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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________________
FORM 10-Q


(Mark One)    
☒   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: January 31, 2021
Or

☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            

Commission file number 001-37483
______________________________________________________________________________
HEWLETT PACKARD ENTERPRISE COMPANY
(Exact name of registrant as specified in its charter)

Delaware   47-3298624
(State or other jurisdiction of
incorporation or organization) 		  (I.R.S. employer
identification no.)

11445 Compaq Center West Drive, Houston, Texas 77070
(Address of principal executive offices) (Zip code)
(650) 687-5817
(Registrant's telephone number, including area code)
______________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, par value $0.01 per share HPE New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of Hewlett Packard Enterprise Company common stock outstanding as of February 26, 2021 was 1,301,145,494 shares, par value $0.01.



HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Form 10-Q
For the Quarterly Period Ended January 31, 2021

Table of Contents
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3


Forward-Looking Statements
This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of Part I, contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of Hewlett Packard Enterprise Company and its consolidated subsidiaries ("Hewlett Packard Enterprise") may differ materially from those expressed or implied by such forward-looking statements and assumptions. The words "believe", "expect", "anticipate", "optimistic", "intend", "aim", "will", "should" and similar expressions are intended to identify such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to the scope and duration of the novel coronavirus pandemic ("COVID-19") and its impact on our business, operations, liquidity and capital resources, employees, customers, partners, supply chain, financial results and the world economy; any projections of revenue, margins, expenses, investments, effective tax rates, interest rates, the impact of the U.S. Tax Cuts and Jobs Act of 2017 and related guidance or regulations, net earnings, net earnings per share, cash flows, liquidity and capital resources, inventory, goodwill, impairment charges, hedges and derivatives and related offsets, order backlog, benefit plan funding, deferred tax assets, share repurchases, currency exchange rates, repayments of debts including our asset-backed debt securities, or other financial items; the projections, execution, timing and results of any transformation or restructuring plans, including estimates and assumptions related to the anticipated benefits, cost savings or charges of implementing the transformation and restructuring plans; any statements of the plans, strategies and objectives of management for future operations, as well as the execution of corporate transactions or contemplated acquisitions, research and development expenditures, and any resulting benefit, cost savings, charges, or revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on Hewlett Packard Enterprise and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the need to address the many challenges facing Hewlett Packard Enterprise's businesses; the competitive pressures faced by Hewlett Packard Enterprise's businesses; risks associated with executing Hewlett Packard Enterprise's strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of Hewlett Packard Enterprise's products and the delivery of Hewlett Packard Enterprise's services effectively; the protection of Hewlett Packard Enterprise's intellectual property assets, including intellectual property licensed from third parties and intellectual property shared with its former parent; risks associated with Hewlett Packard Enterprise's international operations (including pandemics and public health problems, such as the outbreak of COVID-19); the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by Hewlett Packard Enterprise and its suppliers, customers, clients and partners, including any impact thereon resulting from events such as the COVID-19 pandemic; the hiring and retention of key employees; the execution, integration and risks associated with business combination and investment transactions; the impact of changes to environmental, global trade, and other governmental regulations; changes in our product, lease, intellectual property or real estate portfolio; the payment or non-payment of a dividend for any period; the efficacy of using non-GAAP, rather than GAAP, financial measures in business projections and planning; the judgments required in connection with determining revenue recognition; impact of company policies and related compliance; utility of segment realignments; allowances for recovery of receivables and warranty obligations; provisions for, and resolution of, pending investigations, claims and disputes; and other risks that are described herein, including but not limited to the items discussed in "Risk Factors" in Item 1A of Part II of this Quarterly Report on Form 10-Q and that are otherwise described or updated from time to time in Hewlett Packard Enterprise's reports filed with the Securities and Exchange Commission. Hewlett Packard Enterprise assumes no obligation and does not intend to update these forward-looking statements, except as required by applicable law.

4


Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Index
  Page
6
7
8
9
10
12
12
14
17
19
19
20
22
26
27
28
31
32
33
33

5


HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
  Three Months Ended January 31,
  2021 2020
  In millions, except per share amounts
Net revenue:    
Products $ 4,138  $ 4,247 
Services 2,573  2,589 
Financing income 122  113 
Total net revenue 6,833  6,949 
Costs and expenses:    
Cost of products 2,890  2,910 
Cost of services 1,596  1,684 
Financing interest 59  73 
Research and development 468  485 
Selling, general and administrative 1,159  1,218 
Amortization of intangible assets 110  120 
Transformation costs 311  89 
Acquisition, disposition and other related charges 18  22 
Total costs and expenses 6,611  6,601 
Earnings from operations 222  348 
Interest and other, net (44) (19)
Tax indemnification adjustments (16) (21)
Non-service net periodic benefit credit 17  37 
Earnings from equity interests 26  33 
Earnings before taxes 205  378 
(Provision) benefit for taxes 18  (45)
Net earnings $ 223  $ 333 
Net earnings per share:    
Basic $ 0.17  $ 0.26 
Diluted $ 0.17  $ 0.25 
Weighted-average shares used to compute net earnings per share:    
Basic 1,300  1,300 
Diluted 1,315  1,315 


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6


HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
  Three Months Ended
January 31,
  2021 2020
  In millions
Net earnings $ 223  $ 333 
Other comprehensive income before taxes:    
Change in net unrealized gains (losses) on available-for-sale securities:    
Net unrealized gains (losses) arising during the period 3  2 
(Gains) losses reclassified into earnings —  (3)
3  (1)
Change in net unrealized gains (losses) on cash flow hedges:    
Net unrealized gains (losses) arising during the period (329) 75 
Net (gains) losses reclassified into earnings 278  (69)
(51) 6 
Change in unrealized components of defined benefit plans:    
Net unrealized gains (losses) arising during the period —  17 
Amortization of net actuarial loss and prior service benefit 71  61 
Curtailments, settlements and other 1  — 
72  78 
Change in cumulative translation adjustment 21  (4)
Other comprehensive income before taxes 45  79 
(Provision) benefit for taxes (2) (9)
Other comprehensive income, net of taxes 43  70 
Comprehensive income $ 266  $ 403 


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
7


HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
  As of
  January 31, 2021 October 31, 2020
(Unaudited) (Audited)
  In millions, except par value
ASSETS    
Current assets:    
Cash and cash equivalents $ 4,165  $ 4,233 
Accounts receivable, net of allowances 2,933  3,386 
Financing receivables, net of allowances 3,883  3,794 
Inventory 2,791  2,674 
Assets held for sale 34  77 
Other current assets 2,266  2,392 
Total current assets 16,072  16,556 
Property, plant and equipment 5,573  5,625 
Long-term financing receivables and other assets 10,585  10,544 
Investments in equity interests 2,211  2,170 
Goodwill 18,017  18,017 
Intangible assets 993  1,103 
Total assets $ 53,451  $ 54,015 
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Notes payable and short-term borrowings $ 3,727  $ 3,755 
Accounts payable 5,196  5,383 
Employee compensation and benefits 1,149  1,391 
Taxes on earnings 119  148 
Deferred revenue 3,440  3,430 
Accrued restructuring 241  366 
Other accrued liabilities 4,059  4,265 
Total current liabilities 17,931  18,738 
Long-term debt 11,963  12,186 
Other non-current liabilities 7,298  6,995 
Commitments and contingencies
Stockholders' equity    
HPE stockholders' equity:    
Preferred stock, $0.01 par value (300 shares authorized; none issued)
—  — 
Common stock, $0.01 par value (9,600 shares authorized; 1,300 and 1,287 shares issued and outstanding at January 31, 2021 and October 31, 2020, respectively)
13  13 
Additional paid-in capital 28,427  28,350 
Accumulated deficit (8,332) (8,375)
Accumulated other comprehensive loss (3,896) (3,939)
Total HPE stockholders' equity 16,212  16,049 
Non-controlling interests 47  47 
Total stockholders' equity 16,259  16,096 
Total liabilities and stockholders' equity $ 53,451  $ 54,015 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
8


HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
  Three Months Ended January 31,
  2021 2020
  In millions
Cash flows from operating activities:    
Net earnings $ 223  $ 333 
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:    
Depreciation and amortization 674  690 
Stock-based compensation expense 113  93 
Provision for inventory and doubtful accounts 52  41 
Restructuring charges 232  84 
Deferred taxes on earnings (71) (28)
Earnings from equity interests (26) (33)
Other, net 65  (36)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 446  82 
Financing receivables (120) (104)
Inventory (148) (204)
Accounts payable (161) (250)
Taxes on earnings (34) (27)
Restructuring (220) (87)
Other assets and liabilities (62) (633)
Net cash provided by (used in) operating activities 963  (79)
Cash flows from investing activities:    
Investment in property, plant and equipment (513) (568)
Proceeds from sale of property, plant and equipment 113  462 
Purchases of available-for-sale securities and other investments (7) (59)
Maturities and sales of available-for-sale securities and other investments 1  8 
Financial collateral posted (266) (48)
Financial collateral received 20  147 
Payments made in connection with business acquisitions, net of cash acquired —  (6)
Net cash used in investing activities (652) (64)
Cash flows from financing activities:    
Short-term borrowings with original maturities less than 90 days, net 26  127 
Proceeds from debt, net of issuance costs 323  340 
Payment of debt (611) (450)
Payments related to stock-based award activities, net (34) (43)
Repurchase of common stock —  (204)
Cash dividends paid to non-controlling interests (8) — 
Contributions from non-controlling interests —  1 
Cash dividends paid (155) (156)
Net cash used in financing activities (459) (385)
Decrease in cash, cash equivalents and restricted cash (148) (528)
Cash, cash equivalents and restricted cash at beginning of period 4,621  4,076 
Cash, cash equivalents and restricted cash at end of period $ 4,473  $ 3,548 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
9


Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

Common Stock
Three Months Ended January 31, 2021 Number of Shares Par Value Additional Paid-in Capital Accumulated Deficit Accumulated
Other
Comprehensive
Loss 		Equity
Attributable
to the
Company 		Non-
controlling
Interests 		Total
Equity
  In millions, except number of shares in thousands
Balance at October 31, 2020 1,287,010  $ 13  $ 28,350  $ (8,375) $ (3,939) $ 16,049  $ 47  $ 16,096 
Net earnings 223  223  223 
Other comprehensive income 43  43  43 
Comprehensive income 266  —  266 
Stock-based compensation expense 113  113  113 
Tax withholding related to vesting of employee stock plans (57) (57) (57)
Issuance of common stock in connection with employee stock plans and other 13,486  21  21  21 
Cash dividends declared ($0.12 per share)
(155) (155) (155)
Effects of adoption of accounting standard updates (1)
(25) (25) (25)
Balance at January 31, 2021 1,300,496  $ 13  $ 28,427  $ (8,332) $ (3,896) $ 16,212  $ 47  $ 16,259 

(1) Represents the impact of the adoption of the accounting standard on the measurement of credit losses on financial instruments.

(1) Represents the impact of the adoption of an accounting standard - Pending
10


Common Stock
Three Months Ended January 31, 2020 Number of Shares Par Value Additional Paid-in Capital  Accumulated Deficit Accumulated
Other
Comprehensive
Loss 		Equity
Attributable
to the
Company 		Non-
controlling
Interests 		Total
Equity
  In millions, except number of shares in thousands
Balance at October 31, 2019 1,294,369  $ 13  $ 28,444  $ (7,632) $ (3,727) $ 17,098  $ 51  $ 17,149 
Net earnings 333  333  2  335 
Other comprehensive income 70  70  70 
Comprehensive income 403  2  405 
Stock-based compensation expense 93  93  93 
Tax withholding related to vesting of restricted stock units (72) (72) (72)
Issuance of common stock in connection with employee stock plans and other 11,361  26  1  27  1  28 
Repurchases of common stock (12,827) (204) (204) (204)
Cash dividends declared ($0.12 per share)
(156) (156) (156)
Effects of adoption of accounting standard updates 43  (43) —  — 
Balance at January 31, 2020 1,292,903  $ 13  $ 28,287  $ (7,411) $ (3,700) $ 17,189  $ 54  $ 17,243 






The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
11

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1: Overview and Summary of Significant Accounting Policies
Background
Hewlett Packard Enterprise Company ("Hewlett Packard Enterprise", "HPE", or the "Company") is a global technology leader focused on developing intelligent solutions that allow customers to capture, analyze and act upon data seamlessly from edge to cloud. Hewlett Packard Enterprise enables customers to accelerate business outcomes by driving new business models, creating new customer and employee experiences, and increasing operational efficiency today and into the future. Hewlett Packard Enterprise's customers range from small- and medium-sized businesses ("SMBs") to large global enterprises and governmental entities.
On November 1, 2015, the Company became an independent publicly-traded company through a pro rata distribution by HP Inc. ("former Parent" or "HPI"), formerly known as Hewlett-Packard Company ("HP Co."), of 100% of the outstanding shares of Hewlett Packard Enterprise Company to HP Inc.'s stockholders (the "Separation").
Basis of Presentation
The Condensed Consolidated Financial Statements of the Company were prepared in accordance with United States ("U.S.") Generally Accepted Accounting Principles ("GAAP"). In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements of Hewlett Packard Enterprise contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company's financial position as of January 31, 2021 and October 31, 2020, its results of operations for the three months ended January 31, 2021 and 2020, its cash flows for the three months ended January 31, 2021 and 2020, and its statements of stockholders' equity for the three months ended January 31, 2021 and 2020.
The results of operations for the three months ended January 31, 2021 and the cash flows for the three months ended January 31, 2021 are not necessarily indicative of the results to be expected for the full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2020, including "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Quantitative and Qualitative Disclosures About Market Risk" and the Consolidated Financial Statements and notes thereto included in Items 7, 7A and 8, respectively.
Principles of Consolidation
The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and all subsidiaries and affiliates in which the Company has a controlling financial interest or is the primary beneficiary. All intercompany transactions and accounts within the consolidated businesses of the Company have been eliminated.
The Company consolidates a Variable Interest Entity (“VIE”) where it has been determined that the Company is the primary beneficiary of the entity’s operation. In evaluating whether the Company is the primary beneficiary, the Company evaluates its power to direct the most significant activities of the VIE by considering the purpose and design of the entity and the risks the entity was designed to create and pass through to its variable interest holders. The Company also evaluates its economic interests in the VIE.
The Company accounts for investments in companies over which it has the ability to exercise significant influence but does not hold a controlling interest under the equity method of accounting, and the Company records its proportionate share of income or losses in Earnings from equity interests in the Condensed Consolidated Statements of Earnings.
Non-controlling interests are presented as a separate component within Total stockholders' equity in the Condensed Consolidated Balance Sheets. Net earnings attributable to non-controlling interests are recorded within Interest and other, net in the Condensed Consolidated Statements of Earnings and are not presented separately, as they were not material for any periods presented.
12
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Segment Realignment and Reclassifications
Effective at the beginning of the first quarter of fiscal 2021, HPE implemented certain organizational changes to align its segment financial reporting more closely with its current business structure. These organizational changes are:
(i) the transfer of the lifecycle event services business, previously reported within the Advisory and Professional Services ("A & PS") reportable segment to Compute, Storage and HPC & MCS reportable segments; (ii) the transfer of certain software and related services business, previously reported within the Compute, Storage and A & PS reportable segments to the Corporate Investments and Other reportable segment, to form a new Software operating segment; and (iii) the transfer of the remaining A & PS operating segment, previously reported as a separate reportable segment, to the Corporate Investments and Other reportable segment. As a result of these changes, the Corporate Investments and Other Segment now includes the A & PS operating segment, the Communications and Media Solutions operating segment, the Software operating segment, and Hewlett Packard Enterprise Labs which is responsible for research and development.
Additionally, effective at the beginning of the first quarter of fiscal 2021, the Company has excluded stock-based compensation expense from its segment earnings from operations.
The Company reflected these changes to its segment information retrospectively to the earliest period presented, which primarily resulted in the realignment of net revenue, operating profit and total assets for each of the segments as described above. These changes had no impact on Hewlett Packard Enterprise’s previously reported consolidated net revenue, net earnings, net earnings per share ("EPS") or total assets.
Significant Accounting Policies
Except for the change in certain accounting policies upon adoption of the accounting standards described below, there have been no significant changes to the Company's significant accounting policies described in PART II, Item 8, Note 1, "Overview and Summary of Significant Accounting Policies", of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2020.
Recently Adopted Accounting Pronouncements
In January 2021, the FASB issued guidance to clarify that all derivative instruments affected by changes to the interest rates used for discounting, margining or contract price alignment can apply certain optional expedients and exceptions mentioned in its reference rate reform guidance even though they do not reference to LIBOR or a rate being discontinued. This guidance was effective upon issuance. The Company adopted the guidance in the first quarter of fiscal 2021 and there was no impact on its Condensed Consolidated Financial Statements upon adoption.
In December 2019, the FASB amended the existing accounting standards for income taxes. The amendments clarify and simplify the accounting for income taxes by eliminating certain exceptions to the general principles. The Company adopted the guidance in the first quarter of fiscal 2021 and there was no material impact on its Condensed Consolidated Financial Statements.
In August 2018, the FASB issued guidance on a customer's accounting for implementation costs incurred in cloud-computing arrangements that are hosted by a vendor. Certain types of implementation costs should be capitalized and amortized over the term of the hosting arrangement. The Company adopted the guidance in the first quarter of fiscal 2021 and there was no material impact on its Condensed Consolidated Financial Statements.

In August 2018, the FASB issued guidance which changes the disclosure requirements for fair value measurements and defined benefit pension plans. The Company adopted the guidance in the first quarter of fiscal 2021 and there was no impact on its Condensed Consolidated Financial Statements. However, the Company expects to have additional disclosures relating to retirement and post-retirement benefit plans in its Annual Report on Form 10-K for the fiscal year ended October 31, 2021.

In June 2016, the FASB amended the existing accounting standards for the measurement of credit losses with additional amendments in 2018, 2019 and 2020. These amendments primarily require the measurement and recognition of current expected credit losses for financial assets held at amortized cost. The amended accounting standard replaces the existing incurred loss impairment model with an expected loss model, which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. The Company adopted the Current Expected Credit Losses standard (the “CECL standard”) as of November 1, 2020 using the modified retrospective method, with the cumulative-effect adjustment recorded to the opening balance of Accumulated deficit within stockholders’
13
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
equity in the Condensed Consolidated Balance Sheets. The cumulative effect of adopting the CECL standard resulted in an increase of $28 million to the allowance for expected credit losses within financing receivables, and a corresponding increase of $25 million, net of $3 million of deferred taxes to Accumulated deficit as of November 1, 2020.

The allowance for expected credit losses related to accounts receivables is comprised of a general reserve and a specific reserve. The Company may record a specific reserve for individual accounts when the Company becomes aware of specific customer circumstances, such as in the case of a bankruptcy filing or deterioration in the customer's operating results or financial position. If there are additional changes in circumstances related to the specific customer, the Company further adjusts estimates of the recoverability of receivables. The Company maintains an allowance for credit losses for all other customers based on a variety of factors, including the use of third-party credit risk models that generate quantitative measures of default probabilities based on market factors, the financial condition of customers and the length of time receivables are past due. These qualitative factors are subjective and require a degree of management judgement. The past due or delinquency status of a receivable is based on the contractual payment terms of the receivable. The Company establishes an allowance for expected credit losses related to accounts receivable, including unbilled receivables.

The allowance for expected credit losses related to financing receivables is comprised of a general reserve and a specific reserve. The Company establishes a specific reserve for financing receivables with identified exposures, such as customer defaults, bankruptcy or other events, that make it unlikely the Company will recover its investment. For individually evaluated receivables, the Company determines the expected cash flow for the receivable, which includes consideration of estimated proceeds from disposition of the collateral and calculates an estimate of the potential loss and the probability of loss. For those accounts where a loss is considered probable, the Company records a specific reserve. The Company maintains a general reserve using a credit loss model on a regional basis and bases such percentages on several factors, including consideration of historical credit losses and portfolio delinquencies, trends in the overall weighted-average risk rating of the portfolio, current economic conditions, and forward-looking information, including reasonable and supportable forecasts. The Company believes the economic forecasts employed represent reasonable and supportable forecasts, followed by a reversion to long term trends. The Company excludes accounts evaluated as part of the specific reserve from the general reserve analysis. The Company generally writes off a receivable or records a specific reserve when a receivable becomes 180 days past due, or sooner if the Company determines that the receivable is not collectible.
The Company’s debt securities are generally considered available-for-sale and are reported at fair value with unrealized gains and losses, net of applicable taxes, recorded in Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets. Realized gains and losses for available-for-sale securities are calculated based on the specific identification method and included in Interest and other, net in the Condensed Consolidated Statements of Earnings. The Company monitors its investment portfolio for potential impairment on a quarterly basis. When the carrying amount of an investment in debt securities exceeds its fair value and the decline in value is determined to be due to credit-related factors, the Company recognizes the impairment by way of an allowance for credit loss in Interest and other, net in the Condensed Consolidated Statement of Earnings while the impairment that is not credit related is recorded in Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets.
Recently Enacted Accounting Pronouncements
In January 2020, the FASB issued guidance to clarify certain interactions between the guidance to account for equity securities, the guidance to account for investments under the equity method of accounting, and the guidance to account for derivatives and hedging. The new guidance clarifies the application of measurement alternatives and the accounting for certain forward contracts and purchased options to acquire investments. The Company is required to adopt the guidance in the first quarter of fiscal 2022, though early adoption is permitted. The Company is currently evaluating the timing and the impact of these amendments on its Consolidated Financial Statements.
There have been no other significant changes to the Company's accounting policies, or recently adopted or enacted accounting pronouncements disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2020.
Note 2: Segment Information
As described in Note 1, "Overview and Summary of Significant Accounting Policies", effective at the beginning of the first quarter of fiscal 2021, the Company implemented certain organizational changes to align its segment financial reporting more closely with its current business structure. Hewlett Packard Enterprise's operations are now organized into six segments for financial reporting purposes: Compute, HPC & MCS, Storage, Intelligent Edge, Financial Services ("FS"), and Corporate Investments and Other. Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker ("CODM"), who is the Chief Executive Officer ("CEO"), uses to evaluate, view and run the
14
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Company's business operations, which include, but are not limited to, customer base and homogeneity of products and technology. The six segments are based on this organizational structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results. A summary description of each segment follows.
Compute portfolio offers both general purpose servers for multi-workload computing and workload optimized servers to
offer the best performance and value for demanding applications. This portfolio of products includes the HPE Proliant rack and
tower servers; HPE BladeSystem, and HPE Synergy. Compute offerings also include operational and support services.
High Performance Computing & Mission-Critical Solutions portfolio offers specialized compute servers designed to support specific use cases. The HPC portfolio of products includes the HPE Apollo and Cray high performance computing products that are often sold as supercomputing systems, including exascale supercomputers. The MCS portfolio includes the HPE Superdome Flex, HPE Nonstop and HPE Integrity product lines. The HPC & MCS segment also includes the Converged Edge Systems business which consists of the HPE Moonshot and HPE Edgeline products. HPC & MCS offerings also include operational and support services.
Storage portfolio offers workload optimized storage product and service offerings which include an intelligent hyperconverged infrastructure ("HCI") with HPE Nimble Storage dHCI and HPE SimpliVity. The portfolio also includes HPE Primera, HPE Nimble Storage and HPE 3PAR Storage for mission-critical and general-purpose workloads, HPE Recovery Manager Central, HPE StoreOnce, HPE Cloud Volumes Backup and Big Data solutions. Storage also provides solutions for secondary workloads and traditional tape, storage networking and disk products, such as HPE Modular Storage Arrays ("MSA") and HPE XP. Storage offerings also include operational and support services.
Intelligent Edge portfolio offers wired and wireless local area network "(LAN"), campus and data center switching, software-defined wide-area-networking, security, and associated services to enable secure connectivity for businesses of any size. The HPE Aruba product portfolio includes products such as Wi-Fi access points, switches, routers, and sensors. The HPE Aruba software and services portfolio includes software products for cloud-based management, network management, network access control, analytics and assurance, location services software and professional and support services, as well as as-a Service ("aaS") and consumption models for the Intelligent Edge portfolio of products.
Financial Services provides flexible investment solutions, such as leasing, financing, IT consumption, and utility programs and asset management services, for customers that facilitate unique technology deployment models and the acquisition of complete IT solutions, including hardware, software and services from Hewlett Packard Enterprise and others.
Corporate Investments and Other includes the Communications and Media Solutions business ("CMS") which primarily offers software and related services to the telecommunications industry; the HPE Software business which offers HPE Ezmeral Container Platform and HPE Ezmeral Data Fabric, and incubates other software related technology innovation; the A & PS business which primarily offers consultative-led services, HPE and partner technology expertise and advice, implementation services as well as complex solution engagement capabilities; and the Hewlett Packard Labs which is responsible for research and development.
Segment Policy
There have been no changes to the Company's segment accounting policies disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2020, except for the organizational changes and the change in allocation of stock based compensation expense described in Note 1, "Overview and Summary of Significant Accounting Policies".
Hewlett Packard Enterprise does not allocate to its segments certain operating expenses, which it manages at the corporate level. These unallocated operating costs include certain corporate costs and eliminations, stock-based compensation expense, amortization of initial direct costs, amortization of intangible assets, impairment of goodwill, transformation costs, disaster charges, acquisition, disposition and other related charges.
15
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Segment Operating Results
Segment net revenue and segment operating results were as follows:
  Compute HPC & MCS Storage Intelligent Edge Financial
Services 		Corporate
Investments and Other 		Total
  In millions
Three months ended January 31, 2021          
Net revenue $ 2,930  $ 746  $ 1,174  $ 803  $ 859  $ 321  $ 6,833 
Intersegment net revenue 56  16  19  3  1  —  95 
Total segment net revenue $ 2,986  $ 762  $ 1,193  $ 806  $ 860  $ 321  $ 6,928 
Segment earnings (loss) from operations $ 342  $ 43  $ 235  $ 152  $ 84  $ (31) $ 825 
Three months ended January 31, 2020          
Net revenue $ 2,982  $ 831  $ 1,237  $ 715  $ 857  $ 327  $ 6,949 
Intersegment net revenue 48  8  15  5  2  —  78 
Total segment net revenue $ 3,030  $ 839  $ 1,252  $ 720  $ 859  $ 327  $ 7,027 
Segment earnings (loss) from operations $ 324  $ 63  $ 251  $ 87  $ 75  $ (53) $ 747 
The reconciliation of segment operating results to Hewlett Packard Enterprise Condensed Consolidated Financial statements was as follows:
  Three Months Ended
January 31,
  2021 2020
  In millions
Net Revenue:  
Total segments $ 6,928  $ 7,027 
Eliminations of intersegment net revenue (95) (78)
Total Hewlett Packard Enterprise consolidated net revenue $ 6,833  $ 6,949 
Earnings before taxes:    
Total segment earnings from operations $ 825  $ 747 
Unallocated corporate costs and eliminations (52) (52)
Stock-based compensation expense (110) (93)
Amortization of initial direct costs (2) (3)
Amortization of intangible assets (110) (120)
Transformation costs (311) (89)
Acquisition, disposition and other related charges (18) (42)
Interest and other, net (44) (19)
Tax indemnification adjustments (16) (21)
Non-service net periodic benefit credit 17  37 
Earnings from equity interests 26  33 
Total Hewlett Packard Enterprise consolidated earnings before taxes $ 205  $ 378 
16
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Total assets by segment and the reconciliation of segment assets to Hewlett Packard Enterprise consolidated total assets were as follows:
As of
January 31, 2021 October 31, 2020
In millions
Compute $ 14,927  $ 14,962 
HPC & MCS 5,902  6,245 
Storage 6,397  6,438 
Intelligent Edge 4,318  4,352 
Financial Services 14,605  14,765 
Corporate Investments and Other 1,067  1,124 
Corporate and unallocated assets 6,235  6,129 
Total Hewlett Packard Enterprise consolidated assets $ 53,451  $ 54,015 
The Company’s net revenue by geographic region was as follows:
Three Months Ended January 31,
2021 2020
In millions
Americas:
United States $ 2,178  $ 2,318 
Americas excluding U.S. 435  468 
Total Americas 2,613  2,786 
Europe, Middle East and Africa 2,620  2,560 
Asia Pacific and Japan 1,600  1,603 
Total Hewlett Packard Enterprise consolidated net revenue $ 6,833  $ 6,949 

Note 3: Transformation Programs
Transformation programs are comprised of the cost optimization and prioritization plan, and the HPE Next initiative.
During the third quarter of fiscal 2020, the Company launched the cost optimization and prioritization plan which focuses on realigning the workforce to areas of growth, including a new hybrid workforce model called Edge-to-Office, real estate strategies and simplifying and evolving our product portfolio strategy. The changes to the workforce will vary by country, based on business needs, local legal requirements and consultations with employee works councils and other employee representatives, as appropriate. The implementation period of the cost optimization and prioritization plan is through fiscal 2023. During this time the Company expects to incur transformation costs predominantly related to labor restructuring, non-labor restructuring, IT investments, design and execution charges and real estate initiatives.
During the third quarter of fiscal 2017, the Company launched an initiative called HPE Next to put in place a purpose-built company designed to compete and win in the markets where it participates. Through this program, the Company is simplifying the operating model, and streamlining our offerings, business processes and business systems to improve our execution. The implementation period of the HPE Next initiative is through fiscal 2023. As of October 31, 2020, the headcount exits under HPE Next Plan are complete. During the remaining implementation period, the Company expects to incur transformation costs predominantly related to IT infrastructure costs for streamlining, upgrading and simplifying back-end operations, and real estate initiatives. These costs are expected to be partially offset by gains from real estate sales.
17
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Transformation Costs
During the three months ended January 31, 2021, the Company incurred $252 million of charges related to the cost optimization and prioritization plan which is recorded within Transformation costs, the components of which were as follows:
  Three months ended January 31, 2021
  In millions
Program management $ 37 
Restructuring charges 215 
Total transformation costs $ 252 
During the three months ended January 31, 2021 and 2020, the Company incurred $59 million and $89 million, respectively, in net charges associated with HPE Next which were recorded within Transformation costs in the Condensed Consolidated Statements of Earnings. The components of Transformation costs relating to HPE Next were as follows:
  Three months ended January 31,
2021 2020
  In millions
Program management $ 2  $ 11 
IT costs 26  28 
Restructuring charges 17  84 
Gain on real estate sales (1) (34)
Other 15  — 
Total transformation costs $ 59  $ 89 
Restructuring Plan
Restructuring activities related to the Company's employees and infrastructure under the cost optimization and prioritization plan and HPE Next Plan, were presented in the table below:
Cost Optimization and Prioritization Plan HPE Next Plan
  Employee
Severance 		Infrastructure
and other 		Employee
Severance 		Infrastructure
and other
In millions
Liability as of October 31, 2020 $ 210  $ 68  $ 144  $ 52 
Charges 54  161  —  17 
Cash payments (117) (25) (65) (13)
Non-cash items 6  (37) 4  (2)
Liability as of January 31, 2021
$ 153  $ 167  $ 83  $ 54 
Total costs incurred to date, as of January 31, 2021
$ 284  $ 260  $ 1,261  $ 242 
Total expected costs to be incurred as of January 31, 2021
$ 700  $ 610  $ 1,261  $ 248 

The current restructuring liability related to the transformation programs, reported in Condensed Consolidated Balance Sheets at January 31, 2021 and October 31, 2020, was $234 million and $359 million, respectively, in accrued restructuring, and $42 million and $24 million, respectively, in Other accrued liabilities. The non-current restructuring liability related to the transformation programs, reported in Other non-current liabilities in the Condensed Consolidated Balance Sheets as of January 31, 2021 and October 31, 2020, was $181 million and $91 million, respectively.

18
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Note 4: Retirement Benefit Plans
The Company's net pension benefit (credit) cost for defined benefit plans recognized in the Condensed Consolidated Statements of Earnings was as follows:
  Three months ended January 31,
  2021 2020
  In millions
Service cost $ 24  $ 23 
Interest cost(1)
29  36 
Expected return on plan assets(1)
(119) (135)
Amortization and deferrals(1):
   
Actuarial loss 74  64 
Prior service benefit (3) (3)
Net periodic benefit (credit) cost 5  (15)
Settlement loss(1)
1  — 
Total net benefit (credit) cost $ 6  $ (15)

(1)These non-service components of net periodic benefit cost were included in Non-service net periodic benefit credit in the Condensed Consolidated Statements of Earnings.
Note 5: Taxes on Earnings
Provision for Taxes
The Company's effective tax rate was (8.8)% and 11.9% for the three months ended January 31, 2021 and 2020, respectively. The effective tax rate generally differs from the U.S. federal statutory rate of 21% due to favorable tax rates associated with certain earnings from the Company’s operations in lower tax jurisdictions throughout the world but are also impacted by discrete tax adjustments during each fiscal period.

For the three months ended January 31, 2021, the Company recorded $90 million of net income tax benefits related to various items discrete to the period. The amount primarily included $66 million of income tax benefits related to transformation costs, and acquisition, disposition and other related charges and $30 million of income tax benefits related to the change in pre-Separation tax liabilities, primarily those for which we share joint and several liability with HP Inc. and for which we are indemnified by HP Inc.
For the three months ended January 31, 2020, the Company recorded $16 million of net income tax benefits related to various items discrete to the period. The amount primarily included $21 million of income tax benefits related to the change in pre-Separation tax liabilities for which the Company shares joint and several liability with HP Inc. and for which the Company is indemnified by HP Inc.
Uncertain Tax Positions
As of January 31, 2021 and October 31, 2020, the amount of unrecognized tax benefits was $2.1 billion and $2.2 billion, respectively, of which up to $702 million and $731 million, respectively, would affect the Company's effective tax rate if realized as of their respective periods.
For tax liabilities pertaining to unrecognized tax benefits, the Company recognizes interest income from favorable settlements and interest expense and penalties in (Provision) benefit for taxes in the Condensed Consolidated Statements of Earnings. As of January 31, 2021 and October 31, 2020, the Company had accrued $112 million and $119 million, respectively, for interest and penalties in the Condensed Consolidated Balance Sheets.
The Company engages in continuous discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. The Company does not expect complete resolution of any U.S. Internal Revenue Service ("IRS") audit cycle within the next 12 months. However, it is reasonably possible that certain federal, foreign and state tax issues may be concluded in the next 12 months, including issues involving resolution of certain intercompany transactions, joint and several tax liabilities
19
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
and other matters. Accordingly, the Company believes it is reasonably possible that its existing unrecognized tax benefits may be reduced by an amount up to $47 million within the next 12 months.
Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities included in the Condensed Consolidated Balance Sheets were as follows:
  As of
  January 31, 2021 October 31, 2020
  In millions
Deferred tax assets $ 1,885  $ 1,778 
Deferred tax liabilities (308) (290)
Deferred tax assets net of deferred tax liabilities $ 1,577  $ 1,488 

Note 6: Balance Sheet Details
Balance sheet details were as follows:
Cash, cash equivalents and restricted cash
As of
January 31, 2021 October 31, 2020
In millions
Cash and cash equivalents $ 4,165  $ 4,233 
Restricted cash(1)
308  388 
Total $ 4,473  $ 4,621 

(1) The Company includes restricted cash in Other current assets in the accompanying Condensed Consolidated Balance Sheets.
Inventory
  As of
  January 31, 2021 October 31, 2020
  In millions
Finished goods $ 1,203  $ 1,197 
Purchased parts and fabricated assemblies 1,588  1,477 
Total $ 2,791  $ 2,674 
Property, Plant and Equipment
  As of
  January 31, 2021 October 31, 2020
  In millions
Land $ 79  $ 89 
Buildings and leasehold improvements 1,720  1,886 
Machinery and equipment, including equipment held for lease 9,771  9,624 
11,570  11,599 
Accumulated depreciation (5,997) (5,974)
Total $ 5,573  $ 5,625 
20
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Warranties
The Company's aggregate product warranty liability as of January 31, 2021, and changes were as follows:
  Three Months Ended
January 31, 2021
  In millions
Balance at beginning of period $ 385 
Charges 55 
Adjustments related to pre-existing warranties (10)
Settlements made (60)
Balance at end of period $ 370 
Contract balances
The Company’s contract balances consist of contract assets, contract liabilities, and costs to obtain a contract with a customer.
Contract Assets
A summary of accounts receivable, net, including unbilled receivables was as follows:
As of
January 31, 2021 October 31, 2020
In millions
Accounts receivable, net
Accounts receivable $ 2,769  $ 3,227 
Unbilled receivables 211  205 
Allowances (47) (46)
Total $ 2,933  $ 3,386 
The allowances for credit losses related to accounts receivable and changes therein were as follows:
  As of
  January 31, 2021 October 31, 2020
  In millions
Balance at beginning of the period $ 46  $ 31 
Provision for credit losses 3  29 
Write off's, net of recoveries (2) (14)
Balance at end of the period $ 47  $ 46 
Sale of Trade Receivables
The Company has third-party revolving short-term financing arrangements intended to facilitate the working capital requirements of certain customers. During the three months ended January 31, 2021, the Company sold $1.1 billion of trade receivables. During the twelve months ended October 31, 2020, the Company sold $3.9 billion of trade receivables. The Company recorded an obligation of $74 million and $75 million in Notes payable and short-term borrowings in its Condensed Consolidated Balance Sheets as of January 31, 2021 and October 31, 2020 respectively, related to the trade receivables sold and collected from the third-party for which the revenue recognition was deferred.
Contract Liabilities
Contract liabilities consist of deferred revenue. The aggregate balance of current and non-current deferred revenue was $6.3 billion and $6.2 billion as of January 31, 2021 and October 31, 2020, respectively. During the three months ended January 31, 2021, approximately $1.2 billion of the deferred revenue as of October 31, 2020 was recognized as revenue.
21
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents contract work that has not yet been performed and does not include contracts where the customer is not committed. Remaining performance obligations estimates are subject to change and are affected by several factors, including contract terminations, changes in the scope of contracts, adjustments for revenue that has not materialized and adjustments for currency.
Remaining performance obligations consist of deferred revenue. As of January 31, 2021, the aggregate amount of remaining performance obligations was $6.3 billion. The Company expects to recognize approximately 44% of this amount as revenue over the remainder of the fiscal year.
Costs to Obtain a Contract
As of January 31, 2021, the current and non-current portions of the capitalized costs to obtain a contract were $56 million and $81 million, respectively. As of October 31, 2020, the current and non-current portions of the capitalized costs to obtain a contract were $54 million and $76 million, respectively. The current and non-current portions of the capitalized costs to obtain a contract were included in Other current assets and Long-term financing receivables and other assets, respectively, in the Condensed Consolidated Balance Sheet. For the three months ended January 31, 2021 and 2020, the Company amortized $15 million and $14 million respectively, of capitalized costs to obtain a contract. The amortized capitalized costs to obtain a contract are included in Selling, general and administrative expense in the Condensed Consolidated Statement of Earnings.
Note 7: Accounting for Leases as a Lessor
Financing receivables represent sales-type and direct-financing leases of the Company and third-party products. These receivables typically have terms ranging from two to five years and are usually collateralized by a security interest in the underlying assets. Financing receivables also include billed receivables from operating leases. The allowance for credit losses represents future expected credit losses over the life of the receivables based on past experience, current information and forward-looking economic considerations. The components of financing receivables were as follows:
  As of
  January 31, 2021 October 31, 2020
  In millions
Minimum lease payments receivable $ 9,532  $ 9,448 
Unguaranteed residual value 375  364 
Unearned income (750) (754)
Financing receivables, gross 9,157  9,058 
Allowance for credit losses
(203) (154)
Financing receivables, net 8,954  8,904 
Less: current portion (3,883) (3,794)
Amounts due after one year, net $ 5,071  $ 5,110 
22
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
As of January 31, 2021 and October 31, 2020, scheduled maturities of the Company's minimum lease payments receivable were as follows:
As of
January 31, 2021 October 31, 2020
Fiscal year In millions
Remainder of fiscal 2021 $ 3,328  $ 4,182 
2022 2,910  2,662 
2023 1,872  1,572 
2024 960  720 
2025 372  252 
Thereafter 90  60 
Total undiscounted cash flows $ 9,532  $ 9,448 
   Present value of lease payments (recognized as finance receivables) $ 8,782  $ 8,694 
   Unearned income $ 750  $ 754 
Sale of Financing Receivables
The Company enters into arrangements to transfer the contractual payments due under certain financing receivables to third party financial institutions. For the transfer of receivables that qualifies the true-sale accounting criteria in accordance with Accounting Standards Codification ("ASC") 860 - Transfers and Servicing of Financial Assets, the Company derecognizes the carrying value of the receivable transferred and recognizes a net gain or loss on the sale. For transfer of receivables that do not satisfy the true-sale accounting criteria, the Company accounts the obligation as unsecured debt and records the short-term portion in Notes payable and short-term borrowings and long-term portion in Long-term debt in its Condensed Consolidated Balance Sheets. During the three months ended January 31, 2021 the Company sold $57 million of financing receivables, for which $11 million did not satisfy the true-sale accounting criteria. During the fiscal year ended October 31, 2020, the Company sold $103 million of financing receivables.
Credit Quality Indicators
Due to the homogeneous nature of its leasing transactions, the Company manages its financing receivables on an aggregate basis when assessing and monitoring credit risk. Credit risk is generally diversified due to the large number of entities comprising the Company's customer base and their dispersion across many different industries and geographic regions. The Company evaluates the credit quality of an obligor at lease inception and monitors that credit quality over the term of a transaction. The Company assigns risk ratings to each lease based on the creditworthiness of the obligor and other variables that augment or mitigate the inherent credit risk of a particular transaction. Such variables include the underlying value and liquidity of the collateral, the essential use of the equipment, the term of the lease, and the inclusion of credit enhancements, such as guarantees, letters of credit or security deposits.
The credit risk profile of financing receivables, based on internal risk ratings as of January 31, 2021, presented on amortized cost basis by year of origination was as follows:

 
As of January 31, 2021
Risk Rating
Low Moderate High
Fiscal Year In millions
2021 $ 483  $ 434  $ 28 
2020 1,882  1,522  84 
2019 1,257  1,120  79 
2018 671  679  82 
2017 and prior 338  408  90 
Total $ 4,631  $ 4,163  $ 363 

23
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The credit risk profile of gross financing receivables, based on internal risk ratings as of October 31, 2020, was as follows:
  As of
  October 31, 2020
  In millions
Risk Rating:  
Low $ 4,590 
Moderate 4,091 
High 377 
Total $ 9,058 
Accounts rated low risk typically have the equivalent of a Standard & Poor's rating of BBB– or higher, while accounts rated moderate risk generally have the equivalent of BB+ or lower. The Company classifies accounts as high risk when it considers the financing receivable to be impaired or when management believes there is a significant near-term risk of impairment. Effective November 1, 2020, under the new guidance for credit losses, the Company discloses its credit quality by year of origination. The credit quality indicators do not reflect any mitigation actions taken to transfer credit risk to third parties.
Allowance for Credit Losses
The allowance for credit losses for financing receivables as of January 31, 2021 and October 31, 2020 and the respective changes during the three and twelve months then ended were as follows:
  As of
  January 31, 2021 October 31, 2020
  In millions
Balance at beginning of period $ 154  $ 131 
Adjustment for adoption of the new credit loss standard 28  — 
Provision for credit losses 18  43 
Adjustment to the existing allowance 19  — 
Write-offs (16) (20)
Balance at end of period $ 203  $ 154 
Non-Accrual and Past-Due Financing Receivables
The following table summarizes the aging and non-accrual status of gross financing receivables:
  As of
  January 31, 2021 October 31, 2020
  In millions
Billed:(1)
   
Current 1-30 days $ 379  $ 340 
Past due 31-60 days 41  43 
Past due 61-90 days 30  22 
Past due > 90 days 125  140 
Unbilled sales-type and direct-financing lease receivables 8,582  8,513 
Total gross financing receivables $ 9,157  $ 9,058 
Gross financing receivables on non-accrual status(2)
$ 367  $ 364 
Gross financing receivables 90 days past due and still accruing interest(2)
$ 95  $ 74 

(1)Includes billed operating lease receivables and billed sales-type and direct-financing lease receivables.
(2)Includes billed operating lease receivables and billed and unbilled sales-type and direct-financing lease receivables.
24
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Operating Leases
Operating lease assets included in Property, plant and equipment in the Condensed Consolidated Balance Sheets were as follows:
  As of
  January 31, 2021 October 31, 2020
  In millions
Equipment leased to customers $ 7,225  $ 7,184 
Accumulated depreciation (3,218) (3,157)
Total $ 4,007  $ 4,027 
Minimum future rentals on non-cancelable operating leases related to leased equipment were as follows:
As of
January 31, 2021
Fiscal year In millions
Remainder of fiscal 2021 $ 1,432 
2022 1,219 
2023 577 
2024 117 
2025 11 
Thereafter 1 
Total $ 3,357 
If a lease is classified as an operating lease, the Company records lease revenue on a straight line basis over the lease term. At commencement of an operating lease, initial direct costs are deferred and are expensed over the lease term on the same basis as the lease revenue is recorded.
The following table presents amounts included in the Condensed Consolidated Statement of Earnings related to lessor activity as of January 31, 2021:
Three Months Ended January 31,
2021 2020
In millions
Sales-type leases and direct financing leases:
Interest income $ 122  $ 113 
Lease income - operating leases 604  625 
Total lease income $ 726  $ 738 
Variable Interest Entities
The Company has issued asset-backed debt securities under a fixed-term securitization program to private investors. The asset-backed debt securities are collateralized by the U.S. fixed-term financing receivables and leased equipment in the offering, which is held by a Special Purpose Entity (“SPE”). The SPE meets the definition of a VIE and is consolidated, along with the associated debt, into the Condensed Consolidated Financial Statements as the Company is the primary beneficiary of the VIE. The SPE is a bankruptcy-remote legal entity with separate assets and liabilities. The purpose of the SPE is to facilitate the funding of customer receivables and leased equipment in the capital markets.
The Company’s risk of loss related to securitized receivables and leased equipment is limited to the amount by which the Company’s right to receive collections for assets securitized exceeds the amount required to pay interest, principal, and fees and expenses related to the asset-backed securities.
25
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
The following table presents the assets and liabilities held by the consolidated VIE as of January 31, 2021, which are included in the Condensed Consolidated Balance Sheets. The assets in the table below include those that can be used to settle the obligations of the VIE. Additionally, general creditors do not have recourse to the assets of the VIE.
As of
  January 31, 2021 October 31, 2020
Assets held by VIE In millions
Other current assets $ 119  $ 120 
Financing receivables
Short-term $ 494  $ 531 
Long-term $ 478  $ 584 
Property, plant and equipment $ 569  $ 665 
Liabilities held by VIE
Notes payable and short-term borrowings, net of unamortized debt issuance costs $ 847  $ 886 
Long-term debt, net of unamortized debt issuance costs $ 627  $ 834 

Note 8: Goodwill
The following table represents the change in carrying value of goodwill, by reportable segment, for three months ended January 31, 2021:
  Compute HPC & MCS Storage Intelligent Edge Financial Services Corporate Investments and Other Total
  In millions
Balance at October 31, 2020 and January 31, 2021 (1) (2)
$ 7,532  $ 3,616  $ 3,946  $ 2,566  $ 144  $ 213  $ 18,017 

(1)As a result of the organizational realignments which were effective as of November 1, 2020, (described in Note 1, "Overview and Summary of Significant Accounting Policies"), $213 million of goodwill was reallocated from Storage segment to Corporate Investments and Other segment as of the beginning of the period using a relative fair value approach.
(2)Goodwill is net of accumulated impairment losses of $953 million. Of this amount, $865 million related to the HPC & MCS reporting unit was recorded during the second quarter of 2020 and $88 million related to the CMS reporting unit within Corporate Investments and Other was recorded during the fourth quarter of fiscal 2018. There is no goodwill remaining in the CMS reporting unit.
Effective at the beginning of the first quarter of fiscal 2021, the Company's operations were realigned into six segments for financial reporting purposes. The Company's reporting units containing goodwill are consistent with the reportable segments identified in Note 2, "Segment Information" with the exception of Corporate Investments and Other which is made up of three reporting units, A & PS, CMS, and Software, of which only Software has goodwill. As a result of this realignment, the Company performed an interim quantitative goodwill impairment test for all of its reporting units as of November 1, 2020, which did not result in any goodwill impairment charges. The fair value of all reporting units continued to exceed the carrying value of their net assets. The excess of fair value over carrying value for our reporting units ranged from approximately 8% to 37% of the respective carrying values. In order to evaluate the sensitivity of the estimated fair value of our reporting units in the goodwill impairment test, the Company applied a hypothetical 10% decrease to the fair value of each reporting unit. Based on the results of this hypothetical 10% decrease all of the reporting units had an excess of fair value over carrying value, with the exception of HPC & MCS reporting unit.
As of the interim test date, the HPC & MCS reporting unit has goodwill of $3.6 billion and an excess of fair value over carrying value of net assets of 8%. The fair value of the HPC & MCS reporting unit was based on a weighting of fair values derived most significantly from the income approach, and to a lesser extent, the market approach. The HPC & MCS business is facing challenges on the current and projected future results as the revenue growth is dependent on timing of delivery and related achievement of customer acceptance milestones. If the Company is not successful in addressing these challenges, the projected revenue growth rates or operating margins could decline resulting in a decrease in the fair value of the HPC & MCS reporting unit. The fair value of the HPC & MCS reporting unit could also be negatively impacted by changes in its weighted
26
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
average cost of capital, changes in management's business strategy or significant and sustained declines in the stock price, which could result in an indicator of impairment.
In addition, should economic conditions deteriorate, estimates of future cash flows for each of the Company's reporting units may be insufficient to support the carrying value and the goodwill assigned to them, requiring impairment charges. Further impairment charges, if any, may be material to the results of operations and financial position.
The Company will continue to evaluate the recoverability of goodwill on an annual basis as of the beginning of its fourth fiscal quarter and whenever events or changes in circumstances indicate there may be a potential impairment.
Note 9: Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.
The following table presents the Company's assets and liabilities that are measured at fair value on a recurring basis:
  As of January 31, 2021 As of October 31, 2020
  Fair Value
Measured Using 		Fair Value
Measured Using
 
Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Remaining Inputs (Level 2)
Significant Other Unobservable Remaining Inputs
(Level 3)
Total
Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Remaining Inputs (Level 2)
Significant Other Unobservable Remaining Inputs
(Level 3)
Total
  In millions
Assets                
Cash Equivalents and Investments:                
Time deposits $ —  $ 821  $ —  $ 821  $ —  $ 939  $ —  $ 939 
Money market funds 1,605  —  —  1,605  1,167  —  —  1,167 
Foreign bonds —  132  —  132  —  125  —  125 
Other debt securities —  —  20  20  —  —  21  21 
Derivative Instruments:                
Interest rate contracts —  202  —  202  —  220  —  220 
Foreign exchange contracts —  144  —  144  —  290  —  290 
Other derivatives —  1  —  1  —  —  —  — 
Total assets $ 1,605  $ 1,300  $ 20  $ 2,925  $ 1,167  $ 1,574  $ 21  $ 2,762 
Liabilities                
Derivative Instruments:                
Interest rate contracts $ —  $ 1  $ —  $ 1  $ —  $ 2  $ —  $ 2 
Foreign exchange contracts —  360  —  360  —  189  —  189 
Other derivatives —  1  —  1  —  3  —  3 
Total liabilities $ —  $ 362  $ —  $ 362  $ —  $ 194  $ —  $ 194 
The Company uses valuation techniques that are based upon observable and unobservable inputs. Observable inputs are developed using market data such as publicly available information and reflect the assumptions market participants would use, while unobservable inputs are developed using the best information available about the assumptions market participants would use.
Other Fair Value Disclosures
Short-Term and Long-Term Debt: At January 31, 2021 and October 31, 2020, the estimated fair value of the Company's short-term and long-term debt was $17.0 billion and $17.1 billion, respectively. At January 31, 2021 and October 31, 2020, the carrying value of the Company's short-term and long-term debt was $15.7 billion and $15.9 billion, respectively.
27
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
In the second quarter of fiscal 2020, the Company recorded a goodwill impairment charge of $865 million associated with the HPC & MCS reporting unit. The fair value of the Company's reporting units was classified in Level 3 of the fair value hierarchy due to the significance of unobservable inputs developed using company-specific information. For more information on the goodwill impairment, see Note 8 "Goodwill".
Note 10: Financial Instruments
Cash Equivalents and Available-for-Sale Debt Investments
Cash equivalents and available-for-sale debt investments were as follows:
  As of January 31, 2021 As of October 31, 2020
  Cost Gross Unrealized Gain Fair
Value 		Cost Gross Unrealized Gain Fair
Value
  In millions
Cash Equivalents:            
Time deposits $ 821  $ —  $ 821  $ 939  $ —  $ 939 
Money market funds 1,605  —  1,605  1,167  —  1,167 
Total cash equivalents 2,426  —  2,426  2,106  —  2,106 
Available-for-Sale Debt Investments:            
Foreign bonds 112  20  132  108  17  125 
Other debt securities 19  1  20  20  1  21 
Total available-for-sale debt investments 131  21  152  128  18  146 
Total cash equivalents and available-for-sale debt investments $ 2,557  $ 21  $ 2,578  $ 2,234  $ 18  $ 2,252 
As of January 31, 2021 and October 31, 2020, the carrying amount of cash equivalents approximated fair value due to the short period of time to maturity. Time deposits were primarily issued by institutions outside of the U.S. as of January 31, 2021 and October 31, 2020. The estimated fair value of the available-for-sale debt investments may not be representative of values that will be realized in the future.
Contractual maturities of available-for-sale debt investments were as follows:
  January 31, 2021
  Amortized Cost Fair Value
  In millions
Due in one year $ 1  $ 1 
Due in more than five years 130  151 
$ 131  $ 152 
Equity securities investments in privately held companies are included in Long-term financing receivables and other assets in the Condensed Consolidated Balance Sheets. The carrying amount of those without readily determinable fair values amounted to $301 million and $295 million at January 31, 2021 and October 31, 2020, respectively.
Investments in equity securities that are accounted for using the equity method are included in Investments in equity interests in the Condensed Consolidated Balance Sheets. These amounted to $2.2 billion at January 31, 2021 and October 31, 2020.
The Company did not recognize any impairments on these equity investments during the three months ended January 31, 2021.
28
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Fair Value of Derivative Instruments in the Condensed Consolidated Balance Sheets
The gross notional and fair value of derivative instruments in the Condensed Consolidated Balance Sheets were as follows:
  As of January 31, 2021 As of October 31, 2020
    Fair Value   Fair Value
  Outstanding
Gross
Notional 		Other
Current
Assets 		Long-Term
Financing
Receivables
and Other
Assets 		Other
Accrued
Liabilities 		Long-Term
Other
Liabilities 		Outstanding
Gross
Notional 		Other
Current
Assets 		Long-Term
Financing
Receivables
and Other
Assets 		Other
Accrued
Liabilities 		Long-Term
Other
Liabilities
  In millions
Derivatives designated as hedging instruments                    
Fair value hedges:                    
Interest rate contracts $ 3,850  $ —  $ 202  $ —  $ —  $ 3,850  $ —  $ 220  $ —  $ — 
Cash flow hedges:                    
Foreign currency contracts 7,749  27  33  179  116  7,652  75  85  95  38 
Interest rate contracts 500  —  —  1  —  500  —  —  2  — 
Net investment hedges:
Foreign currency contracts 1,819  16  29  21  27  1,804  34  44  11  9 
Total derivatives designated as hedging instruments 13,918  43  264  201  143  13,806  109  349  108  47 
Derivatives not designated as hedging instruments                    
Foreign currency contracts 5,816  33  6  14  3  6,157  43  9  35  1 
Other derivatives 123  1  —  1  —  105  —  —  3  — 
Total derivatives not designated as hedging instruments 5,939  34  6  15  3  6,262  43  9  38  1 
Total derivatives $ 19,857  $ 77  $ 270  $ 216  $ 146  $ 20,068  $ 152  $ 358  $ 146  $ 48 
Offsetting of Derivative Instruments
The Company recognizes all derivative instruments on a gross basis in the Condensed Consolidated Balance Sheets. The Company's derivative instruments are subject to master netting arrangements and collateral security arrangements. The Company does not offset the fair value of its derivative instruments against the fair value of cash collateral posted under collateral security agreements. The information related to the potential effect of the Company's use of the master netting agreements and collateral security agreements were as follows:
  As of January 31, 2021
  In the Condensed Consolidated Balance Sheets  
  (i) (ii) (iii) = (i)–(ii) (iv) (v) (vi) = (iii)–(iv)–(v)
        Gross Amounts Not Offset  
  Gross
Amount
Recognized 		Gross
Amount
Offset 		Net Amount
Presented 		Derivatives Financial
Collateral 		Net Amount
  In millions
Derivative assets $ 347  $ —  $ 347  $ 176  $ 188 
(1)
$ (17)
Derivative liabilities $ 362  $ —  $ 362  $ 176  $ 168 
(2)
$ 18 
29
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

  As of October 31, 2020
  In the Condensed Consolidated Balance Sheets  
  (i) (ii) (iii) = (i)–(ii) (iv) (v) (vi) = (iii)–(iv)–(v)
        Gross Amounts Not Offset  
  Gross
Amount
Recognized 		Gross
Amount
Offset 		Net Amount
Presented 		Derivatives Financial
Collateral 		Net Amount
  In millions
Derivative assets $ 510  $ —  $ 510  $ 137  $ 321 
(1)
$ 52 
Derivative liabilities $ 194  $ —  $ 194  $ 137  $ 55 
(2)
$ 2 

(1)Represents the cash collateral posted by counterparties as of the respective reporting date for the Company's asset position, net of derivative amounts that could be offset, as of, generally, two business days prior to the respective reporting date.
(2)Represents the collateral posted by the Company in cash or through the re-use of counterparty cash collateral as of the respective reporting date for the Company's liability position, net of derivative amounts that could be offset, as of, generally, two business days prior to the respective reporting date. As of January 31, 2021, of the $168 million of collateral posted, $67 million was in cash and $101 million was through re-use of counterparty collateral. As of October 31, 2020, $55 million of collateral posted was entirely by way of re-use of counterparty collateral.
The amounts recorded on the Condensed Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges were as follows:
Carrying amount of the hedged assets/ (liabilities) Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets/ (liabilities)
As of As of
January 31, 2021 October 31, 2020 January 31, 2021 October 31, 2020
In millions In millions
Long-term debt $ (4,042) $ (4,059) $ (202) $ (220)
The pre-tax effect of derivative instruments in cash flow and net investment hedging relationships recognized in Other Comprehensive Income ("OCI") were as follows:
Gains (Losses) Recognized in OCI on Derivatives
Three months ended January 31, 2021 Three months ended January 31, 2020
In millions
Derivatives in Cash Flow Hedging relationship
Foreign exchange contracts $ (329) $ 76 
Interest rate contracts —  (1)
Derivatives in Net Investment Hedging relationship
Foreign exchange contracts (74) 21 
Total $ (403) $ 96 
As of January 31, 2021, the Company expects to reclassify an estimated net accumulated other comprehensive loss of approximately $69 million, net of taxes, to earnings in the next twelve months along with the earnings effects of the related forecasted transactions associated with cash flow hedges.
30
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Effect of Derivative Instruments on the Condensed Consolidated Statements of Earnings
The pre-tax effect of derivative instruments on the Condensed Consolidated Statements of Earnings were as follows:

Gains (Losses) Recognized in Income
Three months ended January 31, 2021 Three months ended January 31, 2020
Net revenue Interest and other, net Net revenue Interest and other, net
In millions
Total amounts of income and expense line items presented in the Condensed Consolidated Statements of Earnings in which the effects of fair value hedges, cash flow hedges and derivatives not designated as hedging instruments are recorded $ 6,833  $ (44) $ 6,949  $ (19)
Gains (losses) on derivatives in fair value hedging relationships
Interest rate contracts
Hedged items $ —  $ 18  $ —  $ (29)
Derivatives designated as hedging instruments —  (18) —  29 
Gains (losses) on derivatives in cash flow hedging relationships
Foreign exchange contracts
Amount of gains (losses) reclassified from accumulated other comprehensive income into income (64) (213) 26  43 
Interest rate contracts
Amount of gains (losses) reclassified from accumulated other comprehensive income into income —  (1) —  — 
Gains (losses) on derivatives not designated as hedging instruments
Foreign exchange contracts —  (41) —  (54)
Other derivatives —  1  —  (3)
Total gains (losses) $ (64) $ (254) $ 26  $ (14)

Note 11: Borrowings
Notes Payable, Short-Term Borrowings and Long-Term Debt
Notes payable, short-term borrowings, including the current portion of long-term debt, and long-terms debt were as follows:
As of
January 31, 2021 October 31, 2020
In millions
Current portion of long-term debt $ 2,712  $ 2,768 
FS commercial paper 686  677 
Notes payable to banks, lines of credit and other 329  310 
Total notes payable and short-term borrowings $ 3,727  $ 3,755 
Long-term debt 11,963  12,186 
Total Debt $ 15,690  $ 15,941 
31
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Asset-backed Debt Securities
In March 2021, the Company issued $1.0 billion of asset-backed debt securities in six tranches at a weighted average price of 99.99% and a weighted average interest rate of 0.49%, payable monthly from April 2021 with a stated final maturity date of March 2031.
Commercial Paper
Hewlett Packard Enterprise maintains two commercial paper programs, "the Parent Programs", and a wholly-owned subsidiary maintains a third program. Hewlett Packard Enterprise's U.S. program provides for the issuance of U.S. dollar-denominated commercial paper up to a maximum aggregate principal amount of $4.75 billion. Hewlett Packard Enterprise's euro commercial paper program provides for the issuance of commercial paper outside of the U.S. denominated in U.S. dollars, euros or British pounds up to a maximum aggregate principal amount of $3.0 billion or the equivalent in those alternative currencies. The combined aggregate principal amount of commercial paper outstanding under those two programs at any one time cannot exceed the $4.75 billion as authorized by Hewlett Packard Enterprise's Board of Directors. In addition, the Hewlett Packard Enterprise subsidiary's euro Commercial Paper/Certificate of Deposit Program provides for the issuance of commercial paper in various currencies of up to a maximum aggregate principal amount of $1.0 billion. As of January 31, 2021 and October 31, 2020, no borrowings were outstanding under the Parent Programs, and $686 million and $677 million, respectively, were outstanding under the subsidiary’s program.
Note 12: Stockholders' Equity
The components of Accumulated other comprehensive loss, net of taxes as of January 31, 2021, and changes during the three months ended January 31, 2021 were as follows:
  Net unrealized
gains (losses) on
available-for-sale
securities 		Net unrealized
gains (losses)
on cash
flow hedges 		Unrealized
components
of defined
benefit plans 		Cumulative
translation
adjustment 		Accumulated
other
comprehensive
loss
  In millions
Balance at beginning of period $ 18  $ (7) $ (3,473) $ (477) $ (3,939)
Other comprehensive (loss) income before reclassifications 3  (329) —  21  (305)
Reclassifications of (gains) losses into earnings —  278  72  —  350 
Tax (provision) benefit —  5  (5) (2) (2)
Balance at end of period $ 21  $ (53) $ (3,406) $ (458) $ (3,896)
The components of Accumulated other comprehensive loss, net of taxes as of January 31, 2020, and changes during the three months ended January 31, 2020 were as follows:
  Net unrealized
gains (losses) on
available-for-sale
securities 		Net unrealized
gains (losses)
on cash
flow hedges 		Unrealized
components
of defined
benefit plans 		Cumulative
translation
adjustment 		Accumulated
other
comprehensive
loss
  In millions
Balance at beginning of period $ 23  $ 53  $ (3,366) $ (437) $ (3,727)
Effect of change in accounting principle —  (10) —  (33) (43)
Other comprehensive (loss) income before reclassifications 2  75  17  (4) 90 
Reclassifications of (gains) losses into earnings (3) (69) 61  —  (11)
Tax (provision) benefit —  (1) (9) 1  (9)
Balance at end of period $ 22  $ 48  $ (3,297) $ (473) $ (3,700)
Share Repurchase Program
On April 6, 2020, the Company announced that it suspended purchases under its share repurchase program in response to the global economic uncertainty that resulted from the worldwide spread of COVID-19. As of January 31, 2021, the Company had a remaining authorization of $2.1 billion for future share repurchases.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
Note 13: Net Earnings Per Share
The Company calculates basic net EPS using net earnings and the weighted-average number of shares outstanding during the reporting period. Diluted net EPS includes the weighted-average dilutive effect of restricted stock units, stock options, and performance-based awards.
The reconciliations of the numerators and denominators of each of the basic and diluted net EPS calculations were as follows:
  Three Months Ended January 31,
  2021 2020
  In millions, except per share amounts
Numerator:    
Net earnings $ 223  $ 333 
Denominator:    
Weighted-average shares used to compute basic net EPS 1,300  1,300 
Dilutive effect of employee stock plans 15  15 
Weighted-average shares used to compute diluted net EPS 1,315  1,315 
Net earnings per share:    
Basic $ 0.17  $ 0.26 
Diluted $ 0.17  $ 0.25 
Anti-dilutive weighted-average stock awards(1)
22  1 

(1)The Company excludes shares potentially issuable under employee stock plans that could dilute basic net EPS in the future from the calculation of diluted net earnings per share, as their effect, if included, would have been anti-dilutive for the periods presented.
Note 14: Litigation and Contingencies
Hewlett Packard Enterprise is involved in various lawsuits, claims, investigations and proceedings including those consisting of intellectual property, commercial, securities, employment, employee benefits and environmental matters, which arise in the ordinary course of business. In addition, as part of the Separation and Distribution Agreement, Hewlett Packard Enterprise and HP Inc. (formerly known as "Hewlett-Packard Company") agreed to cooperate with each other in managing certain existing litigation related to both parties' businesses. The Separation and Distribution Agreement included provisions that allocate liability and financial responsibility for pending litigation involving the parties, as well as provide for cross-indemnification of the parties against liabilities to one party arising out of liabilities allocated to the other party. The Separation and Distribution Agreement also included provisions that assign to the parties responsibility for managing pending and future litigation related to the general corporate matters of HP Inc. arising prior to the Separation. Hewlett Packard Enterprise records a liability when it believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. Significant judgment is required to determine both the probability of having incurred a liability and the estimated amount of the liability. Hewlett Packard Enterprise reviews these matters at least quarterly and adjusts these liabilities to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other updated information and events pertaining to a particular matter. Litigation is inherently unpredictable. However, Hewlett Packard Enterprise believes it has valid defenses with respect to legal matters pending against us. Nevertheless, cash flows or results of operations could be materially affected in any particular period by the resolution of one or more of these contingencies. Hewlett Packard Enterprise believes it has recorded adequate provisions for any such matters and, as of January 31, 2021, it was not reasonably possible that a material loss had been incurred in connection with such matters in excess of the amounts recognized in its financial statements.
Litigation, Proceedings and Investigations
Ross and Rogus v. Hewlett Packard Enterprise Company. On November 8, 2018, a putative class action complaint was filed in the Superior Court of California, County of Santa Clara alleging that HPE pays its California-based female employees “systemically lower compensation” than HPE pays male employees performing substantially similar work. The complaint alleges various California state law claims, including California’s Equal Pay Act, Fair Employment and Housing Act, and Unfair Competition Law, and seeks certification of a California-only class of female employees employed in certain “Covered Positions.” The complaint seeks damages, statutory and civil penalties, attorneys’ fees and costs. On April 2, 2019, HPE filed a
33
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
demurrer to all causes of action and an alternative motion to strike portions of the complaint. On July 2, 2019, the court denied HPE’s demurrer as to the claims of the putative class and granted HPE’s demurrer as to the claims of the individual plaintiffs.
India Directorate of Revenue Intelligence Proceedings. On April 30 and May 10, 2010, the India Directorate of Revenue Intelligence (the "DRI") issued show cause notices to Hewlett-Packard India Sales Private Ltd ("HP India"), a subsidiary of HP Inc., seven HP India employees and one former HP India employee alleging that HP India underpaid customs duties while importing products and spare parts into India and seeking to recover an aggregate of approximately $370 million, plus penalties. Prior to the issuance of the show cause notices, HP India deposited approximately $16 million with the DRI and agreed to post a provisional bond in exchange for the DRI's agreement to not seize HP India products and spare parts and to not interrupt the transaction of business by HP India.
On April 11, 2012, the Bangalore Commissioner of Customs issued an order on the products-related show cause notice affirming certain duties and penalties against HP India and the named individuals of approximately $386 million, of which HP India had already deposited $9 million. On December 11, 2012, HP India voluntarily deposited an additional $10 million in connection with the products-related show cause notice. On April 20, 2012, the Commissioner issued an order on the parts-related show cause notice affirming certain duties and penalties against HP India and certain of the named individuals of approximately $17 million, of which HP India had already deposited $7 million. After the order, HP India deposited an additional $3 million in connection with the parts-related show cause notice to avoid certain penalties.
HP India filed appeals of the Commissioner's orders before the Customs Tribunal along with applications for waiver of the pre-deposit of remaining demand amounts as a condition for hearing the appeals. The Customs Department has also filed cross-appeals before the Customs Tribunal. On January 24, 2013, the Customs Tribunal ordered HP India to deposit an additional $24 million against the products order, which HP India deposited in March 2013. The Customs Tribunal did not order any additional deposit to be made under the parts order. In December 2013, HP India filed applications before the Customs Tribunal seeking early hearing of the appeals as well as an extension of the stay of deposit as to HP India and the individuals already granted until final disposition of the appeals. On February 7, 2014, the application for extension of the stay of deposit was granted by the Customs Tribunal until disposal of the appeals. On October 27, 2014, the Customs Tribunal commenced hearings on the cross-appeals of the Commissioner's orders. The Customs Tribunal rejected HP India's request to remand the matter to the Commissioner on procedural grounds. The hearings were scheduled to reconvene on April 6, 2015, and again on November 3, 2015 April 11, 2016, and January 15, 2019, but were canceled at the request of the Customs Tribunal. The hearing was again rescheduled for January 20, 2021 but was postponed and has not yet been rescheduled.
ECT Proceedings. In January 2011, the postal service of Brazil, Empresa Brasileira de Correios e Telégrafos ("ECT"), notified a former subsidiary of HP Inc. in Brazil ("HP Brazil") that it had initiated administrative proceedings to consider whether to suspend HP Brazil's right to bid and contract with ECT related to alleged improprieties in the bidding and contracting processes whereby employees of HP Brazil and employees of several other companies allegedly coordinated their bids and fixed results for three ECT contracts in 2007 and 2008. In late July 2011, ECT notified HP Brazil it had decided to apply the penalties against HP Brazil and suspend HP Brazil's right to bid and contract with ECT for five years, based upon the evidence before it. In August 2011, HP Brazil appealed ECT's decision. In April 2013, ECT rejected HP Brazil's appeal, and the administrative proceedings were closed with the penalties against HP Brazil remaining in place. In parallel, in September 2011, HP Brazil filed a civil action against ECT seeking to have ECT's decision revoked. HP Brazil also requested an injunction suspending the application of the penalties until a final ruling on the merits of the case. The court of first instance has not issued a decision on the merits of the case, but it has denied HP Brazil's request for injunctive relief. HP Brazil appealed the denial of its request for injunctive relief to the intermediate appellate court, which issued a preliminary ruling denying the request for injunctive relief but reducing the length of the sanctions from five to two years. HP Brazil appealed that decision and, in December 2011, obtained a ruling staying enforcement of ECT's sanctions until a final ruling on the merits of the case. HP Brazil expects the decision to be issued in 2021 and any subsequent appeal on the merits to last several years.
Forsyth, et al. vs. HP Inc. and Hewlett Packard Enterprise. This purported class and collective action was filed on August 18, 2016 and an amended complaint was filed on December 19, 2016 in the United States District Court for the Northern District of California, against HP Inc. and Hewlett Packard Enterprise alleging defendants violated the Federal Age Discrimination in Employment Act ("ADEA"), the California Fair Employment and Housing Act, California public policy and the California Business and Professions Code by terminating older workers and replacing them with younger workers. Plaintiffs seek to certify a nationwide collective action under the ADEA comprised of all individuals aged 40 and older who had their employment terminated by an HP entity pursuant to a work force reduction ("WFR") plan on or after December 9, 2014 for individuals terminated in deferral states and on or after April 8, 2015 in non-deferral states. Plaintiffs also seek to certify a Rule 23 class under California law comprised of all persons 40 years or older employed by defendants in the state of California and terminated pursuant to a WFR plan on or after August 18, 2012. On September 20, 2017, the court granted the defendants' motion to compel arbitration and administratively closed the case pending resolution of the arbitration proceedings. On
34
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
November 30, 2017, three named plaintiffs filed a single arbitration demand. Thirteen additional plaintiffs later joined the arbitration. On December 22, 2017, defendants filed a motion to (1) stay the case pending arbitrations and (2) enjoin the demanded arbitration and require each plaintiff to file a separate arbitration demand. On February 6, 2018, the court granted the motion to stay and denied the motion to enjoin. The claims of these sixteen arbitration named plaintiffs have been resolved. Additional opt-in plaintiffs were added to the litigation and these claims also were resolved as part of the arbitration process. The stay of the Forsyth class action has been lifted and a Third Amended Complaint was filed on January 7, 2020. Defendants filed a motion to dismiss the Third Amended Complaint on February 6, 2020. On May 18, 2020, the court issued an order granting in part and denying in part Defendants’ motion to dismiss. The court granted Plaintiffs leave to amend their complaint. On July 9, 2020, Plaintiffs filed a Fourth Amended Complaint. On October 15, 2020, Defendants' motion to dismiss the Fourth Amended Complaint was denied. On December 30, 2020, Plaintiffs filed a Motion for Preliminary Class Certification. Defendants’ Opposition to Plaintiffs’ Motion was filed on February 23, 2021. A hearing date on the Motion for Preliminary Class Certification is tentatively scheduled for April 15, 2021.
Hewlett-Packard Company v. Oracle (Itanium). On June 15, 2011, HP Inc. filed suit against Oracle in the Superior Court of California, County of Santa Clara in connection with Oracle's March 2011 announcement that it was discontinuing software support for HP Inc.’s Itanium-based line of mission critical servers. HP Inc. asserted, among other things, that Oracle’s actions breached the contract that was signed by the parties as part of the settlement of the litigation relating to Oracle’s hiring of Mark Hurd. Trial was bifurcated into two phases. HP Inc. prevailed in the first phase of the trial, in which the court ruled that the contract at issue required Oracle to continue to offer its software products on HP Inc.'s Itanium-based servers for as long as HP Inc. decided to sell such servers. Phase 2 of the trial was then postponed by Oracle’s appeal of the trial court’s denial of Oracle’s “anti-SLAPP” motion, in which Oracle argued that HP Inc.’s damages claim infringed on Oracle’s First Amendment rights. On August 27, 2015, the California Court of Appeal rejected Oracle’s appeal. The matter was remanded to the trial court for Phase 2 of the trial, which began on May 23, 2016, and was submitted to the jury on June 29, 2016. On June 30, 2016, the jury returned a verdict in favor of HP Inc., awarding HP Inc. approximately $3 billion in damages: $1.7 billion for past lost profits and $1.3 billion for future lost profits. On October 20, 2016, the court entered judgment for this amount with interest accruing until the judgment is paid. Oracle’s motion for a new trial was denied on December 19, 2016, and Oracle filed its notice of appeal from the trial court’s judgment on January 17, 2017. On February 2, 2017, HP Inc. filed a notice of cross-appeal challenging the trial court’s denial of prejudgment interest. On May 16, 2019, HP Inc. filed its application to renew the judgment. As of May 16, 2019, the renewed judgment is approximately $3.8 billion. Daily interest on the renewed judgment is now accruing at $1 million and will be recorded upon receipt. The parties have completed appellate briefing in the California Court of Appeal and are awaiting the scheduling of oral argument. Pursuant to the terms of the Separation and Distribution Agreement, HP Inc. and Hewlett Packard Enterprise will share equally in any recovery from Oracle once Hewlett Packard Enterprise has been reimbursed for all costs incurred in the prosecution of the action prior to the HP Inc. /Hewlett Packard Enterprise separation on November 1, 2015.
Oracle America, Inc., et al. v. Hewlett Packard Enterprise Company (Terix copyright matter). On March 22, 2016, Oracle filed a complaint against HPE in the United States District Court for the Northern District of California, alleging copyright infringement, interference with contract, intentional interference with prospective economic relations, and unfair competition. Oracle’s claims arise out of HPE’s prior use of a third-party maintenance provider named Terix Computer Company, Inc. (“Terix”). Oracle contends that in connection with HPE’s use of Terix as a subcontractor for certain customers of HPE’s multivendor support business, Oracle’s copyrights were infringed, and HPE is liable for vicarious and contributory infringement and related claims. The lawsuit against HPE follows a prior lawsuit brought by Oracle against Terix in 2013 relating to Terix’s alleged unauthorized provision of Solaris patches to customers on Oracle hardware. On June 14, 2018, the court heard oral argument on HPE's and Oracle's cross-motions for summary judgment. On January 29, 2019, the court granted HPE’s Motion for Summary Judgment as to all of Oracle’s claims and vacated the trial date. On February 20, 2019, the court entered judgment in favor of HPE, dismissing Oracle’s claims in their entirety. Oracle has appealed the trial court’s ruling to the United States Court of Appeals for the Ninth Circuit. On August 20, 2020, the United States Court of Appeals for the Ninth Circuit issued its ruling, affirming in part and reversing in part the trial court’s decision granting summary judgment in favor of HPE. On October 6, 2020, the matter was remanded to the United States District Court for the Northern District of California for further proceedings consistent with the ruling from the United States Court of Appeals for the Ninth Circuit. The United States District Court for the Northern District of California has set a hearing date on summary judgment motions for June 3, 2021 and a trial date for November 29, 2021.
Network-1 Technologies, Inc. v. Alcatel-Lucent USA Inc., et al. This patent infringement action was filed on September 15, 2011 in the United States District Court for the Eastern District of Texas, alleging that various Hewlett Packard Enterprise switches and access points infringe Network-1’s patent relating to the 802.3af and 802.3at “Power over Ethernet” standards. Network-1 seeks damages, attorneys’ fees and costs, and declaratory and injunctive relief. A jury trial was conducted beginning
35
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
on November 6, 2017. On November 13, 2017, the jury returned a verdict in favor of HPE, finding that HPE did not infringe Network-1’s patent and that the patent was invalid. On August 29 2018, the court denied Network-1's motion for a new trial on infringement and entered the jury's verdict finding that HPE does not infringe the relevant Network-1 patent. The court also granted Network-1's motion for Judgment as a Matter of Law on validity. Network-1 has appealed the jury verdict of non-infringement to the United States Court of Appeals for the Federal Circuit. HPE has cross-appealed the court’s decision to grant Network-1's motion for Judgment as a Matter of Law on validity. Appellate briefing has been completed. The Federal Circuit Court of Appeal held oral argument on November 4, 2019. On September 24, 2020, the Federal Circuit issued its ruling, affirming-in-part and reversing-in-part the jury's verdict, and finding that an erroneous claim construction was presented to the jury that prejudiced Network-1. HPE filed a petition for rehearing with the Federal Circuit that was denied on November 20, 2020. The matter has been remanded back to United States District Court for the Eastern District of Texas for further proceedings consistent with the Federal Circuit's ruling.
Shared Litigation with HP Inc., DXC and Micro Focus
As part of the Separation and Distribution Agreements between Hewlett Packard Enterprise and HP Inc., Hewlett Packard Enterprise and DXC, and Hewlett Packard Enterprise and Seattle SpinCo, the parties to each agreement agreed to cooperate with each other in managing certain existing litigation related to both parties' businesses. The Separation and Distribution Agreements also included provisions that assign to the parties responsibility for managing pending and future litigation related to the general corporate matters of HP Inc. (in the case of the separation of Hewlett Packard Enterprise from HP Inc.) or of Hewlett Packard Enterprise (in the case of the separation of DXC from Hewlett Packard Enterprise and the separation of Seattle SpinCo from Hewlett Packard Enterprise), in each case arising prior to the applicable separation.
Environmental
The Company's operations and products are or may in the future become subject to various federal, state, local and foreign laws and regulations concerning environmental protection, including laws addressing the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes, the clean-up of contaminated sites, the substances and materials used in the Company's products, the energy consumption of products, services and operations and the operational or financial responsibility for recycling, treatment and disposal of those products. This includes legislation that makes producers of electrical goods, including servers and networking equipment, financially responsible for specified collection, recycling, treatment and disposal of past and future covered products (sometimes referred to as "product take-back legislation"). The Company could incur substantial costs, its products could be restricted from entering certain jurisdictions, and it could face other sanctions, if it were to violate or become liable under environmental laws or if its products become non-compliant with environmental laws. The Company's potential exposure includes impacts on revenue, fines and civil or criminal sanctions, third-party property damage or personal injury claims and clean-up costs. The amount and timing of costs to comply with environmental laws are difficult to predict.
In particular, the Company may become a party to, or otherwise involved in, proceedings brought by U.S. or state environmental agencies under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), known as "Superfund," or other federal, state or foreign laws and regulations addressing the clean-up of contaminated sites, and may become a party to, or otherwise involved in, proceedings brought by private parties for contribution towards clean-up costs. The Company is also contractually obligated to make financial contributions to address actions related to certain environmental liabilities, both ongoing and arising in the future, pursuant to its Separation and Distribution Agreement with HP Inc.
36
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is organized as follows:
•Executive Overview.  A discussion of our business and summary analysis of financial and other highlights, including non-GAAP financial measures, affecting the Company in order to provide context to the remainder of the MD&A.
•Critical Accounting Policies and Estimates.  A discussion of accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.
•Results of Operations.  An analysis of our financial results comparing the three months ended January 31, 2021 to the prior-year period. A discussion of the results of operations at the consolidated level is followed by a discussion of the results of operations at the segment level.
•Liquidity and Capital Resources.  An analysis of changes in our cash flows and a discussion of our financial condition and liquidity.
•Contractual and Other Obligations.  An overview of contractual obligations, retirement benefit plan funding, restructuring plans, uncertain tax positions,and off-balance sheet arrangements.
We intend the discussion of our financial condition and results of operations that follows to provide information that will assist the reader in understanding our Condensed Consolidated Financial Statements, the changes in certain key items in those financial statements from period-to-period, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our Condensed Consolidated Financial Statements. This discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes that appear elsewhere in this document.
The following Executive Overview, Results of Operations and Liquidity discussions and analysis compare the three months ended January 31, 2021 to the prior-year period, unless otherwise noted. The Capital Resources and Contractual and Other Obligations discussions present information as of January 31, 2021, unless otherwise noted.
        For purposes of this MD&A section, we use the terms "Hewlett Packard Enterprise", "HPE", the "Company", "we", "us" and "our" to refer to Hewlett Packard Enterprise Company.
EXECUTIVE OVERVIEW
We are a global technology leader focused on developing intelligent solutions that allow customers to capture, analyze and act upon data seamlessly from edge to cloud. We enable customers to accelerate business outcomes by driving new business models, creating new customer and employee experiences, and increasing operational efficiency today and into the future. Our legacy dates to a partnership founded in 1939 by William R. Hewlett and David Packard, and we strive every day to uphold and enhance that legacy through our dedication to providing innovative technological solutions to our customers.
The global pandemic has brought a renewed focus on digital transformation as businesses are rethinking everything from remote work and collaboration to business continuity and data insight. As the world recovers from the global pandemic, our customers are looking for the agility and simplicity of the cloud native world with the flexibility and control of a hybrid business model. HPE acted intentionally and quickly last year to become a more agile organization to enable our ability to innovate. While the macro economic uncertainties remain with Covid-19 as new variants emerge, we remain cautiously optimistic as Covid-19 vaccines are now being broadly distributed and administered. We expect to see gradual improvement as the world heads to recovery in customer spending through the remainder of fiscal 2021. Across all of our HPE businesses, we are aligning resources, unlocking operating leverage, and investing in growth so we can continue to help our customers transform and digitize their businesses.
Our operations are organized into six reportable segments for financial reporting purposes: Compute; High Performance Computing & Mission-Critical Solutions ("HPC & MCS"); Storage; Intelligent Edge; HPE Financial Services ("FS"); and Corporate Investments and Other. Our 2021 first fiscal quarter total net revenue of $6.8 billion was down 1.7% or down 2.5% when adjusted for currency, while we delivered a strong gross profit margin despite challenges from the global pandemic. Our
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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
GAAP gross margin was 33.5%, up 0.7 percentage points and non-GAAP gross profit margin was 33.7%, up 0.3 percentage points. Our GAAP operating margin was 3.2%, down 1.8 percentage points compared to prior year period due primarily to higher investments in our transformation programs. Our non-GAAP operating profit margin was 11.3%, up 1.3 percentage points from the prior year period, as a result of cost savings from our transformation programs. For the first quarter of fiscal 2021, we generated $963 million of cash flow from operations and $563 million of free cash flows through disciplined execution, strong expense management and critical investment prioritization.
Financial Results
The following table summarizes our consolidated GAAP financial results:
Three Months Ended January 31,
2021 2020 Change
In millions, except per share amounts
Net revenue $ 6,833  $ 6,949  (1.7)%
Gross profit $ 2,288  $ 2,282  0.3%
Gross profit margin 33.5% 32.8  % 0.7 pts
Earnings from operations $ 222  $ 348  (36.2)%
Operating profit margin 3.2% 5.0  % (1.8) pts
Net earnings $ 223  $ 333  (33.0)%
Diluted net earnings per share $ 0.17  $ 0.25  $(0.08)
Cash flow from operations $ 963  $ (79) $1,042
The following table summarizes our consolidated Non-GAAP financial results:
Three Months Ended January 31,
2021 2020 Change
In millions, except per share amounts
Net revenue adjusted for currency $ 6,773  $ 6,949  (2.5)%
Non-GAAP gross profit $ 2,303  $ 2,318  (0.6)%
Non-GAAP gross profit margin 33.7  % 33.4  % 0.3 pts
Non-GAAP earnings from operations $ 773  $ 695  11.2%
Non-GAAP operating profit margin 11.3  % 10.0  % 1.3 pts
Non-GAAP net earnings $ 679  $ 657  3.3%
Non-GAAP diluted net earnings per share $ 0.52  $ 0.50  $0.02
Free cash flow $ 563  $ (185) $748
Each non-GAAP measure has been reconciled to the most directly comparable GAAP measure herein. Please refer to the section "GAAP to Non-GAAP Reconciliations" included in this MD&A for these reconciliations, usefulness of non-GAAP financial measures, and material limitations associated with the use of non-GAAP financial measures.


38
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Returning capital to our shareholders remains an important part of capital allocation framework that consist of capital returns to shareholders and strategic investments. During the first quarter of fiscal 2021, we paid a quarterly dividend of $0.12 per share to our shareholders. On March 2, 2021 we declared our fiscal 2021 second quarterly dividend of $0.12 per share, payable on or about April 7, 2021, to stockholders of record as of the close of business on March 10, 2021. As a result of uncertainties due to COVID-19, we suspended purchases under our share repurchase program previously authorized by our Board of Directors. As of January 31, 2021, we had a remaining authorization of $2.1 billion for future share repurchases.
We believe our existing balances of cash, cash equivalents and marketable securities, along with commercial paper and other short-term liquidity arrangements, are sufficient to satisfy our working capital needs, capital asset purchases, dividends, debt repayments and other liquidity requirements associated with its existing operations. As of January 31, 2021, our cash, cash equivalents and restricted cash were $4.5 billion, compared to the October 31, 2020 balance of $4.6 billion. We maintain a $4.75 billion five year senior unsecured committed credit facility that was entered into in August 2019. As of January 31, 2021 no borrowings were outstanding under this credit facility.
Subsequent Events
On March 3, 2021, we issued $1.0 billion of asset-backed debt securities in six tranches at a weighted average price of 99.99% and a weighted average interest rate of 0.49%, payable monthly from April 2021 with a stated final maturity date of March 2031.
On February 23, 2021, we completed the acquisition of CloudPhysics, an innovative company with a SaaS-based, data-driven platform for smarter IT across on-premises and cloud. This acquisition extends our ability to bring real world insights to customers and partners across most IT environments.
Trends and Uncertainties
We are in the process of addressing many challenges facing our business, including effects of COVID-19, a discussion of which is available in sections entitled "Risk Factors" in Item 1A of Part I and "Trends and Uncertainties" in Item 7 of our Annual Report on Form 10-K for the fiscal year ended October 31, 2020.
Updates to the COVID-19 response included in 10-K
COVID-19 vaccines are now broadly distributed and administered. While it is not possible at this time to broadly offer on-site vaccination opportunities to our workforce due to vaccine scarcity and storage requirements, we are monitoring developments and will evaluate opportunities to partner with governments, health authorities, and others as they arise. HPE is committed to help support costs for the vaccine through HPE health benefits or other programs, to the extent not covered by government programs, medical plans or other sources.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's Discussion and Analysis of Financial Condition and Results of Operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with United States ("U.S.") Generally Accepted Accounting Principles ("GAAP"). The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses, and disclosure of contingent liabilities. Estimates are assessed each period and updated to reflect current information, such as the economic considerations related to the impact that COVID-19 could have on our significant accounting estimates. Significant estimates that are based on a forecast include inventory reserves, provision for taxes, valuation allowance for deferred taxes, and impairment assessment of goodwill, intangible assets and other long lived assets. The Company believes that these estimates, judgements and assumptions are reasonable under the circumstances, and are subject to significant uncertainties, some of which are beyond the Company’s control. Should any of these estimates change, it could adversely affect Company’s results of operations. Additionally, as the extent and duration of the impacts from COVID-19 remain unclear, the Company’s estimates, judgements and assumptions may evolve as conditions change. Management believes that there have been no significant changes during the three months ended January 31, 2021, with the exception of certain accounting policies that were updated resulting from our adoption of the Current Expected Credit Losses standard (See Note 1 in Item 1, "Overview and Summary of Significant Accounting Policies"), to the items that we disclosed as our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended October 31, 2020.
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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
ACCOUNTING PRONOUNCEMENTS
For a summary of recent accounting pronouncements applicable to our Condensed Consolidated Financial Statements, see Note 1 in Item 1, "Overview and Summary of Significant Accounting Policies".
RESULTS OF OPERATIONS
Revenue from our international operations has historically represented, and we expect will continue to represent, a majority of our overall net revenue. As a result, our revenue growth has been impacted, and we expect will continue to be impacted, by fluctuations in foreign currency exchange rates. In order to provide a framework for assessing performance excluding the impact of foreign currency fluctuations, we present the year-over-year percentage change in revenue on a constant currency basis, which assumes no change in foreign currency exchange rates from the prior-year period and does not adjust for any repricing or demand impacts from changes in foreign currency exchange rates. This change in revenue on a constant currency basis is calculated as the quotient of (a) current year revenue converted to U.S. dollars using the prior-year period's foreign currency exchange rates divided by (b) the prior-year period revenue. This information is provided so that revenue can be viewed without the effect of fluctuations in foreign currency exchange rates, which is consistent with how management evaluates our revenue results and trends. This constant currency disclosure is provided in addition to, and not as a substitute for, the year-over-year percentage change in revenue on a GAAP basis. Other companies may calculate and define similarly labeled items differently, which may limit the usefulness of this measure for comparative purposes.
Results of operations in dollars and as a percentage of net revenue were as follows:
  Three Months Ended January 31,
  2021 2020
  Dollars % of
Revenue 		Dollars % of
Revenue
  Dollars in millions
Net revenue $ 6,833  100.0  % $ 6,949  100.0  %
Cost of sales 4,545  66.5  4,667  67.2 
Gross profit 2,288  33.5  2,282  32.8 
Research and development 468  6.8  485  7.0 
Selling, general and administrative 1,159  17.0  1,218  17.5 
Amortization of intangible assets 110  1.6  120  1.7 
Transformation costs 311  4.6  89  1.3 
Acquisition, disposition and other related charges 18  0.3  22  0.3 
Earnings from operations 222  3.2  348  5.0 
Interest and other, net (44) (0.7) (19) (0.3)
Tax indemnification adjustments (16) (0.2) (21) (0.3)
Non-service net periodic benefit credit 17  0.3  37  0.5 
Earnings from equity interests 26  0.4  33  0.5 
Earnings before taxes 205  3.0  378  5.4 
(Provision) benefit for taxes 18  0.3  (45) (0.6)
Net earnings $ 223  3.3  % $ 333  4.8  %
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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Stock-based compensation expense is included within costs and expenses presented in the table above as follows:
Three Months Ended January 31,
2021 2020
In millions
Cost of sales $ 13  $ 13 
Research and development 37  27 
Selling, general and administrative 60  53 
Acquisition, disposition and other related charges 3  — 
Total $ 113  $ 93 

Three Months Ended January 31, 2021 compared with the three months ended January 31, 2020
Net Revenue
For the three months ended January 31, 2021, total net revenue was $6.8 billion, decreased by $116 million, or 1.7% (decreased 2.5% on a constant currency basis), as compared to the prior-year period. U.S. net revenue decreased by $140 million, or 6.0%, to $2.2 billion, and net revenue from outside of the U.S. decreased by $24 million, or 0.5%, to $4.6 billion. Net revenue was impacted for the three months ended January 31, 2021 due to multiple factors which include the impact from a challenging macro-economic environment, timing of delivery and related achievement of customer acceptance milestones, and highly competitive environment. However we experienced strong momentum of revenue growth in our WLAN and Switching product offerings. Additionally, the general weakening of the U.S. dollar relative to certain foreign currencies during the three months ended January 31, 2021 compared to the same period in 2020, had a favorable impact on net revenue.
From a segment perspective, the net revenue decrease in the three months ended January 31, 2021, as compared to the prior-year period, was primarily led by declines in HPC & MCS, Storage, and Compute, partially offset by a net revenue increase in Intelligent Edge. The components of the weighted net revenue change by segment were as follows:
Three Months Ended January 31, 2021
Percentage points
Compute (0.6)
HPC & MCS (1.1)
Storage (0.8)
Intelligent Edge 1.2 
Financial Services — 
Corporate Investments and Other (0.2)
Total Segment (1.5)
Elimination of Intersegment net revenue (0.2)
  Total HPE (1.7)
Please refer to the section "Segment Information" below for the discussion of the segment result on each of our reportable segments.
Gross Profit
For the three months ended January 31, 2021, as compared to the prior-year period, total gross profit margin increased 0.7 percentage points. The gross profit margin increase was primarily due to a favorable mix of revenue from higher margin products and services, improved pricing and operational efficiency achieved through our transformation programs, partially offset by higher supply chain costs and higher variable compensation expense.
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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Research and Development
Research and development ("R&D") expense decreased by $17 million, or 4% for the three months ended January 31, 2021, as compared to the prior-year period, due primarily to the cost savings achieved as we rationalize our R&D through transformation programs by focusing investment in growth areas, and lower travel expenses, partially offset by higher variable compensation expense.
Selling, General and Administrative
Selling, general and administrative expense decreased by $59 million, or 5% for the three months ended January 31, 2021, as compared to the prior-year period, due primarily to the cost savings achieved through our transformation programs and lower travel expenses, partially offset by higher variable compensation and on-going expenses from business acquisitions.
Amortization of Intangible Assets
Amortization of intangible assets decreased by $10 million, or 8% for the three months ended January 31, 2021, as compared to the prior-year period, due to certain intangible assets associated with prior acquisitions reaching the end of their amortization periods and increase in write-off of certain intangible assets in the prior-year period, partially offset by an increase in the amortization of intangible assets from recent business acquisition.
Transformation Costs
Transformation programs are comprised of the cost optimization and prioritization plan we introduced in May 2020, and the HPE Next Initiative.
Transformation costs increased by $222 million, or 249%, for the three months ended January 31, 2021, as compared to the prior-year period, due primarily to the restructuring charges and the program management charges recorded in the current period in connection with the cost optimization and prioritization plan, partially offset by lower restructuring charges from the HPE Next initiative.
See Note 3, "Transformation Programs", for discussion on the Transformation Costs.
Interest and Other, Net
Interest and other, net expense increased by $25 million for the three months ended January 31, 2021, as compared with the prior-year period, due primarily to lower gain on the sale of certain assets in the current year period, partially offset by favorable currency fluctuations.
Tax Indemnification Adjustments
We recorded tax indemnification expense of $16 million and $21 million for the three months ended January 31, 2021 and 2020, respectively. For the three months ended January 31, 2021 and 2020, the amount primarily resulted from changes in certain pre-Separation tax liabilities for which we share joint and several liability with HP Inc. and for which we are indemnified under the Termination and Mutual Release Agreement. For the three months ended January 31, 2021, the amount also included changes to certain pre-divestiture tax liabilities related to our Enterprise Services business spun off in 2017.
Non-service net periodic benefit
Non-service net periodic benefit credit decreased by $20 million for the three months ended January 31, 2021, as compared with the prior-year periods, due primarily to lower expected returns on plan assets.
Provision for Taxes
Our effective tax rate was (8.8)% and 11.9% for the three months ended January 31, 2021 and 2020, respectively. Our effective tax rate generally differs from the U.S. federal statutory rate of 21% due to favorable tax rates associated with certain earnings from our operations in lower tax jurisdictions throughout the world but may also be materially impacted by discrete tax adjustments during the fiscal year.
See Note 5, "Taxes on Earnings", for discussion on provision for taxes.
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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Segment Information
Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker ("CODM"), who is the Chief Executive Officer ("CEO"), uses to evaluate, view and run our business operations, which include, but are not limited to, customer base and homogeneity of products and technology. The segments are based on this organizational structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results.
As described in Item 1, Note 1, "Overview and Summary of Significant Accounting Policies", effective at the beginning of the first quarter of fiscal 2021, we (a) excluded stock-based compensation expense from our segment earnings from operations; and (b) implemented certain organizational changes to align our segment financial reporting more closely with our current business structure. As result of these organizational change, our operations are now organized into six segments for financial reporting purposes:Compute, HPC & MCS, Storage, Intelligent Edge, FS, and Corporate Investments and Other. The Corporate Investments and Other Segment now includes the A & PS operating segment, the Communications and Media Solutions operating segment, the Software operating segment, and the Hewlett Packard Enterprise Labs which is responsible for research and development. We reflected these changes in our segment information retrospectively to the earliest period presented, which primarily resulted in the realignment of net revenue, and operating profit for each of the segments. These changes had no impact on Hewlett Packard Enterprise's previously reported consolidated results.
As a result of this organizational change, we performed an interim quantitative goodwill impairment test for all of our reporting units as of November 1, 2020, which did not result in any goodwill impairment charges. The fair value of all reporting units continued to exceed the carrying value of their net assets and did not result in impairment. The excess of fair value over carrying value for our reporting units ranged from approximately 8% to 37% of the respective carrying values. In order to evaluate the sensitivity of the estimated fair value of our reporting units in the goodwill impairment test, we applied a hypothetical 10% decrease to the fair value of each reporting unit. Based on the results of this hypothetical 10% decrease all of the reporting units had an excess of fair value over carrying value, with the exception of HPC & MCS reporting unit. Should economic conditions deteriorate, estimates of future cash flows for each of our reporting units may be insufficient to support the carrying value and the goodwill assigned to them, requiring impairment charges. Further impairment charges, if any, may be material to the results of operations and financial position. We will continue to evaluate the recoverability of goodwill on an annual basis as of the beginning of its fourth fiscal quarter and whenever events or changes in circumstances indicate there may be a potential impairment.
Segment Results
The following provides an overview of our key financial metrics by segment for the three months ended January 31, 2021, as compared to the prior-year period:
Compute HPC & MCS Storage Intelligent Edge Financial Services Corporate Investments and Other HPE Consolidated
Net revenue(1)
$ 2,986  $ 762  $ 1,193  $ 806  $ 860  $ 321  $ 6,833 
Year-over-year change % (1.5) % (9.2) % (4.7) % 11.9  % 0.1  % (1.8) % (1.7) %
Earnings (loss) from operations(2)
$ 342  $ 43  $ 235  $ 152  $ 84  $ (31) $ 222 
Earnings (loss) from operations as a % of net revenue 11.5  % 5.6  % 19.7  % 18.9  % 9.8  % (9.7) % 3.2  %
Year-over-year change percentage points 0.8 pts (1.9) pts (0.3) pts 6.8 pts 1.1 pts 6.5 pts 1.3 pts

(1)HPE consolidated net revenue excludes intersegment net revenue.
(2)Segment earnings from operations exclude certain unallocated corporate costs and eliminations, stock-based compensation expense, amortization of initial direct costs, amortization of intangible assets, transformation costs and acquisition, disposition and other related charges.
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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Compute
  Three months ended January 31,
  2021 2020 % Change
  Dollars in millions  
Net revenue $ 2,986  $ 3,030  (1.5) %
Earnings from operations $ 342  $ 324  5.6  %
Earnings from operations as a % of net revenue 11.5  % 10.7  %  

Three months ended January 31, 2021 compared with three months ended January 31, 2020
Compute net revenue decreased by $44 million, or 1.5% (decreased 2.2% on a constant currency basis), for the three months ended January 31, 2021 as compared to the prior-year period.
Net revenue in Compute decreased primarily due to the impact of the pace and timing of economic recovery from COVID-19 partially offset by favorable currency fluctuations. While Compute experienced a decline in unit shipments, revenue was favorably impacted due to a shift towards products with higher average unit prices.
Compute earnings from operations as a percentage of net revenue increased 0.8 percentage points for the three months ended January 31, 2021, as compared to the prior-year period, due to a decrease in operating expenses as a percentage of net revenue, while the cost of products and services as a percentage of net revenue remained relatively flat. The decrease in operating expense as a percentage of net revenue was primarily due to cost savings from our transformation programs, partially offset by higher variable compensation expense.

HPC & MCS

  Three Months Ended January 31,
  2021 2020 % Change
  Dollars in millions  
Net revenue $ 762  $ 839  (9.2) %
Earnings from operations $ 43  $ 63  (31.7) %
Earnings from operations as a % of net revenue 5.6  % 7.5  %

Three months ended January 31, 2021 compared with three months ended January 31, 2020
HPC & MCS net revenue decreased by $77 million, or 9.2% (decreased 9.1% on a constant currency basis), for the three months ended January 31, 2021, as compared to the prior-year period.
Net revenue in HPC & MCS decreased primarily due to timing of delivery and related achievement of customer acceptance milestones. We expect timing of the milestone achievement to even out during the remainder of the fiscal year.
HPC & MCS earnings from operations as a percentage of net revenue decreased 1.9 percentage points for the three months ended January 31, 2021, as compared to the prior-year period, primarily due to an increase in operating expenses as a percentage of net revenue, while cost of products and services as a percentage of net revenue remained relatively flat. The increase in operating expenses as a percentage of net revenue was primarily due to the scale of net revenue decline along with an increase in field selling costs and variable compensation expense. These were partially offset by the cost savings from our transformation programs.

44
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Storage
  Three Months Ended January 31,
  2021 2020 % Change
  Dollars in millions  
Net revenue $ 1,193  $ 1,252  (4.7) %
Earnings from operations $ 235  251  (6.4) %
Earnings from operations as a % of net revenue 19.7  % 20.0  %
Three months ended January 31, 2021 compared with three months ended January 31, 2020
Storage net revenue decreased by $59 million or 4.7% (decreased 5.6% on a constant currency basis), for the three months ended January 31, 2021 as compared to the prior-year period. The Storage segment was impacted by reduced demand coupled with competitive pricing pressures. As a result, net revenue declined in Traditional Storage products. Net revenue also declined in the Simplivity and 3PAR products as we continue our transition to more software-rich products in the hyperconverged portfolio and primary storage market respectively. Partially offsetting the net revenue decline was revenue growth from HPE Primera and HPE Nimble Storage.
Storage earnings from operations as a percentage of net revenue decreased 0.3 percentage points for the three months ended January 31, 2021, as compared to the prior-year period, due to a decrease in cost of products and services as a percentage of net revenue, partially offset by an increase in operating expenses as a percentage of net revenue. The decrease in cost of products and services as a percentage of net revenue was due primarily to favorable mix of revenue from higher-margin Storage services and software-rich HPE Nimble and Primera products, and improved operational efficiencies achieved through our transformation programs, the effects of which were partially offset by competitive pricing pressures and higher variable compensation expense. The increase in operating expenses as a percentage of net revenue was due primarily to the scale of the net revenue decline, while total operating expenses declined during the period due to lower field selling costs, partially offset by higher variable compensation expense.
Intelligent Edge
  Three Months Ended January 31,
  2021 2020 % Change
  Dollars in millions  
Net revenue $ 806  $ 720  11.9  %
Earnings from operations $ 152  $ 87  74.7  %
Earnings from operations as a % of net revenue 18.9  % 12.1  %  

Three months ended January 31, 2021 compared with three months ended January 31, 2020
Intelligent Edge net revenue increased by $86 million, or 11.9% (increased 10.6% on a constant currency basis), for the three months ended January 31, 2021, as compared to the prior-year period.
Net revenue in Intelligent Edge increased primarily due to the addition of revenue from SilverPeak, revenue growth in WLAN and Switching products and favorable foreign currency fluctuations.
Intelligent Edge earnings from operations as a percentage of net revenue increased 6.8 percentage points for the three months ended January 31, 2021 as compared to the prior year period due primarily to a decrease in operating expenses as a percentage of net revenue and a decrease in cost of products and services as a percentage of net revenue. The decrease in cost of product and services as a percentage of net revenue was primarily due to improved operational efficiencies achieved through our transformation programs, lower cost of switching and WLAN product materials, and the impact of SilverPeak acquisition, partially offset by competitive pricing pressures and higher supply chain costs. The decrease in operating expenses as a percentage of net revenue was primarily due to improved operational efficiencies including cost savings from transformation programs partially offset by the addition of expenses from SilverPeak acquisition.

45
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Financial Services
  Three Months Ended January 31,
  2021 2020 % Change
  Dollars in millions
Net revenue $ 860  $ 859  0.1  %
Earnings from operations $ 84  $ 75  12.0  %
Earnings from operations as a % of net revenue 9.8  % 8.7  %
Three months ended January 31, 2021 compared with three months ended January 31, 2020
FS net revenue increased by $1 million, or 0.1% (decreased 1.2% on a constant currency basis), for the three months ended January 31, 2021, as compared to the prior-year period. The increase in net revenue was due primarily to favorable currency fluctuations, largely offset by a decrease in rental revenue due to lower average operating lease assets, along with lower asset management revenue from lease buyouts.
FS earnings from operations as a percentage of net revenue increased 1.1 percentage points for the three months ended January 31, 2021, as compared to the prior-year period, due primarily to lower cost of services as a percentage of net revenue, while operating expenses as a percentage of net revenue remained relatively flat. The decrease to cost of services as a percentage of net revenue resulted from lower depreciation expense and borrowing costs, partially offset by higher bad debt expense.
Financing Volume
  Three Months Ended January 31,
  2021 2020
  In millions
Financing volume $ 1,245  $ 1,408 
Financing volume, which represents the amount of financing provided to customers for equipment and related software and services, including intercompany activity, decreased by 11.6% for the three months ended January 31, 2021 as compared to the prior-year period. The decrease was primarily driven by lower financing associated with third-party product sales and related service offerings.
Portfolio Assets and Ratios
The portfolio assets and ratios derived from the segment balance sheets for FS were as follows:
  As of
  January 31, 2021 October 31, 2020
  Dollars in millions
Financing receivables, gross $ 9,157  $ 9,058 
Net equipment under operating leases 4,007  4,027 
Capitalized profit on intercompany equipment transactions(1)
296  315 
Intercompany leases(1)
93  92 
Gross portfolio assets 13,553  13,492 
Allowance for credit losses(2)
203  154 
Operating lease equipment reserve 46  64 
Total reserves 249  218 
Net portfolio assets $ 13,304  $ 13,274 
Reserve coverage 1.8  % 1.6  %
Debt-to-equity ratio(3)
7.0x 7.0x
(1)Intercompany activity is eliminated in consolidation.
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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
(2)Allowance for credit losses for financing receivables includes both the short- and long-term portions.
(3)Debt benefiting FS consists of intercompany equity that is treated as debt for segment reporting purposes, intercompany debt, and borrowing- and funding-related activity associated with FS and its subsidiaries. Debt benefiting FS totaled $11.8 billion and $11.7 billion at January 31, 2021 and October 31, 2020, respectively, and was determined by applying an assumed debt-to-equity ratio, which management believes to be comparable to that of other similar financing companies. FS equity at both January 31, 2021 and October 31, 2020 was $1.7 billion.
As of January 31, 2021 and October 31, 2020, FS net cash and cash equivalents balances were approximately $713 million and $729 million, respectively.
FS bad debt expense includes charges to general reserves, specific reserves and write-offs for sales-type, direct-financing and operating leases. For the three months ended January 31, 2021 and 2020, FS recorded net bad debt expense of $28 million and $14 million, respectively.
As of January 31, 2021, FS experienced an increase in billed finance receivables compared to October 31, 2020, which included limited impact to collections from customers as a result of COVID-19. We are currently unable to fully predict the extent to which COVID-19 may adversely impact future collections of our receivables.
Corporate Investments and Other
  Three Months Ended January 31,
  2021 2020 % Change
  Dollars in millions
Net revenue $ 321  $ 327  (1.8) %
Loss from operations $ (31) $ (53) 41.5  %
Loss from operations as a % of net revenue (9.7) % (16.2) %
Three months ended January 31, 2021 compared with three months ended January 31, 2020
Corporate Investments and Other net revenue decreased by $6 million, or 1.8% (decreased 3.7% on a constant currency basis), for the three months ended January 31, 2021 as compared to the prior-year period. The decrease in Corporate Investments net revenue was due primarily to a weak demand in A & PS business, resulting from the challenging macroeconomic environment as a result of pandemic. Partially offsetting the net revenue decrease was revenue growth from the Communications and Media Solutions ("CMS") and Software business.
Corporate Investments and Other loss from operations as a percentage of net revenue decreased 6.5 percentage points for the three months ended January 31, 2021, as compared to the prior-year period. The decrease was due primarily to lower cost of services as a percentage of net revenue coupled with a decrease in operating expenses as a percentage of net revenue. The decrease in cost of services as a percentage of net revenue was due primarily to overhead efficiencies and operational efficiency achieved through our transformation programs. The decrease in operating expenses as a percentage of net revenue was primarily due to cost savings from transformation programs.
LIQUIDITY AND CAPITAL RESOURCES
We use cash generated by operations as our primary source of liquidity. We believe that internally generated cash flows will be generally sufficient to support our operating businesses, capital expenditures, product development initiatives, acquisitions and disposal activities including legal settlements, restructuring activities, transformation costs, indemnifications, maturing debt, interest payments, and income tax payments, in addition to any future investments, share repurchases and stockholder dividend payments. We expect to supplement this short-term liquidity, if necessary, by accessing the capital markets, issuing commercial paper, and borrowing under credit facilities made available by various domestic and foreign financial institutions. However, our access to capital markets may be constrained and our cost of borrowing may increase under certain business, market and economic conditions. Our liquidity is subject to various risks including the risks identified in the section entitled "Risk Factors" in Item 1A of Part II and market risks identified in the section entitled "Quantitative and Qualitative Disclosures about Market Risk" in Item 3 of Part I.
47
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in the capital markets, which can increase the cost of capital and adversely impact access to capital. In addition, our businesses have been and may continue to be adversely affected, which may have a material adverse impact on our profitability and cash flows, and the timing and collectability of payments may be adversely affected as a result of the impact of COVID-19 on our customers. We continue to monitor the severity and duration of the pandemic and its impact on the U.S. and other global economies, consumer behavior, our businesses, results of operations, financial condition and cash flows.
Our cash and cash equivalent balances are held in numerous locations throughout the world, with a majority of the amount held outside the U.S. We utilize a variety of planning and financing strategies in an effort to ensure that our worldwide cash is available when and where it is needed. Our cash position is strong and we expect that our cash and cash equivalent balances, anticipated cash flow generated from operations and access to capital markets will be sufficient to cover our expected near-term cash outlays.
Amounts held outside of the U.S. are generally utilized to support non-U.S. liquidity needs. Repatriations of amounts held outside the U.S. generally will not be taxable from a U.S. federal tax perspective, but may be subject to state income or foreign withholding tax. Where local restrictions prevent an efficient intercompany transfer of funds, our intent is to keep cash balances outside of the U.S. and to meet liquidity needs through ongoing cash flows, external borrowings, or both. We do not expect restrictions or potential taxes incurred on repatriation of amounts held outside of the U.S. to have a material effect on our overall liquidity, financial condition or results of operations.
As a result of increased uncertainty due to COVID-19, purchases under our share repurchase program previously authorized by our Board of Directors, were suspended and as such, no purchases were made during the three months ended January 31, 2021. As of January 31, 2021, we had a remaining authorization of $2.1 billion for future share repurchases.
For more information on our share repurchase program, refer to the section entitled "Unregistered Sales of Equity Securities and Use of Proceeds" in Item 2 of Part II.
Liquidity
Our cash flow metrics were as follows:
  Three months ended January 31,
  2021 2020
  In millions
Net cash provided by (used in) operating activities $ 963  $ (79)
Net cash used in investing activities (652) (64)
Net cash used in financing activities (459) (385)
Net decrease in cash, cash equivalents and restricted cash $ (148) $ (528)
Operating Activities
For the three months ended January 31, 2021, net cash from operating activities increased by $1.0 billion, as compared to the corresponding period in fiscal 2020. The increase was primarily due to higher cash generated from working capital, higher profitability and lower variable compensation payouts, partially offset by investments in our transformation programs.
Working capital metrics for the three months ended January 31, 2021 compared with the three months ended January 31, 2020
  Three months ended January 31,
  2021 2020 Change
Days of sales outstanding in accounts receivable ("DSO") 39  37  2 
Days of supply in inventory ("DOS") 55  49  6 
Days of purchases outstanding in accounts payable ("DPO") (103) (103) — 
Cash conversion cycle (9) (17) 8 
The cash conversion cycle is the sum of DSO and DOS less DPO. Items which may cause the cash conversion cycle in a particular period to differ include, but are not limited to, changes in business mix, changes in payment terms (including extended payment terms from suppliers), the extent of receivables factoring, seasonal trends, the timing of the revenue recognition and inventory purchases within the period, the impact of commodity costs and acquisition activity.
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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
DSO measures the average number of days our receivables are outstanding. DSO is calculated by dividing ending accounts receivable, net of allowance for doubtful accounts, by a 90-day average of net revenue. Compared to the corresponding three month period in fiscal 2020, DSO increased primarily due to lower sale of receivables and early payments, partially offset by favorable billings linearity.
DOS measures the average number of days from procurement to sale of our products. DOS is calculated by dividing ending inventory by a 90-day average of cost of goods sold. Compared to the corresponding three month period in fiscal 2020, DOS increased primarily due to longer inventory cycles in the Cray business.
DPO measures the average number of days our accounts payable balances are outstanding. DPO is calculated by dividing ending accounts payable by a 90-day average of cost of goods sold. Compared to the corresponding three month period in fiscal 2020, DPO remained flat.
Investing Activities
For the three months ended January 31, 2021, net cash used in investing activities increased by $588 million, as compared to the corresponding period in fiscal 2020. The increase was primarily due to higher cash utilized for investment in property, plant and equipment, net of sales proceeds by $294 million and higher cash utilized in net financial collateral activities by $345 million as compared to the prior-year period.
Financing Activities
For the three months ended January 31, 2021, net cash used in financing activities increased by $74 million, as compared to the corresponding period in fiscal 2020. The increase was primarily due to higher cash utilized for debt repayment, net of proceeds, by $279 million partially offset by share repurchases of $204 million in the prior year period.
Capital Resources
We maintain debt levels that we establish through consideration of a number of factors, including cash flow expectations, cash requirements for operations, investment plans (including acquisitions), share repurchase activities, our cost of capital and targeted capital structure.
In December 2020, we filed a shelf registration statement with the Securities and Exchange Commission that allows us to sell, at any time and from time to time, in one or more offerings, debt securities, preferred stock, common stock, warrants, depository shares, purchase contracts, guarantees or units consisting of any of these securities.
Commercial Paper
We maintain two commercial paper programs, "the Parent Programs", and a wholly-owned subsidiary maintains a third program. Our U.S. program provides for the issuance of U.S. dollar-denominated commercial paper up to a maximum aggregate principal amount of $4.75 billion. Our euro commercial paper program provides for the issuance of commercial paper outside of the U.S. denominated in U.S. dollars, euros or British pounds up to a maximum aggregate principal amount of $3.0 billion or the equivalent in those alternative currencies. The combined aggregate principal amount of commercial paper outstanding under those two programs at any one time cannot exceed $4.75 billion. In addition, our subsidiary's euro Commercial Paper/Certificate of Deposit Program provides for the issuance of commercial paper in various currencies of up to a maximum aggregate principal amount of $1.0 billion. As of January 31, 2021 and October 31, 2020, no borrowings were outstanding under the Parent Programs, and $686 million and $677 million, respectively, were outstanding under our subsidiary’s program.
During the first three months of fiscal 2021, we issued $220 million and repaid $240 million of commercial paper.
Revolving Credit Facility
We maintain a $4.75 billion five year senior unsecured committed credit facility that was entered into in August 2019. Loans under the revolving credit facility may be used for general corporate purposes, including support of the commercial paper program. Commitments under the Credit Agreement are available for a period of five years, which period may be extended, subject to the satisfaction of certain conditions, by up to two, one-year periods. Commitment fees, interest rates and other terms of borrowing under the credit facility vary based on Hewlett Packard Enterprise's external credit rating. As of January 31, 2021 and October 31, 2020, no borrowings were outstanding under the Credit Agreement.
Available Borrowing Resources
49
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
We had the following additional liquidity resources available if needed:
  As of
January 31, 2021
  In millions
Commercial paper programs $ 5,064 
Uncommitted lines of credit $ 1,237 

CONTRACTUAL AND OTHER OBLIGATIONS
Contractual Obligations
Our contractual obligations have not changed materially since October 31, 2020. For further information see "Contractual and Other Obligations" in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended October 31, 2020.
Retirement Benefit Plan Funding
For the remainder of fiscal 2021, we anticipate making contributions of approximately $145 million to our non-U.S. pension plans. Our policy is to fund our pension plans so that we meet at least the minimum contribution requirements, as established by various authorities including local government and tax authorities.
Restructuring Plans
As of January 31, 2021, we expect to make future cash payments of approximately $1.2 billion in connection with our approved restructuring plans, which includes $350 million expected to be paid through the remainder of fiscal 2021 and $830 million expected to be paid thereafter. For more information on our restructuring activities, see Note 3, "Transformation Programs".
Uncertain Tax Positions
As of January 31, 2021, we had approximately $425 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions. These liabilities and related interest and penalties include $28 million expected to be paid within one year. For the remaining amount, we are unable to make a reasonable estimate as to when cash settlement with tax authorities might occur due to the uncertainties related to these tax matters. Payments of these obligations would result from settlements with tax authorities. For more information on our uncertain tax positions, see Note 5, "Taxes on Earnings".
Off-Balance Sheet Arrangements
As part of our ongoing business, we have not participated in transactions that generate material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
We have third-party revolving short-term financing arrangements intended to facilitate the working capital requirements of certain customers. For more information on our third-party revolving short-term financing arrangements, see Note 6, "Balance Sheet Details", to the Consolidated Financial Statements in Item 1 of Part I, which is incorporated herein by reference.
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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
GAAP to Non GAAP Reconciliations
Effective at the beginning of the first quarter of fiscal 2021, the Company excluded stock-based compensation expense from its segment earnings from operations results and excluded stock-based compensation expense from non-GAAP results. The Company has reflected this change retrospectively to its financial results retrospectively to the earliest period presented. This change had no impact on Hewlett Packard Enterprise's previously reported consolidated GAAP results. However, the Company reflected the change resulting from the reclassification of its stock-based compensation expense by restating its consolidated non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP earnings from operations, non-GAAP operating profit margin, non-GAAP net earnings and non-GAAP net earnings per share.
The following tables provides reconciliation of GAAP to non-GAAP measures for the three months ended January 31, 2021 and 2020:
Reconciliation of GAAP net earnings and diluted net earnings per share to non-GAAP net earnings and diluted net earnings per share.
Three Months Ended January 31,
2021 2020
Dollars in millions Diluted net earnings per share Dollars in millions Diluted net earnings per share
GAAP net earnings $ 223  $ 0.17  $ 333  $ 0.25 
Non-GAAP adjustments:
Amortization of initial direct costs 2  —  3  — 
Amortization of intangible assets 110  0.08  120  0.09 
Transformation costs 311  0.23  89  0.07 
Stock-based compensation expense 110  0.08  93  0.07 
Acquisition, disposition and other related charges 18  0.01  42  0.03 
Tax indemnification adjustments 16  0.02  21  0.02 
Non-service net periodic benefit credit (17) (0.01) (37) (0.03)
Loss from equity interests(1)
34  0.03  37  0.03 
Adjustments for taxes (128) (0.09) (44) (0.03)
Non-GAAP net earnings $ 679  $ 0.52  $ 657  $ 0.50 
(1) Represents the amortization of basis difference adjustments related to the H3C divestiture.
Reconciliation of GAAP earnings from operations and operating profit margin to non-GAAP earnings from operations and operating profit margin.

Three Months Ended January 31,
2021 2020
Dollars % of
Revenue 		Dollars % of
Revenue
In millions
GAAP earnings from operations $ 222  3.2  % $ 348  5.0  %
Non-GAAP adjustments:
Amortization of initial direct costs 2  —  % 3  —  %
Amortization of intangible assets 110  1.6  % 120  1.7  %
Transformation costs 311  4.6  % 89  1.3  %
Stock-based compensation expense 110  1.6  % 93  1.4  %
Acquisition, disposition and other related charges 18  0.3  % 42  0.6  %
Non-GAAP earnings from operations $ 773  11.3  % $ 695  10.0  %
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HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Reconciliation of GAAP gross profit and gross profit margin to non-GAAP gross profit and gross profit margin.
Three Months Ended January 31,
2021 2020
Dollars % of
Revenue 		Dollars % of
Revenue
In millions
GAAP Net revenue $ 6,833  100  % $ 6,949  100  %
GAAP Cost of sales 4,545  66.5  % 4,667  67.2  %
GAAP Gross profit $ 2,288  33.5  % $ 2,282  32.8  %
Non-GAAP adjustments
Amortization of initial direct costs $ 2  —  % $ 3  —  %
Stock-based compensation expense 13  0.2  % 13  0.2  %
Acquisition, disposition and other related charges(1)
—  —  % 20  0.4  %
Non-GAAP Gross Profit $ 2,303  33.7  % $ 2,318  33.4  %

(1) Represent charges related to a non-cash inventory fair value adjustment in connection with the acquisition of Cray, which was included in Cost of Sales.
Reconciliation of net cash provided by (used in) operating activities to free cash flow.
Three Months Ended January 31,
2021 2020
In millions
Net cash provided by (used in) operating activities $ 963  $ (79)
Investment in property, plant and equipment (513) (568)
Proceeds from sale of property, plant and equipment 113  462 
Free cash flow $ 563  $ (185)
Non-GAAP financial measures
The non-GAAP financial measures presented are net revenue on a constant currency basis, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue), non-GAAP net earnings and non-GAAP diluted net earnings per share. These non-GAAP financial measures are used by management for purposes of evaluating our historical and prospective financial performance, as well as evaluating our performance relative to our competitors. These non-GAAP financial measures are not computed in accordance with, or as an alternative to, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to net revenue on a constant currency basis is net revenue. The GAAP measure most directly comparable to non-GAAP gross profit is gross profit. The GAAP measure most directly comparable to non-GAAP gross profit margin is gross profit margin. The GAAP measure most directly comparable to non-GAAP earnings from operations is earnings from operations. The GAAP measure most directly comparable to non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue) is operating profit margin (Earnings from operations as a percentage of net revenue). The GAAP measure most directly comparable to non-GAAP net earnings is net earnings. The GAAP measure most directly comparable to non-GAAP diluted net earnings per share is diluted net earnings per share.
Net revenue on a constant currency basis assumes no change in the foreign exchange rate from the prior-year period. Non-GAAP gross profit and non-GAAP gross profit margin is defined to exclude charges related to the amortization of initial direct costs, stock-based compensation expense and certain acquisition, disposition and other related charges. Non-GAAP earnings from operations and non-GAAP operating profit margin (non-GAAP earnings from operations as a percentage of net revenue) consist of earnings from operations excluding any charges related to the amortization of initial direct costs, amortization of intangible assets, impairment of goodwill, transformation costs, disaster charges (recovery), stock-based compensation expense and acquisition, disposition and other related charges. Non-GAAP net earnings and Non-GAAP diluted net earnings per share consist of net earnings or diluted net earnings per share excluding those same charges, as well as an
52
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
adjustment to tax indemnification adjustments, non-service net periodic benefit credit, loss from equity interests, certain income tax valuation allowances and separation taxes, the impact of U.S. tax reform, structural rate adjustment and excess tax benefit from stock-based compensation. In addition, non-GAAP net earnings and non-GAAP diluted net earnings per share are adjusted by the amount of additional taxes or tax benefits associated with each non-GAAP item. We believe that excluding the items mentioned above from these non-GAAP financial measures allows management to better understand our consolidated financial performance in relation to the operating results of our segments. Management does not believe that the excluded items are reflective of ongoing operating results, and excluding them facilitates a more meaningful evaluation of our current operating performance in comparison to our peers. The excluded items can be inconsistent in amount and frequency and/or not reflective of the operational performance of the business.
These non-GAAP financial measures have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of the limitations in relying on these non-GAAP financial measures are that they can have a material impact on the equivalent GAAP earnings measures, they may be calculated differently by other companies and may not reflect the full economic effect of the loss in value of certain assets.
We compensate for these limitations on the use of non-GAAP financial measures by relying primarily on our GAAP results and using non-GAAP financial measures only as a supplement. We also provide a reconciliation of each non-GAAP financial measure to its most directly comparable GAAP measure. We believe that providing net revenue on a constant currency basis, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP earnings from operations, non-GAAP operating profit margin, non-GAAP net earnings and non-GAAP diluted net earnings per share in addition to the related GAAP measures provides greater transparency to the information used in our financial and operational decision making and allows the reader of our Condensed Consolidated Financial Statements to see our financial results “through the eyes” of management.
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Table of Contents
Item 3.    Quantitative and Qualitative Disclosures About Market Risk.
For quantitative and qualitative disclosures about market risk affecting HPE, see "Quantitative and Qualitative Disclosures About Market Risk" in Item 7A of Part II of our Annual Report on Form 10-K for the fiscal year ended October 31, 2020. There have been no material changes in our market risk exposures since October 31, 2020.
Item 4.    Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report (the "Evaluation Date"). Based on this evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information related to the Company, including our consolidated subsidiaries, required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company's management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting during the quarter ended January 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting even though our global workforce continues to primarily work-from-home due to COVID-19. We are continually monitoring and assessing the COVID-19 situation and its impact on our internal controls.


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Table of Contents
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Information with respect to this item may be found in Note 14, "Litigation and Contingencies".
Item 1A. Risk Factors.
Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the fiscal period ended October 31, 2020, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Securities
There were no unregistered sales of equity securities during the period covered by this report.
On April 6, 2020, the Company announced that it suspended purchases under its share repurchase program in response to the global economic uncertainty that resulted from the worldwide spread of the novel coronavirus. As of January 31, 2021, the Company had no unsettled open market repurchases and had a remaining authorization of $2.1 billion for future share repurchases.
Item 5. Other Information.
None.
Item 6. Exhibits.
The Exhibit Index beginning on page 56 of this report sets forth a list of exhibits.
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Table of Contents
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
EXHIBIT INDEX
  Incorporated by Reference
Exhibit
Number 		Exhibit Description Form File No. Exhibit(s) Filing Date
2.1 8-K 001-37483 2.1 November 5, 2015
2.2 8-K 001-37483 2.2 November 5, 2015
2.3 8-K 001-37483 2.4 November 5, 2015
2.4 8-K 001-37483 2.5 November 5, 2015
2.5 8-K 001-37483 2.6 November 5, 2015
2.6 8-K 001-37483 2.7 November 5, 2015
2.7 8-K 001-37483 2.1 May 26, 2016
2.8 8-K 001-37483 2.2 May 26, 2016
2.9 8-K 001-37483 2.1 September 7, 2016
2.10 8-K 001-37483 2.2 September 7, 2016
2.11 8-K 001-37483 2.3 September 7, 2016
2.12 8-K 001-37483 2.1 November 2, 2016
2.13 8-K 001-37483 2.2 November 2, 2016
2.14 8-K 001-37483 99.1 March 7, 2017
2.15 8-K 001-37483 99.2 March 7, 2017
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2.16 8-K 001-38033 2.1 April 6, 2017
2.17 8-K 001-38033 2.2 April 6, 2017
2.18 8-K 001-38033 2.3 April 6, 2017
2.19 8-K 001-38033 2.4 April 6, 2017
2.20 8-K 001-38033 2.5 April 6, 2017
2.21 8-K 001-38033 2.6 April 6, 2017
2.22 8-K 001-37483 2.1 September 1, 2017
2.23 8-K 001-37483 2.2 September 1, 2017
2.24 8-K 001-37483 2.3 September 1, 2017
2.25 8-K 001-37483 2.4 September 1, 2017
2.26 8-K 001-37483 2.1 May 17, 2019
2.27 8-K 001-37483 2.1 July 13, 2020
3.1 8-K 001-37483 3.1 November 5, 2015
3.2 8-K 001-37483 3.2 November 5, 2015
3.3 8-K 001-37483 3.1 March 20, 2017
3.4 8-K 001-37483 3.2 March 20, 2017
4.1 8-K 001-37483 4.1 October 13, 2015
4.2 8-K 001-37483 4.5 October 13, 2015
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4.3 8-K 001-37483 4.6 October 13, 2015
4.4 8-K 001-37483 4.7 October 13, 2015
4.5 8-K 001-37483 4.8 October 13, 2015
4.6 8-K 001-37483 4.2 September 19, 2018
4.7 8-K 001-37483 4.3 September 19, 2018
4.8 8-K 001-37483 4.2 September 13, 2019
4.9 8-K 001-37483 4.3 September 13, 2019
4.10 8-K 001-37483 4.2 April 9, 2020
4.11 8-K 001-37483 4.3 April 9, 2020
4.12 8-K 001-37483 4.2 July 17, 2020
4.13 8-K 001-37483 4.3 July 17, 2020
4.14 8-K 001-37483 4.12 October 13, 2015
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4.15 S-3ASR 333-222102 4.5 December 15, 2017
4.16 10-K  001-37483 4.16 December 10, 2020
10.1 8-K 001-37483 10.1 January 30, 2017
10.2 10-12B/A 001-37483 10.4 September 28, 2015
10.3 S-8 333-207679 4.4 October 30, 2015
10.4 8-K 001-37483 10.4 November 5, 2015
10.5 8-K 001-37483 10.7 November 5, 2015
10.6 8-K 001-37483 10.8 November 5, 2015
10.7 8-K 001-37483 10.9 November 5, 2015
10.8 8-K 001-37483 10.10 November 5, 2015
10.9 10-Q 001-37483 10.14 March 10, 2016
10.10 10-Q 001-37483 10.15 March 10, 2016
10.11 8-K 001-37483 10.1 May 26, 2016
10.12 S-8 333-216481 4.3 March 6, 2017
10.13 S-8 333-217349 4.3 April 18, 2017
10.14 S-8 333-217349 4.4 April 18, 2017
10.15 S-8 333-217438 4.3 April 24, 2017
10.16 10-K 000-51333 10.3 September 10, 2012
10.17 S-8 333-221254 4.3 November 1, 2017
10.18 S-8 333-221254 4.4 November 1, 2017
10.19 S-8 333-226181 4.3 July 16, 2018
10.20 10-Q 001-37483 10.29 September 4, 2018
10.21 10-Q 001-37483 10.30 September 4, 2018
10.22 10-K 001-37483 10.27 December 12, 2018
10.23 10-K 001-37483 10.29 December 12, 2018
10.24 S-8 333-229449 4.3 January 31, 2019
10.25 10-Q 001-37483 10.32 March 9, 2020
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10.26 8-K 001-37483 10.1 August 20, 2019
10.27 S-8 333-234033 4.3 October 1, 2019
10.28 10-K 001-37483 10.31 December 13, 2019
10.29 S-8 333-249731 4.3 October 29, 2020
10.30 S-8 333-249731 4.4 October 29, 2020
10.31
10.32
31.1
31.2
32
101.INS Inline XBRL Instance Document‡
101.SCH Inline XBRL Taxonomy Extension Schema Document‡
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document‡
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document‡
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document‡
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document‡
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*    Indicates management contract or compensation plan, contract or arrangement
‡    Filed herewith
†    Furnished herewith
    The registrant agrees to furnish to the Commission supplementally upon request a copy of any instrument with respect to long-term debt not filed herewith as to which the total amount of securities authorized thereunder does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis.
60
Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
    HEWLETT PACKARD ENTERPRISE COMPANY
    /s/ TAREK A. ROBBIATI
Tarek A. Robbiati
 Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Authorized
Signatory)
Date: March 4, 2021
61

Exhibit 10.31
IMAGE_01.JPG


May 16, 2019

PERSONAL & CONFIDENTIAL

Peter Ungaro
901 5th Ave #1000
Seattle, WA 98164 Dear Peter,
On behalf of Hewlett Packard Enterprise Company (“HPE” or the “Company”), I am pleased to formally extend an offer to you to join our Hybrid IT Group as a Senior Vice President and General Manager in Seattle, Washington, having responsibilities consistent with such position, and reporting to the Executive Vice President, Hybrid IT or an executive of equivalent or more senior stature (the “Reporting Officer”). We hope you'll view this offer as an opportunity to further develop your professional career and help us innovate at HPE. Together we can create what comes next!

This offer is contingent on your continued employment with Cray Inc. (“Cray”) until your first day with Hewlett Packard Enterprise (referred to as your “start date”) and the successful closing of HPE’s acquisition of Cray (the “Merger”). In the event that the Merger is not consummated for any reason or if you are not employed with Cray on the date the Merger is completed (the “Closing Date”), this offer will be considered null and void. Your start date will be the Closing Date. Capitalized terms that are used in this letter that are not otherwise defined will have the meanings ascribed to them in the Agreement and Plan of Merger, by and among HPE, Canopy Merger Sub, Inc. and Cray Inc., dated as of May 16, 2019 (the “Merger Agreement”).

1.Notwithstanding anything to the contrary contained in the Merger Agreement, any equity award agreement or plan, subject to the occurrence of the Effective Time, you shall forfeit any and all then- unvested Company Options and Company RSU Awards (“Unvested Equity”) immediately prior to the Effective Time and in consideration therefor, you shall receive:

•A lump sum cash payment equal to the Unvested Equity Value (as defined below) of the Company Options and that portion of the Unvested Equity Value of your Company RSU Awards such that the payment at Closing is equal to 50% of the aggregate Unvested Equity Value, less applicable tax withholdings, payable within five (5) Business Days following the Closing Date; and

•A cash-based award (“Cash Award”) having a total value equal to 50% of the aggregate Unvested Equity Value that will vest upon the earlier of (1) the first anniversary of the Closing Date, subject to your continued employment with HPE through such date, and (2) the termination of your employment by HPE without Cause, by you for Good Reason or due to your death or Disability (each of Cause, Good Reason and Disability as defined in Exhibit A) (collectively, a “Qualifying Termination”). Any vested portion of the Cash Award shall be paid to you within five (5) Business Days of the vesting date, less applicable tax withholdings. You will forfeit any unvested portion of the Cash Award upon a termination of your employment with HPE and its subsidiaries that is not a Qualifying Termination.

The lump sum cash payment covered by the first bullet above will be funded first by the spread value of the unvested Company Options such that the Cash Award shall not include any portion of such spread value. For purposes of this offer letter, the “Unvested Equity Value” shall equal the value of the


Unvested Equity based on the Merger Consideration payable pursuant to the Merger Agreement. The unvested Company Options will be valued using the “spread” between exercise price per share and the Merger Consideration and the performance-vesting Company RSU Awards will be valued using the deemed 50% performance vesting rate set forth in the Merger Agreement. And in accordance with the Merger Agreement, the other 50% of the performance-vested Company RSU Awards will be forfeited at Closing. Any vested Company Options you hold at the Effective Time that meet the criteria to qualify as Cash-Out Options will be cashed out as provided in the Merger Agreement.
2.Upon the occurrence of the Effective Time, your Management Retention Agreement (“MRA”) with Cray Inc., and any rights thereunder immediately shall terminate, except that Section 4(c) and (e) and Section 6 of the MRA shall remain in full force and effect in accordance with their terms (and any reference to “another agreement, plan or arrangement” in Section 4(c) of the MRA shall include this offer letter). You acknowledge that you do not and will not participate in the Cray Executive Severance Policy.
3.Your initial annual base salary will be $600,000 to be paid in twenty-four (24) semi-monthly payments (less all applicable deductions and withholdings). Your paydays are expected to occur on the 15th and last day of the month unless such date falls on a weekend or a company-observed holiday in which case you will be paid on the workday immediately preceding the payday.
4.In addition to your base salary, you will be eligible to participate in the Company's Pay-for- Results Annual Bonus Plan ("PfR Plan"). As a General Manager, you will be eligible for a target bonus opportunity equal to 125% of your eligible earnings with a maximum bonus opportunity equal to 312.5% of your eligible earnings for the current fiscal year, subject to the PfR Plan's terms and conditions noted in the PfR Plan document. The performance metrics and payout, if any, are determined annually by the HR and Compensation Committee of the HPE Board of Directors (the “HRC”), or its delegate(s), in its sole discretion. Your bonus, if any, will be prorated for the balance of the fiscal year that is currently in place when you join the Company. The Company will deduct from the bonus any applicable withholding taxes or other deductions it is required to make by law.
5.As consideration for the value we believe you bring to this venture, we are pleased to offer you a retention package consisting of both, a one-time award of performance-based Restricted Stock Units and annual Restricted Stock Units, with the following terms:

•Subject to your continued employment through the Closing Date, on the Closing Date the Company will grant to you a target number (rounded to the nearest whole number) of HPE Restricted Stock Units in substantially the form attached here to as Exhibit B, with each unit corresponding to one share of HPE common stock, equal to the quotient of $1,000,000 divided by the closing price of HPE common stock on the trading day immediately preceding the Closing Date (the “HPE PBRSUs”). The HPE PBRSUs will cliff vest subject to (1) the integrated Cray business unit of HPE having achieved HPE’s business plan over the three-year period immediately following the date on which the Effective Time occurs (the “IRB”) and (2) your continued employment with HPE through the three year anniversary of the Closing Date. In the event that financial results exceed the IRB, you may earn up to 300%, of the HPE PBRSUs, based upon the recommendation of HPE’s CEO, but subject to review and approval of the HRC. Except as otherwise provided in the Hewlett Packard Enterprise Company Severance and Long- Term Incentive Change in Control Plan for Executive Officers (the “HPE Severance Plan”), you will forfeit the HPE PBRSUs upon the termination of your employment with HPE and its subsidiaries prior to the vesting of such HPE PBRSUs.

•Subject to your continued employment through the earlier of the first anniversary of the Closing Date and a Qualifying Termination (such earlier date, the “First Milestone Date”), HPE shall pay to you an amount in cash equal to $1,000,000 (the “First Milestone Payment”), less applicable tax withholdings, within five Business Days following the First Milestone Date. You will forfeit any unvested portion of the First Milestone Payment upon a termination of your employment with HPE and its subsidiaries that is not a Qualifying Termination.

Company Confidential    2

•Subject to your continued employment through the earlier of the second anniversary of the Closing Date and a Qualifying Termination (such earlier date, the “Second Milestone Date”), HPE shall pay to you an amount in cash equal to $1,000,000 (the “Second Milestone Payment”), less applicable tax withholdings, within five Business Days following the Second Milestone Date. You will forfeit any unvested portion of the Second Milestone Payment upon a termination of your employment with HPE and its subsidiaries that is not a Qualifying Termination.

•Subject to the approval by the HRC, for the first three years of your employment with HPE following the Closing Date, you will receive an annual grant of HPE Restricted Stock Units (each such annual grant, the “Annual RSUs”) subject to (1) your acceptance of this letter and the terms contained herein, (2) the occurrence of the Effective Time and (3) your continued employment with HPE and its subsidiaries through the applicable grant date. The Annual RSUs will be granted on HPE’s normal annual equity grant cycle and will be valued at $3,000,000 on the grant date, as determined by HPE, with each unit corresponding to one share of HPE common stock. Each grant of Annual RSUs will vest as to one-third of the restricted stock units on each anniversary of the grant date for a period of three (3) years, subject to your continued service through the applicable vesting date. The full terms and conditions of this grant will be provided to you in a Grant Agreement shortly after the grant date and such terms shall govern with respect to the grant. Except as otherwise provided in the HPE Severance Plan, you will forfeit any unvested Annual RSUs upon the termination of your employment with HPE and its subsidiaries prior to the applicable vesting date.
6.When you join HPE, you will be eligible to participate in the HPE Severance Plan at the Executive Vice President level and to participate in the other benefit programs that are generally afforded to HPE employees, subject to HPE’s policies; provided, however, that notwithstanding anything to the contrary contained in the HPE Severance Plan, payments under the HPE Severance Plan shall be made on the same schedule required by the MRA to the extent required by Section 409A. These and any other benefit programs are subject to modification from time to time. For detailed information, go to ALEX for HPE.
7.You will receive credit for your continuous service with Cray in determining the rate at which you accrue vacation under HPE’s vacation program and for other HPE employee benefit programs and policies as provided in the agreements governing the Merger.
8.If you accept this offer as set forth above, you must also meet the following conditions to be eligible for employment with the Company:

•Arbitration Agreement. This offer and your employment are also conditional upon your review and acceptance of the Mutual Agreement to Arbitrate Claims. Arbitration has become a common practice in many areas of business and HPE recognizes arbitration to be an effective way to resolve employment-related disputes. This Mutual Agreement to Arbitrate Claims is substantially the same agreement executed by all executive officers of the Company and is consistent with the current form of such agreement. Please review the attached Mutual Agreement to Arbitrate Claims.

•Agreement Regarding Confidential Information and Proprietary Developments ("ARCIPD"). This offer and your employment are conditional upon your review and acceptance of the ARCIPD. This ARCIPD is on substantially the same terms as provided to all executive officers of the Company and is consistent with the current form of such agreement. Please review the attached ARCIPD.

Please understand your employment with the Company would be on an at-will basis, and as such, would be for an indefinite term and may be ended, with or without cause, at any time by either you or
Company Confidential    3

the Company, with or without previous notice. The at-will nature of your job may be changed only through a written communication to you from the Company's General Counsel.

Sincerely,

/s/ Alan May

Alan May
Executive Vice President, Human Resources




Company Confidential    4

Offer of Employment Acceptance

To accept this offer of employment and agree to the above, please do the following:

a.Print this offer letter including attached agreements.
b.Sign below and in the 5 areas indicated within the attached agreements indicating your acceptance of offer and terms.
c.Select "reply to all" from your HPE offer email and attach your signed offer letter and agreements . Send the email.

In accepting the Company's conditional offer of employment, I have read, understand and agree to the terms and conditions of Agreements and other documents attached, specifically the Mutual Agreement to Arbitrate Claims, HPE Agreement Regarding Confidential Information and Proprietary Developments, Former Employers' Property/Confidential Information Agreement, Rules Regarding Obligations Related to Previous Employers & Other Third Parties, and the HPE Employee Letter of Assurance Agreement.

Additionally, I have read, understand and agree to comply with the Company's Standards of Business Conduct ("SBC") and all related policies, including the U.S. Drug Policy, and acknowledge my responsibility to comply with the SBC and related o 1Cies following the commencement of my employment.


Signature required:    /s/ Peter Ungaro                    5/16/19    
            Peter Ungaro                    Date



All documents herein after are required by candidate to sign



Company Confidential    5

Hewlett Packard Enterprise Agreement Regarding Confidential Information and Proprietary Developments
1.Relationship to Employment. I desire to be employed by Hewlett Packard Enterprise or by one of its affiliates or subsidiaries (including their successors and assigns) (collectively, "HPE" or the "Company"). This Agreement states important terms that will apply during and after my employment by HPE. I understand, however, that nothing relating to this Agreement will be interpreted as a contract or commitment whereby HPE is deemed to promise continuing employment for a specified duration.
2.Confidential Information. This Agreement concerns confidential business and technical information and know-how not generally known to the public which is acquired or produced by me in connection with my employment by HPE (hereinafter "Confidential Information") as well as trade secrets that are acquired or produced by me in connection with my employment by HPE. Confidential Information may include, without limitation, information regarding HPE organizations, staffing, finance, structure, employee performance, compensation of others, research and development, manufacturing and marketing, files, keys, certificates, passwords and other computer information, as well as information that HPE receives from others under an obligation of confidentiality. I agree to abide by HPE's Confidential Information Policy and specifically agree that with regard to HPE Confidential Information and trade secrets:
a.to use such information only in the performance of HPE duties;
b.to hold such information in confidence and trust; and
c.to use all reasonable precautions to assure that such information is not disclosed to unauthorized persons, including, without limitation, through the media, blogs, social networking sites or other online forums, or otherwise used in an unauthorized manner, both during and after my employment with HPE.
I further agree that any organizational information, staffing information, and information on performance and/or compensation of other employees learned by me in connection with my employment by HPE is the Confidential Information of HPE, and I agree that I will not share such information with any recruiters or any other employers, either during or subsequent to my employment with HPE; further, I agree that I will not use or permit use of such as a means to recruit or solicit other HPE employees away from HPE (either for myself or for others).
I understand that nothing in this Agreement is intended to prohibit or restrict communication with governmental agencies in compliance with applicable law.
3.Proprietary Developments. This Agreement also concerns inventions and discoveries (whether or not patentable), designs, works of authorship, mask works, improvements, data, processes, computer programs and software (hereinafter called "Proprietary Developments") that are conceived or made by me alone or with others while I am employed by HPE and that relate to the research and development or the business of HPE, or that result from work performed by me for HPE, or that are developed, in whole or in part, using HPE's equipment, supplies, facilities or trade secret information. Such Proprietary Developments are the sole property of HPE, and I hereby assign and transfer all rights in such Proprietary Developments to HPE. I also agree that any works of authorship created by me shall be deemed to be "works made for hire." For all Proprietary Developments, I further agree:
a.to disclose them promptly to HPE;
b.to sign any assignment document to formally perfect and confirm my assignment of title to HPE;
c.to assign any right of recovery for past damages to HPE; and
d.to execute any other documents deemed necessary by HPE to obtain, record and perfect patent, copyright, mask works and/or trade secret protection in all countries, in HPE's name and at HPE's expense.
I understand that HPE may assign and/or delegate these rights. I agree that, if requested, my disclosure, assignment, execution and cooperation duties will be provided to the entity designated by HPE.


In compliance with prevailing provisions of relevant state statutes,* this Agreement does not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee's own time, unless (a) the invention relates (i) to the business of the employer or (ii) to the employer's actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer.
4.Respect for Rights of Former Employers. I agree to honor any valid disclosure or use restrictions on information or intellectual property known to me and received from any former employers or any other parties prior to my employment by HPE. I agree that without prior written consent of such former employers or other parties, I will not knowingly use any such information in connection with my HPE work or work product, and I will not bring onto the premises of HPE any such information in whatever tangible or readable form.
5.Work Product. The product of all work performed by me during and within the scope of my HPE employment including, without limitation, any files, presentations, reports, documents, drawings, computer programs, devices and models, will be the sole property of HPE. I understand that HPE has the sole right to use, sell, license, publish or otherwise disseminate or transfer rights in such work product.
6.HPE Property. I will not remove any HPE property from HPE premises without HPE's permission. Upon termination of my employment with HPE, I will return all HPE property to HPE unless HPE's written permission to keep it is obtained.
7.Protective Covenants. I acknowledge that a simple agreement not to disclose or use HPE's Confidential Information, trade secrets, or Proprietary Developments after my employment by HPE ends would be inadequate, standing alone, to protect HPE's legitimate business interests because some activities by a former employee who had held a position like mine would, by their nature, compromise such Confidential Information, trade secrets, and Proprietary Developments as well as the goodwill and customer relationships that HPE will pay me to develop for the Company during my employment by HPE. I recognize that activities that violate HPE's rights in this regard, whether or not intentional, are often undetectable by HPE until it is too late to obtain any effective remedy, and that such activities will cause irreparable injury to HPE. To prevent this kind of irreparable harm, I agree that for a period of twelve months following the termination of my employment with HPE, I will abide by the following Protective Covenants:
(a)No Conflicting Business Activities. I will not provide services to a Competitor in any role or position (as an employee, consultant, or otherwise) that would involve Conflicting Business Activities, however, in the event my employment with HPE terminates as a result of a Workforce Restructuring program or similar reduction in force, the restriction in this clause (paragraph 7, subpart (a)) will not apply;
(b)No Solicitation of Customers. I will not (in person or through assistance to others) knowingly participate in soliciting or communicating with any customer of HPE in pursuit of a Competing Line of Business if I either had business-related contact with that customer or received Confidential Information about that customer in the last two years of my employment at HPE;
(c)No Solicitation of HPE Employees. I will not (in person or through assistance to others), for the benefit of a Competitor, knowingly participate in soliciting or communicating with an HPE Employee for the purpose of persuading or helping the HPE Employee to end or reduce his or her employment relationship with HPE if I either worked with that HPE Employee or received Confidential Information about that HPE Employee in the last two years of my employment with HPE; and
(d)No Solicitation of HPE Suppliers. I will not (in person or through assistance to others), for the benefit of a Competitor, knowingly participate in soliciting or communicating with an HPE Supplier for the purpose of persuading or helping the HPE Supplier to end or modify to HPE's detriment an existing business relationship with HPE if I either worked with that HPE Supplier or received Confidential Information about that HPE Supplier in the last two years of my employment with HPE.
As used here, "Competitor" means an individual, corporation, other business entity or separately operated business unit of an entity that engages in a Competing Line of Business. "Competing Line of Business" means
Company Confidential    2

a business that involves a product or service offered by anyone other than HPE that would replace or compete with any product or service offered or to be offered by HPE with which I had material

involvement while employed by HPE (unless HPE and its subsidiaries are no longer engaged in or planning to engage in that line of business). "Conflicting Business Activities" means job duties or other business- related activities in the United States or in any other country where the HPE business units in which I work do business, or management or supervision of such job duties or business-related activities, if such job duties or business-related activities are the same as or similar in any material way to the job duties or business-related activities in which I participate or as to which I receive Confidential Information or trade secrets in the last two years of my employment with HPE. "HPE Employee" means an individual employed by or retained as a consultant to HPE or its subsidiaries. "HPE Supplier" means an individual, corporation, other business entity or separately operated business unit of an entity that regularly provides goods or services to HPE or its subsidiaries, including without limitation any OEM, ODM or subcontractor.
8.Enforcement. I make these agreements to avoid any future dispute between myself and HPE regarding specific restrictions on my post-employment conduct that will be reasonable, necessary and enforceable to protect HPE's Confidential Information, trade secrets, and Proprietary Developments and other legitimate business interests. The Protective Covenants are ancillary to the other terms of this Agreement and my employment relationship with HPE. This Agreement benefits both me and HPE because, among other things, it provides finality and predictability for both me and the Company regarding enforceable boundaries on my future conduct. Accordingly, I agree that this Agreement and the restrictions in it should be enforced under common law rules favoring the enforcement of such agreements. For these reasons, I agree that I will not pursue any legal action to set aside or avoid application of the Protective Covenants.
9.Notice of Post-Employment Activities. If I accept a position with a Competitor at any time within twelve months following termination of my employment with HPE, I will promptly give written notice to the senior Human Resources manager for the HPE business sector in which I worked, with a copy to HPE's General Counsel, and will provide HPE with the information it needs about my new position to determine whether such position would likely lead to a violation of this Agreement (except that I need not provide any information that would include the Competitor's trade secrets). I consent to HPE notifying my new employer of my rights and obligations under this Agreement.
10.Relief; Extension. I understand that if I violate this Agreement (particularly the Protective Covenants), HPE will be entitled to (i) injunctive relief by temporary restraining order, temporary injunction, and/or permanent injunction, (ii) recovery of attorney's fees and costs incurred by HPE in obtaining such relief where allowed by law, and (iii) any other legal and equitable relief to which HPE may be entitled. Injunctive relief will not exclude other remedies that might apply. If I am found to have violated any restrictions in the Protective Covenants, then the time period for such restrictions will be extended by one day for each day that I am found to have violated them, up to a maximum extension equal to the time period originally prescribed for the restrictions. I acknowledge that if the Company determines that (i) I have engaged in misconduct prohibited by applicable law or any applicable policy of the Company, as in effect from time to time, or (ii) the Company is required to make recovery from me under applicable law or a Company policy adopted to comply with applicable legal requirements, then the Company may, in its sole discretion, to the extent it determines appropriate and to the extent permitted under applicable law, (a) recover from me any incentive payments (whether cash or equity) paid to me up to three years prior to the end of my employment or any time thereafter; (b) cancel my outstanding incentive awards (cash and equity) whether or not vested, and cancel future payments due hereunder, and (c) take any other action required or permitted by applicable law; provided, however, that the Company will not, unless required or permitted by applicable law, recover amounts from a plan of non-qualified deferred compensation to the extent the recovery would result in tax penalties to me under Internal Revenue Code Section 409A.
11.Severability; Authority for Revision; Inure to Successors. The provisions of this Agreement will be separately construed. If any provision contained in this Agreement is determined to be void, illegal or unenforceable, in whole or in part, then the other provisions contained herein will remain in full force and effect as if the provision so determined had not been contained herein. If the restrictions provided in this Agreement
Company Confidential    3

are deemed unenforceable as written, the parties expressly authorize the court to revise, delete, or add to such restrictions to the extent necessary to enforce the intent of the parties and to provide HPE's goodwill, Confidential Information, trade secrets, Proprietary Developments and other business interests with effective protection. The title and paragraph headings in this Agreement are provided for convenience of reference only, and shall not be considered in determining its meaning, intent or applicability. This Agreement will automatically inure to the benefit of, and will be enforceable by, any parent, subsidiary , affiliate, successor or assign of HPE that I become employed with or have material involvement with, in order to protect such entity's legitimate business interests_ I agree that this Agreement, including but not limited to the Protective Covenants contained in paragraph 7 (and its subparts), may be assigned by HPE to a subsequent employer, successor , or assign without the need for further authorization or agreement from me.
12.Governing Law; Venue. The laws of the state of Delaware shall govern this Agreement , the construction of its terms, and the interpretation of the rights and duties of the parties hereto without regard to any conflicts of laws principles to the contrary. Subject to the limitations of any mandatory arbitration obligation I may be subject to, the exclusive venue for any legal action arising from this Agreement will be a federal or state court of competent jurisdiction located in the state of Delaware (or, if Delaware is not a legally proper and sustainable venue state then the state where I was last employed with HPE). I hereby stipulate and consent to the personal jurisdiction of such courts , and expressly waive any right to object to any such court's exercise of jurisdiction over me on grounds of convenience or otherwise. I agree that Delaware has a compelling interest in the enforcement of this Agreement because it is designed to help preserve shareholder value and rights in a Delaware corporation and it is ancillary to a grant of equity under HPE incentive plan(s) governed by Delaware law

I have been notified that I have the right to consult legal counsel prior to signing this Agreement.


Signature required:    /s/ Peter Ungaro                    5/16/19    
            Peter Ungaro                    Date

* Including: California Labor Code Section 2870; Delaware Code Title 19 Section 805 ; Illinois
7651LCS1060/ 1-3, "Employees Patent Act"; Kansas Statutes Section 44- 130; Minnesota Statutes 13A Section 181 .78 ; North Carolina General Statutes Article 10A, Chapter 66 , Commerce and Business, Section 66-57. 1; Utah Code Sections 34-39-1 through 34-39-3, "Employment Inventions Act"; Washington Rev. Code, Title 49 RCW: Labor Regulations , Chapter 49.44.140.


Page 1 of 1: The scanned copy of this form in OFIS is the official document of record.
Rev 060315/MG4-All Us
Firmwide: 144453201. 1 066902 . 1000
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Exhibit 10.32

TRANSITION AND SEPARATION AGREEMENT

This Transition and Separation Agreement (this “Agreement”) is entered into by and between Peter Ungaro (“Executive”) and Hewlett Packard Enterprise Company, a Delaware corporation (the “Company”, and in combination with its subsidiaries, affiliates and assigns, “HPE”), effective as of the date Executive signs this Agreement (the “Effective Date”) with reference to the following facts:

A.Executive is currently serving as Senior Vice President and General Manager of High Performance Computing and Mission Critical Solutions for the Company.
    
B.Executive and the Company have mutually agreed that Executive shall terminate from his current role at the Company effective on March 2, 2021 (the “Transition Date”) and shall be employed in a new role through effectiveness of Executive’s termination from employment with the Company at close of business on April 2, 2021 (the “Separation Date”).

C.Executive and the Company desire to establish the obligations of the parties in connection with the Executive’s employment termination.

D.Executive and the Company want to ensure the smooth transition of Executive’s duties and responsibilities to the Company and for Executive to provide certain transitional services as a consultant to the Company for a period following the Separation Date.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties agree as follows:

1.Transition of Role and Termination of Employment.

(a)Transition. As of the Transition Date, Executive hereby resigns from any offices, boards of directors (or similar governing bodies), committees of such boards of directors (or similar governing bodies) and other committees of HPE that Executive serves on and Executive’s title shall be changed to Special Advisor to the Chief Executive Officer. In this role, from the Transition Date through the Separation Date, the Executive shall remain employed on a full-time basis by the Company on Executive’s current base salary providing assistance towards technical development roadmaps and key customer relations, shall work to transition his duties and responsibilities to such individual(s) as the CEO may determine, and shall perform such other duties and responsibilities as may reasonably be requested by the CEO, consistent with Executive’s position. Prior to the Separation Date, the Company may not terminate Executive’s employment except for “Cause” (as defined in the Offer Letter (the “Offer Letter”) by and between Executive and HPE, dated as of May 16, 2019).

(b)Termination. Executive’s employment with the Company shall end effective as of the Separation Date.

(c)    Accrued Compensation, Expenses and Benefits; COBRA Assistance. On the Separation Date, the Company shall pay to Executive: (i) all accrued salary and (ii) any unreimbursed business expenses incurred by Executive prior to the Separation Date that are substantiated and reimbursable in accordance with applicable Company policy. Further, the Company shall pay to Executive: an amount equal to the employer portion of COBRA continuation coverage under the Company’s group health plans as in effect


as of the Separation Date with respect to the level of coverage in effect for Executive and his eligible dependents as of such date, on a monthly basis on the first business day of the calendar month next following the calendar month in which the applicable COBRA premiums were paid, with respect to the period from the Separation Date until the earlier of (y) the Consulting Period End Date and (z) September 30, 2021, less required tax withholdings. In addition, Executive will be eligible to receive the Company health and retirement benefits for which Executive is otherwise eligible, under the terms of those ERISA plans. Executive is entitled to these payments and benefits regardless of whether Executive executes this Agreement.

(d)    Full Payment. Executive acknowledges that the amounts described in Section 1(c) above shall constitute full and complete satisfaction of any and all amounts properly due and owing to Executive as a result of Executive’s employment with the Company and separation therefrom. Executive further acknowledges that Executive’s unvested and outstanding cash and equity awards shall be deemed forfeited as of the Separation Date and Executive will have no further obligations under any award agreement evidencing the terms of such awards, including the restrictive covenants included in the “Additional Eligibility Requirements” or comparable section thereof. Executive further acknowledges that Executive’s eligibility for benefits under the Company’s Severance and Long-Term Change in Control Plan for Executive Officers shall be deemed forfeited as of the Separation Date.

2.Transition Consulting Services.
(a)    Consulting Period. During the period (the “Consulting Period”) commencing April 5, 2021 and ending September 30, 2021, unless earlier terminated as provided below (the last day of the Consulting Period, the “Consulting Period End Date”), Executive shall be available to provide services to the Company as a consultant and shall provide transition services (the “Transition Services”) on an as-needed, as-requested basis in Executive’s areas of expertise, work experience and responsibility, including assistance regarding ongoing technical development and key customer relations. Such Transition Services shall be provided by telephone or in person or, at the Company’s request, at the Company’s business premises or such other location as the Company may reasonably designate (subject to reasonable accommodation for restrictions imposed from time to time by applicable federal, state and local governments as a result of the COVID-19 pandemic).
(b)    Consulting Fees. In exchange for the performance of the Transition Services during the Consulting Period, Executive shall be paid a corresponding consulting fee of $150,000 per month (pro-rated for any partial month of Transition Services) (the “Consulting Fee”). The Consulting Fee payable for each month of the Consulting Period will be paid within five business days after the end of such month.
(c)    Success Fee. Subject to Executive’s provision of Transition Services through September 30, 2021 and achievement of the Company’s financial performance objectives identified on Schedule I hereto, Executive will be paid a lump sum cash award with a target value of $315,000 (the “Success Fee”) within ninety days after September 30, 2021.
(d) Expenses. The Company will also reimburse Executive for expenses actually incurred by Executive in performing the Transition Services, so long as such expenses are reasonable and necessary as determined by the Company and approved in advance by the Company.
(e) Confidentiality and Work Product. Executive shall hold all confidential business information, trade secrets and other Confidential Information (as defined in the ARCIPD) that is obtained in performing the Transition Services in trust and confidence for the Company. Executive agrees that all
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discoveries, designs, works of authorship and other Proprietary Developments (as defined in the ARCIPD) conceived or made by Executive, alone or with others, in performing the Transition Services are the sole property of the Company, and Executive hereby assigns and transfers all Executive’s rights to such Proprietary Developments to the Company. In supplement to these commitments, Sections 2, 3 and 5 of the ARCIPD (as defined below) are hereby incorporated, mutatis mutuandis, and will apply for duration of the Consulting Period as if they were set forth in their entirety herein.
(f) Books and Records. Executive shall maintain adequate books and records relating to the fees owing hereunder and expenses to be reimbursed and shall submit fee invoices and requests for reimbursement in a timely manner and form acceptable to the Company.
(g)    Benefits. As an independent contractor, Executive understands and agrees that, except as provided in Section 1(c) hereof while performing any services for the Company after the Separation Date, Executive shall not be eligible to participate in or accrue benefits under any Company benefit plan for which status as an employee of the Company is a condition of such participation or accrual.
(h)    Independent Contractor Status. Executive and the Company acknowledge and agree that, during the Consulting Period, Executive shall be an independent contractor. During the Consulting Period and thereafter, Executive shall not be an agent or employee of the Company and shall not be authorized to act on behalf of the Company or obligate the Company by contract or otherwise. Executive agrees to furnish all materials necessary to accomplish the Transition Services and assumes all of the risk for Executive’s own profit or loss with respect to the Transition Services provided hereunder. Executive acknowledges and agrees that the Company shall not direct or control the Executive with respect to the manner in which the Transition Services are provided. Executive represents that Executive is not economically dependent upon the Company in any way with respect to the fees payable hereunder. Personal income and self-employment taxes for any fees or other compensation to which Executive is entitled during the Consulting Period shall be the sole responsibility of Executive. Executive agrees to indemnify and hold the Company and the other entities released herein harmless for any tax claims or penalties resulting from any failure by Executive to make required personal income and self-employment tax payments with respect to such compensation.
(i) Termination. During the period beginning on April 5, 2021 and ending on September 30, 2021, the Company may only terminate Executive’s engagement in the event of a material breach of this Agreement by Executive. Executive may terminate the Consulting Period early for any reason with two weeks’ prior written notice to the Company. Either party may also terminate the Consulting Period at any time in the event of a material breach of this Agreement (including any breach of Sections 2(e) or 6 hereof or of Section 7 of the ARCIPD) by the counter-party that is not cured within five business days of such counter-party receiving written notice of the purported material breach.
3.General Release and Waiver of Claims.

(a) Initial Release. To the fullest extent permitted by law, Executive, on behalf of Executive and Executive’s heirs, assigns, executors, administrators, trusts, spouse and estate, hereby releases, forever discharges and waives any other claims Executive may have against the Company, its direct and indirect subsidiaries and affiliates (including each of their predecessors, successors and assigns), and each of their past, present and future officers, directors, agents and employees (the “Releasees”), whether or not acting in their official capacity, from all liability, claims, damages and causes of action of every kind in connection with matters, facts or events through the Effective Date of this Agreement. This release extends, without limitation, to all “wrongful discharge” or retaliation claims, claims relating to any contract of employment, express or implied, any covenant of good faith and fair dealing, express or
3


implied, public policy violation, any tort of any nature, or any federal, state, or local statute or ordinance, any claim for employment discrimination, including harassment, any claim under Title VII of the Civil Rights Act of 1964, as amended 42 U.S.C. 1981, the Worker Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act, or any other federal, state or local laws relating to employment or employment discrimination, and any claims for attorney’s fees and costs. This release extends to any claims that may be brought on Executive’s behalf by any person or agency, as well as any class or representative action under which Executive may have any rights or benefits; Executive agrees not to accept any recovery or benefits under any such claim or action, and Executive assigns any such recovery or benefits to the Company. This release does not apply to any claims arising under the Age Discrimination in Employment Act (ADEA); this release does not, and shall not be construed as an attempt to, waive or release any claim or right that cannot lawfully be waived or released by private agreement between Executive and the Company. Nothing in this Agreement or the Exhibits hereto shall be construed to prohibit Executive from filing a charge or complaint, including a challenge to the validity of this Agreement, with the Equal Employment Opportunity Commission, National Labor Relations Board, or any other comparable federal, state or local agency charged with the investigation and enforcement of any employment laws or participating in any investigation or proceeding conducted by the EEOC, NLRB or other comparable federal, state or local agency, although by signing this Agreement, Executive agrees and understands that Executive is waiving his/her right to individual relief based on claims asserted in such a charge or complaint. Executive intends this release to apply as a full and final settlement of all claims encompassed by this paragraph, whether known or unknown, suspected or unsuspected, and accordingly Executive waives any rights Executive might otherwise have under Section 1542 of the Civil Code of California, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.
Executive and the Company do not intend to release any (i) claims for coverage under any D&O or other similar insurance policy of the Company, (ii) claims for enforcement of this Agreement, (iii) claims for reimbursement of unreimbursed business expenses properly incurred prior to the Separation Date in accordance with the Company’s policy, (iv) claims as an equityholder in the Company (including any rights Executive has arising under operative documents applicable to Executive in such capacity) and (v) claims under Section 2 of the Offer Letter and the related sections of Executive’s Management Retention Agreement with Cray, Inc.
(b) Second Release. Executive and the Company agree to enter into a second release in the form attached as Exhibit A (the “Second Release”) within twenty-one (21) days after the Separation Date.
4.Return of Property. Executive agrees to return to HPE all company-owned computers, peripherals, supplies and equipment, and all confidential and proprietary information and other property of HPE on or before the Consulting Period End Date.

5.Restrictive Covenant Agreements. Executive reaffirms his commitments and obligations set forth in the Agreement Regarding Confidential Information and Proprietary Developments attached as Exhibit B and subsequently amended by this Section 5 (the “ARCIPD”), and Executive agrees that these commitments and obligations shall survive Executive’s termination of employment with the Company as is specified in the ARCIPD. The parties agree that Section 12 of the ARCIPD is hereby modified to provide that as concerns the adjudication of any restriction that qualifies as a noncompetition covenant
4


under the Washington Noncompete Act (Title 49 RCW, Chapter 49.62), Executive shall not be required to litigate such a noncompetition covenant outside the state of Washington nor shall any other state’s law deprive Executive of the protections or benefits of Washington law. Conditioned upon Executive’s timely entry into (and non-revocation of) the Second Release and Executive’s continued employment through the Separation Date, the parties agree that Sections 7 and 9 of the ARCIPD are modified to establish a September 30, 2021 expiration date for the Protective Covenants and Notice of Post-Employment Activities, respectively, therein, subject to Section 10 of the ARCIPD. For the avoidance of doubt, the duration of the ARCIPD is entirely independent from the duration of the Consulting Period, and except as expressly modified by the forgoing the ARCIPD shall continue and remain in effect and as written.

6.No Disparagement; Cooperation. Executive will not at any time disparage HPE or its products, services or business practices or make any unfair or misleading statement regarding same. HPE agrees to instruct its directors and officers not to, directly or indirectly, make any disparaging remarks or statements regarding the Executive to any person or entity, either orally or in writing, except as may be required by law. Upon the receipt of reasonable notice from HPE, Executive agrees to reasonably cooperate with and assist HPE and its legal counsel in connection with any current or future litigation, investigation or other legal matters involving HPE about which Executive has knowledge or information including by offering availability at mutually convenient times and reasonable locations. Notwithstanding the foregoing, Executive’s cooperation following the Consulting Period End Date shall be in a manner that does not interfere with any other employment or other work being carried on by Executive nor otherwise unreasonably interfere with Executive’s other commitments. Executive understands HPE will reimburse Executive for reasonable travel expenses incurred as a result of, and directly related to, Executive’s cooperation. Additionally, following the Consulting Period End Date, to the extent services provided in connection with this Section 6 exceed ten (10) hours in the aggregate, Executive shall be paid a fee based on Executive’s base salary as of the Separation Date. In the event Executive is called other than by HPE as a witness to testify in any proceeding or matter related to HPE, Executive agrees to notify HPE immediately in order to give HPE a reasonable opportunity to respond and/or participate in such proceeding or matter. Nothing in this Agreement shall be construed to prevent Executive from providing truthful testimony if mandated by subpoena or court order to do so, or from cooperating fully with any request from or investigation by any federal, state or local government agency or commission (each, a “Government Agency”).

7.Executive’s Representations. Executive warrants and represents that (a) Executive has not filed or authorized the filing of any complaints, charges or lawsuits against the Company or any affiliate of the Company with any Government Agency or court, and that if, unbeknownst to Executive, such a complaint, charge or lawsuit has been filed on Executive’s behalf, Executive will immediately cause it to be withdrawn and dismissed, (b) Executive has reported all hours worked as of the date of this Agreement and has been paid all salary, wages, bonuses, commissions and/or benefits to which Executive may be entitled and no other salary, wages, bonuses, commissions and/or benefits are due to him, except as provided in this Agreement, (c) Executive has no known workplace injuries or occupational diseases and has been provided and/or has not been denied any leave requested under the Family and Medical Leave Act or any similar state law, (d) the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject and (e) upon the execution and delivery of this Agreement by the Company and Executive, this Agreement will be a valid and binding obligation of Executive, enforceable in accordance with its terms.

8.No Admission of Liability. This Agreement is not and shall not be construed or contended by Executive to be an admission or evidence of any wrongdoing or liability on the part of Releasees.
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9.Choice of Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without regard to any conflicts of laws principles that would require the laws of any other jurisdiction to apply. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.

10.Arbitration; Venue. Subject to the limitations of the Mutual Agreement to Arbitrate Claims between Executive and the Company dated May 16, 2019 attached as Exhibit C, the exclusive venues for any legal action arising from this Agreement will be a federal or state court of competent jurisdiction located in either the State of Washington or the State of Delaware. Executive and the Company hereby stipulate and consent to the personal jurisdiction of such courts, and expressly waive any right to object to any such court’s exercise of jurisdiction over Executive on grounds of convenience or otherwise.

11.Attorneys’ Fees. If any action is brought to enforce the terms of this Agreement, the prevailing party will be entitled to recover its reasonable attorneys’ fees, costs and expenses from the other party, in addition to any other relief to which the prevailing party may be entitled. Provided that supporting invoices are submitted within thirty (30) days of the date hereof, the Company will pay Executive’s reasonable attorneys’ fees of up to $10,000 in connection with the negotiation of this Agreement within ninety (90) days following the date hereof.

12.Assignability; Successors. The rights and benefits under this Agreement are personal to the Executive and such rights and benefits shall not be subject to assignment, alienation or transfer, except to the extent such rights and benefits are lawfully available to the estate or beneficiaries of the Executive upon death. The Company shall assign its rights and obligations under this Agreement to any successor to all or substantially all of the business or the assets of the Company (by merger or otherwise). This Agreement shall be binding upon and inure to the benefit of the Company and its successors, assigns, personnel and legal representatives.

13.Complete and Voluntary Agreement. This Agreement, together with Exhibit A, Exhibit B and Exhibit C constitutes the entire agreement between Executive and the Company with respect to Company’s employment of the Executive and any other subject matters hereof and supersedes all prior negotiations and agreements (including, for avoidance of doubt, Executive’s Grant Agreement for Performance-Based Restricted Stock Units dated January 29, 2020 and Executive’s Grant Agreement for Restricted Stock Units dated December 10, 2020), whether written or oral, relating to such subject matters. Executive acknowledges that neither Releasees nor their agents or attorneys have made any promise, representation or warranty whatsoever, either express or implied, written or oral, that is not contained in this Agreement for the purpose of inducing Executive to execute the Agreement, and Executive acknowledges that Executive has executed this Agreement in reliance only upon such promises, representations and warranties as are contained herein, and that Executive is executing this Agreement voluntarily, free of any duress or coercion. By signing below, Executive affirms that Executive was advised to consult with an attorney prior to signing this Agreement.

14.Severability. The provisions of this Agreement are severable, and if any part of it is found to be invalid or unenforceable, the other parts shall remain fully valid and enforceable. Specifically, should a court, arbitrator, or Government Agency conclude that a particular claim may not be released as a matter of law, it is the intention of the parties that the general release, the waiver of unknown claims and the covenant not to sue above shall otherwise remain effective to release any and all other claims.

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15.Notice. Any notice to be given hereunder shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight carrier to the parties at the addresses set forth below.

To the Executive:
At the Executive’s current home address reflected in the Company’s employment files

To the Company at:
Hewlett Packard Enterprise
Attn: General Counsel
11445 Compaq Center West Drive
Houston, TX 77070

16.Modification; Counterparts; Facsimile/PDF Signatures. It is expressly agreed that this Agreement may not be altered, amended, modified, or otherwise changed in any respect except by another written agreement that specifically refers to this Agreement, executed by authorized representatives of each of the parties to this Agreement. This Agreement may be executed in any number of counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument. Execution of a facsimile or PDF copy shall have the same force and effect as execution of an original, and a copy of a signature will be equally admissible in any legal proceeding as if an original.

[Signatures on next page]


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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered as of the date indicated next to their respective signatures below.
DATED: 01 March 2021 /s/ Peter J. Ungaro
Peter Ungaro
HEWLETT PACKARD ENTERPRISE COMPANY
DATED: 1 March 2021
By: /s/ Alan May
Name: Alan May
Title: EVP, Chief People Officer

Signature Page to Transition and Separation Agreement

EXHIBIT A

FORM OF SECOND RELEASE


1.Context of Agreement. This Release Agreement (this “Agreement”) is entered into by and between Peter Ungaro (“Executive”) and Hewlett Packard Enterprise Company, a Delaware corporation (the “Company”, and in combination with its subsidiaries, affiliates, and assigns, “HPE”), effective as of the eighth day following the date Executive signs this Agreement (the “Effective Date”) with reference to the termination of Executive’s employment with the Company.

2.General Release and Waiver of Claims. In consideration for the valuable opportunities and rights offered by Sections 2 and 5 of Executive’s Transition and Separation Agreement, to the fullest extent permitted by law, Executive, on behalf of Executive and Executive’s heirs, assigns, executors, administrators, trusts, spouse and estate, hereby releases, forever discharges and waives any other claims Executive may have against the Company, its direct and indirect subsidiaries and affiliates (including each of their predecessors, successors and assigns), and each of their past, present and future officers, directors, agents and employees (the “Releasees”), whether or not acting in their official capacity, from all liability, claims, damages and causes of action of every kind in connection with matters, facts or events through the Effective Date of this Agreement. This release extends, without limitation, to all “wrongful discharge” or retaliation claims, claims relating to any contract of employment, express or implied, any covenant of good faith and fair dealing, express or implied, public policy violation, any tort of any nature, or any federal, state, or local statute or ordinance, any claim for employment discrimination, including harassment, any claim under Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act (ADEA), the Older Workers Benefit Protection Act, 42 U.S.C. 1981, the Worker Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act, or any other federal, state or local laws relating to employment or employment discrimination, and any claims for attorney’s fees and costs. This release extends to any claims that may be brought on Executive’s behalf by any person or agency, as well as any class or representative action under which Executive may have any rights or benefits; Executive agrees not to accept any recovery or benefits under any such claim or action, and Executive assigns any such recovery or benefits to the Company. This release does not apply to any claims arising under the ADEA after the Effective Date of this Agreement; this release does not, and shall not be construed as an attempt to, waive or release any claim or right that cannot lawfully be waived or released by private agreement between Executive and the Company. Nothing in this Agreement shall be construed to prohibit Executive from filing a charge or complaint, including a challenge to the validity of this Agreement, with the EEOC, NLRB, or any other comparable federal, state or local agency charged with the investigation and enforcement of any employment laws or participating in any investigation or proceeding conducted by the EEOC, NLRB or other comparable federal, state or local agency, although by signing this Agreement, Executive agrees and understands that Executive is waiving his/her right to individual relief based on claims asserted in such a charge or complaint. Executive intends this release to apply as a full and final settlement of all claims encompassed by this paragraph, whether known or unknown, suspected or unsuspected, and accordingly Executive waives any rights Executive might otherwise have under Section 1542 of the Civil Code of California, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.
Exhibit A


Executive and the Company do not intend to release claims any (i) claims for coverage under any D&O or other similar insurance policy of the Company, (ii) claims for enforcement of Executive’s Transition and Separation Agreement with the Company, (iii) claims for reimbursement of unreimbursed business expenses properly incurred prior to the Separation Date in accordance with the Company’s policy; (iv) claims as an equityholder in the Company (including any rights Executive has arising under operative documents applicable to Executive in such capacity); and (v) claims under Section 2 of the Offer Letter by and between Executive and the Company, dated as of May 16, 2019, and the related sections of Executive’s Management Retention Agreement with Cray, Inc.
3.Choice of Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without regard to any conflicts of laws principles that would require the laws of any other jurisdiction to apply. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.

4.Arbitration; Venue. Subject to the limitations of the Mutual Agreement to Arbitrate Claims between Executive and the Company dated May 16, 2019, the exclusive venue for any legal action arising from this Agreement will be a federal or state court of competent jurisdiction located in the state of Delaware. Executive and the Company hereby stipulate and consent to the personal jurisdiction of such courts, and expressly waive any right to object to any such court's exercise of jurisdiction over Executive on grounds of convenience or otherwise. Executive agrees that Delaware has the most material interest of any state in the enforcement of this Agreement because it is designed to help preserve shareholder value and rights in a Delaware corporation.

5.Attorneys’ Fees. If any action is brought to enforce the terms of this Agreement, the prevailing party will be entitled to recover its reasonable attorneys’ fees, costs and expenses from the other party, in addition to any other relief to which the prevailing party may be entitled.

6.Assignability; Successors. The rights and benefits under this Agreement are personal to the Executive and such rights and benefits shall not be subject to assignment, alienation or transfer, except to the extent such rights and benefits are lawfully available to the estate or beneficiaries of the Executive upon death. The Company shall assign its rights and obligations under this Agreement to any successor to all or substantially all of the business or the assets of the Company (by merger or otherwise). This Agreement shall be binding upon and inure to the benefit of the Company and its successors, assigns, personnel and legal representatives.

7.No Admission of Liability. This Agreement is not and shall not be construed or contended by Executive to be an admission or evidence of any wrongdoing or liability on the part of Releasees.

8.Complete and Voluntary Agreement. This Agreement, along with Executive’s Mutual Agreement to Arbitration Claims, Executive’s Agreement Regarding Confidential Information and Proprietary Developments (ARCIPD) and Executive’s Transition and Separation Agreement, each of which will remain in effect, sets forth the entire agreement between Executive and HPE concerning the termination of Executive’s employment, and supersedes any other written or oral promises concerning the subject matter of this Agreement. Executive has not relied on any representations or statements not set forth in this Agreement with regard to the subject matter, basis or effect of this Agreement

9.Severability. The provisions of this Agreement are severable, and if any part of it is found to be invalid or unenforceable, the other parts shall remain fully valid and enforceable. Specifically, should a court or arbitrator conclude that a particular claim may not be released as a matter of law, it is the
Exhibit A


intention of the parties that the general release, the waiver of unknown claims and the covenant not to sue above shall otherwise remain effective to release any and all other claims.

10.Modification; Facsimile/PDF Signatures. It is expressly agreed that this Agreement may not be altered, amended, modified, or otherwise changed in any respect except by another written agreement that specifically refers to this Agreement, executed by authorized representatives of each of the parties to this Agreement. Execution of a facsimile or PDF copy shall have the same force and effect as execution of an original, and a copy of a signature will be equally admissible in any legal proceeding as if an original.

11.Review of Transition and Separation Agreement; Expiration of Offer. Executive understands that Executive may take up to twenty-one (21) days to consider this Agreement (the “Consideration Period”). The offer set forth in this Agreement, if not accepted by Executive before the end of the Consideration Period, will automatically expire. By signing below, Executive affirms that Executive was advised to consult with an attorney prior to signing this Agreement. Executive also understands that Executive may revoke this Agreement within seven (7) days of signing this document. If Executive either fails to properly sign or validly revokes this Agreement, it will be null and void in its entirety, and Executive will not be entitled to the rights described in Section 5 of the Transition and Separation Agreement between the parties.
DATED: ______________________, 2021
Peter Ungaro






Exhibit A


EXHIBIT B

AGREEMENT REGARDING CONFIDENTIAL INFORMATION AND PROPRIETARY DEVELOPMENTS DATED MAY 16, 2019

(See attached)


Exhibit B

Hewlett Packard Enterprise Agreement Regarding Confidential Information and Proprietary Developments

1.Relationship to Employment. I desire to be employed by Hewlett Packard Enterprise or by one of its affiliates or subsidiaries (including their successors and assigns) (collectively, "HPE" or the "Company"). This Agreement states important terms that will apply during and after my employment by HPE. I understand, however, that nothing relating to this Agreement will be interpreted as a contract or commitment whereby HPE is deemed to promise continuing employment for a specified duration.

2.Confidential Information. This Agreement concerns confidential business and technical information and know-how not generally known to the public which is acquired or produced by me in connection with my employment by HPE (hereinafter "Confidential Information") as well as trade secrets that are acquired or produced by me in connection with my employment by HPE. Confidential Information may include, without limitation, information regarding HPE organizations, staffing, finance, structure, employee performance, compensation of others, research and development, manufacturing and marketing, files, keys, certificates, passwords and other computer information, as well as information that HPE receives from others under an obligation of confidentiality. I agree to abide by HPE's Confidential Information Policy and specifically agree that with regard to HPE Confidential Information and trade secrets:

a.to use such information only in the performance of HPE duties;

b.to hold such information in confidence and trust; and

c.to use all reasonable precautions to assure that such information is not disclosed to unauthorized persons, including, without limitation, through the media, blogs, social networking sites or other online forums, or otherwise used in an unauthorized manner, both during and after my employment with HPE.

I further agree that any organizational information, staffing information, and information on performance and/or compensation of other employees learned by me in connection with my employment by HPE is the Confidential Information of HPE, and I agree that I will not share such information with any recruiters or any other employers, either during or subsequent to my employment with HPE; further, I agree that I will not use or permit use of such as a means to recruit or solicit other HPE employees away from HPE (either for myself or for others).

I understand that nothing in this Agreement is intended to prohibit or restrict communication with governmental agencies in compliance with applicable law.

3.Proprietary Developments. This Agreement also concerns inventions and discoveries (whether or not patentable), designs, works of authorship, mask works, improvements, data, processes, computer programs and software (hereinafter called "Proprietary Developments") that are conceived or made by me alone or with others while I am employed by HPE and that relate to the research and development or the business of HPE, or that result from work performed by me for HPE, or that are developed, in whole or in part, using HPE's equipment, supplies, facilities or trade secret information. Such Proprietary Developments are the sole property of HPE, and I hereby assign and transfer all rights in such Proprietary Developments to HPE. I also agree that any works of authorship created by me shall be deemed to be "works made for hire." For all Proprietary Developments, I further agree:

a.to disclose them promptly to HPE;
Exhibit B


b.to sign any assignment document to formally perfect and confirm my assignment of title to HPE;

c.to assign any right of recovery for past damages to HPE; and

d.to execute any other documents deemed necessary by HPE to obtain, record and perfect patent, copyright, mask works and/or trade secret protection in all countries, in HPE's name and at HPE's expense.

I understand that HPE may assign and/or delegate these rights. I agree that, if requested, my disclosure, assignment, execution and cooperation duties will be provided to the entity designated by HPE.

In compliance with prevailing provisions of relevant state statutes,* this Agreement does not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employee's own time, unless (a) the invention relates (i) to the business of the employer or (ii) to the employer's actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer.

4.Respect for Rights of Former Employers. I agree to honor any valid disclosure or use restrictions on information or intellectual property known to me and received from any former employers or any other parties prior to my employment by HPE. I agree that without prior written consent of such former employers or other parties, I will not knowingly use any such information in connection with my HPE work or work product, and I will not bring onto the premises of HPE any such information in whatever tangible or readable form.

5.Work Product. The product of all work performed by me during and within the scope of my HPE employment including, without limitation, any files, presentations, reports, documents, drawings, computer programs, devices and models, will be the sole property of HPE. I understand that HPE has the sole right to use, sell, license, publish or otherwise disseminate or transfer rights in such work product.

6.HPE Property. I will not remove any HPE property from HPE premises without HPE's permission. Upon termination of my employment with HPE, I will return all HPE property to HPE unless HPE's written permission to keep it is obtained.

7.Protective Covenants. I acknowledge that a simple agreement not to disclose or use HPE's Confidential Information, trade secrets, or Proprietary Developments after my employment by HPE ends would be inadequate, standing alone, to protect HPE's legitimate business interests because some activities by a former employee who had held a position like mine would, by their nature, compromise such Confidential Information, trade secrets, and Proprietary Developments as well as the goodwill and customer relationships that HPE will pay me to develop for the Company during my employment by HPE. I recognize that activities that violate HPE's rights in this regard, whether or not intentional, are often undetectable by HPE until it is too late to obtain any effective remedy, and that such activities will cause irreparable injury to HPE. To prevent this kind of irreparable harm, I agree that for a period of twelve months following the termination of my employment with HPE, I will abide by the following Protective Covenants:
(a)No Conflicting Business Activities. I will not provide services to a Competitor in any role or position (as an employee, consultant, or otherwise) that would involve Conflicting Business
Exhibit B

Activities, however, in the event my employment with HPE terminates as a result of a Workforce Restructuring program or similar reduction in force, the restriction in this clause (paragraph 7, subpart (a)) will not apply;

(b)No Solicitation of Customers. I will not (in person or through assistance to others) knowingly participate in soliciting or communicating with any customer of HPE in pursuit of a Competing Line of Business if I either had business-related contact with that customer or received Confidential Information about that customer in the last two years of my employment at HPE;

(c)No Solicitation of HPE Employees. I will not (in person or through assistance to others), for the benefit of a Competitor, knowingly participate in soliciting or communicating with an HPE Employee for the purpose of persuading or helping the HPE Employee to end or reduce his or her employment relationship with HPE if I either worked with that HPE Employee or received Confidential Information about that HPE Employee in the last two years of my employment with HPE; and

(d)No Solicitation of HPE Suppliers. I will not (in person or through assistance to others), for the benefit of a Competitor, knowingly participate in soliciting or communicating with an HPE Supplier for the purpose of persuading or helping the HPE Supplier to end or modify to HPE's detriment an existing business relationship with HPE if I either worked with that HPE Supplier or received Confidential Information about that HPE Supplier in the last two years of my employment with HPE.

As used here, "Competitor" means an individual, corporation, other business entity or separately operated business unit of an entity that engages in a Competing Line of Business. "Competing Line of Business" means a business that involves a product or service offered by anyone other than HPE that would replace or compete with any product or service offered or to be offered by HPE with which I had material involvement while employed by HPE (unless HPE and its subsidiaries are no longer engaged in or planning to engage in that line of business). "Conflicting Business Activities" means job duties or other business- related activities in the United States or in any other country where the HPE business units in which I work do business, or management or supervision of such job duties or business-related activities, if such job duties or business-related activities are the same as or similar in any material way to the job duties or business-related activities in which I participate or as to which I receive Confidential Information or trade secrets in the last two years of my employment with HPE. "HPE Employee" means an individual employed by or retained as a consultant to HPE or its subsidiaries. "HPE Supplier" means an individual, corporation, other business entity or separately operated business unit of an entity that regularly provides goods or services to HPE or its subsidiaries, including without limitation any OEM, ODM or subcontractor.

8.Enforcement. I make these agreements to avoid any future dispute between myself and HPE regarding specific restrictions on my post-employment conduct that will be reasonable, necessary and enforceable to protect HPE's Confidential Information, trade secrets, and Proprietary Developments and other legitimate business interests. The Protective Covenants are ancillary to the other terms of this Agreement and my employment relationship with HPE. This Agreement benefits both me and HPE because, among other things, it provides finality and predictability for both me and the Company regarding enforceable boundaries on my future conduct. Accordingly, I agree that this Agreement and the restrictions in it should be enforced under common law rules favoring the enforcement of such agreements. For these reasons, I agree that I will not pursue any legal action to set aside or avoid application of the Protective Covenants.
Exhibit B


9.Notice of Post-Employment Activities. If I accept a position with a Competitor at any time within twelve months following termination of my employment with HPE, I will promptly give written notice to the senior Human Resources manager for the HPE business sector in which I worked, with a copy to HPE's General Counsel, and will provide HPE with the information it needs about my new position to determine whether such position would likely lead to a violation of this Agreement (except that I need not provide any information that would include the Competitor's trade secrets). I consent to HPE notifying my new employer of my rights and obligations under this Agreement.

10.Relief; Extension. I understand that if I violate this Agreement (particularly the Protective Covenants), HPE will be entitled to (i) injunctive relief by temporary restraining order, temporary injunction, and/or permanent injunction, (ii) recovery of attorney's fees and costs incurred by HPE in obtaining such relief where allowed by law, and (iii) any other legal and equitable relief to which HPE may be entitled. Injunctive relief will not exclude other remedies that might apply. If I am found to have violated any restrictions in the Protective Covenants, then the time period for such restrictions will be extended by one day for each day that I am found to have violated them, up to a maximum extension equal to the time period originally prescribed for the restrictions. I acknowledge that if the Company determines that (i) I have engaged in misconduct prohibited by applicable law or any applicable policy of the Company, as in effect from time to time, or (ii) the Company is required to make recovery from me under applicable law or a Company policy adopted to comply with applicable legal requirements, then the Company may, in its sole discretion, to the extent it determines appropriate and to the extent permitted under applicable law, (a) recover from me any incentive payments (whether cash or equity) paid to me up to three years prior to the end of my employment or any time thereafter; (b) cancel my outstanding incentive awards (cash and equity) whether or not vested, and cancel future payments due hereunder, and (c) take any other action required or permitted by applicable law; provided, however, that the Company will not, unless required or permitted by applicable law, recover amounts from a plan of non-qualified deferred compensation to the extent the recovery would result in tax penalties to me under Internal Revenue Code Section 409A.

11.Severability; Authority for Revision; Inure to Successors. The provisions of this Agreement will be separately construed. If any provision contained in this Agreement is determined to be void, illegal or unenforceable, in whole or in part, then the other provisions contained herein will remain in full force and effect as if the provision so determined had not been contained herein. If the restrictions provided in this Agreement are deemed unenforceable as written, the parties expressly authorize the court to revise, delete, or add to such restrictions to the extent necessary to enforce the intent of the parties and to provide HPE's goodwill, Confidential Information, trade secrets, Proprietary Developments and other business interests with effective protection. The title and paragraph headings in this Agreement are provided for convenience of reference only, and shall not be considered in determining its meaning, intent or applicability. This Agreement will automatically inure to the benefit of, and will be enforceable by, any parent, subsidiary , affiliate, successor or assign of HPE that I become employed with or have material involvement with, in order to protect such entity's legitimate business interests_ I agree that this Agreement, including but not limited to the Protective Covenants contained in paragraph 7 (and its subparts), may be assigned by HPE to a subsequent employer, successor , or assign without the need for further authorization or agreement from me.

12.Governing Law; Venue. The laws of the state of Delaware shall govern this Agreement , the construction of its terms, and the interpretation of the rights and duties of the parties hereto without regard to any conflicts of laws principles to the contrary. Subject to the
Exhibit B

limitations of any mandatory arbitration obligation I may be subject to, the exclusive venue for any legal action arising from this Agreement will be a federal or state court of competent jurisdiction located in the state of Delaware (or, if Delaware is not a legally proper and sustainable venue state then the state where I was last employed with HPE). I hereby stipulate and consent to the personal jurisdiction of such courts , and expressly waive any right to object to any such court's exercise of jurisdiction over me on grounds of convenience or otherwise. I agree that Delaware has a compelling interest in the enforcement of this Agreement because it is designed to help preserve shareholder value and rights in a Delaware corporation and it is ancillary to a grant of equity under HPE incentive plan(s) governed by Delaware law

I have been notified that I have the right to consult legal counsel prior to signing this Agreement.


Signature required:    /s/ Peter Ungaro                    5/16/19    
Peter Ungaro                     Date

* Including: California Labor Code Section 2870; Delaware Code Title 19 Section 805 ; Illinois
7651LCS1060/ 1-3, "Employees Patent Act"; Kansas Statutes Section 44- 130; Minnesota Statutes 13A Section 181 .78 ; North Carolina General Statutes Article 10A, Chapter 66 , Commerce and Business, Section 66-57. 1; Utah Code Sections 34-39-1 through 34-39-3, "Employment Inventions Act"; Washington Rev. Code, Title 49 RCW: Labor Regulations , Chapter 49.44.140.


Page 1 of 1: The scanned copy of this form in OFIS is the official document of record.

Rev 060315/MG4-All Us

Firmwide: 144453201. 1 066902 . 1000
Exhibit B

EXHIBIT C

MUTUAL AGREEMENT TO ARBITRATE CLAIMS DATED MAY 16, 2019

(See attached)
Exhibit C

MUTUAL AGREEMENT TO ARBITRATE CLAIMS

This Mutual Agreement to Arbitrate Claims (“Agreement”) is between me (hereafter “Employee”) and Hewlett Packard Enterprise Company (hereafter the “Company” or “HPE”) or the subsidiary by which Employee is employed. Any reference to the Company will be a reference also to all direct and indirect parent, subsidiary, partners, divisions, and affiliated entities, and all predecessors, successors and assigns of any of them. The Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) shall govern this Agreement, which confirms a transaction involving commerce. The Parties expressly agree that this Agreement shall be construed, interpreted, and its validity and enforceability determined, in accordance with the FAA. The mutual obligations by the Company and by Employee to arbitrate differences provide mutual consideration for this Agreement. It is mutually agreed that any and all disputes or claims as defined below between Employee and the Company shall be submitted to arbitration under the following conditions.

1.Scope of Agreement. This Agreement applies to any past, present or future dispute arising out of or related to Employee's application, employment and/or separation from employment with the Company and survives after the employment relationship ends. The Agreement applies to any dispute that the Company may have against Employee or that Employee may have against: (1) the Company; (2) its current and former officers, directors, principals, shareholders, owners, employees, or agents; (3) the Company’s benefit plans or the plan’s sponsors, fiduciaries, administrators, affiliates, or agents; and (4) all predecessors, successors and assigns of any of them. Except as it otherwise provides, this Agreement is intended to apply to the resolution of disputes that otherwise would be resolved in a court of law or before a forum other than arbitration. This Agreement requires all such disputes to be resolved only by an arbitrator through final and binding arbitration and not by way of court or jury trial. With the exception of claims regarding the validity, scope, or enforceability (including unconscionability) of the Class Action Waiver, Collective Action Waiver, and Private Attorney General Waiver, addressed below, Employee and the Company agree to submit to the arbitrator all claims or issues regarding arbitrability, the validity, scope, enforceability, interpretation, or application of this Agreement, the arbitrator’s jurisdiction, as well as any gateway, threshold, or any other challenges to this Agreement, including claims that this Agreement is unconscionable.

2.Covered Claims. Except as it otherwise provides, this Agreement applies, without limitation, to disputes or claims arising out of or relating to Employee’s employment relationship with the Company, including, but not limited to: (i) discrimination or harassment based on race, creed, color, religion, sex, age, disability, leave status, national origin, ancestry, sexual orientation, marital status, veteran or military reserve status, or any other characteristic protected by federal, state or local law; (ii) retaliation, including, but not limited to, whistleblower status or retaliation for filing a workers' compensation claim; (iii) torts, including, but not limited to, battery, defamation, invasion of privacy, infliction of emotional distress, or workplace injury not otherwise covered by applicable workers' compensation laws; (iv) all employment related laws, including, but not limited to, Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Equal Pay Act, Genetic Information Nondiscrimination Act, the Family and Medical Leave Act, the Worker Adjustment Retraining and Notification Act, and any amendments to these laws, and any such related or similar state or local laws; (v) any federal, state or local law or common law doctrine for breach of contract, promissory estoppel, wrongful discharge or conversion; (vi) claims for interference with rights under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or other claims concerning administration of ERISA plans not excluded below; (vii) claims under federal or state law, or under policy, program or contract (express or implied) regarding compensation or wages including, without limitation, claims for pay, minimum wage and overtime, wage or other penalties, benefits (except as excluded below), vacation, meal and rest breaks,
Exhibit C

classification, reimbursement of expenses, compensation, stock or incentive bonus plans; (viii) claims concerning trade secrets, unfair competition, the Uniform Trade Secrets Act, intellectual property rights and associated laws; and (ix) federal and state statutes, regulations, ordinances or other laws, if any, addressing any of the foregoing or similar subject matters, and all other state statutory and common law claims.

3.Claims Not Covered By This Agreement. This Agreement does not apply to claims for workers compensation benefits, state disability insurance and unemployment insurance benefits. This Agreement does not apply to claims for employee benefits under any benefit plan sponsored by the Company and covered by the Employee Retirement Income Security Act of 1974 or funded by insurance, which include their own dispute resolution procedure; however, this Agreement does apply to any claims for breach of fiduciary duty, for penalties, or alleging any other violation of the Employment Retirement Income Security Act of 1974, as amended, even if such claim is combined with a claim for benefits. This Agreement does not apply to claims for employee benefits under any benefit plan sponsored by the Company which includes its own arbitration procedure; however, if such arbitration procedure is held to be not binding or unenforceable, then this Agreement does apply. The Company and Employee may pursue temporary and/or preliminary injunctive relief in a court of competent jurisdiction for tortious interference with prospective employment and/or the protection of confidential information and/or trade secrets, prevention of unfair competition, or enforcement of post-employment contractual restrictions related to same; provided, however, that all issues of final relief shall continue to be decided through arbitration, and the pursuit of the temporary and/or preliminary injunctive relief described herein shall not constitute a waiver of the parties’ agreement to arbitrate by any party. Disputes that may not be subject to pre-dispute arbitration as provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act are excluded from the coverage of this Agreement. This Agreement also shall not be construed to require the arbitration of any claims against a defense contractor that may not be the subject of a mandatory arbitration agreement as provided by any Department of Defense Appropriations Act and their implementing regulations.

4.Administrative Agency Claims. Regardless of any other terms of this Agreement, claims may be brought before and remedies awarded by an administrative agency if, and only if, applicable law permits access to such an agency even with the existence of an agreement to arbitrate. Such administrative claims include without limitation claims or charges brought before the Equal Employment Opportunity Commission (www.eeoc.gov), the U.S. Department of Labor (www.dol.gov), the National Labor Relations Board (www.nlrb.gov), or the Office of Federal Contract Compliance Programs (http://www.dol.gov/ofccp/). Nothing in this Agreement shall be deemed to stop or excuse a party from bringing an administrative claim before any agency in order to fulfill the party's requirement to exhaust administrative remedies and procedures before making a claim in arbitration.

5.Notice of Claim and Exhaustion of Internal Procedures. All claims in arbitration are subject to the same statutes of limitation that would apply in court. The party bringing the claim must demand arbitration in writing and deliver the written demand by hand, overnight delivery or first class mail to the other party within the applicable statute of limitations period. The demand for arbitration shall include identification of the parties, a statement of the legal and factual basis of the claim(s), and a specification of the remedy sought. Any demand for arbitration made to the Company shall be provided to the Company’s principal office located at 3000 Hanover Street, Palo Alto, CA 94304-1112, attention HPE General Counsel. Notice to the Employee shall be sent to the Employee’s last known home address as reflected in HPE’s system of record. The arbitrator shall resolve all disputes regarding the timeliness or propriety of the demand for arbitration. Before initiating arbitration, Employee must utilize, and nothing contained in this
Exhibit C

Agreement shall be construed to prevent or excuse Employee or the Company from utilizing, the Company's or applicable benefit plan’s existing internal procedures for investigation and/or resolution of complaints, and this Agreement is not intended to be a substitute for the utilization of such procedures.

6.Class, Collective and Representative Action Waivers. Employee and the Company agree to bring any dispute in arbitration on an individual basis only, and not on a class, collective, or private attorney general representative action basis. Accordingly, the Employee and Company agree as follows:

(a)There will be no right or authority for any dispute to be brought, heard, or arbitrated as a class action (“Class Action Waiver”). The Class Action Waiver shall not be severable from this Agreement in any case in which (1) the dispute is filed as a class action; and (2) a civil court of competent jurisdiction finds the Class Action Waiver is unenforceable. In such instances, the class action must be litigated in a civil court of competent jurisdiction.

(b)There will be no right or authority for any dispute to be brought, heard, or arbitrated as a collective action (“Collective Action Waiver”). The Collective Action Waiver shall not be severable from this Agreement in any case in which (1) the dispute is filed as a collective action; and (2) a civil court of competent jurisdiction finds the Collective Action Waiver is unenforceable. In such instances, the collective action must be litigated in a civil court of competent jurisdiction.

(c)There will be no right or authority for any dispute to be brought, heard, or arbitrated as a private attorney general representative action (“Private Attorney General Waiver”). The Private Attorney General Waiver shall be severable from this Agreement in any case in which a civil court of competent jurisdiction finds the Private Attorney General Waiver is unenforceable. In such instances and where the claim is brought as a private attorney general, such private attorney general claim must be litigated in a civil court of competent jurisdiction.

(d)Although an Employee will not be retaliated against, disciplined, or threatened with discipline as a result of his or her exercising his or her rights under Section 7 of the National Labor Relations Act by the filing of or participation in a class, collective, or representative action in any forum, the Company may lawfully seek enforcement of this Agreement and the Class Action Waiver, Collective Action Waiver and Private Attorney General Waiver under the FAA and seek dismissal of such class, collective, or representative actions or claims. Notwithstanding any other clause contained in this Agreement, any claim that all or part of the Class Action Waiver, Collective Action Waiver, or Private Attorney General Waiver is invalid, unenforceable, unconscionable, void, or voidable may be determined only by a court of competent jurisdiction and not by an arbitrator.

(e)The Class Action Waiver, Collective Action Waiver, and Private Attorney General Waiver shall be severable from this agreement in any case in which the dispute is filed as an individual action and severance is necessary to ensure that the individual action proceeds in arbitration.

7.Mandatory Mediation. After submission of the written claim as set forth above, the parties shall submit the matter to non-binding mediation before a mutually selected neutral mediator. The Company shall pay the reasonable fees of the mediator and the expenses associated with the mediation. The International Institute for Conflict Resolution Prevention and Resolution (CPR) or some comparable independent mediation service shall be used to provide the mediator and the rules under which the mediation will be conducted. In the event the claim is not resolved through the mediation process, the claim shall be submitted to binding arbitration, as provided herein.

Exhibit C

8.Selection of the Arbitrator and Arbitration Rules. The parties shall select the neutral arbitrator and/or arbitration sponsoring organization by mutual agreement. If the parties are not able to mutually agree to an arbitrator and/or arbitration sponsoring organization, the arbitration will be held through the American Arbitration Association (“AAA”), and except as provided in this Agreement, shall be in accordance with the then current Employment Arbitration Rules of the AAA. The AAA rules are available from the Company’s Office of the General Counsel or from the AAA (currently they can be found at www.adr.org/employment). Unless the parties jointly agree otherwise, the Arbitrator shall be either an attorney who is experienced in employment law and licensed to practice law in the state in which the arbitration is convened, or a retired judge (the "Arbitrator"), and the arbitration shall take place in or near the city in which Employee is currently or was last employed by the Company, as reflected in the Company directory. In the event the parties mutually choose a sponsoring organization, or AAA is designated, the Arbitrator shall be selected as follows: The organization selected shall give each party a list of five (5) arbitrators drawn from its panel of arbitrators. Each party shall have ten (10) calendar days from the postmark date on the list to strike all names on the list it deems unacceptable. If only one common name remains on the lists of all parties, that individual shall be designated as the Arbitrator. If more than one common name remains on the lists of all parties, the parties shall strike names alternately from the list of common names until only one remains, with the party to strike first to be determined by a coin toss. If no common name remains on the lists of all parties, the selected organization shall furnish an additional list of five (5) arbitrators from which the parties shall strike alternately, with the party striking first to be determined by a coin toss, until only one name remains. That person shall be designated as the Arbitrator. Any party to this Agreement may be represented by an attorney selected by the party.

9.Pre-Arbitration Procedures. The Arbitrator shall have jurisdiction to hear and rule on pre-hearing disputes and is authorized to hold pre-hearing conferences by telephone or in person, as the Arbitrator deems necessary. The Arbitrator shall have the power to entertain a motion to dismiss and/or a motion for summary judgment by either party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure.

10.Substantive Law and Arbitration Proceeding. The parties will arbitrate their dispute before the Arbitrator, who shall confer with the parties regarding the conduct of the hearing and resolve any disputes the parties may have in that regard. The arbitration shall be conducted consistent with the then-current AAA Rules (or such other rules as agreed upon by the parties) to the extent they are not inconsistent with any provision of this Agreement. The Arbitrator shall apply the substantive law including, but not limited to, applicable statutes of limitations, of the state of Delaware, or federal law, or both, as applicable to the claims asserted. The Arbitrator is without jurisdiction to apply any different substantive law. In arbitration, the parties will have the right to conduct adequate civil discovery, bring dispositive motions, and present witnesses and evidence as needed to present their cases and defenses, and any disputes in this regard shall be resolved by the Arbitrator. The Federal Rules of Evidence shall apply. Within 30 days of the close of the arbitration hearing, any party will have the right to prepare, serve on the other party and file with the Arbitrator a brief.

11.Confidentiality. Except as may be permitted or required by law, as determined by the Arbitrator, neither a party nor an Arbitrator may disclose the existence, content (including all testimony, information and discovery materials), or results of any arbitration hereunder without the prior written consent of all parties.

12.The Arbitrator’s Award. The Arbitrator may award any party any remedy to which that party is entitled under applicable law, but such remedies shall be limited to those that would be available to a party in his or her individual capacity in a court of law, and no remedies that
Exhibit C

otherwise would be available to an individual in a court of law will be forfeited by virtue of this Agreement

13.The Arbitrator’s Written Decision. The Arbitrator will issue a decision or award in writing, stating the essential findings of fact and conclusions of law. A court of competent jurisdiction shall have the authority to enter a judgment upon the award made pursuant to the arbitration. The Arbitrator shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error.

14.Arbitration Fees. Each party will pay the fees for his, her, or its own attorneys, subject to any remedies to which that party may later be entitled under applicable law. In all cases where required by law, the Company will pay the Arbitrator's and arbitration fees. However, if under applicable law the Company is not required to pay all of the Arbitrator's and/or arbitration fees, such fee(s) will be apportioned between the parties in accordance with said applicable law, and any disputes in that regard will be resolved by the Arbitrator.

15.Successors and Assigns. This Agreement will inure to the benefit of the parties’ heirs, successors and assigns. Employee agrees this Agreement may be assigned by the Company to a subsequent employer, successor, or assign without the need for further authorization or agreement from Employee.

16.Entire Agreement. This Agreement is the full and complete agreement relating to the formal resolution of employment- related disputes. Except as stated above regarding the Class Action Waiver , Collective Action Waiver , and Private Attorney General Waiver , in the event any portion of this Agreement is deemed unenforceable , the unenforceable provision will be severed from the Agreement and the remainder of this Agreement will be enforceable. Notwithstanding any contrary language , if any , in any Company policy or writing, this Agreement may not be modified, revised or terminated absent a writing signed by both parties.

17.At-Will Employment. This Agreement does not in any way alter the "at-will" status of my employment ; Employee understands and agrees his/her employment with HPE is for an indefinite term and is terminable , with or without cause, at any time by either Employee or HPE.

BY SIGNING BELOW, THE EMPLOYEE ACKNOWLEDGES THAT HE OR SHE HAS CAREFULLY READ THIS AGREEMENT AND AGREES TO ITS TERMS. THE EMPLOYEE AGREES THAT BY SIGNING THIS AGREEMENT, THE COMPANY AND EMPLOYEE ARE GIVING UP THEIR RIGHTS TO A JURY TRIAL AND THAT PURSUANT TO THE TERMS OF THIS AGREEMENT, WE ARE AGREEING TO ARBITRATE CLAIMS COVERED BY THIS AGREEMENT.

EMPLOYEE FURTHER AGREES THAT HIS/HER ELECTRONIC SIGNATURE ON OR ELECTRONIC ACCEPTANCE OF THIS AGREEMENT SHALL HAVE THE SAME BINDING EFFECT AS A HANDWRITTEN SIGNATURE AND ACCEPTANCE.


Exhibit C

                             Hewlett Packard Enterprise Company



/s/ Peter Ungaro                      /s/ Alan May                    
Employee Signature                     Alan May
Executive Vice President, Human Resources

Peter Ungaro                    
Employee Name Printed


     5/16/19                
Date
Exhibit C

Exhibit 31.1
CERTIFICATION
I, Antonio F. Neri, certify that:
1.    I have reviewed this Quarterly Report on Form 10-Q of Hewlett Packard Enterprise Company;
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.    The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.    The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: March 4, 2021
/s/ ANTONIO F. NERI
 
Antonio F. Neri
President and Chief Executive Officer
(Principal Executive Officer)



Exhibit 31.2
CERTIFICATION
I, Tarek A. Robbiati, certify that:
1.    I have reviewed this Quarterly Report on Form 10-Q of Hewlett Packard Enterprise Company;
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.    The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.    The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: March 4, 2021
  /s/ TAREK A. ROBBIATI
 
Tarek A. Robbiati
 Executive Vice President and Chief Financial Officer
(Principal Financial Officer)



Exhibit 32
CERTIFICATION
OF
CHIEF EXECUTIVE OFFICER
AND
CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Antonio F. Neri, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Hewlett Packard Enterprise Company for the first quarter ended January 31, 2021, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Hewlett Packard Enterprise Company.
Date: March 4, 2021
  By: /s/ ANTONIO F. NERI
 
Antonio F. Neri
President and Chief Executive Officer

I, Tarek A. Robbiati, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Hewlett Packard Enterprise Company for the first quarter ended January 31, 2021, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Hewlett Packard Enterprise Company.
Date: March 4, 2021
  By: /s/ TAREK A. ROBBIATI
 
Tarek A. Robbiati
 Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Hewlett Packard Enterprise Company and will be retained by Hewlett Packard Enterprise Company and furnished to the Securities and Exchange Commission or its staff upon request.