What changed in this filing

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Item 1A. Risk Factors

2022-12-08 compared with 2021-12-10 · 161 added, 105 removed, 341 unchanged (44% of the section changed)

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Business and Operational Risks

We are unable to predict the extent to which the ongoing global COVID-19 pandemic may adversely impact our business operations, financial performance and results of operations.

The COVID-19 pandemic and efforts to control its spread have significantly curtailed the movement of people, goods and services worldwide, including in most or all of the regions in which we sell our products and services and conduct our business operations.

The pandemic has resulted in a global slowdown of economic activity, including travel restrictions, prohibitions of non-essential activities in some cases, disruption and shutdown of businesses and greater uncertainty in global financial markets.

We are unable to predict the extent to which the ongoing global COVID-19 pandemic, or other outbreaks, epidemics, pandemics, or public health crises may adversely impact our business operations, financial performance and results of operations.

For the past two years, the COVID-19 pandemic and efforts to control its spread have significantly curtailed the movement of people, goods and services worldwide, including in most or all of the regions in which we sell our products and services and conduct our business operations.

The pandemic has resulted in, and may continue to or at a later time result in, a global slowdown of economic activity, including travel restrictions, prohibitions of non-essential activities in some cases, disruption and shutdown of businesses and greater uncertainty in global financial markets.

Our operations have been affected by a range of external factors related to the COVID-19 pandemic that are not within our control, including the various restrictions imposed by cities, counties, states and countries on our employees, customers, partners and suppliers designed to limit the spread of COVID-19.

Although the immediate impacts of the COVID-19 pandemic have been assessed, the long-term magnitude and duration of the disruption and resulting decline in business activity is still highly uncertain and cannot currently be predicted.

In response to the COVID-19 pandemic and to ensure the safety of our employees, we have implemented a global work-from-home policy until further notice that applies to a significant majority of our employees, with the exception of those performing essential activities.

Most recently, we have announced a vaccination requirement for covered U.S.

employees as required by Executive Order 14042 for federal contractors.

We recognize that there are existing legal challenges to Executive Order 14042, and we will ensure that the timing and scope of the implementation of our vaccination requirement is consistent with the legal status of Executive Order 14042.

Our employees may elect to return to the office in jurisdictions where both local requirements and our own health and safety standards have been met.

As such instances occur, employees have returned to the office in a phased process and remain subject to safety regimens anchored around vaccination or testing requirements, as we determine is appropriate based on local conditions.

Moreover, certain industry and customer events that we sponsor or at which we present have been canceled, postponed or moved to virtual-only experiences, and we may deem it advisable to similarly alter, postpone or cancel entirely additional events in the future.

We are also seeing an increase in customer requirements for HPE employees to be vaccinated and/or tested for COVID-19 before being able to enter customer sites, which could potentially present an operational challenge.

Also, work-from-home and other modified business practices introduce additional operational risks, including cybersecurity risks, which may result in inefficiencies or delays, and have affected the way we conduct our product development, sales, customer support and other activities.

Unanticipated disruptions in services provided through our localized physical infrastructure caused by the COVID-19 pandemic can curtail the functioning of critical components of our IT systems, and adversely affect our ability to fulfill orders, provide services, respond to customer requests and maintain our worldwide business operations.

Our implementation of employee vaccination requirements may result in attrition, including attrition of critically skilled labor, and difficulty securing future labor needs, which could have a material adverse effect on our business, financial condition, and results of operations.

The pandemic has adversely affected, and could continue to adversely affect, our business, by negatively impacting the demand for our products and services;

restricting our operations and sales, marketing and distribution efforts;

disrupting the supply chains of hardware products;

and disrupting our research and development capabilities, engineering, design and manufacturing processes and other important business activities.

There have been, and will continue to be, delays of hardware product shipments from our vendors and out of our manufacturing operations worldwide as a result of capacity issues.

We also expect product shipment delays as a result of shortages and capacity issues that continue to impact logistics operations.

We expect the COVID-19 pandemic could continue to have a negative impact on our sales and our results of operations, the size and duration of which we are currently unable to predict.

While such changes were factored into the forecast used to assess assets for reserves and impairment, including goodwill, any changes to the profitability for the next fiscal year could impact the realizability of assets.

Additionally, concerns over the economic impact of the COVID-19 pandemic have caused extreme volatility in financial and other capital markets which has and may continue to adversely impact our stock price, our ability to access capital markets and our ability to fund liquidity needs.

To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition, and stock price, it may also have the effect of heightening many of the other risks described in this Part I, Item 1A of this Form 10-K.

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Although the immediate impacts of the COVID-19 pandemic have been assessed and mitigated, the ultimate extent of the impact of the pandemic, including as a result of possible subsequent outbreaks of COVID-19 or of new variants thereof and measures taken in response thereto, will depend on future developments, which remain highly uncertain and cannot currently be predicted.

Based on employee vaccination rates and public health guidance, we have begun a return to most HPE offices on a hybrid basis for most employees, adhering to any government requirements in effect locally.

We continue to monitor the situation, including cases within our workforce, and will take action to adjust office attendance policies as circumstances warrant in order to protect the health and safety of employees, contractors, and others who visit our sites.

Vaccination requirements or other risk mitigation strategies for site entry and other activities remain in effect in many countries where it is legally permissible to implement such a requirement(s), though discretion to implement such policies has been returned to local executive leadership.

The pandemic and its uneven recovery have adversely affected, continue to adversely affect, and we expect may continue to adversely affect, our business, in a variety of ways, including by restricting our operations and sales, marketing and distribution efforts;

and disrupting the supply chains of hardware products.

In addition, as the COVID-19 pandemic has disrupted the operations of our customers, partners, and suppliers, there have been, and there may continue to be, delays of hardware product shipments from our vendors and out of our manufacturing and logistics operations worldwide as a result of capacity issues.

While capacity shortages are beginning to show signs of recovery, they may nevertheless persist, adversely disrupting our business.

Additionally, concerns over the economic impact of the COVID-19 pandemic have caused extreme volatility in financial and other capital markets, which has adversely impacted, and may continue to adversely impact, our stock price, our ability to access capital markets, and our ability to fund liquidity needs.

Outbreaks, epidemics, pandemics, or public health crises may in the future adversely affect, among other things, demand for our products and services;

our operations and sales, marketing, and distribution efforts;

the supply chains of hardware products and components;

our research and development capabilities;

our engineering, design, and manufacturing processes;

and other important business activities.

Outbreaks, epidemics, pandemics, or public health crises may also result in our restriction or suspension of international and/or domestic travel, prohibitions of non-essential activities in some cases, and limit our in-person activities within HPE and with customers.

Such outbreaks, epidemics, pandemics, or public health crises may also present operational challenges, such as unanticipated disruptions in services provided through our localized physical infrastructure, which can in turn curtail the functioning of critical components of our IT systems, and adversely affect our ability to fulfill orders, provide services, respond to customer requests and maintain our worldwide business operations.

The negative impacts of the global COVID-19 pandemic or other outbreaks, epidemics, pandemics, or public health crises on the broader global economy and related impacts on our or our customers’ business operations and demand for our products and services will depend on future developments and actions taken in response to such events, which are highly uncertain and cannot be predicted.

Additional impacts and risks that we are not currently aware of may arise.

We are similarly unable to predict the full extent of the impact of the COVID-19 pandemic or other outbreaks, epidemics, pandemics, or public health crises on our customers, partners, and suppliers.

To the extent the COVID-19 pandemic or other outbreaks, epidemics, pandemics, or public health crises adversely affect our business, results of operations, financial condition, and stock price, they may also have the effect of heightening many of the other risks described in this Part I, Item 1A of this Form 10-K.

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Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

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and medical epidemics or pandemics.

The impacts and frequency of any of the above could furthermore be exacerbated by climate change, particularly in countries where we operate that have limited infrastructure and disaster recovery resources.

We are predominantly self-insured to mitigate the impact of most catastrophic events.

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Climate change serves as a risk multiplier increasing both the frequency and severity of natural disasters that may affect our worldwide business operations.

Our corporate headquarters is located in Houston, Texas, which suffers from floods, hurricanes, and other extreme weather, and a portion of our research and development activities are located in California, which suffers from drought conditions and catastrophic wildfires, each affecting the health and safety of our employees.

In California, to mitigate wildfire risk, electric utilities are deploying public safety power shutoffs, which affects electricity reliability to our facilities and our communities.

Our corporate headquarters is located in Spring, Texas, which suffers from floods, hurricanes, and other extreme weather, and a portion of our research and development activities are located in California, which suffers from drought conditions and catastrophic wildfires, each affecting the health and safety of our employees.

In California, to mitigate wildfire risk, electric utilities have been periodically deploying public safety power shutoffs, which affects electricity reliability to our facilities and our communities.

In 2017, our principal worldwide IT data centers in Houston were flooded due to Hurricane Harvey.

Since then, HPE has increased its resiliency through site selection and infrastructure technological investments to mitigate and adapt to physical risks from climate change.

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, Czech Republic, Mexico, China, Malaysia, Taiwan, and Singapore.

While we seek to mitigate our business risks associated with climate change through such efforts, we may be unsuccessful in doing so as there are inherent climate-related risks wherever business is conducted.

Furthermore, climate change may reduce the availability or increase the cost of insurance for these negative impacts of natural disasters by contributing to an increase in the incidence and severity of such natural disasters.

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.

We also rely on major logistics hubs, which are strategically located near manufacturing facilities in the major regions and in proximity to HPE's distribution channels and customers.

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The ultimate impact on us, our significant suppliers and our general infrastructure of being located near vulnerable locations is continuing to be assessed.

Our transition to a subscription/consumption-based business model may adversely affect our business, operating results and free cash flow.

We are currently transitioning to an as-a-service company, providing our entire portfolio through a range of subscription/consumption-based, pay-per-use and as-a-service offerings.

Our transition to a software consumption-based business model may adversely affect our business, operating results and free cash flow.

We are currently transitioning to an as-a-service company, providing our entire portfolio through a range of software consumption-based, pay-per-use and as-a-service offerings.

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.

Such business model changes entail significant risks and uncertainties, and we may be unable to complete the transition to a subscription/consumption-based business model or manage the transition successfully and in a timely manner, and our ability to accurately forecast our future operating results may be adversely affected.

Additionally, we may not realize all of the anticipated benefits of the subscription/consumption transition, even if we successfully complete the transition.

The transition to a subscription/consumption-based business model also means that our historical results, especially those achieved before we began the transition, may not be indicative of our future results.

Further, as customer demand for our consumption 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).

Such business model changes entail significant risks and uncertainties, and we may be unable to complete the transition to a software consumption-based business model or manage the transition successfully and in a timely manner, and our ability to accurately forecast our future operating results may be adversely affected.

Additionally, we may not realize all of the anticipated benefits of the software consumption transition, even if we successfully complete the transition.

The transition to a software consumption-based business model also means that our historical results, especially those achieved before we began the transition, may not be indicative of our future results.

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).

In addition, the transition to an as-a-service company is expected to require incremental capital requirements, resulting in a negative impact to cash flows in the near term, and may require us to dedicate additional resources, including sales and marketing costs.

Furthermore, we anticipate needing to redesign our go-to-market structure, to better align with the subscription/consumption-based business model.

We must adapt our sales processes for new sales and marketing approaches, including those required by our shift to subscription/consumption services and other changes resulting from the pandemic.

Furthermore, we anticipate needing to continually adapt our go-to-market structure, to better align with the software consumption-based business model.

We must adapt our sales processes for new sales and marketing approaches, including those required by our shift to software consumption-based services and other changes resulting from the pandemic.

Changing our go-to-market structure may affect employee compensation models and ultimately our ability to retain employees.

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There is no assurance that we will be able to successfully implement these adjustments in a timely or cost-effective manner, or that we will be able to realize all or any of the expected benefits from such adjustments.

Further, our subscription/consumption offerings could subject us to increased risk of liability related to the provision of services as well as operational, technical, legal or other costs.

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Further, our software consumption offerings could subject us to increased risk of liability related to the provision of services as well as operational, technical, legal or other costs.

We depend on third-party suppliers, and our financial results could suffer if we fail to manage our supplier relationships properly.

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• Component shortages.

We have been and currently are experiencing delays and shortages of certain components as a result of strong demand and capacity constraints due to economic changes resulting from the COVID-19 pandemic, disruptions in the operations of component suppliers, and other problems experienced by suppliers or problems faced during the transition to new suppliers.

A surge in demand for silicon has arisen across numerous markets affecting availability of key components of our products and our supplier's products, which may adversely affect customer deliveries and our anticipated revenues.

As shortages or delays persist, the price of certain components has increased and may continue to increase, we may be exposed to quality issues, or, at some point, the components may not be available at all.

We have been and are currently experiencing delays and shortages of certain components as a result of strong demand and capacity constraints due to economic changes resulting from the COVID-19 pandemic, disruptions in the operations of component suppliers, and other problems experienced by suppliers or problems faced during the transition to new suppliers.

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.

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• Excess supply.

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 or non-cancelable commitments 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-cancelable commitments, or other inventory management arrangements with vendors.

In addition, we may purchase components strategically in advance of demand to take advantage of favorable pricing or to address concerns about the availability of future components.

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The loss of a single-source supplier, the deterioration of our relationship with a single-source supplier, or any unilateral modification to the contractual terms under which we are supplied components by a single-source supplier could adversely affect our business and financial performance.

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We may not achieve some or all of the expected benefits of our restructuring plans and our periodic restructuring programs can be disruptive to our business.

We have announced restructuring plans, including the HPE Next initiative (whereby we are simplifying our operating model and streamlining our offerings, business processes and business systems) and the cost optimization and prioritization plan, in order to realign our cost structure due to the changing nature of our business and to achieve operating efficiencies that we expect to reduce costs, as well as simplify our organizational structure, upgrade our IT infrastructure and redesign business processes.

We may not be able to obtain the cost savings and benefits that were initially anticipated in connection with our restructuring.

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While our restructuring plans are substantially complete, their implementation periods are ongoing, and it is possible that we may not achieve all of the expected benefits of such restructuring plans.

We have announced and have been implementing, restructuring plans, including the HPE Next initiative (whereby we are simplifying our operating model and streamlining our offerings, business processes and business systems) and the cost optimization and prioritization plan, in order to realign our cost structure due to the changing nature of our business and to achieve operating efficiencies that we expect to reduce costs, as well as simplify our organizational structure, upgrade our IT infrastructure and redesign business processes.

While our restructuring plans are substantially complete, their implementation periods are ongoing, and it is possible that we may not be able to maintain all the cost savings and benefits that were attained in connection with our restructurings.

Additionally, as a result of restructuring initiatives, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiency during transitional periods.

Reorganization and restructuring can require a significant amount of management and other employees' time and focus, which may divert attention from operating and growing our business.

If we fail to achieve some or all of the expected benefits of restructuring, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

For more information about our restructuring plans, the HPE Next initiative and the cost optimization and prioritization plan, see Note 3, "Transformation Programs", to the Consolidated Financial Statements.

If we fail to sustain all of the expected benefits of restructuring, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

Any failure by us to identify, manage and complete acquisitions and subsequent integrations, divestitures and other significant transactions successfully could harm our financial results, business and prospects.

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• The impact of divestitures on our revenue growth may be larger than projected, as we may experience greater dis-synergies than expected.

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

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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

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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.

Under these arrangements, performance by the divested businesses or other conditions outside of our control could affect our future financial results.

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It is possible that future attacks may result in material misappropriation, system disruptions or shutdowns, malicious alteration, or destruction of our confidential or personal information or that of third parties.

Malicious parties also may be able to develop and deploy viruses, worms, ransomware and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products.

Malicious parties may compromise our manufacturing supply chain to embed malicious software or hardware in our products for use in compromising our customers.

Malicious parties also may be able to develop and deploy viruses, worms, ransomware, and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products, including within our cloud-based environments and offerings.

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.

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.

In addition, sophisticated hardware and operating system software and applications that we produce or procure from third parties may contain defects in design or manufacture, including flaws that could unexpectedly interfere with the operation of the system.

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We manage and store various proprietary information and sensitive or confidential data relating to our business.

In addition, our business may process, store and transmit customer data, including commercially sensitive and personal data, subject to the European General Data Protection Regulation and other privacy laws.

With our business increasingly providing cloud 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 as-a-service offerings, malicious parties could target such services, potentially resulting in an increased risk of compromise of customer data and regulatory exposure.

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.

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In addition, the cost and operational consequences of managing an incident and implementing further data protection measures could be significant.

Portions of our IT infrastructure also may experience interruptions, delays or cessations of service or produce errors in connection with systems integration or migration work that takes place from time to time.

Portions of our IT infrastructure also have experienced, and may experience, interruptions, delays or cessations of service or produce errors in connection with systems integration or migration work that takes place from time to time.

We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be more expensive, time-consuming, disruptive and resource intensive.

Furthermore, our data centers depend on predictable and reliable energy and networking capabilities, the cost or availability of which could be adversely affected or disrupted by a variety of factors, including but not limited to the effects of climate change.

Such disruptions could adversely impact our ability to fulfill orders and respond to customer requests and interrupt other processes.

Delayed sales, lower margins, or lost customers resulting from these disruptions could reduce our revenue, increase our expenses, damage our reputation, and adversely affect our stock price.

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If we cannot successfully execute our go-to-market strategy and continue to develop, manufacture and market innovative products, services, and solutions, our business and financial performance may suffer.

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HPE delivers unique, open and intelligent technology solutions, including those utilizing machine learning and artificial intelligence capabilities, with a consistent experience across all clouds and edge computing platforms.

To successfully execute this strategy, we must address business model shifts and optimize go-to-market execution by improving cost structure,

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aligning sales coverage with strategic goals, improving channel execution and strengthening our capabilities in our areas of strategic focus, while continuing to pursue new product innovation that builds on our strategic capabilities in areas such as cloud and data center computing, software-defined networking, converged storage, high-performance compute, and wireless networking.

To successfully execute this strategy, we must address business model shifts and optimize go-to-market execution by improving cost structure, aligning sales coverage with strategic goals, improving channel execution and strengthening our capabilities in our areas of strategic focus, while continuing to pursue new product innovation that builds on our strategic capabilities in areas such as cloud and data center computing, software-defined networking, converged storage, high-performance compute, and wireless networking.

Any failure to successfully execute this strategy, including any failure to invest sufficiently in strategic growth areas, could adversely affect our business, results of operations and financial condition.

The process of developing an edge-to-cloud platform as-a-service solution and enhancing existing hardware and software products, services, and solutions is complex, costly and uncertain, and any failure by us to anticipate customers' changing needs and emerging technological trends accurately could significantly harm our market share, results of operations and financial condition.

The process of developing and improving an edge-to-cloud platform as-a-service solution and enhancing existing hardware and software products, services, and solutions is complex, costly and uncertain, and any failure by us to anticipate customers' changing needs and emerging technological trends accurately could significantly harm our market share, results of operations and financial condition.

For example, as the transition to an environment characterized by cloud-based computing and software being delivered as-a-service progresses, we must continue to successfully develop and deploy cloud-based solutions for our customers.

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Our research and development initiatives may not be successful in whole or in part, including research and development projects which we have prioritized with respect to funding and/or personnel.

After we develop an edge-to-cloud platform product, we must be able to scale quickly while also managing costs and preserving margins.

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.

Any delay in the development, production or marketing of a new product, service or solution could result in us not being among the first to 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 to succeed, we will need to compete effectively across numerous factors.

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.

If we cannot continue to produce quality products and services, our reputation, business and financial performance may suffer .

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In addition, quality issues can impair our relationships with new or existing customers and adversely affect our brand and reputation, which could, in turn, adversely affect our results of operations.

Issues in the development and use of artificial intelligence may result in reputational harm or liability.

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

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biased information.

Ineffective or inadequate AI development or deployment practices by us or others could result in incidents that impair the acceptance of AI solutions or cause harm to individuals or society.

These deficiencies and other failures of AI systems could subject us to competitive harm, regulatory action, legal liability, and brand or reputational harm.

Some AI scenarios present ethical issues, and while we aim to use AI ethically and attempt to predict and anticipate ethical issues presented by its use, we may be unsuccessful in identifying or resolving issues before they arise.

If we enable or offer AI solutions that are controversial because of their impact on human rights, privacy, employment, or other social, economic, or political issues, we may experience brand or reputational harm.

If we fail to manage the distribution of our products and services properly, our business and financial performance could suffer.

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Moreover, some of our wholesale distributors may have insufficient financial resources and may not be able to withstand changes in business conditions, including economic weakness, industry consolidation, and market trends.

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significant distributors operate on narrow margins and have been negatively affected by business pressures in the past.

Many of our significant distributors operate on narrow margins and have been negatively affected by business pressures in the past.

Considerable trade receivables that are not covered by collateral or credit insurance are outstanding with our distribution channel partners.

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Further, changes in our management team may be disruptive to our business, and any failure to successfully transition and assimilate key new hires or promoted employees could adversely affect our business and results of operations.

As competition for highly skilled employees in our industry has grown increasingly intense, we have experienced, and may continue to experience, higher than anticipated levels of employee attrition.

These risks to attracting and retaining the necessary talent may be exacerbated by recent labor constraints and inflationary pressures on employee wages and benefits.

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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.

There has been an increased focus from regulators and stakeholders on ESG matters, including greenhouse gas emissions and climate-related risks;

diversity, equity, and inclusion;

responsible sourcing and supply chain;

human rights and social responsibility;

and corporate governance and oversight.

Given our commitment to ESG, we actively manage these issues and have established and publicly announced certain goals, commitments, and targets which we may refine or even expand further in the future.

These goals, commitments, and targets reflect our current plans and aspirations and are not guarantees that we will be able to achieve them.

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.

Further, there is uncertainty around the accounting standards and climate-related disclosures associated with emerging laws and reporting requirements and the related costs to comply with the emerging regulations.

Our failure or perceived failure to achieve our ESG goals, maintain ESG practices, or comply with emerging ESG regulations that meet evolving regulatory or stakeholder expectations could harm our reputation, adversely impact our ability to attract and retain customers and talent, and expose us to increased scrutiny from the investment community and enforcement authorities.

Our reputation also may be harmed by the perceptions that our stakeholders have about our action or inaction on ESG-related issues.

Damage to our reputation and loss of brand equity may reduce demand for our products and services and thus have an adverse effect on our future financial results, as well as require additional resources to rebuild our reputation and could also reduce our stock price.

Industry Risks

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If we are unable to effectively manage these complicated relationships with vertical partners, our business and results of operations could be adversely affected.

We face aggressive price competition and may have to continue lowering the prices of many of our products and services to stay competitive, while simultaneously seeking to maintain or improve our revenue and gross margin.

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competitors who have a greater presence in some of the lower-cost markets in which we compete, or who can obtain better pricing, more favorable contractual terms and conditions or more favorable allocations of products and components during periods of limited supply may be able to offer lower prices than we are able to offer.

We face aggressive price competition and may continue to do so.

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.

In addition, competitors who have a greater presence in some of the lower-cost markets in which we compete, or who can obtain better pricing, more favorable contractual terms and conditions, or more favorable allocations of products and components during periods of limited supply may be able to offer lower prices than we are able to offer.

Our cash flows, results of operations, and financial condition may be adversely affected by these and other industry-wide pricing pressures.

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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.

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.

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

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decisions, we may lose market share in certain areas, which could adversely affect our financial performance and business prospects.

Even if we are able to maintain or increase market share for a particular product, its financial performance could decline because the product is in a maturing industry or market segment or contains technology that is becoming obsolete.

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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.

Federal Reserve, along with central banks around the world, have been raising interest rates and signaled expectations of additional rate increases.

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.

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.

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Our future business and financial performance could suffer due to a variety of international factors, including:

• ongoing instability or changes in a country's or region's economic or political conditions, including inflation, recession, interest rate fluctuations and actual or anticipated military or political conflicts, including uncertainties and instability in economic and market conditions caused by the COVID-19 pandemic;

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• ongoing instability or changes in a country's or region's economic or political conditions, including inflation, recession, interest rate fluctuations, and actual or anticipated military or political conflicts, including uncertainties and instability in economic and market conditions caused by the COVID-19 pandemic, the ongoing conflict between Russia and Ukraine, and the relationship between China and the U.S.;

• inflationary pressures, such as those the market is currently experiencing, which may increase costs for materials, supplies, and services;

• adverse or uncertain macroeconomic conditions, including fears of a global economic downturn or recession;

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• network security, privacy, and data sovereignty concerns, which could make foreign customers reluctant to purchase products and services from U.S.-based technology companies;

• longer collection cycles and financial instability among customers;

• local labor conditions and regulations, including local labor issues faced by specific suppliers and original equipment manufacturers ("OEMs"), or changes to immigration and labor law policies which may adversely impact our access to technical and professional talent;

• local labor conditions and regulations, including local labor issues faced by specific suppliers and OEMs, or changes to immigration and labor law policies which may adversely impact our access to technical and professional talent;

• managing our geographically dispersed workforce;

• differing technology standards or customer requirements;

• local content and manufacturing requirements, which could impact our ability to sell into those markets;

• difficulties associated with repatriating earnings in restricted countries, and changes in tax laws;

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For example, we rely on suppliers in Asia for product assembly and manufacture.

The ongoing conflict between Russia and Ukraine has impacted business and financial performance in that region.

HPE is proceeding with an exit of our remaining business in Russia and Belarus, while closely monitoring and analyzing the trade restrictions imposed against Russia and Belarus by the United States, the European Union (the “EU”), and several other jurisdictions to ensure HPE’s compliance with applicable laws.

We cannot provide any assurance that such exit will be efficient or uninterrupted, which may negatively impact our operational expenses due to increased relocation costs or impact service delivery in such geographies.

We implement policies, procedures, and training designed to facilitate compliance with anti-corruption laws around the world, including the U.S.

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Currencies other than the U.S.

dollar, including the euro, the British pound, Chinese yuan (renminbi) and the Japanese yen, can have an impact on our results as expressed in U.S.

dollar, including the euro, the Japanese yen and British pound can have an impact on our results as expressed in U.S.

Currency volatility contributes to variations in our sales of products and services in impacted jurisdictions.

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this, too, could adversely affect our ability to sell products or services and our competitive position.

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Our products and services depend in part on intellectual property and technology licensed from third parties.

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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.

These third-party software components may become

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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.

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.

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• limiting our flexibility in planning for, or reacting to, changes in our business and industry;

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• 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.

Recent quantitative tightening by the U.S.

Federal Reserve, along with other central banks around the world, may affect our short-term ability or desire to incur debt.

To the extent that we incur additional indebtedness, the risks described above could increase.

In addition, our actual cash requirements in the future may be greater than expected.

Our cash flow from operations may not be sufficient to service our

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outstanding debt or to repay our outstanding debt as it becomes due, and we may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to service or refinance our debt.

Our cash flow from operations may not be sufficient to service our outstanding debt or to repay our outstanding debt as it becomes due, and we may not be able to borrow money, sell assets, or otherwise raise funds on acceptable terms, or at all, to service or refinance our debt.

The revenue and profitability of our operations have historically varied, which makes our future financial results less predictable.

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Overall gross margins and profitability in any given period are dependent partially on the product, service, customer, and geographic mix reflected in that period's net revenue.

The conflict between Russia and Ukraine and the trade sanctions imposed by the U.S., the EU, and other countries in response have negatively impacted our operations and financial performance in both countries.

There could be additional negative impacts to our net revenues, earnings, and cash flows should the situation escalate beyond its current scope, including, among other potential impacts, economic recessions in certain neighboring countries or globally, due to inflationary pressures and supply chain cost increases or the geographic proximity of the war relative to the rest of Europe.

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.

Competition, lawsuits, investigations, increases in component and manufacturing costs that we are unable to pass on to our customers, component supply disruptions, and other risks affecting our businesses may have a significant impact on our overall gross margin and profitability.

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Moreover, our efforts to address the challenges facing our business could increase the level of variability in our financial results because the rate at which we are able to realize the benefits from those efforts may vary from period to period.

Our uneven sales cycle makes planning and inventory management difficult and future financial results less predictable.

Our uneven sales cycle and supply chain disruptions make planning and inventory management difficult and future financial results less predictable.

In some of our businesses, our quarterly sales have periodically reflected a pattern in which a disproportionate percentage of each quarter's total sales occurs towards the end of the quarter.

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Many of the factors that create and affect seasonal trends are beyond our control.

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.

We have, in some instances, responded to such constraints by committing to higher inventory purchases and balances relative to our historical positions in order to secure manufacturing capacity.

While these measures have been taken to shorten lead times to deliver products to customers, they may

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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.

We make estimates and assumptions in connection with the preparation of our Consolidated Financial Statements and any changes to those estimates and assumptions could adversely affect our results of operations.

In connection with the preparation of our Consolidated Financial Statements, we use certain estimates and assumptions based on historical experience and other factors.

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, 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.

While we believe that these estimates and assumptions are reasonable under the circumstances, they are subject to significant uncertainties, some of which are beyond our control.

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We are subject to various federal, state, local, and foreign laws and regulations such as those concerning environmental protection.

For example, we face increasing complexity related to product design, the use of regulated, hazardous and scarce materials, the associated energy consumption and efficiency related to the use of products, the transportation and shipping of products, climate change regulations, and the reuse, recycling and/or disposal of products and their components at end-of-use or useful life as we adjust to new and future requirements relating to our transition to a more circular economy.

For example, we face increasing complexity related to product design;

the use of regulated, hazardous, and scarce materials;

the associated energy consumption and efficiency related to the use of products;

the transportation and shipping of products;

climate change regulations;

and the reuse, recycling and/or disposal of products and their components at end-of-use or useful life as we adjust to new and future requirements relating to our transition to a more circular economy.

A significant portion of our hardware revenues come from international sales.

Any changes to current environmental legal requirements, such

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as the EU Restriction of Hazardous Substances Directive, the EU Waste Electrical and Electronic Equipment Directive or China's regulation on Management Methods for Controlling Pollution Caused by Electronic Information Products, among others, may increase our cost of doing business internationally and impact our hardware revenues from the EU, China and/or other countries proposing or adopting similar environmental legal requirements.

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 Sustainable Corporate Governance).

If we were to violate or become liable under environmental or certain ESG-related laws or if our products become non-compliant with such laws or market access requirements, our customers may refuse to purchase our products, and we could incur costs or face other sanctions, such as restrictions on our products entering certain jurisdictions, fines, and/or civil or criminal sanctions.

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.

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).

If we were to violate or become liable under environmental or certain ESG-related laws or if our products become non-compliant with such laws or market access requirements, it could result in loss of market access or limit offerings in those markets or our customers may refuse to purchase our products, and we could incur costs or face other sanctions, such as restrictions on our products entering certain jurisdictions, fines, and/or civil or criminal sanctions.

Environmental regulations may also impact the availability and cost of energy or emissions related to energy consumption which may increase our cost of manufacturing and/or the cost of powering and cooling owned IT infrastructures.

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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.

If we were to violate or become liable under laws or regulations associated with privacy or security, we could incur substantial costs or face other sanctions.

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Failure to comply with government contracting regulations could adversely affect our business and results of operations.

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.

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.

Any violation of government contracting laws and regulations or contract terms could result in the imposition of various civil and criminal penalties, which may include termination of contracts, forfeiture of profits, suspension of payments and fines, treble damages, and suspension from future government contracting.

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If we are suspended or disbarred from government work or if our ability to compete for new government contracts is adversely affected, our financial performance could suffer.

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Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our financial performance.

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These proposals, if finalized and adopted by the associated countries, would impose a global minimum corporate tax rate of 15%, could increase tax complexity and uncertainty, and may adversely affect our provision for income taxes.

House of Representatives has passed legislation consistent with the framework President Biden announced previously, which includes a number of changes that would impact the U.S.

federal taxation of corporations.

Among other items, the legislation includes provisions that would raise the tax rate on foreign income of U.S.

corporations, apply the Global Intangible Low-Tax Income regime on a country-by-country basis, impose a new alternative minimum tax on book income, and impose a surcharge on corporate stock buybacks.

Senate has not voted on or agreed to the legislation, but if this happens and President Biden signs it into law, it could materially impact our tax provision, cash tax liability and effective tax rate.

During fiscal 2019, we executed a Termination and Mutual Release Agreement which terminated our Tax Matters Agreement with HP Inc.

Because we now have limited indemnity rights from HP Inc., we potentially bear more economic risk for certain potential unfavorable tax assessments.

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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.

The impact of this provision will be dependent on the extent of share repurchases made in future periods.

We are evaluating the Corporate AMT and its potential impact on our future U.S.

tax expense, cash taxes, and effective tax rate, as well as any other impacts the Inflation Reduction Act may have on our financial position and results of operations.

Risks Related to Prior Separations

The stock distribution in either or both of the completed separations of our former Enterprise Services business and our former Software segment could result in significant tax liability, and DXC or Micro Focus (as applicable) may in certain cases be obligated to indemnify us for any such tax liability imposed on us.

The completed separations of our former Enterprise Services business and our Software Segment 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");

The stock distribution in either or both of the completed separations of our former Enterprise Services business and our former Software segment could result in significant tax liability, and DXC Technology Company or Micro Focus International plc (as applicable) may in certain cases be obligated to indemnify us for any such tax liability imposed on us.

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.

While the Software Separation generally qualified for tax-free treatment for us, Seattle SpinCo and Micro Focus, the acquisition of Seattle SpinCo by Micro Focus resulted in the recognition of gain (but not loss) for U.S.

While the Seattle Transaction generally qualified for tax-free treatment for us, Seattle SpinCo and Micro Focus, the acquisition of Seattle SpinCo by Micro Focus resulted in the recognition of gain (but not loss) for U.S.

persons who received Micro Focus American Depositary Shares in the Software separation.

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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 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.

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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.

We obtained private letter rulings from the IRS regarding certain U.S.

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Any such indemnity obligations could be material.

We continue to face a number of risks related to the Separation from our former Parent, including those associated with ongoing indemnification obligations, which could adversely affect our financial condition and results of operations, and shared use of certain intellectual property rights, which could in the future adversely impact our reputation.

In connection with the Separation, Hewlett Packard Enterprise and HP Inc.

We continue to face a number of risks related to our separation from HP Inc., our former parent, including those associated with ongoing indemnification obligations, which could adversely affect our financial condition and results of operations, and shared use of certain intellectual property rights, which could in the future adversely impact our reputation.

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.

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We may be obligated to fully indemnify HP Inc.

for certain liabilities under the

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Separation agreements or HP Inc.

for certain liabilities under the Separation agreements or HP Inc.

may not be able to fully cover their indemnification obligations to us under the same Separation agreements.

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the announcement of new, planned or contemplated products, services, technological innovations, acquisitions, divestitures, or other significant transactions by us or our competitors;

developments in our transformation programs or in our transition to an as-a-service business model;

our quarterly financial results and comparisons to estimates by the investment community or financial outlook provided by us;

the financial results and business strategies of our competitors;

market volatility or downturns caused by outbreaks, epidemics, pandemics, geopolitical tensions or conflicts, or other macroeconomic dynamics;

developments relating to pending investigations, claims, and disputes;

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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.

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Unresolved Staff Comments.

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 1A. Risk Factors