HP 2006 Annual Report Download - page 103

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 7: Goodwill and Purchased Intangible Assets (Continued)
Based on the results of its annual impairment tests, HP determined that no impairment of the
Compaq trade name existed as of August 1, 2006 or August 1, 2005. However, future impairment tests
could result in a charge to earnings. HP will continue to evaluate the purchased intangible asset with
an indefinite life on an annual basis as of the beginning of its fourth fiscal quarter and whenever events
and changes in circumstances indicate that there may be a potential impairment.
The finite-lived purchased intangible assets consist of customer contracts, customer lists and
distribution agreements, which have weighted average useful lives of approximately eight years, and
developed and core technology, patents and product trademarks, which have weighted average useful
lives of approximately six years.
Estimated future amortization expense related to finite-lived purchased intangible assets at
October 31, 2006 was as follows:
Fiscal year: In millions
2007 ......................................................... $ 545
2008 ......................................................... 478
2009 ......................................................... 396
2010 ......................................................... 289
2011 ......................................................... 168
Thereafter ..................................................... 54
Total ......................................................... $1,930
Note 8: Restructuring Charges
Fiscal 2005 Restructuring Plans
In the fourth quarter of fiscal 2005, HP’s Board of Directors approved a restructuring plan
designed to simplify HP’s structure, reduce costs and place greater focus on its customers. HP included
original estimates of 15,300 positions in the fiscal 2005 restructuring plan. Subsequent to the initial
estimate, HP reduced the number of total positions to 15,200. The initial charge for these actions
totaled $1.6 billion. After completion of HP’s voluntary severance programs in Europe and Asia, total
charges in connection with this plan, coupled with other final adjustments, are expected to exceed the
original charge by $108 million. During fiscal 2006, HP recognized charges of approximately
$167 million relating to employee severance and other benefits charges, including adjustment related to
reduce non-cash stock-based compensation by $14 million. HP also recognized a $6 million termination
benefit expense and a $3 million settlement and curtailment loss from the non-U.S. pension plans.
These charges were offset by settlement gains of $46 million from the U.S. pension plans and
curtailment gains of $24 million from the U.S. retiree medical program. The $167 million of severance
related charge was reflective of higher population of employees participating in higher cost early
retirement and voluntary programs with the greatest impact in Europe.
The charge in the fourth quarter of fiscal 2005 included approximately $400 million related to
employee severance and other benefits associated with the early retirement of 3,200 U.S. employees
who left HP by October 31, 2005. The majority of these costs were funded by HP’s pension plan assets.
The remaining charges of approximately $1.2 billion, which include approximately $100 million of
non-cash stock-based compensation, are related to severance and other benefits for approximately
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