HP 2015 Annual Report Download - page 62

Table of Contents
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•Software gross margin increased due to the shift to more profitable contracts and improved workforce utilization in professional services;
•HPFS gross margin increased due to a higher portfolio margin, primarily from lower bad debt expense, a lower cost of funds and improved
margins in remarketing sales;
•Personal Systems gross margin increased due primarily to operational cost improvements, a favorable mix of commercial products and the sale
of IP; and
•EG gross margin decreased due primarily to the impact of a higher mix of ISS products, lower mix of BCS products and competitive pricing
pressure in ISS and Networking.
A more detailed discussion of segment gross margins and operating margins is included under "Segment Information" below.
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Research and Development
R&D expense increased 2% in fiscal 2015 as compared to fiscal 2014 due primarily to expenses from the acquisition of Aruba and increases in
Technology Services, cloud and HP Labs, partially offset by favorable currency impacts.
R&D expense increased 10% in fiscal 2014 as compared to fiscal 2013 with increases across each of our segments as we made investments in our
strategic focus areas of cloud, security, big data and mobility.
Selling, General and Administrative
SG&A expense decreased 9% in fiscal 2015 as compared to fiscal 2014 due primarily to favorable currency impacts and declines in go-to-market costs as
a result of lower commissions and productivity initiatives.
SG&A expense increased 1% in fiscal 2014 as compared to fiscal 2013 due primarily to higher compensation costs, litigation expenses and higher
selling costs from investments in the areas of cloud, networking and storage, partially offset by gains from sales of real estate and lower program spending in
marketing.
Amortization of Intangible Assets
Amortization expense decreased in fiscal 2015 and in fiscal 2014 due primarily to certain intangible assets associated with prior acquisitions reaching
the end of their respective amortization periods, partially offset by amortization expense from intangible assets resulting from the acquisition of Aruba in
fiscal 2015.
Restructuring Charges
Restructuring charges decreased 37% in fiscal 2015 due primarily to lower charges from the multi-year restructuring plan initially announced in May
2012 (the "2012 Plan").
On September 14, 2015, our Board of Directors approved a restructuring plan (the "2015 Plan") in connection with the Separation which will be
implemented through fiscal 2018. As a result, HP recognized $391 million of charges related to the 2015 Plan during the fourth quarter of fiscal 2015.
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Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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