Keysight Technologies 10-K 2015-10-31

10-K 1 keys-10312015x10k.htm 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission File Number: 001-36334

Keysight Technologies, Inc.

(Exact name of registrant as specified in its charter)

Address of principal executive offices: 1400 Fountaingrove Parkway, Santa Rosa, CA 95403

Registrant's telephone number, including area code: (800) 829-4444

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes T No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No T

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 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 T No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes T No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 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 T

The aggregate market value of common equity held by non-affiliates as of April 30, 2015 was approximately $4 billion, based upon the closing price of the Registrant's common stock as quoted on New York Stock Exchange on such date. Shares of stock held by officers, directors and 5 percent or more stockholders have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of December 14, 2015, there were 170,850,543 shares of our common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

TABLE OF CONTENTS

Forward-Looking Statements

This report contains forward-looking statements including, without limitation, statements regarding trends, seasonality, cyclicality and growth in, and drivers of, the markets we sell into, our strategic direction, our future effective tax rate and tax valuation allowance, earnings from our foreign subsidiaries, remediation activities, new product and service introductions, the ability of our products to meet market needs, changes to our manufacturing processes, the use of contract manufacturers, the impact of local government regulations on our ability to pay vendors or conduct operations, our liquidity position, our ability to generate cash from operations, growth in our businesses, our investments, the potential impact of adopting new accounting pronouncements, our financial results, our purchase commitments, our contributions to our pension plans, the selection of discount rates and recognition of any gains or losses for our benefit plans, our cost-control activities, savings and headcount reduction recognized from our restructuring programs and other cost saving initiatives, and other regulatory approvals, the integration of our acquisitions and other transactions, our transition to lower-cost regions, and the existence of economic instability, that involve risks and uncertainties. Our actual results could differ materially from the results contemplated by these forward-looking statements due to various factors, including those discussed in Item 1A and elsewhere in this Form 10-K.

PART I

Overview

Keysight Technologies, Inc. ("we," "us," "Keysight" or the "company”), incorporated in Delaware on December 6, 2013, is a measurement company providing core electronic design and test solutions to communications and electronics industries. We provide electronic measurement instruments and systems and related software, software design tools, and related services that are used in the design, development, manufacture, installation, deployment and operation of electronics equipment. Related services include start-up assistance, instrument productivity, application services and instrument calibration and repair. We also offer customization, consulting and optimization services throughout the customer's product lifecycle.

On November 1, 2014, Keysight became an independent publicly-traded company through the distribution by Agilent Technologies Inc. ("Agilent") of 100 percent of the outstanding common stock of Keysight to Agilent's shareholders (the "Separation"). Each Agilent shareholder of record as of the close of business on October 22, 2014 received one share of Keysight common stock for every two shares of Agilent common stock held on the record date. Approximately 167 million shares of Keysight common stock were distributed on November 1, 2014 to Agilent shareholders. Keysight's Registration Statement on Form 10 was declared effective by the U.S. Securities and Exchange Commission ("SEC") on October 6, 2014. Keysight's common stock began trading "regular-way" under the ticker symbol "KEYS" on the New York Stock Exchange on November 3, 2014.

After separation, we reorganized our business into two operating segments, the measurement solutions segment and customer support and services segment. The measurement solutions segment consists of businesses that sell hardware and software products including Radio Frequency ("RF"), microwave, digital and other design and test technology solutions. The customer support and services segment consists of businesses that provide repair and calibration services for our customers' installed base of instruments and facilitates the resale of refurbished used equipment.

On August 13, 2015, we acquired all share capital of Anite, for a cash purchase price of $558 million, net of $43 million cash acquired. Anite is a U.K.-based global company with strong software expertise and a leading supplier of wireless test solutions. This acquisition strengthens our wireless software design and test portfolio and its Network Test business expands our served addressable market. Coupled with Keysight's expertise in helping customers design and test hardware, we can now provide customers with more comprehensive wireless hardware and software solutions. Anite’s Network Test business will also enable us to provide innovative solutions that help customers deliver an outstanding experience for mobile users in the network. Keysight funded the acquisition using existing cash.

We have a comprehensive sales strategy that uses our direct sales force, distributors, resellers and manufacturer's representatives. The strategy varies based on the size of customer, the complexity of products and geographical coverage. We generated $2.9 billion of net revenue in fiscal year 2015, 2014 and 2013. Of our total net revenue of $2.9 billion for the fiscal year ended October 31, 2015, we generated 35 percent in the United States and 65 percent outside the United States. As of October 31, 2015, we employed approximately 10,250 people worldwide. Our primary research and development and manufacturing sites are in California and Colorado in the United States and outside of the United States in China, Germany, Great Britain, India, Japan, Malaysia, Singapore and Spain.

Net revenue, income from operations and assets by business segment as of and for the fiscal years ended October 31, 2015, 2014 and 2013 are shown in Note 21, "Segment Information," to our combined and consolidated financial statements, which we incorporate by reference herein.

We had approximately 15,500 direct customers for our products and services in fiscal year 2015 and greater than 30,000 customers including indirect channels. No single customer represented a material amount of our net revenue. Many of our customers acquire products and services across both of our segments.

Strategies

With a singular focus on electronic design and test, we help our customers bring breakthrough electronic products to market faster and at a lower cost. Our research and development investments focus on our customers' design and test challenges, from simulation to design validation to manufacturing and optimization. Market and customer opportunities are driven by the need for faster data rates and new form factors, and by evolving technology standards.

Strengths

Our Electronic Measurement Business originated in 1939. Our legacy encompasses more than 75 years of innovation, measurement science expertise and deep customer relationships. We do business with most Fortune 1000 companies that are developing electronic products. The following strengths are significant:

Technology Leadership as a Competitive Differentiator: Proprietary software and hardware technologies unavailable on the commercial market and developed by our thirteen R&D centers around the world, enable many Keysight products to deliver the best design and measurement solution capability available for our customers’ engineering requirements. Built on an intellectual property foundation developed over a 30 year period, Keysight’s Electronic Design Automation computer aided design software for radio and microwave frequency designs is the premiere tool used by over two-thirds of the world’s engineers doing design work in this field. Some of Keysight’s hardware technologies are designed and manufactured in our own in-house integrated circuit fabrication facilities which were purpose-built and optimized to deliver unmatched capabilities across the broad portfolio of Keysight instruments. Once developed, these technologies can be deployed into multiple instrument form factors which include the Feature Rich Box or Bench Top instruments, modular instruments and handheld portable instruments. For Keysight, deploying technology across all the instrument form factors provides multiple revenue streams from a single technology investment. The result is that Keysight is recognized as being the product leader in four core engineering instrumentation categories; RF and Microwave Design Simulation software, Network Analyzers, Signal Analyzers, and Signal Sources.

Broad Portfolio of Solutions to Address Customer Needs: We believe we have the broadest portfolio of electronic measurement products in the industry. Our hardware product portfolio spans many technologies, price points and form factors. We address time and frequency domain applications with RF, microwave, high-speed digital and general instrumentation. In addition, we have a broad portfolio of software products including Electronic Design Automation software for RF and high-speed digital design, hundreds of measurement application solutions to help customers make specific measurements quickly and consistently, and software tools for programming. We were recognized in December 2014 with the 2014 Global Frost & Sullivan Award for Market Leadership in Instrumentation Software for capturing the highest market share within the industry. We were recognized in September 2015 with the Global Frost & Sullivan Global Electronics Test Systems in Automotive Price/Performance Value Leadership 2015. We were also recognized with the 2015 Global Frost & Sullivan Award for Growth Excellence Leadership in the digital oscilloscope market in December 2015.

Industry Leading Commitment to Product Quality and Reliability: We believe we have a reputation in the industry for high quality and high reliability electronic measurement instrumentation and software. This reputation for quality is supported by a three-year instrument warranty. Ensuring quality and reliability is an integral part of our new product development processes.

Large Installed Base: We have a large installed base of equipment because of the breadth of our product portfolio and our long history of producing high-performance and high-quality products. This installed base enables a strong and growing Customer Support and Services organization that provides a wide range of calibration and repair services, on both a per incident and contract basis, and provides a significant source of loyal customers for future sales.

Sales Channel with Global Reach: We have a worldwide and comprehensive sales channel. We have experienced management teams and highly technical sales and application engineers in all parts of the world, including a strong local presence in emerging markets. Our sales channel strategy is segmented by customer size, customer location and product characteristics. We deploy a direct sales organization for medium and large targeted accounts, and focus our direct sales efforts on higher performance products that require configuration and application-specific information. Approximately 76 percent of our business comes from customer interactions with our direct sales organization. To ensure broad geographic coverage and wide availability of our general purpose products, we maintain a network of over 600 channel partners to complement our direct sales force.

Centralized Order Fulfillment: Our order fulfillment organization allows us to leverage the scale and scope of our business to provide high-quality, market-leading instrument solutions to our customers while generating competitive gross margins. Our Penang, Malaysia site is our largest manufacturing facility, with a proven track record of operational excellence, technology capability and quality. We have an established network of suppliers and subcontractors, especially in Asia, that complements our in-house capabilities.

Business Model: Our operating model incorporates a substantial amount of cost structure flexibility with the intent to be materially profitable across the business cycle. Our variable compensation programs, sales channel strategy and the outsourced components of our supply chain have been implemented to improve the flexibility of our cost structure.

Measurement Solutions Business

Our measurement solutions business provides electronic measurement instruments and systems and related software and software design tools that are used in the design, development, manufacture, installation, deployment and operation of electronics equipment. We provide start‑up assistance, consulting, optimization and application support throughout the customer’s product lifecycle.

We employed approximately 9,050 people as of October 31, 2015 in our measurement solutions business. This business generated revenue of $2.5 billion in fiscal 2015, 2014 and 2013.

Measurement Solutions Markets

Our electronic design and test solutions serve the following three markets:

Communications Market

We market our electronic design and test solutions to network equipment manufacturers (“NEMs”), wireless device manufacturers, and communications service providers, including the component manufacturers within the supply chain for these customers. Growth in mobile data traffic and increasing complexity in semiconductors and components are drivers of test demand across the communications market.

NEMs manufacture and sell products to facilitate the transmission of voice, data and video traffic. The NEMs’ customers are communications service providers that deploy and operate the networks and services, as well as distribute end‑user subscriber devices, including wireless personal communication devices and set‑top boxes. To meet their customers’ demands, NEMs require test and measurement instruments, systems and solutions for the development, production and installation of each network technology.

Wireless device manufacturers require design and test solutions for the design, development, manufacture and repair of mobile devices. These mobile devices are used for voice, data and video delivery to individuals who connect wirelessly to the service provider’s network. The device manufacturers’ primary customers are large and small service providers and consumers who purchase devices directly from retailers. Wireless device manufacturers require design and test solutions that enable technology development in conformance with the latest communications standards.

Communications service providers require reliable network equipment that enables new service offerings and allows their networks to operate at ever‑increasing capacities. To achieve this, communications service providers require a range of sophisticated

test instruments and systems to ensure conformance to communication standards and network requirements and to evaluate network performance.

Component manufacturers design, develop and manufacture electronic components and modules used in network equipment and wireless devices. The component manufacturers require test and measurement products to verify that the performance of their components and modules meets the specifications of their NEM and device customers.

Aerospace and Defense Market

We market our electronic design and test solutions to manufacturers and research facilities within the aerospace and defense industries. This market includes commercial and government customers and their contracted suppliers. The modernizations of satellite, radar and surveillance systems worldwide are drivers of test demand within the aerospace and defense market.

Government customers include departments or ministries of defense and related agencies around the world. Contractors support the government and commercial customers by providing design and manufacturing capabilities for a variety of programs. We also sell to sub‑contractors and component manufacturers within the supply chain.

Customers use our electronic measurement instruments to develop and manufacture a wide variety of electronic components and systems used in aerospace and defense industries including commercial and military aircraft, space, satellite, radar, intelligence and surveillance. Customers test the electrical parameters of RF, microwave frequency and digital components and assemblies, final products and large systems containing multiple electronic instruments.

Industrial, Computer and Semiconductor Market

We market our electronic design and test solutions to customers with significant electronic content within the industrial, computer and semiconductor test market. These industries design, develop and manufacture a wide range of products, including those produced in high volumes, such as computers, computer peripherals, electronic components, consumer electronics, enterprise servers, storage networks and automotive electronics. The components, printed circuit assemblies and functional devices for these products may be designed, developed and manufactured by electronic components companies, by original equipment manufacturers or by contract manufacturers. Other industrial applications for products include power, energy, medical, research and education.

Customers use test solutions in developing and manufacturing a wide variety of electronic components and systems. These customers’ test requirements include testing the electrical parameters of digital, radio frequency, and microwave frequency components and assemblies; testing multiple parameters of the printed circuit boards used in almost every electronic device; testing of the final product; and testing of systems containing multiple electronic instruments. For semiconductor and board test applications, customers use our solutions in the design, development, manufacture, installation, deployment, and operation of semiconductor and printed circuit assemblies.

Measurement Solutions Products

Our electronic design and test solutions include RF and microwave instruments, digital instruments and various other general purpose test instruments and targeted test solutions. We offer these products and related software in a variety of form factors, including benchtop, modular and handheld, depending on the specific requirements of the customer application.

RF and Microwave Products

Our RF and microwave test instruments and related software and electronic design automation (“EDA”) software tools are used mainly in wireless and aerospace and defense applications. These products are required for the design and production of wireless network products, communications links, cellular handsets and base stations. RF and microwave test instruments include signal analyzers, signal generators, network analyzers, one box testers and power meters. The recent acquisition of Anite provides the software and hardware tools used to design and test the software portion of wireless devices and test the performance of networks.

Digital Products

Our digital test products are used by research and development engineers across a broad range of industries to validate the function and performance of their digital product and system designs. These designs include a wide range of products from simple digital control circuits to complex high-speed systems such as computer servers and the latest generation gaming consoles. The test products offered include oscilloscopes, logic and serial protocol analyzers, logic‑signal sources, arbitrary waveform generators, and bit error rate testers. Our customers also use our high‑frequency EDA software tools to model signal integrity problems in digital design applications as digital speeds continue to increase.

Software Solutions

Our high-frequency EDA software tools are used to model, simulate and analyze communications product designs at the circuit and system levels. Our measurement application software is an extension of our hardware solutions which enables a wide range of measurement capability used across all end markets to design and manufacture next-generation electronic components and products. The recent acquisition of Anite provides the software tools used to design and test the software portion of wireless devices and test the performance of networks.

Other Products

Our general purpose instruments and related software are used across all of our markets by engineers in research and development laboratories, in manufacturing, for calibration and service; for measuring voltage, current, frequency, signal pulse width, modulation and other complex electronics measurements. Our general purpose products include voltmeters, multimeters, frequency counters, bench and system power supplies, function generators and waveform synthesizers.

Our semiconductor and board test solutions enable customers to develop and test state-of-the-art semiconductors, test printed circuit boards and measure position and distance information to the sub‑nanometer level. We supply parametric test instruments and systems used primarily to examine semiconductor wafers during the manufacturing process. Our in‑circuit test systems help identify quality defects, such as faulty or incorrect parts, that affect electrical performance. Our laser interferometer measurement systems are based on precision optical technology and provide precise position or distance information for dimensional measurements.

Our surveillance systems and subsystems are used by defense and government engineers and technicians to detect, locate and analyze signals of interest. The products offered include probes for detecting signals and software that enables the identification and analysis of these signals.

Our suite of fiber optic test products measure and analyze a wide variety of critical optical and electrical parameters in fiber optic networks and their components. Components which can be tested with our solutions include source lasers, optical amplifiers, filters and other passive components. Test products include optical modulation analyzers, optical component analyzers, optical power meters, and optical laser source products.

Our microscopy products are high‑resolution imaging devices that can resolve features as small as an atomic lattice. Our atomic force microscopes and scanning electron microscopes allow researchers to observe and manipulate molecular and atomic level features. Our portfolio provides customers with reliable, easy‑to‑use tools for a wide range of nanotechnology applications, including semiconductor, data storage, polymers, materials science and life science studies.

Measurement Solutions Customers

Our customers include original equipment and contract manufacturers of electronic products, wireless device manufacturers and network equipment manufacturers who design, develop, manufacture and install network equipment. Other customers are service providers who implement, maintain and manage communication networks and services, and companies who design, develop, and manufacture semiconductors and semiconductor lithography systems. Our customers use our products to conduct research and development, manufacture, install and maintain radio frequency, microwave frequency, digital, semiconductor, and optical products and systems. Many of our customers purchase solutions across several of our major product lines for their different business units.

We had approximately 6,600 direct customers for the measurement solutions business in fiscal year 2015. No single customer represented a material amount of our net revenue.

In general, the orders and revenues from many of the electronic measurement markets and product categories are seasonal, traditionally marked by lower business levels in the first and third quarters of the fiscal year and higher volumes in the second and fourth quarters of the fiscal year. The seasonal impact of our business is tempered by broader economic trends and the diversity of our electronic measurement products and customers, which span multiple industries.

Measurement Solutions Sales, Marketing and Support

We have a comprehensive sales strategy, using a direct sales force, resellers, manufacturer’s representatives and distributors to meet our customers’ needs.

Our direct sales force focuses on addressing our largest customer needs and recommending solutions involving the effective use and deployment of our equipment, systems and capabilities. Some of our direct sales force concentrates on more complex products such as our high‑performance instruments, where customers require strategic consultation. Our direct sales force consists

of field and application engineers who have in‑depth knowledge of the customers’ business and technology needs. Our application engineers provide a combination of consulting, systems integration and application and software engineering services that are instrumental in all stages of the sale, implementation and support of our complex systems and solutions.

To complement our direct sales force, we have agreements with channel partners around the world. These partners, including resellers, manufacturer’s representatives and distributors, serve customers across both of our segments and are expected to provide the same level of service and support as our direct sales force. Lower dollar sales transactions are also served by our tele‑sales and electronic commerce channels.

Measurement Solutions Manufacturing

We concentrate our electronic measurement manufacturing efforts primarily on final assembly and test of our products. To maximize our productivity and our ability to respond to market conditions, we use contract manufacturers for the production of printed circuit boards, sheet metal fabrication, metal die-casting, plastic molding and standard electronic components. We also manufacture proprietary devices and assemblies in our own fabrication facilities for competitive advantage. We have manufacturing facilities in California and Colorado in the United States. Outside of the United States we have manufacturing centralized in Malaysia with other manufacturing facilities in China, Germany and Japan. Our Penang, Malaysia site is our largest test and measurement manufacturing facility with proven operational excellence through scale, scope and expertise.

Within our business, there are three Technology Centers that collectively provide key components and sub‑systems. The three Technology Centers are located in Boeblingen, Germany, Colorado Springs, Colorado and Santa Rosa, California. These technologies include optical components and sub‑systems, Application-Specific Integrated Circuits (ASICs), Thick and Thin Films, High Speed Probes and Precision Machining. These Technology Centers provide a competitive advantage by developing unique technologies for our instrumentation needs.

We generally only manufacture products when we have received firm orders for delivery and do not generally hold large stocks of finished inventory.

Measurement Solutions Competition

The market for electronic design and test solutions is highly competitive across our targeted markets. In the communications test market, our primary competitors are Anritsu Corporation, Ansoft Corporation (a subsidiary of Ansys Corporation), Cobham plc, National Instruments Corporation, Rohde & Schwarz GmbH & Co. KG, Tektronix, Inc. (a subsidiary of Danaher Corporation) and Teradyne, Inc. In the aerospace and defense market our primary competitors are Cobham plc, Rohde & Schwarz GmbH & Co. KG, and Tektronix, Inc. In the industrial, computer, and semiconductor market, we compete against companies such as Ametek, Inc., Fluke Corporation (a subsidiary of Danaher Corporation), National Instruments Corporation, Rohde & Schwarz GmbH & Co. KG, Tektronix, Inc., Teledyne Technologies Incorporated and Teradyne, Inc.

Our electronic design and test solutions offer a wide range of products and related software, and these products compete primarily on the basis of product quality and functionality.

Customer Support and Services Business

The customer support and services business provides accredited repair and calibration services for our installed base instrument customers and facilitates the resale of used equipment. Our customer support and services business enables our customers to maximize the value from their electronic measurement equipment through system uptime support, customer site resident professionals, on-site calibrations and localized service centers. Providing these services assures a high level of instrument performance and availability while minimizing the cost of ownership and equipment downtime.

We employed approximately 1,200 people as of October 31, 2015 in our customer support and services business. This business generated revenue of approximately $400 million in each of fiscal 2015, 2014 and 2013.

Customer Support and Services Markets

Our customer support and services business broadly addresses the same markets as the measurement solutions business, which includes the communications, aerospace and defense and industrial, computer and semiconductor test markets.

Customer Support and Services Products

Our customer support and services business provides accredited repair and calibration services for our electronic measurement instruments. We also manage instrument trade‑in programs and refurbish and sell used instruments.

Repair: We provide repair services to our customers. Repair services are performed in company service centers or on‑site at customer locations.

Calibration: We are an accredited calibration service provider for our electronic design and test solutions. Calibration services are performed in company service centers or on site at customer locations. We continue to expand our multi-vendor physical, dimensional and optical calibration services to meet the growing customer demand.

Parts: We provide parts and self‑maintenance tools to customers who do their own in‑house maintenance.

Refurbished Used Equipment: We refurbish and resell used equipment sourced primarily from sales demonstration equipment and trade‑in programs. Our CertiPrime program ensures the same high-quality product as new equipment.

Customer Support and Services Customers

The customers for our customer support and services business include most customers of the measurement solutions business as well as customers who buy repair and calibration services and parts for our products they already own. We had approximately 13,000 direct customers for the customer support and services business. No single customer represented a material amount of our net revenue.

Customer Support and Services Sales, Marketing and Support

Our electronic measurement customer support and services business shares the same industry‑leading sales, marketing and support resources as the measurement solutions business, including the same direct sales force and complementary channel partners.

Our global presence, with localized service proximity, is an important factor in sustaining our customers’ equipment uptime. The service delivery organization includes more than 60 Keysight service locations in 30 countries, customer on‑site capabilities, resident professionals and a network of complementary channel partners.

Customer Support and Services Competition

Our electronic measurement customer support and services business competes with independent test instrument service providers and other original equipment manufacturers. Many of these competitors offer a wide range of services and can support instruments from multiple manufacturers. Service quality, cost and turn‑around time drive competitiveness. In addition, some of our customers have in‑house calibration and repair capabilities.

We compete with regional and country‑specific test instrument service providers and government measurement laboratories that are not original equipment manufacturers. Our primary competitors are Trescal Limited, Tektronix Instrument Calibration Services and Ceprei Laboratories. Due to differing country and regulatory accreditation standards, the services provided may vary greatly.

Our refurbished instruments business faces competition from other electronic measurement instrument competitors with trade‑in programs and from numerous rental companies, equipment dealers, brokers and resellers.

The following discussions of Research and Development, Backlog, Intellectual Property, Materials, Environmental and International Operations include information common to each of our businesses.

Research and Development

Research and development ("R&D") expenditures were $387 million in fiscal 2015, $361 million in fiscal 2014 and $375 million in fiscal 2013. We anticipate that we will continue to have significant R&D expenditures in order to maintain our competitive position with a continuous flow of innovative, high-quality products and services. We are committed to investing in R&D and have focused our development efforts on key strategic opportunities in order to align our business with available markets and position ourselves to grow in our markets.

Our R&D efforts focus on potential new products and product improvements covering a wide variety of technologies. We conduct R&D in four principal areas: applied R&D in enabling technologies, communications, simulation and measurement. Our R&D seeks to improve on various technical competencies in electronics, software, systems and solutions. In each of these R&D fields, we conduct R&D that is focused on specific product development for release in the short-term as well as other R&D that is intended to be the foundation for future products over a longer time horizon. Product development R&D investments support new product introductions, improvements to existing products and development of products to meet future market opportunities.

Backlog

Backlog represents the amount of revenue expected from orders that have already been booked, including orders for goods and services that have not been delivered to customers, orders invoiced but not yet recognized as revenue, and orders for goods that were shipped but not invoiced, awaiting acceptance by customers.

At October 31, 2015, our unfilled backlog was approximately $779 million, as compared to approximately $781 million at October 31, 2014. We expect that a majority of the unfilled backlog will be recognized as revenue within six months. On average, our backlog represents approximately three months' of revenue. We believe backlog on any particular date, while indicative of short-term revenue performance, is not necessarily a reliable indicator of medium or long-term revenue performance.

Intellectual Property

We generate patent and other intellectual property rights covering significant inventions and other innovations in order to create a competitive advantage. Although we believe that our licenses, patents and other intellectual property rights have value, in general no single license, patent or other intellectual property right is in itself material, other than the Keysight mark. In addition, our intellectual property rights may be challenged, invalidated or circumvented or may otherwise not provide significant competitive advantage.

Materials

Our manufacturing operations employ a wide variety of semiconductors, electromechanical components and assemblies and raw materials such as plastic resins and sheet metal. We purchase materials from thousands of suppliers on a global basis. Some of the parts that require custom design work are not readily available from alternate suppliers due to their unique design or the length of time necessary for design work. Our long-term relationships with suppliers allow us to proactively manage technology road maps and product discontinuance plans and monitor their financial health. Even so, some suppliers may still extend their lead times, limit supplies, increase prices or cease to produce necessary parts for our products. If these are unique components, we may not be able to find a substitute quickly or at all. To address the potential disruption in our supply chain, we use a number of techniques, including qualifying multiple sources of supply and redesign of products for alternative components. In addition, while we generally attempt to keep our inventory at minimal levels, we do purchase incremental inventory as circumstances warrant to protect the supply chain.

Environmental

Our R&D, manufacturing and distribution operations involve the use of hazardous substances and are regulated under international, federal, state and local laws governing health and safety and the environment. We apply strict standards for protection of the environment and occupational health and safety to sites inside and outside the United States, even if not subject to regulation imposed by foreign governments. We believe that our properties and operations at our facilities comply in all material respects with applicable environmental laws and occupational health and safety laws. However, the risk of environmental liabilities cannot be completely eliminated and there can be no assurance that the application of environmental and health and safety laws will not require us to incur significant expenditures. We are also regulated under a number of international, federal, state, and local laws regarding recycling, product packaging and product content requirements. The environmental, product content/disposal and recycling laws are gradually becoming more stringent and may cause us to incur significant expenditures in the future.

Some of our properties are undergoing remediation by Hewlett-Packard Company ("HP") for subsurface contaminations that were known at the time of Agilent’s separation from HP in 1999. In connection with Agilent’s separation from HP, HP and Agilent entered into an agreement pursuant to which HP agreed to retain the liability for this subsurface contamination, perform the required remediation and indemnify Agilent with respect to claims arising out of that contamination. Agilent has assigned its rights and obligations under this agreement to Keysight in respect of facilities transferred to Keysight in the separation. As a result, HP has access to a limited number of our properties to perform remediation. Although HP agreed to minimize interference with on-site operations at such properties, remediation activities and subsurface contamination may require us to incur unreimbursed costs and could harm on-site operations and the future use and value of the properties. In connection with the separation, Agilent will indemnify us directly for any liabilities related thereto. We cannot be sure that HP will continue to fulfill its remediation obligations or that Agilent will continue to fulfill its indemnification obligations.

In connection with the separation, Agilent also agreed to indemnify us for any liability associated with contamination from past operations at all properties transferred from Agilent to us. We cannot be sure that Agilent will fulfill its indemnification obligations.

We maintain a comprehensive Environmental Site Liability insurance policy which may cover certain clean-up costs or legal claims related to environmental contamination. This policy covers specified active, inactive and divested locations.

International Operations

Our net revenue originating outside the United States, as a percentage of our total net revenue, was approximately 65 percent in fiscal 2015, 64 percent in fiscal 2014, and 67 percent in fiscal 2013, the majority of which was from customers other than foreign governments. Revenues from external customers are generally attributed to regions based upon the location of our sales representative.

Long-lived assets located outside of the United States as a percentage of our total long-lived assets was approximately 62 percent in fiscal year 2015 and 64 percent in fiscal year 2014. Approximately 22 and 26 percent of our long-lived assets were located in Japan in fiscal years 2015 and 2014, respectively. Approximately 12 and 14 percent of our long-lived assets were located in Malaysia in fiscal years 2015 and 2014, respectively.

Most of our sales in international markets are made by foreign sales subsidiaries. In countries with low sales volumes, sales are made through various representatives and distributors. However, we also sell into international markets directly from the United States.

Our international business is subject to risks customarily encountered in foreign operations, including interruption to transportation flows for delivery of parts to us and finished goods to our customers, changes in a specific country's or region's political or economic conditions, trade protection measures, import or export licensing requirements, consequences from changes in tax laws and regulatory requirements, difficulty in staffing and managing widespread operations, differing labor regulations, differing protection of intellectual property and geopolitical turmoil, including terrorism and war. We are also exposed to foreign currency exchange rate risk inherent in our sales commitments, anticipated sales and expenses, and assets and liabilities denominated in currencies other than the local functional currency, and may also become subject to interest rate risk inherent in any debt we incur, or investment portfolios we hold. There may be an increased risk of political unrest in regions where we have significant manufacturing operations such as Southeast Asia. However, we believe that our international diversification provides stability to our worldwide operations and reduces the impact on us of adverse economic changes in any single country. Financial information about our international operations is contained in Note 21, "Segment Information," to our combined and consolidated financial statements.

Acquisition of Material Assets

On August 13, 2015, we acquired all share capital of Anite, a U.K.-based global company, under the scheme document dated July 6, 2015. This acquisition strengthens our wireless software design and test portfolio and its Network Test business expands our served addressable market. Coupled with Keysight's expertise in helping customers design and test hardware, we can now provide customers with more comprehensive wireless hardware and software solutions. Anite’s Network Test business will also enable us to provide innovative solutions that help customers deliver an outstanding experience for mobile users in the network. As a result of the acquisition, Anite has become a wholly-owned subsidiary of Keysight. The consideration paid was $558 million, net of $43 million of cash acquired. We funded the acquisition using our existing cash.

Executive Officers of the Registrant

The names of our executive officers and their ages, titles and biographies as of December 1, 2015 appear below:

Ronald S. Nersesian, 56, has served as President and Chief Executive Officer of Keysight since December 2013 and, prior to separation, served as Executive Vice President of Agilent. Mr. Nersesian served as President of Agilent from November 2012 to September 2013 and as Chief Operating Officer, Agilent from November 2011 to September 2013. From November 2011 to November 2012, Mr. Nersesian served as Agilent’s Executive Vice President and Chief Operating Officer. He served as Senior Vice President, Agilent, and President, Electronic Measurement Group from March 2009 to November 2011, as Agilent’s Vice President and General Manager of the Wireless Business Unit of the Electronics Measurement Group from February 2005 to February 2009, and as Agilent’s Vice President and General Manager of the Design Validation Division from May 2002 to February 2005. Prior to joining Agilent, Mr. Nersesian served in management positions with LeCroy Corporation from 1996 to 2002. From 1984 through 1996, Mr. Nersesian served in various roles with HP. Mr. Nersesian serves on the Board of Directors of Trimble Navigation Limited.

Neil Dougherty, 46, has served as Senior Vice President and Chief Financial Officer of Keysight since December 2013 and, prior to separation, served as Vice President, Agilent, since 2012. From 2012 to 2013, Mr. Dougherty also served as Agilent’s Treasurer. He served as Senior Director in Agilent’s Corporate Development Group from 2010 to 2012, and from 2006 to 2010, he served as Agilent’s Assistant Treasurer. Prior to that, Mr. Dougherty held a broad variety of positions in finance for Agilent and HP.

Jay Alexander, 52, has served as Senior Vice President and Chief Technology Officer of Keysight since May 2014 and, from October 2009 until prior to the separation, he served as Vice President and General Manager for the Oscilloscope and Protocol Division of Agilent.

Ingrid Estrada, 51, has served as Senior Vice President, Human Resources, Keysight since December 2013 and, prior to separation, served as Vice President and General Manager of Global Sourcing of Agilent since 2011, and as Vice President and General Manager of Remarketing Solutions Division of Agilent since 2006.

Michael Gasparian, 57, has served as Senior Vice President of the Communications Solutions Group since November 2015. From March 2014 to November 2015, Mr. Gasparian served as Senior Vice President of Customer Support and Services and Worldwide Marketing for Keysight and, prior to separation, served as Vice President, Agilent since 2000, although he did not work at Agilent from 2009 to 2010. From 2011 to 2012, Mr. Gasparian served as Agilent’s Vice President of Marketing. From 2007 to 2008, Mr. Gasparian served as the General Manager of the Material Science Solutions Unit of Agilent.

Soon Chai Gooi, 54, has served as Senior Vice President of the Industrial Solutions Group since November 2015. From December 2013 to November 2015, Mr. Gooi served as Senior Vice President of Order Fulfillment and Infrastructure for Keysight and, prior to separation, as Senior Vice President, Agilent since December 2011. From November 2012 to September 2013, he served as President of Agilent Order Fulfillment and Supply Chain, and from December 2011 to November 2012, he was the Senior Vice President of Order Fulfillment and Supply Chain. Previously, Mr. Gooi served as Agilent’s Vice President and General Manager of the Electronic Instruments Business Unit and EMG Order Fulfillment from May 2006 to December 2011.

John Page, 51, has served as Senior Vice President of Services Solutions Group since November 2015 and most recently served as vice president of business finance of Keysight from February 2014 to November 2015. Prior to joining Keysight, Mr. Page served as the Chief Financial Officer of Nanosys, Inc. from 2010-2014.

Guy Séné, 60, has served as Senior Vice President of Worldwide Sales since November 2015. From March 2014 to November 2015, Mr. Séné served as Senior Vice President of Measurement Solutions and Worldwide Sales for Keysight and, prior to separation, served as Senior Vice President, Agilent, and President, Electronic Measurement Group since November 2011. From May 2009 to November 2011, Mr. Sene served as Agilent’s Vice President and General Manager, Microwave and Communications Division of the Electronic Measurement Group.

Stephen Williams, 43, has served as Senior Vice President, General Counsel and Secretary of Keysight since December 2013 and, prior to separation, served as Agilent’s Vice President, Assistant General Counsel and Assistant Secretary since November 2009. From February 2007 to November 2009, Mr. Williams served as Managing Counsel in Agilent’s Legal Department.

John Skinner, 53, has served as Vice President, Corporate Controller and Principal Accounting Officer of Keysight since December 2013 and, prior to separation, served as Vice President, Agilent. From April 2012 to December 2013, Mr. Skinner served as Vice President, Agilent and Controller of Global Infrastructure and Enterprise Financial Planning and Analysis. From April 2009 to April 2012, Mr. Skinner served as Agilent’s Senior Director of Agilent Business Reporting.

Investor Information

We are subject to the informational requirements of the Securities Exchange Act of 1934 (“Exchange Act”). Therefore, we file periodic reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Such reports, proxy statements and other information may be read and copied by visiting the Public Reference Room of the SEC at 100 F Street N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically.

You can access financial and other information at our Investor Relations website. The address is www.investor.keysight.com. We make available, free of charge, copies of our annual report on Form 10-K, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC.

Our Corporate Governance Standards, the charters of our Audit and Finance Committee, our Compensation Committee, our Executive Committee and our Nominating/Corporate Governance Committee, as well as our Standards of Business Conduct are available on our website at www.investor.keysight.com under “Corporate Governance.” These items are also available in print to any stockholder in the United States and Canada who requests them by calling (800) 829-4444. This information is also available by writing to the company at the address on the cover of this Annual Report on Form 10-K.

Risks, Uncertainties and Other Factors That May Affect Future Results

Risks Related to Our Business

Depressed and uncertain general economic conditions may adversely affect our operating results and financial condition.

Our business is sensitive to negative changes in general economic conditions, both inside and outside the United States. The continued economic downturn may adversely impact our business, resulting in:

Our operating results and financial condition could be harmed if the markets into which we sell our products decline or do not grow as anticipated.

Visibility into our markets is limited. Our quarterly sales and operating results are highly dependent on the volume and timing of technology-related spending and orders received during the fiscal quarter, which are difficult to forecast and may be cancelled by our customers. In addition, our revenues and earnings forecasts for future fiscal quarters are often based on the expected seasonality or cyclicality of our markets. However, the markets we serve do not always experience the seasonality or cyclicality that we expect. Any decline in our customers' markets would likely result in a reduction in demand for our products and services. The broader semiconductor market is one of the drivers for our business, and therefore, a decrease in the semiconductor market could harm our business. Also, if our customers' markets decline, we may not be able to collect on outstanding amounts due to us. Such declines could harm our financial position, results of operations, cash flows and stock price, and could limit our profitability. Also, in such an environment, pricing pressures could intensify. Since a significant portion of our operating expenses is relatively fixed in nature due to sales, R&D and manufacturing costs, if we were unable to respond quickly enough, these pricing pressures could further reduce our operating margins.

If we do not introduce successful new products and services in a timely manner to address increased competition, rapid technological changes and changing industry standards, our products and services will become obsolete, and our operating results will suffer.

We generally sell our products in industries that are characterized by increased competition through frequent new product and service introductions, rapid technological changes and changing industry standards. In addition, many of the markets in which we operate are seasonal and cyclical. Without the timely introduction of new products, services and enhancements, our products and services will become technologically obsolete over time, in which case our revenue and operating results would suffer. The success of new products and services will depend on several factors, including our ability to:

Dependence on contract manufacturing and outsourcing other portions of our supply chain may adversely affect our ability to bring products to market and damage our reputation. Dependence on outsourced information technology and other administrative functions may impair our ability to operate effectively.

As part of our efforts to streamline operations and to cut costs, we outsource aspects of our manufacturing processes and other functions and continue to evaluate additional outsourcing. If our contract manufacturers or other outsourcers fail to perform their obligations in a timely manner or at satisfactory quality levels, our ability to bring products to market and our reputation could suffer. For example, during a market upturn, our contract manufacturers may be unable to meet our demand requirements, which may preclude us from fulfilling our customers' orders on a timely basis. The ability of these manufacturers to perform is largely outside of our control. Additionally, changing or replacing our contract manufacturers or other outsourcees could cause disruptions or delays. In addition, we outsource significant portions of our information technology ("IT") and other administrative

functions. Since IT is critical to our operations, any failure of our IT providers to perform could impair our ability to operate effectively. In addition to the risks outlined above, problems with manufacturing or IT outsourcing could result in lower revenues and unrealized efficiencies, and could impact our results of operations and stock price. Much of our outsourcing takes place in developing countries and, as a result, may be subject to geopolitical uncertainty.

Failure to adjust our purchases due to changing market conditions or failure to estimate our customers' demand could adversely affect our income.

Our income could be harmed if we are unable to adjust our purchases to market fluctuations, including those caused by the seasonal or cyclical nature of the markets in which we operate. The sale of our products and services are dependent, to a large degree, on customers whose industries are subject to seasonal or cyclical trends in the demand for their products. For example, the consumer electronics market is particularly volatile, making demand difficult to anticipate. During a market upturn, we may not be able to purchase sufficient supplies or components to meet increasing product demand, which could materially affect our results. In the past, we have seen a shortage of parts for some of our products. In addition, some of the parts that require custom design are not readily available from alternate suppliers due to their unique design or the length of time necessary for design work. Should a supplier cease manufacturing such a component, we would be forced to reengineer our product. In addition to discontinuing parts, suppliers may also extend lead times, limit supplies or increase prices due to capacity constraints or other factors. In order to secure components for the production of products, we may continue to enter into non-cancellable purchase commitments with vendors, or at times make advance payments to suppliers, which could impact our ability to adjust our inventory to declining market demands. Prior commitments of this type have resulted in an excess of parts when demand for communications and electronics products has decreased. If demand for our products is less than we expect, we may experience additional excess and obsolete inventories and be forced to incur additional charges.

Our operating results may suffer if our manufacturing capacity does not match the demand for our products.

Because we cannot immediately adapt our production capacity and related cost structures to rapidly changing market conditions, when demand does not meet our expectations, our manufacturing capacity will likely exceed our production requirements. If, during a general market upturn or an upturn in our business, we cannot increase our manufacturing capacity to meet product demand, we will not be able to fulfil

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None.

Our executive offices are located in the United States in an owned facility in Santa Rosa, California. We own or lease a total of approximately 145 operating facilities located throughout the world that handle manufacturing production, assembly, sales, quality, assurance testing, distribution and packaging of our products. These facilities are located in the following countries: Australia, Austria, Belgium, Brazil, Canada, China, Denmark, Finland, France, Germany, Great Britain, Hong Kong, India, Israel, Italy, Japan, Malaysia, Mexico, Netherlands, Russia, Singapore, Spain, South Korea, Sweden, Switzerland, Taiwan, the United Arab Emirates and the United States. As of October 31, 2015, we own or lease a total of approximately 5.8 million square feet of space worldwide, of which we own approximately 4.1 million square feet and lease 1.7 million square feet. Our sales and support facilities occupy a total of approximately 0.5 million square feet. Our manufacturing plants, R&D facilities and warehouse and administrative facilities occupy approximately 5.3 million square feet. All of these facilities are well maintained and suitable for the operations conducted in them.

We are involved in lawsuits, claims, investigations and proceedings, including, but not limited to, patent, commercial and environmental matters, which arise in the ordinary course of business. There are no matters pending that we currently believe are reasonably possible of having a material impact to our business, combined and consolidated financial condition, results of operations or cash flows.

Not applicable.

PART II

Our common stock is listed on the New York Stock Exchange ("NYSE") with the ticker symbol "KEYS.’’ High and low sales prices per share of our common stock as reported by the NYSE for each full quarterly period of fiscal years 2014 are not provided as Keysight common shares did not begin "regular way" trading on the NYSE until November 3, 2014. The following table sets forth the high and low sale prices per quarter for the fiscal year 2015 as reported in the consolidated transaction reporting system for the New York Stock Exchange:

There were 25,139 shareholders of record of Keysight common stock as of December 14, 2015.

We have not paid any dividends or repurchased any stock to date, and we currently intend to retain any future income to fund the development and growth of our business. We do not anticipate paying any cash dividends or repurchase stock in the foreseeable future. All decisions regarding the declaration and payment of dividends and repurchase stock are at the discretion of our Board of Directors and will be evaluated regularly in light of our financial condition, earnings, growth prospects, funding requirements, applicable law, and any other factors that our Board deems relevant.

The information required by this item with respect to equity compensation plans is included under the caption Equity Compensation Plans in our proxy statement for the 2016 annual meeting of stockholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, and is incorporated herein by reference.

The following table presents the selected combined and consolidated financial data, which should be read in conjunction with our combined and consolidated financial statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K. We derived the selected financial data as of October 31, 2015 and for each of the fiscal years in the three-year period ended October 31, 2015 from our audited combined and consolidated financial statements included elsewhere in this Form 10-K. We derived the selected financial data as of October 31, 2012 and for the fiscal year ended October 31, 2011 from audited combined financial statements that are not included in this Form 10-K.

Our historical combined and consolidated financial statements include certain expenses of Agilent that were allocated to us for certain functions, including general corporate expenses related to information technology, research and development, finance, legal, insurance, compliance and human resources activities. These costs may not be representative of the future costs we will incur as an independent public company. The historical financial information included here may not necessarily reflect our financial position and results of operations or what our financial position and results of operations would have been had we been an independent, publicly-traded company during the historical periods presented or be indicative of our future performance as an independent company.

(a)On November 1, 2014, Agilent Technologies, Inc. distributed 167 million shares of Keysight common stock to existing holders of Agilent common stock. Basic and diluted net income per share for all periods through October 31, 2014 is calculated using the shares distributed on November 1, 2014. Refer to Note 7 of the combined and consolidated financial statements for information regarding earnings per common share.

You should read the following discussion in conjunction with the combined and consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. The forward-looking statements contained herein include, without limitation, statements regarding trends, seasonality, cyclicality and growth in, and drivers of, the markets we sell into, our strategic direction, our future effective tax rate and tax valuation allowance, earnings from our foreign subsidiaries, remediation activities, new product and service introductions, the ability of our products to meet market needs, changes to our manufacturing processes, the use of contract manufacturers, the impact of local government regulations on our ability to pay vendors or conduct operations, our liquidity position, our ability to generate cash from operations, growth in our businesses, our investments, the potential impact of adopting new accounting pronouncements, our financial results, our purchase commitments, our contributions to our pension plans, the selection of discount rates and recognition of any gains or losses for our benefit plans, our cost-control activities, savings and headcount reduction recognized from our restructuring programs and other cost saving initiatives, and other regulatory approvals, the integration of our acquisitions and other transactions, our transition to lower-cost regions, and the existence of economic instability, that involve risks and uncertainties. Our actual results could differ materially from the results contemplated by these forward-looking statements due to various factors, including those discussed in Item 1A and elsewhere in this Form 10-K.

Basis of Presentation and Separation from Agilent

Keysight Technologies, Inc. ("we," "us," "Keysight" or the "company"), incorporated in Delaware on December 6, 2013, is a measurement company providing core electronic design and test solutions to communications and electronics industries. Our fiscal year end is October 31. Unless otherwise stated, all years and dates refer to our fiscal year.

On November 1, 2014, Keysight Technologies, Inc. (“we,” "our," “Keysight” or "the company”) became an independent publicly-traded company through the distribution by Agilent Technologies, Inc. ("Agilent") of 100 percent of the outstanding common stock of Keysight to Agilent's shareholders (the "Separation"). Each Agilent shareholder of record as of the close of business on October 22, 2014, received one share of Keysight common stock for every two shares of Agilent common stock held on the record date. Keysight was incorporated in Delaware on December 6, 2013 and is comprised of Agilent's former electronic measurement business. Keysight's Registration Statement on Form 10 was declared effective by the U.S. Securities and Exchange Commission on October 6, 2014. Keysight's common stock began trading "regular-way" under the ticker symbol "KEYS" on the New York Stock Exchange on November 3, 2014.

Agilent transferred substantially all of the assets and liabilities and operations of the electronic measurement business to Keysight in August 2014 ("the Capitalization"). Combined financial statements prior to the Capitalization were prepared on a stand-alone basis derived from Agilent’s consolidated financial statements and accounting records, including expenses that were allocated to us using estimates that we consider to be a reasonable reflection of the utilization of services provided to or benefits received by us.

Following the Capitalization, the consolidated financial statements include the accounts of the company and our subsidiaries. For the first half of fiscal year 2015, Agilent provided some services on a transitional basis for a fee, which were partially offset by other operating income from Keysight services provided to Agilent. These services were received or provided under a transition services agreement. The net costs associated with the transition services agreement were not materially different than the historical costs that were allocated to us related to these same services.

We are incurring other incremental costs as an independent, publicly traded company as compared to the costs historically allocated to us by Agilent. These incremental costs are estimated to be approximately $15 million on an annual pre-tax basis. In addition, for the years ended October 31, 2015 and 2014, we recognized non-recurring separation and related costs of $20 million and $78 million, respectively. We expect to recognize additional non-recurring separation and related costs, which are currently estimated to range from $12 million to $17 million through fiscal 2016. These costs are expected to include primarily costs related to infrastructure resizing and optimization.

Overview and Executive Summary

We provide electronic measurement instruments and systems and related software, software design tools, and related services that are used in the design, development, manufacture, installation, deployment and operation of electronics equipment. Related services include start-up assistance, instrument productivity and application services and instrument calibration and repair. We also offer customization, consulting and optimization services throughout the customer's product lifecycle.

We plan to invest in product development to address the changing needs of the market and facilitate growth. We are investing in research and development to design measurement solutions that will satisfy the changing needs of our customers. These opportunities are being driven by the need for faster data rates and new form factors, and by evolving technology standards.

We have two reportable operating segments, measurement solutions and customer support and services. The measurement solutions segment is primarily the hardware and associated software businesses serving the electronic measurement market. The customer support and services segment provides repair and calibration of the hardware measurement solutions and the resale of used instrument equipment.

Years ended October 31, 2015, 2014 and 2013

Total orders in 2015 were $2,853 million, a decrease of 4 percent when compared to 2014. Order declines in aerospace and defense and communications markets were partially offset by a slight increase in industrial, computer, and semiconductor market. Foreign currency movements had an unfavorable impact of 4 percentage points on the year‑over‑year comparison. Orders associated with acquisitions accounted for 1 percentage point of order growth for the year ended October 31, 2015 when compared to 2014. Orders of $2,963 million in 2014 increased 3 percent when compared to 2013 with growth in all markets.

Net revenue of $2,856 million in 2015 decreased 3 percent when compared to 2014, with communications market contributing 2 percentage points of the decrease and industrial, computer and semiconductor market contributing 1 percentage point of the decrease, while aerospace and defense market revenue was flat. Foreign currency movements had an unfavorable impact of 4 percentage points on the year over year comparison. The revenue increase associated with acquisitions accounted for approximately 1 percentage point for the year ended October 31, 2015 when compared to 2014. Net revenue of $2,933 million in 2014 increased 2 percent when compared to 2013, with industrial, computer and semiconductor market contributing 2 percentage points of the increase, and communications market contributing 1 percentage point of the increase, partially offset by a decline in aerospace and defense market revenue. Foreign currency movements had an unfavorable impact of 1 percentage point on the year over year comparison.

Net income was $513 million in 2015 compared to net income of $392 million in 2014 and $457 million in 2013. In

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At various times, we use derivative financial instruments to limit exposure to changes in foreign currency exchange rates and interest rates. Because derivative instruments are used solely as hedges and not for speculative trading purposes, fluctuations in the market values of such derivative instruments are generally offset by reciprocal changes in the underlying economic exposures that the instruments are intended to hedge. For further discussion of derivative financial instruments, refer to Note 14, "Derivatives."

Currency exchange rate risk

We are exposed to foreign currency exchange rate risks inherent in our sales commitments, anticipated sales, and assets and liabilities denominated in currencies other than the functional currency of our subsidiaries. We hedge future cash flows denominated in currencies other than the functional currency using sales and expense forecasts up to twelve months in advance. Our exposure to exchange rate risks is managed on an enterprise-wide basis. This strategy utilizes derivative financial instruments, including option and forward contracts, to hedge certain foreign currency exposures with the intent of offsetting gains and losses that occur on the underlying exposures with gains and losses on the derivative contracts hedging them. We do not currently and do not intend to utilize derivative financial instruments for speculative trading purposes.

Our operations generate non-functional currency cash flows such as revenues, third-party vendor payments and inter-company payments. In anticipation of these foreign currency cash flows and in view of the volatility of the currency market, we enter into such foreign exchange contracts as described above to substantially mitigate our currency risk. Approximately 75 percent of our revenues in 2015, 74 percent of our revenues in 2014 and 75 percent of our revenues in 2013 were generated in U.S. dollars.

We performed a sensitivity analysis assuming a hypothetical 10 percent adverse movement in foreign exchange rates to the hedging contracts and the underlying exposures described above. As of October 31, 2015 and 2014, the analysis indicated that these hypothetical market movements would not have a material effect on our combined and consolidated financial position, results of operations or cash flows.

Interest rate risk

As of October 31, 2015, we had $1,100 million in principal amount of fixed-rate senior notes outstanding. The carrying amount of the senior notes was $1,099 million, and the related fair value based on quoted prices was $1,091 million. A change in interest rates on long-term debt impacts the fair value of the company’s fixed-rate long-term debt but not the company’s earnings or cash flow because the interest on such debt is fixed. Generally, the fair market value of fixed-rate debt will increase as interest rates fall and decrease as interest rates rise.

As of October 31, 2015, a hypothetical 10 percent increase in interest rates would have decreased the fair value of the company’s fixed-rate long-term debt by approximately $26 million. However, since the company currently has no plans to repurchase its outstanding fixed-rate instruments before their maturity nor do the investors in our fixed-rate debt obligations have the right to demand we pay off these obligations prior to maturity, the impact of market interest rate fluctuations on the company’s fixed-rate long-term debt does not affect the company’s results of operations or stockholders’ equity.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Keysight Technologies, Inc.:

In our opinion, the accompanying balance sheets and the related statements of operations, of comprehensive income, of equity and of cash flows present fairly, in all material respects, the financial position of Keysight Technologies, Inc. and its subsidiaries at October 31, 2015 and October 31, 2014, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 2015 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our audits (which was an integrated audit in 2015). We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Anite plc from its assessment of internal control over financial reporting as of October 31, 2015 because it was acquired by the Company in a purchase business combination during 2015.

We have also excluded Anite plc from our audit of internal control over financial reporting. Anite plc is a wholly-owned subsidiary whose total assets and total revenues represent 4% and 1%, respectively, of the related financial statement amounts as of and for the year ended October 31, 2015.

/s/ PricewaterhouseCoopers LLP

San Jose, California

December 21, 2015

KEYSIGHT TECHNOLOGIES, INC.

COMBINED AND CONSOLIDATED STATEMENT OF OPERATIONS

(in millions, except per share data)

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None.

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of October 31, 2015, pursuant to and as required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of October 31, 2015, the company's disclosure controls and procedures, as defined by Rule 13a-15(e) under the Exchange Act, were effective and designed to ensure that(i) information required to be disclosed in the company's reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and (ii) information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the results of this evaluation, our management concluded that our internal control over financial reporting was effective as of October 31, 2015.

The Company completed the acquisition of Anite plc on August 13, 2015. Management excluded Anite from its assessment of the effectiveness of the Company’s internal control over financial reporting as of October 31, 2015. Anite constituted approximately 1% and 4% of the Company’s total revenue and assets for the year ended October 31, 2015.

The effectiveness of our internal control over financial reporting as of October 31, 2015 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in Item 8 of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

The acquisition of Anite resulted in a change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

None.

PART III

Information regarding our directors will appear under “Proposal No. 1 - Election of Directors” in our Proxy Statement for the Annual Meeting of Stockholders (“Proxy Statement”). That portion of the Proxy Statement is incorporated by reference into this report. Information regarding our executive officers appears in Item 1 of this report under “Executive Officers of the Registrant.” Information regarding our Audit and Finance Committee and our Audit and Finance Committee's financial expert appears under “Audit and Finance Committee Report” and “Board Structure and Compensation” in our Proxy Statement. That portion of the Proxy Statement is incorporated by reference into this report.

There were no material changes to the procedures by which security holders may recommend nominees to our Board of Directors. Information regarding our code of ethics (the company's Standards of Business Conduct) applicable to our principal executive officer, our principal financial officer, our controller and other senior financial officers appears in Item 1 of this report under “Investor Information.” We will post amendments to or waivers from a provision of the Standards of Business Conduct with respect to those persons on our website at www.investor.keysight.com.

In order for a stockholder proposal to be considered for inclusion in Keysight’s proxy statement for the 2016 annual meeting of stockholders, the written proposal must be received by Keysight no later than December 21, 2015 and should contain such information as is required under Keysight’s Bylaws. Such proposals will need to comply with the SEC’s regulations regarding the inclusion of stockholder proposals in Keysight sponsored proxy materials.

Compliance with Section 16(a) of the Exchange Act

Information about compliance with Section 16(a) of the Exchange Act appears under “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement. That portion of the Proxy Statement is incorporated by reference into this report.

Information about compensation of our named executive officers appears under “Executive Compensation”, “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement. Information about compensation of our directors appears under “Director Compensation” and “Compensation Committee Report” and “Stock Ownership Guidelines” in the Proxy Statement. Those portions of the Proxy Statement are incorporated by reference into this report.

Information about security ownership of certain beneficial owners and management appears under "Common Stock Ownership of Certain Beneficial Owners and Management" in the Proxy Statement. That portion of the Proxy Statement is incorporated by reference into this report.

EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes information about our equity compensation plans as of October 31, 2015. All outstanding awards relate to our common stock.

Information about certain relationships and related transactions appears under "Related Person Transaction Policy and Procedures" in the Proxy Statement. Information about director independence appears under the heading "Board Structure and Compensation — Director Independence" in the Proxy Statement. Each of those portions of the Proxy Statement is incorporated by reference into this report.

Information about principal accountant fees and services as well as related pre-approval policies appears under "Fees Paid to PricewaterhouseCoopers" and "Policy on Audit and Finance Committee Preapproval of Audit and Permissible Non-Audit Services of Independent Registered Auditors" in the Proxy Statement. Those portions of the Proxy Statement are incorporated by reference into this report.

PART IV

See Index to Combined and Consolidated Financial Statements under Item 8 of this report.

The following additional financial statement schedule should be considered in conjunction with our combined and consolidated financial statements. All other schedules have been omitted because the required information is either not applicable or not sufficiently material to require submission of the schedule.

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

• Additions include current year additions charged to expenses and current year build due to increases in net deferred tax assets, return to provision true-ups, other adjustments and Other Comprehensive Income ("OCI") impact to deferred taxes.

** Deductions include current year releases credited to expenses and current year reductions due to decreases in net deferred tax assets, return to provision true-ups, other adjustments and OCI impact to deferred taxes.

Exhibits are incorporated herein by reference or are filed with this report as indicated below (numbered in accordance with Item 601 of Regulation S-K):

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: December 21, 2015

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Stephen D. Williams and Jeffrey Li, or any of them, his or her attorneys-in-fact, for such person in any and all capacities, to sign any amendments to this report and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that any of said attorneys-in-fact, or substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.