HP 2008 Annual Report Download - page 119

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 7: Goodwill and Purchased Intangible Assets (Continued)
Estimated future amortization expense related to finite-lived purchased intangible assets at
October 31, 2008 was as follows:
Fiscal year: In millions
2009 ................................................................ $1,495
2010 ................................................................ 1,326
2011 ................................................................ 1,027
2012 ................................................................ 833
2013 ................................................................ 692
Thereafter ............................................................ 1,167
Total ................................................................ $6,540
Note 8: Restructuring Charges
Fiscal 2008 Restructuring Plan
In connection with the acquisition of EDS on August 26, 2008, HP’s management approved and
initiated a restructuring plan to streamline the combined company’s services business and to better
align the structure and efficiency of that business with HP’s operating model. The restructuring plan is
expected to be implemented over the next four years and will include changes to the combined
company’s workforce as well as changes to corporate overhead functions, such as real estate, IT and
procurement. As part of the restructuring plan, HP expects to eliminate approximately 24,700 positions.
In the fourth quarter of fiscal 2008, HP recorded a liability of approximately $1.8 billion related to
the restructuring plan. Approximately $1.5 billion of the liability was associated with pre-acquisition
EDS and was recorded to goodwill, and the remaining approximately $0.3 billion was associated with
HP and was recorded as a restructuring charge. The liability consisted mainly of severance costs, costs
to vacate duplicate facilities and costs associated with early termination of certain contractual
obligations. As of October 31, 2008, approximately 2,300 positions had been eliminated.
HP expects the restructuring costs to be paid out through 2012 with the majority paid out by the
end of fiscal 2009. In future quarters, HP expects to record an additional charge of approximately
$280 million related to severance costs for approximately 2,700 employees and the cost to vacate
duplicate facilities.
All restructuring costs associated with pre-acquisition EDS are reflected in the purchase price of
EDS in accordance with EITF 95-3, ‘‘Recognition of Liabilities in Connection with a Purchase Business
Combination.’’ These costs are subject to change based on the actual costs incurred. Changes to these
estimates could increase or decrease the amount of the purchase price allocated to goodwill.
Prior Fiscal Year Plans
Restructuring plans initiated in fiscal years 2007, 2005, 2003, 2002 and 2001 are substantially
complete, although HP records minor revisions to previous estimates as necessary. During fiscal 2008,
HP recorded a net charge of $24 million due primarily to adjustments for severance and facilities costs
associated with these prior-year plans. As of October 31, 2008, there was a remaining balance of
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