HP 2011 Annual Report Download - page 108

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 7: Goodwill and Purchased Intangible Assets
Goodwill
Goodwill allocated to HP’s business segments as of October 31, 2011 and 2010 and changes in the
carrying amount of goodwill during the fiscal years ended October 31, 2011 and 2010 are as follows:
Enterprise
Imaging Servers,
Personal and Storage HP
Systems Printing and HP Financial Corporate
Group Services Group Networking Software Services Investments Total
In millions
Balance at October 31, 2009 . . $2,487 $16,829 $2,460 $5,005 $ 6,140 $144 $ 44 $33,109
Goodwill acquired during the
period ................ 18 17 — 1,635 1,407 — 2,153 5,230
Goodwill adjustments ....... (5) 121 (4) (30) (2) — 64 144
Balance at October 31, 2010 . . $2,500 $16,967 $2,456 $6,610 $ 7,545 $144 $ 2,261 $38,483
Goodwill acquired during the
period ................ — 66 16 — 6,786 — — 6,868
Goodwill adjustments/
reclassifications .......... (2) 247 (1) 1,460 (268) — (1,423) 13
Impairment loss ........... — — — — — — (813) (813)
Balance at October 31, 2011 . . $2,498 $17,280 $2,471 $8,070 $14,063 $144 $ 25 $44,551
During fiscal 2011, HP recorded approximately $6.9 billion of goodwill related to acquisitions
based on its preliminary estimated fair values of the assets acquired and liabilities assumed. In
connection with organizational realignments implemented in the first quarter of fiscal 2011, HP also
reclassified goodwill related to HP’s networking business from Corporate Investments to Enterprise
Servers, Storage and Networking (‘‘ESSN’’) and goodwill related to the communications and media
solutions business from HP Software to Services.
In the fourth quarter of fiscal 2011, HP determined that it would wind down the manufacture and
sale of webOS devices resulting from the Palm acquisition, including webOS smartphones and the HP
TouchPad. HP also announced that it would continue to explore alternatives to optimize the value of
the webOS technology, including, among others, licensing the webOS software or the related
intellectual property or selling all or a portion of the webOS assets. The decision triggered an
impairment review of the related goodwill and purchased intangible assets recorded in connection with
the Palm acquisition. HP first performed an impairment review of the purchased intangible assets,
which represents the value for the webOS technology, carrier relationships and the trade name. Based
on the information available at the time of the review, HP determined that there was no future value
for the carrier relationships and the trade name but that the carrying value of the webOS technology
approximates its fair value. HP estimated the fair value of the webOS technology based on several
methods, including the market approach using recent comparable transactions and the discounted cash
flow approach using estimated cash flows from potential licensing agreements. Based on that analysis,
HP recognized an impairment loss of $72 million primarily related to the carrier relationships and the
trade name. HP then performed a goodwill impairment test by comparing the carrying value of the
relevant reporting unit to the fair value of that reporting unit. The fair value of the reporting unit was
significantly below the carrying value due to HP’s decision to wind down the sale of all webOS devices.
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