six business segments:

Compute, HPC & AI, Storage, Intelligent Edge, Financial Services ("FS"), and Corporate Investments and Other.

The class of similar product categories within each segment which accounted for more than 10% of our consolidated net revenue in each of the past three years were as follows:

• Fiscal 2021 - Compute products, Compute services, Storage products

• Fiscal 2020 - Compute products, Storage products, Compute services

• Fiscal 2019 - Compute products, Storage products

• Fiscal 2018 - Compute products, Storage products

A summary of our net revenue, earnings from operations and assets for our segments can be found in Note 2, "Segment Information", to our Consolidated Financial Statements in Item 8 of Part II.

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This portfolio of products includes our secure and versatile HPE ProLiant rack and tower servers;

HPE BladeSystem, a modular infrastructure that converges server, storage and networking;

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, and artificial intelligence ("AI").

HPE ProLiant servers are the compute foundation for the fastest growing workloads in the industry including hyperconverged infrastructure ("HCI"), virtual workspaces ("VDI"), data management, transcoding and visualization.

Compute offerings also include operational and support services.

The Compute support team is also a provider of on-premises flexible consumption models, such as HPE GreenLake.

Our HPC & MCS portfolio offers specialized compute servers designed to support specific use cases.

HPE GreenLake for Compute provides flexible Compute as-a-service ("aaS") IT infrastructure on a consumption basis.

Our HPC & AI business offers standard and custom hardware and software solutions designed to support specific use cases.

Our hardware solutions are segmented into several categories, High Performance Compute ("HPC"), Data Solutions, and Edge Compute.

The HPC portfolio includes the HPE Apollo and Cray products that are sold as supercomputing systems, including exascale supercomputers (systems which have exaflops performance or a billion-billion calculations per second), to support data-intensive workloads for high performance computing, data analytics and artificial intelligence applications.

The MCS portfolio includes the HPE Superdome Flex, HPE Nonstop and HPE Integrity product lines for critical applications such as payments and transaction processing that require high availability, fault-tolerant computing infrastructure.

The HPC & MCS segment also includes the Edge Compute business which consists of the HPE Moonshot and HPE Edgeline products for computing at the network edge.

HPC & MCS offerings also include operational and support services.

HPC & MCS products can also be purchased through on-premises flexible consumption models, such as HPE GreenLake.

With offerings that are artificial intelligence-driven and built for hybrid cloud environments with as-a-service consumption and flexible investment options, we provide the right workload optimized destinations for data.

A portion of HPC and MCS revenue is generated by sales to government entities, which are subject to the terms and rights for the convenience of the government entity.

The Data Solutions portfolio (previously named Mission Critical Solutions) includes the HPE Superdome Flex, HPE Nonstop and HPE Integrity product lines for critical applications such as payments and transaction processing that require high availability, fault-tolerant computing infrastructure.

The Edge Compute product portfolio includes HPE Edgeline products for computing at the network edge.

In connection with our hardware offerings, HPE offers a suite of software products, including AI-powered technologies designed to play a critical role in turning data into readily available, actionable information to fuel growth and innovation for our customers.

These include the recently acquired Determined AI, which provides a software stack to train AI models using its open source machine learning platform.

HPC & AI offerings also include operational and support services and solutions delivered as-a-service through HPE GreenLake cloud services, which is a flexible as-a-service platform that HPE can provide on-premises or in a colocation facility.

With offerings that are artificial intelligence-driven and built for hybrid cloud environments with GreenLake consumption models, we provide the right workload optimized destinations for data.

A portion of HPC & AI revenue is generated by sales to government entities, which are subject to the terms and rights for the convenience of the government entity.

These terms and rights include in some instances a dependence on the appropriation of future funding and also termination rights contingent upon not achieving certain milestones .

For a discussion of certain risks related to contracts with government entities, see "Risk Factors—Failure to comply with government contracting regulations could adversely affect our business and results of operations."

We provide workload-optimized products and service offerings that are AI-driven and built for cloud environments with flexible consumption models from HPE GreenLake and flexible investment options.

Powered by HPE InfoSight-advanced artificial intelligence operations, HPE solutions deliver an intelligent data platform that enables customers to unleash the power of their data.

Key offerings include an intelligent HCI portfolio with HPE Nimble Storage dHCI, a disaggregated HCI solution for the enterprise data center and HPE SimpliVity, a hyperconverged platform for general purpose and edge workloads.

The portfolio also includes HPE Primera, HPE Nimble Storage and HPE 3PAR primary storage solutions, comprehensive data protection solutions with HPE Cloud Volumes Backup and HPE StoreOnce, and big data solutions running on HPE Apollo servers.

For a discussion of certain risks related to contracts with government entities, see Item 1A, "Risk Factors—Failure to comply with government contracting regulations could adversely affect our business and results of operations".

HPE Storage is transforming the customer experience with storage as-a-service and cloud data services through the HPE GreenLake edge-to-cloud platform and data infrastructure to enable customers to simplify IT and unlock greater levels of agility with a cloud operational experience.

The customer experience transformation also includes AI and data-driven intelligence with

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HPE InfoSight and HPE CloudPhysics.

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.

The Storage portfolio includes primary storage with HPE Alletra that offers cloud-native data infrastructure, HPE Primera, HPE Nimble Storage and HPE 3PAR;

software-powered hyper-converged infrastructure consisting of HPE Nimble Storage dHCI and HPE SimpliVity;

disaster recovery and ransomware recovery with Zerto, our recent acquisition;

backup as-a-service with HPE Backup and Recovery Service, and big data solutions running on HPE Apollo servers.

Storage also provides solutions for secondary workloads and traditional tape, storage networking and disk products, such as HPE Modular Storage Arrays ("MSA") and HPE XP.

Storage offerings also include operational and support services.

Our A & PS business provides consultative-led services, HPE and partner technology expertise and advice, implementation services and complex solution engagement capabilities.

Our advisors and experts engage early with customers to lead them through their digital transformations and to improve their business outcomes.

A & PS is also a provider of on-premises flexible consumption models that enable IT agility, simplify operations, and align cost to value.

A & PS is of strategic importance to HPE as it drives large value sales of HPE infrastructure products and services such as HPE GreenLake, HPE Ezmeral, HPC & MCS and other Compute & Storage infrastructure products.

We make our data infrastructure portfolio available as-a-service through HPE GreenLake.

Storage offerings also include operational and support services, software subscription services, and solutions delivered as-a-service through HPE GreenLake.

Intelligent Edge

The Intelligent Edge business is comprised of a portfolio of secure edge-to-cloud solutions operating under the Aruba brand that include wireless local area network ("LAN"), campus and data center switching, software-defined wide-area-networking, which now includes Silver Peak, security, and associated services to enable secure connectivity for businesses of any size.

The primary business drivers for Intelligent Edge solutions are mobility and IoT.

The HPE Aruba Product portfolio includes wired and wireless LAN hardware products such as Wi-Fi access points, switches, routers and sensors.

The HPE Aruba software and services portfolio of products includes cloud-based management, network management, which now includes Silver Peak, network access control, analytics and assurance, location services software and professional and support services, as well as as-a-Service and consumption models for the Intelligent Edge portfolio of products.

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 (from the Silver Peak acquisition), network security, and associated services to enable secure connectivity for businesses of any size.

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 wired and wireless local area network hardware products such as Wi-Fi access points, switches, routers and sensors.

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 HPE GreenLake for the Intelligent Edge portfolio of products.

We also offer Aruba ESP (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 ("WAN").

Financial Services

Financial Services provides flexible investment solutions, such as leasing, financing, IT consumption, and 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 ("FS") provides flexible investment solutions, such as leasing, financing, IT consumption, and 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.

FS also supports financial solutions for on-premise flexible consumption models, such as HPE GreenLake.

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FS offers a wide selection of investment solution capabilities for large enterprise customers and channel partners, along with an array of financial options to SMBs and educational and governmental entities.

Corporate Investments

Corporate Investments includes Hewlett Packard Labs which is responsible for research and development, the Communications and Media Solutions ("CMS") business and certain business incubation projects.

Forthcoming Segment Realignments

In order to align our segment financial reporting structure more closely with our current business structure, effective November 1, 2020, we will report the following changes to our reportable segments:

the lifecycle event services business which was previously reported within the A & PS segment will be reported within each of the related hardware segments;

certain software related business offerings previously reported within Compute, Storage and A & PS will be combined and reported within the Corporate Investments segment;

and the remainder of A & PS, which was previously reported as a reportable segment, will be reported within the Corporate Investments segment.

Additionally, the stock-based compensation expense which was previously reported within segment operating results will be now be reported as a corporate cost.

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 ("CMS") business which primarily offers software and related services to the telecommunications industry;

the Software business which offers HPE Ezmeral Container Platform and HPE Ezmeral Data Fabric;

and Hewlett Packard Labs which is responsible for research and development.

Our Strengths

We believe that we possess a number of competitive advantages that distinguish us from our competitors, including:

• Digital transformation is at the forefront of our business priorities.

We have a distinctive and industry leading portfolio of edge-to-cloud solutions and unique capabilities to help accelerate our customers' digital transformation.

• Edge-to-cloud strategy and solutions uniquely solve customer challenges.

As data grows and evolves and enterprises become increasingly distributed, HPE’s edge-to-cloud strategy is uniquely designed to enable customers to securely access, control and maximize the value of all their workloads and data assets to accelerate business outcomes.

The HPE GreenLake platform is an open, secure, fully integrated platform that brings a unified experience across the edge, data center, colocation and cloud.

It is automated and easy to consume with capacity available to scale up and down on demand.

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.

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• 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.

We combine our software-defined infrastructure and services capabilities to provide what we believe is the strongest portfolio of enterprise solutions in the IT industry.

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HPE is distinctly differentiated in delivering a true consumption-based IT experience.

We saw the opportunity early, and that has allowed us to build capabilities and partnerships that are unique in the industry including the ability to deliver our as-a-Service portfolio with over 700 channel partners that can sell the as-a-Service portfolio.

• Multi-year innovation roadmap and strong balance sheet.

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Financial Services 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' Global Asset Recovery Centers, we are helping customers achieve their own sustainability goals by processing more than 4 million assets every year.

• Experienced leadership team and business group leaders aligned to market trends and financial segmentation.

Through Financial Services' Global Asset Recovery Centers, we are helping customers achieve their own sustainability goals by recovering over 3 million IT assets in fiscal 2020 and refurbishing close to 90% for reuse.

• Experienced leadership team.

Our management team has an extensive track record of performance and execution.

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in various leadership positions.

This year we simplified our operating model and have aligned it to the financial segmentation providing more visibility and accountability in our business segments.

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.

Moreover, we have a deep bench of management and technology talent that we believe provides us with an unparalleled pipeline of future leaders and innovators.

• Open platforms.

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This shift demands a common cloud platform that can put the agility and intelligence close to the customers data sources to create real-time insights, everywhere.

Many of our competitors want to lock customers into one flavor of cloud and cloud stack.

Conversely, we believe that the cloud experience should be open and seamless across all our customers' clouds — and the best cloud transformation partner is one who is unbiased, offers choice, and is neutral without an agenda.

Many of our competitors want to lock customers into a cloud stack.

Conversely, we believe that the cloud experience should be open and seamless across all our customers' clouds — and the best cloud transformation partner is one who is unbiased and offers choice.

We are unique in our ability to enable any hybrid cloud strategy and a consistent experience that is open to any cloud and differentiated with our partner integrations.

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• 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;

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• 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;

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We are focused on driving the depth and breadth of our coverage, in addition to identifying efficiencies and productivity gains, in both our direct and indirect businesses.

For example, through our HPE Next Initiative, we reduced the number of countries in which we have a direct sales presence, while simultaneously migrating to a channel-only model in the remaining countries.

This has resulted in a combined go-to-market model, in which we have a direct sales presence in a number of countries, while we sell and deliver our products, solutions and services through a channel-only model in the remaining countries.

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.

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Like other participants in the IT industry, we ordinarily acquire materials and components through a combination of blanket and scheduled purchase orders to support our demand requirements for periods averaging 90 to 120 days.

From time to time, we may experience significant price volatility or supply constraints for certain components that are not available from multiple sources due to certain events taking place where our suppliers are geographically concentrated.

From time to time, we experience significant price volatility or supply constraints for certain components that are not available from multiple sources due to certain events taking place where our suppliers are geographically concentrated.

When necessary, we are often able to obtain scarce components for somewhat higher prices on the open market, which may have an impact on our gross margin, but does not generally disrupt production.

We may also acquire component inventory in anticipation of supply constraints, or enter into longer-term pricing commitments with vendors to improve the priority, price and availability of supply.

See "Risk Factors—We depend on third-party suppliers, and our financial results could suffer if we fail to manage our suppliers relationships properly" in Item 1A.

We also acquire component inventory in anticipation of supply constraints, or enter into longer-term pricing commitments with vendors to improve the priority, price and availability of supply.

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, the industry is being impacted by an increased worldwide demand for electronic components that is anticipated to last at least through the end of this calendar year.

This global shortage impacts HPE and the technology market segment as a whole.

While we anticipate further industry-wide tightening we took proactive inventory buffering measures in order to position us well during the second half of the fiscal year and going forward.

We will take additional inventory actions as appropriate in alignment to the market demand, and will continue to leverage strong partnerships and long-term agreements with our suppliers.

Backlog represents the price of orders related to current or prior periods for which work has not been performed or goods have not been delivered as of the reporting period.

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The higher levels of backlog we experienced in the prior-year period due to the pandemic were largely delivered by the end of fiscal 2020.

At the same time, the global pandemic resulted in an unprecedented demand for electronic devices, which, coupled with related industry-wide supply constraints, has led to a challenging supply chain environment.

Additionally, the pandemic continues to play a role with ongoing delays to the global logistics environment.

As a result, in the second half of fiscal 2021, we experienced a shortage of electric components and logistics timing issues which resulted in significantly higher levels of order backlog and commodity costs across our hardware segments, and particularly in Compute, Storage and Intelligent Edge.

Currently, we expect these challenging supply chain conditions to persist in the near term.

During the pandemic, we have also viewed backlog as an indication of demand health as governments around the world continue to impose restrictions on non-essential work activities and travel.

As and when the pandemic subsides, our focus on backlog may again become less relevant as a reliable indicator of future demand.

For a further discussion of the risks, uncertainties and actions taken in response to the pandemic, see risks identified in the section entitled "Risk Factors" in Item 1A.

International

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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 66% of our overall net revenue in fiscal 2020 came from outside the United States.

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 or other factors could harm our future revenue, costs and expenses, and financial condition," and "—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 14, "Financial Instruments", to our Consolidated Financial Statements in Item 8 of Part II, which are incorporated herein by reference.

Approximately 68% of our overall net revenue in fiscal 2021 came from sales outside the United States.

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 "—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, which are incorporated herein by reference.

Research and Development

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Included in the R&D work currently taking place at the Company are the following initiatives:

In Compute, we are developing high quality next-generation compute solutions (servers, server attached options, and software) that integrate the latest industry technology, which coupled with innovations from HPE are aligned to the requirements of our customers.

In HPC & MCS, we are investing in high-performance compute, storage and networking systems for the most demanding workloads from the edge-to-core.

Investment in technologies in high-performance networking, memory-driven compute, and high-performance storage and data management underpin our differentiated offerings.

We also invest significantly in software, including cloud native developer and highly scalable cluster operating environments, application and performance capabilities, and high-availability solutions.

HPC & MCS also hosts an applied research group where we invest in long term, disruptive R&D such as silicon photonics creating a pipeline of technologies for future offerings.

In the Storage data management sphere, we are investing in new technologies to address the demand in mature and emerging markets.

Our comprehensive on-premises scalable infrastructure that includes an industry-first 100% guarantee offering, is being creatively augmented by an all-inclusive as-a-service HPE Greenlake offering.

The Company continues to empower the edge-to-core data pipeline with embedded AI built-to-scale and to provide deep learning analytics across its entirety.

In Intelligent Edge, we are shifting significant investment towards a "cloud first" innovation model for the comprehensive management of wireless, switching and software defined branch ("SD-Branch") with the cloud native Edge Services Platform ("ESP").

Another key investment priority is artificial intelligence based network operations for the end-to-end optimization of network performance and user experience, combined with securing the network edge infrastructure by segmenting the internet-of-things ("IoT") user traffic with dynamic context based policies.

In Compute, we are developing high quality next-generation compute solutions (servers, server attached options, and software) that integrate the latest industry technology, which coupled with other innovations from HPE are aligned to the requirements of our customers.

In the area of software-as-a-service we are developing a cloud-native, cloud-based server management solution to complement our existing portfolio.

In HPC & AI, we deliver high-performance compute, storage, artificial intelligence and networking systems and solutions for the most demanding workloads.

Our R&D investments are focused on developing new technologies in high-performance fabric, artificial intelligence platforms, scalable memory systems, and high-performance storage and data solutions that underpin our differentiated offerings.

We also invest in software to enable our solutions.

These investments include high-performance computing and artificial intelligence developer tools, cloud-native and scalable cluster management software, and transaction processing software.

HPC & AI also hosts an applied research group, Labs, where we invest in long term, disruptive R&D including photonics, advanced systems architectures, and artificial intelligence software that comprise a pipeline of technologies to consider for future commercialization.

All of our products are being developed with the potential to be delivered in a consumption model including integrated into our HPE GreenLake platform.

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In the Storage data management domain, we are investing in new technologies to address the demand in current and emerging markets.

Our comprehensive on-premise scalable infrastructure is transforming to utilize HPE’s leadership in Compute, Networking, and Storage to provide end-to-end cloud-native infrastructure.

This infrastructure serves as a foundation for our as-a-service offering, includes the industry-first 100% guarantee, and delivers cloud-native infrastructure tightly integrated and managed by our AI engines.

Creatively augmented by an all-inclusive as-a-service HPE GreenLake offering, HPE continues to power the edge-to-core-to-cloud data pipeline with embedded AI that delivers deep learning analytics across the full data lifecycle.

In Intelligent Edge, we are investing in our cloud native Edge Services Platform ("ESP"), which enables simplified operation of wired and wireless networks, together with software defined wide area network ("SD-WAN") connectivity.

The ESP platform complements a broad range of network devices in our unified network infrastructure layer with security capabilities that enable us to identify and authenticate users and IoT endpoints, to enforce policy, and finely segment traffic based on context to contain security threats.

We are also investing in automation, machine learning and artificial intelligence based network operations to optimize user experience and improve operator efficiency.

Many of these capabilities are enabled with the Aruba Central cloud service, and we are investing to integrate Aruba Central as part of the broader HPE GreenLake as-a-service offering.

In Hewlett Packard Labs, we are focused on disruptive innovation and applied research in collaboration with other HPE business groups to deliver differentiated intellectual property ("IP").

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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, 2020, our worldwide patent portfolio included approximate ly 15,000 issued and pending patents.

As of October 31, 2021, our worldwide patent portfolio included approximately 13,000 issued and pending patents.

Patents generally have a term of up to 20 years from the date they are filed.

As our patent portfolio has been built over time, the remaining terms of the individual patents across our patent portfolio vary.

We believe that our patents and patent applications are important for maintaining the competitive differentiation of our products and services, enhancing our freedom of action to sell our products and services in markets in which we choose to participate, and maximizing our return on research

and development investments.

No single patent is in itself essential to our company as a whole or to any of our business segments.

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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.

In fiscal 2020 the outbreak of COVID-19 resulted in a disruption to our supply chain process.

The outbreak resulted in a global slowdown of economic activity including worldwide travel restrictions, prohibitions of non-essential work activities, disruption and shutdown of businesses and greater uncertainty in global financial markets.

These events introduced a disruption to our supply chain at the beginning of the calendar year resulting in significantly higher levels of backlog, particularly in Compute, HPC & MCS, and Storage as lockdown restrictions imposed across the globe disrupted our order fulfillment process and limited our ability to perform on-site installations and meet customer acceptance requirements.

Subsequently, by the latter part of the fiscal period we made significant progress in clearing our backlog such that we exited the fiscal year with normalized backlog levels.

During the COVID-19 pandemic, we have also viewed backlog as an indication of demand health as governments around the world continue to impose restrictions on non-essential work activities and travel.

As and when the COVID-19 pandemic subsides our focus on backlog may again become less relevant as a reliable indicator of future demand.

For a further discussion of the risks, uncertainties and actions taken in response to COVID-19, see risks identified in the section entitled "Risk Factors" in Item 1A, and the "COVID-19 Update" in Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7.

General economic conditions have an impact on our business and financial results.

From time to time, the markets in which we sell our products, services and solutions experience weak economic conditions that may negatively affect sales.

We experience some seasonal trends in the sale of our products and services.

For example, European sales are often weaker in the summer mont hs.

However, the impact of the COVID-19 outbreak may result in temporary changes to the seasonal fluctuation of our business.

For example, European sales are often weaker in the summer months.

However, the pandemic resulted in a temporary disruption to the seasonal fluctuation of our business.

See "Risk Factors—Our uneven sales cycle makes planning and inventory management difficult and future financial results less predictable" in Item 1A.

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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.

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The markets in which we compete are characterized by strong competition among major corporations with long-established positions and a large number of new and rapidly growing firms.

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Moreover, we anticipate that we will have to continue to adjust prices on many of our products and services to stay competitive.

The competitive environments in which each segment operates are described below:

The competitive environments in which our segments operate are described below:

The Compute and Storage businesses operate in the highly competitive enterprise data center infrastructure market, which is characterized by rapid and ongoing technological innovation and price competition.

Our primary competitors are technology vendors such as Dell Technologies Inc., Cisco Systems, Inc., Lenovo Group Ltd., International Business Machines Corporation, and NetApp Inc.

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.

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Our competitive advantages include our 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.

The HPC & MCS business predominantly services customers with data-intensive super-computing, analytics, and artificial intelligence needs.

Our primary competitors are compute technology vendors than can design and build solutions that deliver performance scalability and connectivity necessary to handle super-compute and artificial intelligence ("AI") workloads, including Dell Technologies Inc., Lenovo Group Ltd., and International Business Machines Corporation.

HPC & AI predominantly operates in the market for data-intensive super-computing, analytics, and artificial intelligence.

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., and IBM.

Similar to the compute space, our strategy is to deliver superior products, high-value technology support services and differentiated integrated solutions that combine our infrastructure, software and services capabilities.

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.

The A & PS business predominantly delivers digital transformation expertise to customers.

The strategy of the business is to partner with customers to prioritize, define and implement the technology transformations that will achieve customers' digital transformation goals.

The business has practice areas in digital transformation advisory, hybrid cloud transformation, AI and data, networking & edge, security, IoT, digital workplaces, education and management of change.

Our primary competitors for this business are the consulting services arms of major technology vendors such as International Business Machines Corporation, Dell Technologies Inc., Cisco Systems, Inc., and Accenture.

Intelligent Edge operates in the highly competitive networking and connectivity infrastructure market, which is characterized by rapid and ongoing technological innovation and price competition.

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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.

Climate Change

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.

Our edge-to-cloud strategy helps our customers transform and digitize their business while reducing our environmental footprint.

A legacy of ESG leadership increases our competitiveness and differentiates us in the marketplace by helping our customers achieve their business objectives and sustainability goals.

The HPE Board of Directors provides oversight of our ESG strategy, practices, and policies to ensure integration with our core business strategy.

Sustainable Value Creation - Sustainability performance has become a core business discipline within HPE.

Our Living Progress program is an increasingly powerful component of our relationships with customers, and our sustainability credentials provide us with a competitive advantage, support talent acquisition and retention, and ensure ongoing access to global markets.

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We remain committed to becoming a net zero enterprise by no later than 2050, with near-term targets set across our value chain to measure our progress.

In 2021, most of our greenhouse gas emissions ("GHG") resulted from the manufacture and use of our products.

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.

For instance, as-a-service delivery models can drive the reduction of our climate impact and that of our customers, by eliminating IT inefficiencies and enabling sustainable digital transformations.

HPE GreenLake, the Company's as-a-service offering, allows customers to consume IT resources and spend capital expenditures as needed, thereby reducing the energy and resource consumption of IT infrastructure through improved utilization and provisioning.

To ensure market access across the globe many of our products are certified by eco-labels such as Electronic Product Environment Assessment Tool, TCO Certified, Energy STAR, China SEPA and the China Energy Conservation Program, thus helping our customers make responsible purchasing choices.

Material Government Regulations

Our business activities are worldwide and are subject to various federal, state, local, and foreign laws and our products and services are governed by a number of rules and 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.

Although there is no assurance that existing or future government laws applicable to our operations, services or products will not have a material adverse effect on our capital expenditures, results of operations and competitive position, we do not currently anticipate material expenditures for government regulations.

Nonetheless, as discussed below, we believe that environmental and global trade regulations could potentially materially impact our business.

Nonetheless, as discussed below, we believe that global trade and certain ESG regulations could potentially materially impact our business.

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;

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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").

Finally, as climate change laws, regulations, treaties, and similar initiatives and programs are adopted and implemented throughout the world, we will be required to comply or potentially face market access limitations or other sanctions, including fines.

However, we believe that technology will be fundamental to finding solutions to achieve compliance with and manage those requirements, and we are collaborating with industry, business groups and governments to find and promote ways that our technology can be used to address climate change and to facilitate compliance with related laws, regulations and treaties.

We are committed to maintaining compliance with all environmental laws applicable to our operations, products and services, and to reducing our environmental impact across all aspects of our business.

We meet this commitment with a comprehensive environmental, health and safety policy, strict environmental management of our operations and worldwide environmental programs and services.

Finally, as climate change and other ESG-related laws, regulations, treaties, and similar initiatives and programs are adopted and implemented throughout the world, we will be required to comply or potentially face market access limitations or other sanctions, including fines.

However, we believe that technology will be fundamental to finding solutions to achieve compliance with and manage those requirements, and we are collaborating with industry, business groups and governments to find and promote ways that our technology can be used to address climate change and other ESG-related issues, and to facilitate compliance with related laws, regulations and treaties.

We are committed to maintaining compliance with all environmental and ESG-related laws applicable to our operations, products and services, and to reducing our environmental impact across all aspects of our business.

We meet this commitment with a comprehensive environmental, health and safety policy;

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.

As a global company, the import and export of our products and services are subject to laws and regulations including international treaties, U.S.

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We continue to support open trade policies that recognize the importance of integrated cross-border supply chains that will continue to contribute to the growth of the global economy and measures that standardize compliance for manufacturers to ensure that products comply with safety and security requirements.

For a discussion of the risks associated with government regulations that may materially impact us, please see the section entitled "Risk Factors" in Item 1A.

For a discussion of the risks associated with government regulations that may materially impact us, see "Regulatory Risks" within "Risk Factors" in Item 1A.

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Additional Information

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Antonio Neri 54 President and Chief Executive Officer

Tom Black 51 Senior Vice President, General Manager of Storage

52 Senior Vice President, General Manager of Storage

Karros 52 Senior Vice President, Finance and Treasurer

Neil MacDonald 52 Senior Vice President, General Manager of Compute

MacDonald 53 Senior Vice President, General Manager of Compute

Alan May 63 Executive Vice President and Chief People Officer

Keerti Melkote 50 President, Intelligent Edge

Mottram 53 President, Intelligent Edge

Ricci 60 Senior Vice President, Controller and Principal Accounting Officer

Tarek Robbiati 56 Executive Vice President and Chief Financial Officer

Irv Rothman 74 President and Chief Executive Officer, HPE Financial Services

Rothman 75 President and Chief Executive Officer, HPE Financial Services

Schultz 57 Executive Vice President, Chief Operating and Legal Officer

Peter Ungaro 52 Senior Vice President, General Manager of High Performance Compute and Mission-Critical Systems and Hewlett Packard Labs

Justin Hotard 47 Senior Vice President, General Manager of High Performance Computing and Artificial Intelligence

Antonio Neri;

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Neri served in a similar role for HP Co.'s Enterprise Group from October 2014 to November 2015.

Neri served as Senior Vice President and General Manager of the HP Servers business unit from September 2013 to October 2014 and concurrently as Senior Vice President and General Manager of the HP Networking business unit from May

2014 to October 2014.

Prior to that, Mr.

Neri served as Senior Vice President and General Manager of the HP Technology Services business unit from August 2011 to September 2013 and as Vice President, Customer Services for the HP Personal Systems Group from 2007 to August 2011, having first joined HP Co.

Since December 2017, Mr.

Neri has served as a director of Anthem, Inc., a health insurance provider in the U.S.

From March 2012 to February 2013, Mr.

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from August 2019 to October 2020.

Neil MacDonald;

Senior Vice President, General Manager of Compute

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MacDonald previously served as Vice President and General Manager of BladeSystem from August 2015 to October 2020, having first joined HP Co.

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Executive Vice President and Chief People Officer

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He serves as a Trustee for the American Foundation for the Blind and is on the Board of Governors for the San Francisco Symphony.

Keerti Melkote;

President, Intelligent Edge

Melkote has served as President of our Intelligent Edge business segment since January 2017.

Melkote previously served as Chief Technology Officer of Intelligent Edge from May 2015 to December 2016.

Mottram has served as the President of our Intelligent Edge business since June 2021.

Prior to that, Mr.

Melkote performed a similar role as Chief Technology Officer and Co-Founder of Aruba Networks from February 2009 until our acquisition of Aruba Networks in May 2015.

Previously, Mr.

Melkote served as Co-Founder and Vice President, Products at Aruba Networks from February 2002 to January 2009.

Mottram served as Senior Vice President and General Manager of the Communications Technology Group from April 2019 to June 2021.

Before joining Hewlett Packard Enterprise, he served as the Chief Revenue Officer of Zayo Group, a communications infrastructure provider, from November 2017 to February 2019.

Prior to that, Mr.

Mottram served as Director of the Enterprise Business Unit of Vodafone from May 2014 to November 2017, the Chief Executive Officer of Hong Kong CSL from September 2012 to May 2014, and Executive Director of Global Sales at Telstra International from September 2010 to September 2012, as well as a variety of different operational roles at other telecommunications companies.

Senior Vice President, Controller and Principal Accounting Officer

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from April 2014 to November 2015.

Previously, Mr.

Ricci served as Controller and Principal Accounting Officer at HP Co.

on an interim basis from November 2013 to April 2014.

Previously, Mr.

Prior to that, Mr.

Ricci served as Vice President, Finance for several of HP Co.'s organizations, including Technology and Operations from May 2012 to November 2013, Global Accounts and HP Financial Services from March 2011 to May 2012, and HP Software from March 2009 to March 2011.

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Prior to that, from December 2009 to December 2012, Mr.

Robbiati was Group

Managing Director and President of Telstra International Group in Hong Kong and Executive Chairman of Hong Kong CSL Limited ("CSL"), a subsidiary of Telstra Corporation Limited.

Robbiati was Group Managing Director and President of Telstra International Group in Hong Kong and Executive Chairman of Hong Kong CSL Limited ("CSL"), a subsidiary of Telstra Corporation Limited.

From July 2007 to May 2010, Mr.

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as external counsel on a variety of litigation and regulatory matters.

Peter Ungaro;

Senior Vice President, General Manager of High Performance Compute and Mission-Critical Systems and Hewlett Packard Labs

Ungaro has served as Senior Vice President and General Manager of our High Performance Compute and Mission Critical Systems business segment and Hewlett Packard Labs since September 2019.

Justin Hotard;

Senior Vice President, General Manager of HPC & AI

Hotard has served as our Senior Vice President and General Manager of HPC & AI global business group since March 2021.

Previously, he served as Senior Vice President, Corporate Transformation from September 2020 to March 2021, where he led our transformation efforts to accelerate our pivot to as-a-service offerings.

Prior to that, Mr.

Ungaro was President and Chief Executive Officer of Cray from 2005 until our acquisition of Cray in September 2019.

From September 2004 until March 2005, Mr.

Ungaro served as Senior Vice President of Sales, Marketing, and Services at Cray and, from August 2003 until September 2004, he served as Vice President of Sales and Marketing at Cray.

Before joining Cray in 2003, Ungaro served as Vice President of Sales for Worldwide Deep Computing at IBM.

Ungaro held a variety of other sales leadership positions since joining IBM in 1991.

Hotard served as President and Managing Director of HPE Japan from October 2019 to September 2020, as Senior Vice President and General

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Manager of the Compute Global Business Unit from January 2017 to October 2019 and as Vice President of Strategy, Planning and Operations in the Data Center Infrastructure Group from August 2015 to January 2017.

Before joining Hewlett Packard Enterprise, Mr.

Hotard was President of NCR Small Business from July 2013 to November 2014 and Vice President of Corporate Development of NCR Corporation from July 2012 to August 2013.

Prior to that, Mr.

Hotard served in various corporate development and operational roles at Symbol Technologies and Motorola, Inc.

Available Information

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http://investors.hpe.com/financial/requested-printed-reports

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business