Keysight Technologies (KEYS) 10-K risk factor changes: FY2019 vs FY2018

[removed: Risks,] [added: Risks,] Uncertainties and Other Factors That May Affect Future [removed: Results][added: Results]

[removed: Risks] [added: Risks] Related to Our [removed: Business][added: Business]

[removed: Failure] [added: Failure] to introduce successful new solutions and services in a timely manner to address increased competition, rapid technological changes, and changing industry standards could result in our solutions and services becoming [removed: obsolete.][added: obsolete.]

[removed: Our] [added: Our] future operating results may fluctuate significantly if our investments in innovative technologies are not as profitable as we [removed: anticipate.][added: anticipate.]

We are currently devoting significant resources to the 5G [removed: technology, in the automotive] [added: technology] and [removed: battery industries,] [added: other new technologies] in the [added: automotive, battery,] Internet of Things, and mobile industries.

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

[removed: Economic] [added: Economic] and political policies favoring national interests could adversely affect our results of [removed: operations.][added: operations.]

Many of our suppliers, vendors, [added: customers,] partners, and other entities with whom we do business have strong ties to doing business in [removed: China and their ability to supply materials to us or otherwise work with us is strongly affected by their ability to do business in] China.

[added: If the U.S.’s relationship with China deteriorates or results in trade disputes, trade protection measures, retaliatory actions, tariffs and increased barriers,] policies that favor domestic industries, or increased import or export licensing requirements or restrictions, then our [added: deployment of resources in jurisdictions affected by such measures could be misaligned and our] operations may be adversely affected due to such changes in the economic and political ecosystem in which our suppliers, vendors, [added: customers,] partners, and other entities with whom we do business operate.

Nationalistic economic policies and political trends in [removed: these territories,] [added: the United States, the United Kingdom, the European Union, Singapore, Malaysia and China among other countries,] such as opposition to globalization and free trade, sanctions or trade restrictions, withdrawal from or re-negotiation of global trade agreements, tax policies that favor domestic industries and interests, the anticipated exit of the United Kingdom from the European Union (known as Brexit), the distancing or potential exit of other countries from the European Union, and other similar actions may result in increased transaction costs, reduced ability to hire employees, reduced access to supplies and materials, reduced demand or access to customers in international markets, and inability to conduct our operations as they have been conducted historically.

[removed: Economic,] [added: Economic,] political, and other risks associated with international sales and operations could adversely affect our results of [removed: operations.][added: operations.]

[removed: Our] [added: Our] operating results and financial condition could be harmed if the markets into which we sell our solutions decline or do not grow as [removed: anticipated.][added: anticipated.]

[removed: Uncertainty] [added: Uncertainty] in general economic conditions may adversely affect our operating results and financial [removed: condition.][added: condition.]

[removed: Dependence] [added: Dependence] on contract manufacturing and outsourcing other portions of our supply chain may adversely affect our ability to bring solutions to market and damage our reputation.

Dependence on outsourced information technology and other administrative functions may impair our ability to operate [removed: effectively.][added: effectively.]

[removed: Our] [added: Our] operating results may suffer if our manufacturing capacity does not match the demand for our [removed: solutions.][added: solutions.]

[removed: Key] [added: Key] customers or large orders may expose us to additional business and legal risks that could have a material adverse impact on our operating results and financial [removed: condition.][added: condition.]

[removed: Industry] [added: Industry] consolidation and consolidation among our customer base may lead to increased competition and may harm our operating [removed: results.][added: results.]

[removed: Our] [added: Our] acquisitions, strategic alliances, joint [removed: ventures] [added: ventures, internal reorganizations] and divestitures may result in financial results that are different than [removed: expected.][added: expected.]

If market conditions or other factors lead us to change our strategic direction, we may not realize the expected value from such [removed: transactions.][added: transactions or reorganizations.]

Further, such [added: third-party] transactions often have post-closing arrangements, including, but not limited to, post-closing adjustments, transition services, escrows or indemnifications, the financial results of which can be difficult to predict.

In addition, acquisitions and strategic alliances may require us to integrate a different company culture, management [removed: team] [added: team, employees] and business [removed: infrastructure.][added: infrastructure into our existing operations without impacting the business operations of the newly acquired company.]

We may have difficulty developing, manufacturing and marketing the products of a newly acquired company in a way that enhances [removed: the] performance [added: and expands the markets] of [removed: our businesses or product lines to realize] the [removed: value from expected synergies.][added: newly acquired company.]

[removed: Any] [added: Any] inability to complete acquisitions on acceptable terms could negatively impact our growth rate and financial [removed: performance.][added: performance.]

[removed: We] [added: We] may need additional financing in the future to meet our capital needs or to make opportunistic acquisitions, and such financing may not be available on terms favorable to us, if at all, and may be dilutive to existing [removed: shareholders.][added: shareholders.]

[removed: We] [added: We] have outstanding debt and may incur other debt in the future, which could adversely affect our financial condition, liquidity and results of [removed: operations.][added: operations.]

[removed: If] [added: If] currency exchange rates fluctuate substantially in the future, our financial results could be adversely [removed: affected.][added: affected.]

[removed: Third] [added: Third] parties may claim that we are infringing their intellectual property rights, and we could suffer significant litigation or licensing expenses or be prevented from selling solutions or [removed: services.][added: services.]

[removed: Third] [added: Third] parties may infringe our intellectual property rights, and we may suffer competitive injury or expend significant resources enforcing our intellectual property [removed: rights.][added: rights.]

[removed: Any successful opposition] to our applications in material jurisdictions could impose material costs on us or make it more difficult to protect our brand.

Intellectual property rights and our ability to enforce them may be unavailable or limited in some countries, which could make it easier for competitors to capture market share and [added: could result in lost revenues to the company.]

[removed: If] [added: If] we experience a significant cybersecurity attack or disruption in our IT systems, our business, reputation, and operating results could be adversely [removed: affected.][added: affected.]

In addition, our IT systems may be susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, telecommunication failures, user errors, [added: implementation of new operational systems or software or upgrades to existing systems and software, or] catastrophes or other unforeseen events.

[removed: We] [added: We] are or will be subject to ongoing tax examinations of our tax returns by the IRS and other tax authorities.

An adverse outcome of any such audit or examination by the IRS or other tax authority could have a material adverse effect on our results of operations, financial condition and [removed: liquidity.][added: liquidity.]

[removed: Our] [added: Our] operations may be adversely impacted by changes in our business mix or changes in the tax legislative [removed: landscape.][added: landscape.]

[removed: Changes in] tax [removed: laws, such as tax reform in the United States or changes in tax] laws resulting from the Organization for Economic Co-operation and Development’s (“OECD”) multi-jurisdictional plan of action to address “base erosion and profit shifting” and the taxation of the “Digital Economy” could impact our effective tax rate.

[removed: If] [added: If] tax laws or incentives change or cease to be in effect, our income taxes could increase [removed: significantly.][added: significantly.]

The Singapore tax incentives require that specific conditions be satisfied, which [added: include achieving thresholds of employment, ownership of certain assets, as well as specific types of investment activities within Singapore.]

[removed: Our] [added: Our] business will suffer if we are not able to retain and hire key [removed: personnel.][added: personnel.]

We provide solutions for the design, development, and manufacturing stages of our customers’ workflow.

Our customers who currently use our solutions in one stage of their workflow may not use our solutions in other aspects of their manufacturing process.

International trade disputes and increased tariffs between the United States and such jurisdictions could substantially change our expectations and ability to operate in such jurisdictions as we have done historically.

Their ability to supply materials to us, buy products or services from us, or otherwise work with us is affected by their ability to do business in China.

A decreased demand for our customers’ products or trade restrictions could adversely affect our results of operations.

Our business depends on our customers’ ability to manufacture, design, and sell their products in the marketplace.

International trade disputes affecting our customers could adversely affect our business.

Tariffs on imports to or from China could increase the cost of our customers’ components and raw materials, which could make our customers’ products and services more expensive and could reduce demand for our customers’ products.

Protectionist and retaliatory trade measures by either China or the United States could limit our customers’ ability to sell their products and services and could reduce demand of our customers’ products.

Our customers and other entities in our customer chain could decide to take actions in response to international trade disputes that we could not foresee.

A decrease in demand or significant change in operations from our customers due to international trade disputes could adversely affect our operating results and financial condition.

In addition to the above, our customers and suppliers could become subject to U.S. export restrictions and sanctions, such as, being added to the U.S. Department of Commerce’s “Lists of Parties of Concern” and having U.S. export privileges denied or suspended.

In the event that a customer or supplier of ours becomes subject to such sanctions, we will suspend our business with such customer or supplier.

Because of the increasingly tense political and economic relationship between the United States and China, such sanctions could be imposed with little notice, which could leave us without an adequate alternative solution to compensate for our inability to continue to do business with such customer or supplier.

Some of our suppliers and customers in the supply chain are working on unique solutions and products in the market, and it may be difficult if not impossible to replace them, especially with short notice.

We cannot predict what impact future sanctions could have on our customers or suppliers, and therefore, our business.

Any export restrictions or sanctions and any tariffs or other trade restriction imposed on our customers or suppliers could adversely affect our financial condition and business.

Additionally, we occasionally make changes to our internal structure to align business products, services and solutions with market demands and to obtain cost synergies and operational efficiencies.

The acquired company may not enhance the performance of our businesses or product lines such that we do not realize the value from expected synergies.

| • | the scalability of production, manufacturing and marketing of products of a newly acquired company to broader adjacent markets; |

| • | the ability to cohesively integrate operations, product definitions, price lists, delivery, and technical support for products and solutions of a newly acquired company into our existing operations; |

Any successful opposition

Further, such events could result in loss of revenue, loss of or reduction in purchase orders, inability to report financial information, litigation, regulatory fines and penalties, and other damage that could have a material impact on our business operations.

Changes in tax laws, such as tax reform in the United States or changes in

These regulations are

We have developed internal data handling policies and practices to comply with the General Data Protection Regulation (“GDPR”) in the European Union and data privacy regulations similar to GDPR in other jurisdictions.

Our existing business strategy does not rely on aggregating or selling personally identifiable information, and as a general matter Keysight does not process personally identifiable information on behalf of our customers.

We devote resources to keep up with the changing regulatory environment on data privacy in the jurisdictions where we do business.

Despite our efforts, no assurance can be given that we will be compliant with data privacy regulations.

Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with a person that acquires, more than 15 percent of the outstanding voting stock of a Delaware corporation (an "interested stockholder") shall not engage in any business combination

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Our overall performance depends largely upon domestic and international economic and political conditions.

If the U.S.’s relationship with China deteriorates or results in trade protection measures, retaliatory actions, tariffs and increased barriers,

We have significant operations, including a large number of employees, manufacturing facilities, and operations centers in the United States, the United Kingdom, the European Union, Singapore, Malaysia and China among other countries.

Additionally, we may record significant goodwill and other assets as a result of acquisitions or investments, and we may be required to incur impairment charges, which could adversely affect our consolidated financial position and results of operations.

could result in lost revenues to the company.

include achieving thresholds of employment, ownership of certain assets, as well as specific types of investment activities within Singapore.

In response to changes in data privacy regulations, such as the General Data Protection Regulation (“GDPR”) in the European Union, which became effective on May 25, 2018, we are modifying our data handling practices and devoting resources to keeping up with the changing regulatory environment on data privacy in the jurisdictions where we do business.

under this agreement to Keysight in respect of facilities transferred to us in the separation.

amended and restated certificate of incorporation or bylaws, or any action asserting a claim against us or any of our directors or officers governed by the internal affairs doctrine.

Risks Related to the Acquisition of Ixia

We may not realize all of the anticipated benefits of the acquisition of Ixia or those benefits may take longer to realize than expected.

We may also encounter significant unexpected difficulties in integrating the two businesses.

Our ability to realize the anticipated benefits of the acquisition of Ixia (the "Merger") will depend, to a large extent, on our ability to integrate our and Ixia’s businesses.

The combination of two independent businesses is a complex, costly and time-consuming process.

As a result, we will be required to devote significant management attention and resources to integrating Ixia’s business practices and operations with our existing business practices and operations.

The integration process may disrupt the businesses and, if implemented ineffectively or if impacted by unforeseen negative economic or market conditions or other factors, we may not realize the full anticipated benefits of the Merger.

Our failure to meet the challenges involved in integrating the two businesses to realize the anticipated benefits of the Merger could cause an interruption of, or a loss of momentum in, our activities and could adversely affect our results of operations.

In addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships, and diversion of management's attention.

The difficulties of combining the operations of the companies include but are not limited to:

| • | the diversion of management's attention to integration matters; |

| • | difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from combining Ixia’s business with our business; |

| • | difficulties entering new markets or manufacturing in new geographies where we have no or limited direct prior experience; |

| • | difficulties in the integration of operations and systems; |

| • | difficulties in the assimilation of employees; |

| • | difficulties in managing the expanded operations of a significantly larger and more complex company; |

| • | successfully managing relationships with our strategic partners and supplier and customer base; and |

| • | challenges in maintaining existing, and establishing new, business relationships. |

Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management's time and energy, which could materially impact the business, financial condition and our results of operations.

[removed: Overview] [added: Overview] and Executive [removed: Summary][added: Summary]

Keysight Technologies, Inc. ("we," "us," "Keysight" or the "company"), incorporated in Delaware on December 6, 2013, is a technology company [added: that helps enterprises, service providers and governments accelerate innovation to connect and secure the world by] providing electronic design and test solutions that are used in the [added: simulation,] design, [removed: development,] [added: validation,] manufacture, installation, [removed: deployment, validation,] optimization and secure operation of electronics systems [removed: to] [added: in the] communications, networking and electronics industries.

We also offer customization, consulting and optimization services throughout the customer's product lifecycle, including start-up assistance, [removed: instrument productivity,] [added: asset management, up-time services,] application services and instrument calibration and repair.

As a result, Keysight has [removed: four] [added: three] segments: Communications Solutions Group, Electronic Industrial Solutions [removed: Group, Ixia Solutions] Group and [removed: Services] [added: Ixia] Solutions Group.

The Communications Solutions Group provides electronic design and test software, instruments, [added: systems, services] and [removed: systems spanning] [added: solutions that span both] the [removed: worldwide] [added: global] commercial communications and aerospace, defense and government end markets.

The Electronic Industrial Solutions Group provides [added: electronic design and] test [added: software, instruments, systems, services] and [removed: measurement] solutions across a broad [removed: set] [added: range] of electronic industrial end [added: markets, which include automotive and energy, semiconductor, general electronics and education] markets.

The Ixia Solutions Group provides [added: network] testing, visibility and security solutions, strengthening applications across physical and virtual networks for enterprises, service [removed: providers and] [added: providers,] network equipment [removed: manufacturers.][added: manufacturers and governments.]

[removed: Years] [added: *Years] ended October 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016][added: 2017*]

[removed: Keysight’s total] [added: Total] orders [removed: in 2018] [added: for the year ended October 31, 2019] were [removed: $4,082] [added: $4,441] million, an increase of [removed: 20] [added: 9] percent when compared to [removed: 2017.][added: 2018.]

Foreign currency movements had [removed: a favorable] [added: an unfavorable] impact of 1 percentage point on the year-over-year comparison.

[removed: Orders] [added: Revenue] associated with acquisitions accounted for [removed: 7] [added: 6] percentage points of [removed: order] [added: revenue] growth for the year ended October 31, 2018 when compared to [removed: 2017.]

Foreign currency movements had [removed: a negligible] [added: an unfavorable] impact [added: of 1 percentage point] on the year-over-year comparison.

Orders associated with acquisitions [removed: accounted for 9 percentage points of] [added: and divestitures had a net neutral impact on the] order growth for the year ended October 31, [removed: 2017] [added: 2019] when compared to [removed: 2016.][added: 2018.]

[removed: Foreign currency movements] had a favorable impact of 2 percentage points on the year-over-year comparison.

Revenue associated with acquisitions [removed: accounted for 6 percentage points of] [added: and divestitures had a net neutral impact on the] revenue growth for the year ended October 31, [removed: 2018] [added: 2019] when compared to [removed: 2017.][added: 2018.]

[removed: Revenue] [added: For the same period, revenue] excluding acquisitions [added: and foreign currency movements] grew [added: 14%] year over year, with growth in all our operating segments and across all our markets.

Net revenue of [removed: $3,189] [added: $4,303] million for the year ended October 31, [removed: 2017] [added: 2019] increased [removed: 9] [added: 11] percent when compared to [removed: 2016.][added: 2018.]

Foreign currency movements had [removed: a negligible] [added: an unfavorable] impact [added: of 1 percentage point] on the year-over-year comparison.

Revenue associated with acquisitions [removed: accounted for 7 percentage points of] [added: and divestitures had a net neutral impact on] revenue growth for the year ended October 31, [removed: 2017] [added: 2019] when compared to [removed: 2016.][added: 2018.]

Net income was [removed: $165] [added: $621] million in [removed: 2018] [added: 2019] compared to net income of [removed: $102] [added: $165] million and [removed: $335] [added: $102] million in [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively.

In [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] we generated operating cash flows of [removed: $555] [added: $998] million, [removed: $328] [added: $555] million and [removed: $420] [added: $328] million, respectively.

[removed: Impact] [added: *Impact] of Northern California [removed: Wildfires][added: Wildfires*]

[removed: Our headquarters was under mandatory evacuation for more than three weeks, and while] [added: While] direct damage to our core facilities was limited, our buildings did experience some smoke and other fire-related impacts.

[removed: As of] [added: At] October 31, [removed: 2018,] [added: 2019,] we [removed: have received insurance proceeds of $68 million and have] [added: had] a receivable of [removed: $24] [added: $5] million for losses and expenses for which insurance reimbursement is probable.

In addition, [removed: for the year ended October 31,] [added: in 2019 and] 2018, we made investments in property, plant and equipment related to fire recovery of [added: $7 million and] $27 million, [removed: which is] [added: respectively, that are] expected to be covered by insurance.

[removed: We currently estimate total] [added: In 2019 and 2018, we received] insurance [removed: recovery to range from $125] [added: proceeds of $22] million [removed: to $135] [added: and $68] million, [added: respectively,] which [removed: will] [added: has] substantially [removed: cover] [added: covered] our total fire-related [removed: losses,] expenses [removed: and investments] in [removed: property, plant and equipment in] excess of our $10 million self-insured retention amount.

[removed: Outlook][added: *Outlook*]

Internally, we are [removed: continuously] working to improve operational efficiency [removed: within and] across all functions.

[removed: Currency] [added: Currency] Exchange Rate [removed: Exposure][added: Exposure]

Our revenues, [removed: costs and] expenses, and monetary assets and liabilities are exposed to changes in foreign currency exchange rates as a result of our global operating and financing activities.

Our hedging program is designed to hedge currency movements on a relatively short-term basis of up to [removed: a rolling twelve-month period.][added: twelve months in advance.]

[removed: Results] [added: Results] from [removed: Operations-Years] [added: Operations - Years] ended October 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016][added: 2017]

[removed: Orders and Net Revenue][added: Net Revenue]

Consistent with our strategy, we are seeing an increase in solution sales, which have a longer order-to-revenue conversion cycle; however, [added: we expect that] the majority of [removed: recorded orders] [added: unfilled backlog] will be [removed: delivered] [added: recognized as revenue] within six months.

| | [removed: Year] [added: Year] Ended October [removed: 31,] [added: 31,] | | | | | | | | | | | | [removed: 2018] [added: 2019] over [removed: 2017] [added: 2018] % [removed: Change] [added: Change] | | [removed: 2017] [added: 2018] over [removed: 2016] [added: 2017] % [removed: Change] [added: Change] |

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | | | |

| | [removed: (in millions)] [added: (in millions)] | | | | | | | | | | | | | | |

| Products | $ | [removed: 3,229] [added: 3,554] | | | $ | [removed: 2,664] [added: 3,229] | | | $ | [removed: 2,440] [added: 2,664] | | | [removed: 21%] [added: 10%] | | [removed: 9%] [added: 21%] |

| Services and other | [removed: 649] [added: 749] | | | | [removed: 525] [added: 649] | | | | [removed: 478] [added: 525] | | | | [removed: 24%] [added: 15%] | | [removed: 10%] [added: 24%] |

| Total net revenue | $ | [removed: 3,878] [added: 4,303] | | | $ | [removed: 3,189] [added: 3,878] | | | $ | [removed: 2,918] [added: 3,189] | | | [removed: 22%] [added: 11%] | | [removed: 9%] [added: 22%] |

In 2019 we completed an organizational change to align our services business with our customer-solutions-oriented, go-to-market strategy as reflected by our Keysight Leadership Model ("KLM").

This change enables us to provide our customers with complete solutions that incorporate both leading product capabilities and the appropriate services and support.

Our services delivery is now fully reflected within the markets served, which is a further catalyst of the growth of our services solutions portfolio.

Prior period segment results were revised to conform to the presentation.

The organizational structure continues to include centralized enterprise functions that provide support across the groups.

To more effectively and efficiently address customer solution needs across the communications ecosystem as the network transforms, in the first quarter of fiscal 2020, we completed an organizational change to manage our Ixia Solutions Group within our Communications Solutions Group.

We believe this realignment will create improved go-to-market and product development alignment, as well as accelerate solution synergies in 5G as this new technology is deployed globally.

As a result, beginning with our first quarter of fiscal 2020, we will have two reportable operating segments, Communications Solutions Group (“CSG”) and Electronic Industrial Solutions Group (“EISG”).

The Communications Solutions Group led overall revenue growth with strong growth in the commercial communications market, complemented by growth in the Ixia Solutions Group and the Electronic Industrial Solutions Group.

Foreign currency movements

The increase in net income for the year ended October 31, 2019 when compared to 2018 was driven by a significant non-recurring goodwill impairment charge in 2018, higher revenue volume, highly differentiated solutions, favorable mix, and lower acquisition and integration costs, partially offset by a favorable income tax benefit in the prior period from new U.S. tax legislation and higher research and development investments in leading-edge technologies and key growth opportunities in our end markets.

In 2019, 2018 and 2017, we recognized operating expenses of $3 million, $97 million and $18 million, respectively, offset by income of $3 million, $90 million and $2 million, respectively, for expected insurance recoveries.

Subsequent to October 31, 2019, we received $37 million of insurance proceeds primarily related to replacement of capital and recovery of fire-related expenses.

These proceeds will result in an other operating gain of approximately $32 million in the first quarter of fiscal 2020.

No additional insurance proceeds or material expenses related to the 2017 northern California wildfires are expected.

Our strategy of bringing solutions to market that help customers develop new technologies and accelerate innovation provides a platform for long-term growth.

We expect to continue to see our customers make R&D investments in certain next-generation technologies.

We are still in the early market stages for these emerging technologies, such as 5G, next-generation automotive, internet of things ("IoT") and defense modernization and expect technology investments to continue.

We continue to closely monitor the current macro environment related to trade, tariffs, monetary and fiscal policies.

We have complied and will continue to comply with recent U.S. Department of Commerce export control regulations regarding China.

While short-term uncertainties exist, we remain confident in our strategy and believe we are well-positioned to capture future growth opportunities.

Revenue is recognized upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.

Currency had an unfavorable impact of 3 percentage points and 1 percentage point on revenue growth in Europe and Asia Pacific, respectively, for the year ended October 31, 2019.

2017.

Currency had a favorable impact of 4 percentage points and 1 percentage point on revenue growth in Europe and Asia Pacific, respectively, for the year ended October 31, 2018.

Our unfilled backlog as of October 31, 2019 reflects the impact of the deferred revenue adjustment related to the adoption of *Accounting Standards Update 2014-09, Revenue From Contracts With Customers* ("ASC 606")*.* See Note 2, "New Accounting Pronouncements," for additional information.

| Gross margin on products | 59.5 | % | | 55.1 | % | | 54.6 | % | | 4 ppts | | — |

| Operating margin | 16.5 | % | | (10.2 | )% | | 4.6 | % | | 27 ppts | | (15) ppts |

| Research and development | $ | 688 | | | $ | 624 | | | $ | 507 | | | 10% | | 23% |

Research and development expense increased 10 percent in 2019 compared to 2018, primarily driven by greater investment in key growth opportunities in our end markets, leading-edge technologies, people and infrastructure.

Selling, general and administrative expenses decreased 4 percent in 2019 compared to 2018, primarily driven by a decline in litigation and restructuring costs and acquisition and integration costs, partially offset by an increase in people- related costs.

Other operating expense (income), net for 2018 also includes income from business divestitures.

Operating margin increased 27 percentage points in 2019 when compared to 2018, primarily driven by a non-recurring goodwill impairment charge in 2018, higher revenue volume, highly differentiated solutions, favorable mix, lower acquisition and integration costs, and lower litigation and restructuring-related costs, partially offset by an increase in people-related costs.

Interest income for the years ended October 31, 2019, 2018 and 2017 was $23 million, $12 million and $7 million, respectively, and primarily relates to interest earned on our cash balances.

Other income (expense), net for the years ended October 31, 2019, 2018 and 2017 was income of $61 million, $54 million and $104 million, respectively, and primarily includes income related to our defined benefit and post-retirement benefit plans (interest cost, expected return on assets and amortization of net actuarial loss and prior service credits) and the change in fair value of our equity investments.

The calculation of our tax liabilities involves uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions.

If the payment of these additional

In 2019 we completed an organizational change to align our services business with our customer-solutions-oriented, go-to-market strategy as reflected by our Keysight Leadership Model ("KLM").

This change was made to fully reflect our services delivery within the markets served and further enable the growth of our services solutions portfolio.

Prior period segment results were revised to conform to the presentation.

We 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 evolving technology standards and the need for faster data rates and new form factors.

On April 18, 2017, we completed the acquisition of Ixia, which became a separate reportable operating segment, the Ixia Solutions Group.

The Services Solutions Group provides repair, calibration and consulting services, and resells used Keysight equipment.

Also, our global team of experts provides startup assistance, consulting, optimization and application support across all our end markets.

Total orders in 2017 were $3,406 million, an increase of 15 percent when compared to 2016.

Revenue excluding acquisitions grew year over year, with growth in the Electronic Industrial Solutions Group driven by semiconductor measurement and automotive and energy markets, and growth in the Services Solutions Group.

The Communications Solution Group revenue was flat as gains in the commercial communications market were offset by declines in the aerospace, defense and government market.

The decline in net income for the year ended October 31, 2017 when compared to 2016 is primarily driven by the unfavorable impact from amortization of acquisition-related balances.

Cleaning and restoration efforts are largely complete, and we have fully re-occupied the site.

For the years ended October 31, 2018 and 2017, we recognized costs of $7 million and $16 million, respectively, net of estimated insurance recoveries of $90 million and $2 million, respectively.

In many cases, our insurance coverage exceeds the amount of these covered losses, but no gain contingencies have been recognized as our ability to realize those gains remains uncertain for financial reporting purposes.

There may be a difference in timing of costs incurred and the related insurance reimbursement.

Looking forward, we believe our investments in R&D combined with our completed acquisitions, which have expanded our technology portfolio and the size of our addressable market, position Keysight for growth.

We remain focused on delivering value through differentiated and first-to-market solutions targeted at faster growing markets where customers are investing in next-generation digital and electronic technologies.

While current macro-economic and geopolitical uncertainties exist related to trade, tariffs, monetary and fiscal policies, we expect continued sales growth.

In general, recorded orders represent firm purchase commitments from our customers with established terms and conditions for products and services.

Revenue reflects the delivery and acceptance of the products and services as defined on the customer’s terms and conditions.

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| Orders | $ | 4,082 | | | $ | 3,406 | | | $ | 2,953 | | | 20% | | 15% |

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Orders

Foreign currency movements had a negligible impact on the year-over-year comparison.

Orders associated with acquisitions accounted for 9 percentage points of order growth for the year ended October 31, 2017 when compared to 2016.

| Japan | — | | | (1 | )% | | 5 | % | | 6 | % |

Net revenue for the year ended October 31, 2017 was $3,189 million, an increase of 9 percent when compared to 2016.

Foreign currency movements had a negligible impact on the year-over-year comparison.

Revenue associated with acquisitions accounted for 7 percentage points of revenue growth for the year ended October 31, 2017 when compared to 2016.

Revenue grew 17 percent when compared to 2017 with growth in Americas, Asia Pacific excluding Japan and Europe, partially offset by declines in Japan.

The strength in 5G and data center technologies was offset by decline in the aerospace, defense and government market.

Revenue grew 15 percent year over year when compared to the same period last year, driven by strong growth across all markets and regions.

Revenue from the Electronic Industrial Solutions Group represented approximately 27 percent of total revenue in 2017 and contributed 2 percentage points to total revenue growth.

Revenue from the Ixia Solutions Group represented approximately 11 percent of total revenue in 2018 and contributed 7 percentage points to total revenue growth.

In 2017, revenue from the Ixia Solutions Group represented approximately 6 percent of total revenue and contributed 7 percentage points to total revenue growth.

Revenue from the Services Solutions Group represented approximately 12 percent of total revenue in 2018 and contributed 1 percentage point to the total revenue growth.

For further discussion of derivative financial instruments, refer to Note [removed: 13,] [added: 14,] "Derivatives."

[removed: Currency] [added: *Currency] exchange rate [removed: risk][added: risk*]

[removed: Approximately] [added: In 2019, 2018 and 2017, approximately 74 percent,] 76 percent [removed: in 2018] and 71 percent of our revenues [removed: in each of 2017 and 2016] were generated in U.S. dollars.

As of October 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the analysis indicated that these hypothetical market movements would not have a material effect on our consolidated financial position, results of operations or cash flows.

[removed: Interest] [added: *Interest] rate [removed: risk][added: risk*]

As of October 31, [removed: 2018,] [added: 2019,] we had [removed: $1,800 million] [added: $1.8 billion] in principal amount of senior debt outstanding.

The carrying amount of the fixed-rate senior notes was [removed: $1,790 million,] [added: $1.8 billion,] and the related fair value based on quoted prices was [removed: $1,802 million.][added: $1.9 billion.]

As of October 31, [removed: 2018,] [added: 2019,] 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 [removed: $37] [added: $33] million.

[removed: Overview][added: Overview]

Keysight Technologies, Inc. ("we," "us," "Keysight" or the "company"), incorporated in Delaware on December 6, 2013, is a technology company [added: that helps enterprises, service providers and governments accelerate innovation to connect and secure the world by] providing electronic design and test solutions that are used in the [added: simulation,] design, [removed: development,] [added: validation,] manufacture, installation, [removed: deployment, validation,] optimization and secure operation of electronics systems [removed: to] [added: in the] communications, networking and electronics industries.

We also offer customization, consulting and optimization services throughout the customer's product lifecycle, including start-up assistance, [removed: instrument productivity,] [added: asset management, up-time services,] application services and instrument calibration and repair.

We generated [removed: $3.9] [added: $4.3] billion, [removed: $3.2] [added: $3.9] billion and [removed: $2.9] [added: $3.2] billion of net revenue in [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] respectively.

As of October 31, [removed: 2018,] [added: 2019,] we had approximately [removed: 12,900] [added: 13,600] employees worldwide.

Net revenue, income from operations and assets by business segment as of and for the fiscal years ended October 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] are [removed: shown] [added: provided] in Note [removed: 19,] [added: 20,] "Segment Information," to our consolidated financial statements.

We had more than [removed: 17,000] [added: 17,500] direct customers for our solutions and services in fiscal year [removed: 2018] [added: 2019] and greater than 32,000 customers including indirect channels.

[removed: Strategies][added: Strategies]

With a [removed: singular] focus on electronic [removed: design and] [added: design,] test and optimization, we deliver market-leading solutions across a wide range of industries, including commercial communications, networking, aerospace, defense and government, automotive, energy, [removed: semiconductor] [added: semiconductor, general electronics] and [removed: electronic industrial.][added: education.]

Our [removed: goal] [added: objective] is to increase the productivity of our customers and reduce their [removed: project time-to-market independent of the specific form factor required.][added: time to market.]

[removed: All of these] [added: Keysight's] solutions utilize a common portfolio of [removed: market leading] [added: market-leading] software and hardware [removed: technologies,] [added: technologies] along with [removed: the ability to provide multi-vendor managed services built upon Keysight’s global repair and calibration capabilities.][added: a suite of valued-added services.]

This [added: broad portfolio of solutions] enables our customers to [added: efficiently] develop and deploy [removed: solutions] [added: their products] to address the most rapidly evolving new [removed: technologies.][added: technologies and market opportunities.]

| [removed: •] [added: *◦*] | [removed: New wireless] [added: *Wireless] communication measurement [removed: solutions.] [added: solutions.*] We are investing in the development of new wireless communications test solutions to satisfy the commercial communications end market, which is being driven by growth in mobile [removed: data] [added: data, IoT] and evolving wireless standards, particularly 5G. [added: The acquisition of Anite in fiscal 2015 strengthened our wireless software design and test portfolio and expanded our served addressable market.] With our technical breadth and expertise and strategic engagement with market-leading customers and partners around the world, we have leading-edge solutions for 5G applications available and have been first to market with many 5G solutions. [added: With the acquisition of Prisma Telecom Testing ("Prisma") in fiscal 2019, we enhanced our ability to deliver total solutions to the designers of cellular base stations.] |

| [removed: •] [added: ◦] | [removed: First-to-market network] [added: *Network] test [removed: solutions.] [added: solutions.*] The rapidly growing number of high-speed, connected devices requires service providers and data center operators to continuously update their networks to deliver higher levels of data transfer performance, improve [removed: customer] quality of service and enhance network security. The acquisition of Ixia [removed: in fiscal 2017] established Keysight as a market leader in next-generation network test and network visibility solutions. [removed: With the addition of these capabilities to our portfolio, we are uniquely positioned to deliver complete end-to-end communications network solutions, spanning the entire network from data center through the core and radio access network all the way to wide bandwidth mobile devices, up and down the protocol stack.] |

[removed: Strengths][added: Strengths]

Our legacy encompasses [removed: more than 75] [added: 80] years of innovation, measurement science expertise and deep customer relationships.

We conduct business annually with over 32,000 customers [removed: that are developing electronic products,] [added: around the world,] including [removed: many] [added: most] Fortune 1000 [removed: companies.][added: companies who are developing new electronic technologies, networks, systems, devices and components.]

| [removed: •] [added: *•*] | [removed: Technology] [added: *Technology] Leadership as a Competitive [removed: Differentiator.] [added: Differentiator.*] Proprietary software and hardware technologies unavailable on the commercial market and developed by our [removed: fourteen] research and development [added: technology] centers around the world enable many Keysight products to deliver the best design and measurement solution capability available for our customers’ engineering requirements. [removed: Keysight’s technology leadership is noteworthy because we strive to deliver first-to-market solutions for our customers, ahead of our competition, allowing the customer to also be first with their products, gaining a competitive advantage. Built on an intellectual property foundation developed over several decades, Keysight’s EDA 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 [removed: unmatched] [added: leading-edge] performance and capabilities across the broad portfolio of Keysight instruments. [removed: Once developed, these technologies can be deployed into multiple-instrument form factors, which include feature-rich instruments, modular instruments and handheld portable instruments. For Keysight, deploying technology across all instrument form factors provides multiple revenue streams from a single technology investment.] [added: This differentiation enables] Keysight [removed: is] [added: to be] recognized as [removed: being] a [removed: technology] leader in six core [removed: product instrumentation categories:] [added: measurement platforms:] RF and Microwave Design Simulation software, Network Test, Network Analyzers, Oscilloscopes, Signal Analyzers and Signal Sources. [added: Keysight’s technology leadership supports our strategy to deliver first-to-market solutions for our customers, which in turn enables them to be first to market with their products and gain a competitive advantage.] |

| [removed: •] [added: *•*] | [removed: Broad] [added: *Broad] Portfolio of Solutions [added: and Products] to Address Customer [removed: Needs.] [added: Needs.*] Keysight has [removed: the broadest] [added: a broad] portfolio of electronic design and test solutions [removed: in the industry.] [added: and products, which we continue to expand.] Our hardware product portfolio spans many [removed: technologies, price points] [added: technologies] and [added: price points. Products are available in various physical] form [removed: factors.] [added: factors, such as benchtop instruments, handheld units, custom or industry-standard modular formats, and others.] We address time and frequency domain applications with [removed: RF,] [added: radio-frequency ("RF"),] microwave, high-speed digital and general instrumentation. [added: We also address network test, visibility, and security applications.] In addition, we have a broad portfolio of software [added: solutions and] products to enable [removed: customer] [added: our customers'] success, including [removed: EDA] [added: electronic design automation ("EDA")] software for RF and high-speed digital design, software tools for [removed: programming] [added: programming, automation,] and [added: data analysis, and] a broad range of [removed: measurement application solutions. These help] [added: application-specific software for] our [removed: customers make specific measurements quickly] [added: instruments. Our PathWave software platform incorporates some of these software elements. Finally, we offer an expanding set of services] and [removed: consistently. Keysight is recognized as being a leader across] [added: support delivered under] our [removed: five key markets: commercial communications, aerospace, defense and government, electronic industrial, network test and visibility,] [added: KeysightCare offering. Our broad portfolio of solutions] and [removed: services.] [added: products includes, among others, the following:] |

| [removed: •] [added: *•*] | [removed: Industry-Leading] [added: *Industry-Leading] Commitment to Product Quality and [removed: Reliability.] [added: Reliability.*] Keysight has a reputation in the industry for high-quality and high-reliability electronic measurement instrumentation and software. Ensuring quality and reliability is an integral part of our new product development processes. |

| • | [removed: Large] [added: *Large] Installed [removed: Base.] [added: Base.*] We have a large worldwide installed base of equipment because of the breadth of our solutions portfolio and our long history of producing high-performance and high-quality solutions. This installed base enables a strong and growing [removed: Services Solutions Group,] [added: services solutions portfolio,] which provides a wide range of calibration and repair services, on both a per incident and contract basis, and provides [removed: a significant source of] [added: opportunities as] loyal customers [removed: for future sales.] [added: refresh or upgrade their equipment.] |

| [removed: •] [added: *•*] | [removed: Sales] [added: *Sales] Channel with Global [removed: Reach.] [added: Reach.*] We have a [removed: 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. [removed: Our] [added: As a part of our] sales channel [removed: strategy is segmented by customer size, customer location and product characteristics. We deploy a] [added: strategy, we have increased our] direct sales [removed: organization] [added: capacity by more than 50% since the beginning of fiscal 2017. This global direct channel is] focused on selling high performance products and industry solutions to global and geographic accounts. [removed: Most] [added: Approximately 75 percent] of our [removed: sales in international markets are made by foreign] [added: business comes from customer interactions with our direct] sales [removed: subsidiaries.] [added: organization.] In countries with low sales volumes, sales are made through various representatives and [removed: distributors. However,] [added: channel partners. To ensure broad geographic coverage and further drive growth,] we [removed: also sell] [added: maintain a network of over 650 channel partners to complement our direct sales force.] |

| • | [removed: Centralized] [added: *Centralized] Order [removed: Fulfillment.] [added: 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. Keysight has a central order fulfillment organization that supplies solutions to customers across geographies. 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. |

| • | [removed: Business Model.] [added: *Business Model.*] Our operating model incorporates a substantial amount of cost structure flexibility with the intent to be materially profitable across a range of economic and market conditions. 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. |

[removed: The] [added: The] Keysight Leadership [removed: Model][added: Model]

[removed: Operating Segments][added: Operating Segments]

As a result, Keysight has [removed: four] [added: three] segments: Communications Solutions Group, Electronic Industrial Solutions [removed: Group, Ixia Solutions] Group and [removed: Services] [added: Ixia] Solutions Group.

[removed: Communications] [added: Communications] Solutions [removed: Group][added: Group]

The group provides electronic design and test software, instruments and systems [added: and related services] used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment.

This business generated revenue of [removed: $2.0] [added: $2.7] billion in fiscal [removed: 2018, $1.7] [added: 2019, $2.4] billion in fiscal [removed: 2017] [added: 2018] and [removed: $1.8] [added: $2.1] billion in fiscal [removed: 2016.][added: 2017.]

[removed: Communications] [added: Communications] Solutions Group [removed: Markets][added: Markets]

[removed: Commercial] [added: *Commercial] Communications [removed: Market][added: Market*]

We market our electronic design and test solutions to [added: chipset providers,] network equipment manufacturers (“NEMs”), wireless device [removed: manufacturers] [added: providers] and [removed: communications service providers, including the] component [removed: manufacturers] [added: providers] within the supply chain for these [removed: customers.][added: customers and communications service providers.]

Growth in mobile data traffic and increasing complexity in semiconductors and components are [removed: drivers of] [added: driving] test demand across the communications market.

[removed: NEMs, including] [added: NEMs and] chipset providers, [removed: manufacture] [added: design] and [removed: sell] [added: manufacture] products to enable the transmission of voice, data and video traffic.

The NEMs’ customers are communications service providers that deploy and operate the networks and [added: deliver] services, as well as distribute end‑user subscriber devices, including wireless [removed: personal communication devices] [added: smart phones, tablets] and [removed: set‑top boxes.][added: other connected devices.]

[removed: To meet their] customers’ demands, NEMs require test and measurement instruments, systems and solutions for the development, production and installation of each optical, electrical and wireless network technology.

Wireless device [removed: manufacturers] [added: providers] require design and test solutions for the design, development, manufacture and repair of a variety of mobile [removed: devices.][added: and connected devices, including both smart phones and tablets.]

The device manufacturers’ customers are large and small service providers, enterprises and consumers who purchase [removed: devices] directly from retailers.

Wireless device manufacturers require design and test solutions that enable technology development [removed: in conformance with] [added: that conforms to] the latest standards.

Our software and hardware solutions support our customers' design and test challenges across the entire product lifecycle.

We provide simulation, prototype development and validation solutions for R&D, high-volume manufacturing test solutions, as well as handheld and other solutions for operational optimization post-deployment in the field.

The following strategies are significant:

| • | Expanding our software portfolio |

| *◦* | *PathWave, a new software platform:* PathWave software is designed to provide customers with a breakthrough design and test solution that accelerates the overall workflow from simulation of early concepts through manufacturing and optimization of deployed systems. PathWave is expected to integrate Keysight’s expanding portfolio of software solutions, including design software, measurement applications and instrument control. It provides an open and flexible development environment with common data formats and a consistent user interface in an open, scalable and predictive platform. The platform is in the early stages of a multi-year development timeline and is designed to be the foundation for many Keysight solutions going forward. |

| • | Providing complete solutions with services |

| ◦ | The breadth of our service offerings enables Keysight to provide customers with complete solutions that incorporate both leading product capabilities and the appropriate services and support. We have expanded and deepened our service offerings |

beyond a strong foundation of calibration and repair to include customization, consulting, and optimization services.

Support offerings such as KeysightCare, asset optimization, technology refresh and other value-added services enable us to provide complete customer solutions across a broad set of communications and electronics markets, technologies and industries.

| • | Investing early to achieve first-to-market solutions |

| ◦ | *Automotive design and measurement solutions.* We are investing in the development of new automotive test solutions to address the rapidly emerging electric, hybrid electric, connected and autonomous vehicle segments. Over the prior three years, we have introduced new solutions covering vehicle intelligence, connectivity, power and security. The Automotive Cybersecurity Program validates the resiliency of connected components of a vehicle, individually or as an entirely functioning automobile. In addition, security solutions developed by Ixia, acquired in fiscal 2017, enables Keysight to deliver extensive security validations of the 4G/5G radio access network (RAN) infrastructure that connects vehicles with the back-end data centers. With the acquisition of ScienLab in fiscal 2017, we significantly enhanced our ability to deliver application-optimized, customer-specific test solutions for the development and production of charging technology and infrastructure, energy storage, battery management systems, inverters and DC/DC converters. |

| • | Developing solutions for network transformation |

| *◦* | *Network Transformation Requires New Solutions.* Market drivers are leading to a transformation of both wireless and wired network technologies. In particular, the low-latency and high bandwidth requirements to make 5G a reality are transforming the entire network. Our organic investments and acquisitions to enable the next generation of networks and beyond is illustrated by the graphic below. We provide both wireless and wired network communications design and test solutions that address all seven layers of the communications stack. In addition, these solutions address customer needs across the entire communications ecosystem, from chipsets to devices to network access and then into the core network, data centers and the cloud. |


| • | *Industry-Focused Organization Structure to Support Customer Success:* In 2016, Keysight transformed the company structure from product-focused divisions to industry-focused solution organizations, enabling closer customer alignment. This allows us to partner closely with market leaders to enable new technologies and provide first-to-market solutions for emerging applications. Our solution-centric industry groups provide end-to-end design, test and optimization solutions driven by customer specifications and timetables. Keysight is viewed as a trusted adviser and partner across industries. |


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Customer Success is the heart of everything we do, embodying our relentless drive to deeply understand our customers challenges and help them achieve positive, sustained outcomes through the application of new insights and the use of Keysight solutions.

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| --- | --- |

| • | Market Insight is enabled by our deep customer relationships and focuses our product and solution roadmaps, informs our merger and acquisition ("M&A") priorities, and factors into our hiring priorities and talent development plans. Our market insight allows us to move with speed and focus delivering first-to-market solutions that enable customers to address their engineering challenges. |

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| --- | --- |

| • | Capital Allocation is how we direct our financial and human capital to business opportunities, projects and processes that align with our strategy to generate financial returns, which create value for the company, shareholders and employees. The threshold for our capital allocation is an expected return on invested capital that is above our cost to procure that capital. |

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| • | First-to-Market Solutions is what we strive to deliver to our customers across the industries we serve. By being first-to-market with the right solutions we enable our customers to also be first-to-market with their products. |

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| • | Operational Excellence across all functions is a relentless focus. It allows us to accelerate R&D by developing common technology platforms, maximize margins through cost reductions and supply optimization, implement LEAN+ processes for continuous improvement and leverage general and administrative spend as the company grows. We believe this focus drives long-term competitive advantage and growth, while building customer loyalty. |

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| --- | --- |

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 solutions and geographical coverage.

Many of our customers acquire solutions and services across multiple segments.

Our research and development efforts support our customers' design and test challenges across the entire development lifecycle, beginning with simulation and prototype development and validation, through volume manufacturing test and operational optimization in the network.

These form factors range from complete application-specific solutions and feature-rich benchtop or handheld instruments to customer configurable modular solutions.

| • | New automotive design and measurement solutions. We are actively investing in the development of new automotive test solutions to address the rapidly emerging electric, hybrid electric, connected and autonomous vehicle segments. In |

support of this strategy, over the prior two years, we have introduced 70 new solutions covering vehicle intelligence, connectivity, power and security.

With the addition of ScienLab, we significantly enhanced our ability to deliver application-optimized, customer-specific test solutions for the development and production of charging technology and infrastructure, energy storages, battery management systems, inverters, and DC/DC converters.

We help accelerate innovation to connect and secure the world.

into international markets directly from the United States.

Approximately 75 percent of our business comes from customer interactions with our direct sales organization.

To ensure broad geographic coverage and further drive growth, we maintain a network of over 650 channel partners to complement our direct sales force.

On April 18, 2017, we completed the acquisition of Ixia, which became a separate reportable operating segment, the Ixia Solutions Group (“ISG”).

To achieve this, communications service providers require a range

We also sell to sub‑contractors and component manufacturers within the supply chain.

We offer these products and related software in a variety of form factors, including feature-rich, modular and handheld solutions, depending on the specific requirements of the customer application.

No single customer represented 10 percent or more of the group's net revenue.

These partners, including resellers, manufacturer’s representatives and distributors, serve customers across both the commercial communications and the aerospace, defense and government end markets and are expected to provide the same level of service and support as our direct sales force.

We concentrate our Communications Solutions Group 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.

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.

Our technology centers provide a competitive advantage by developing unique technologies for our solutions.

The group

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.

They come in a wide variety of form factors, such as Bench (one-box), Handhelds (portable) and Modular, to support a variety of electronic measurement, power and signal requirements throughout our customer’s workflow in design, manufacturing and deployment of their products and processes.

Many of these general purpose products are designed for demanding environments, and all provide high performance capability to ensure our customers can trust the measurement science provided by Keysight.

Customer products include semiconductor devices, printed circuit assemblies, electronic modules and systems.

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 solutions, 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 pervasive across 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 the automotive and energy, general electronics measurement and semiconductor measurement markets 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.

These centers underscore our commitment to work with and serve customers in local proximity to support innovative technology projects that will drive the automotive and energy industries.

Electronic Industrial Solutions Group Manufacturing

Centripetal Lawsuit

On July 20, 2017, Centripetal Networks, Inc. ("Centripetal") filed a complaint in the United States District Court for the Eastern District of Virginia, Centripetal Networks, Inc. v.

Keysight Technologies, Inc. and Ixia, Case No. 17-cv-00383-HCM-LRL (E.D. Va), alleging the infringement of Centripetal patents related to certain of Ixia’s products.

Through July 31, 2018, we had accrued an immaterial amount, which represented a settlement offer made early in the litigation.

At that time, we did not believe that a loss was probable or reasonably estimable, nor did we believe there was a reasonable possibility of a material loss.

No settlement demands were made, nor were estimates of damages provided prior to court-ordered mediation.

Mediation was held in September 2018 but did not result in resolution of the case.

On October 2, 2018, trial started before a jury.

During the trial, the parties agreed to settle the case for a worldwide, royalty-bearing, non-transferable, irrevocable, non-terminable, non-exclusive license to Centripetal’s worldwide patent portfolio that ends on December 31, 2021, as well as a monetary, one-time payment of $25 million for past damages that was recognized in selling, general and administrative expense in the consolidated statement of operations.

The complaint was dismissed on October 12, 2018.

The payment for past damages was recognized and paid as of October 31, 2018.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: Form 10-K][added: Form 10-K]

[removed: | (Mark One) | | |][added: (Mark One)]

[removed: | x | | ANNUAL] [added: ☒ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934 |][added: 1934]

[removed: | | | For] [added: For] the fiscal year [removed: ended October] [added: ended October] 31, [removed: 2018 |][added: 2019]

[removed: | o | | TRANSITION] [added: ☐TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934 |][added: 1934]

[removed: | | | For] [added: For] the transition period from [removed: to |][added: to]

[removed: Commission] [added: Commission] File [removed: Number: 001-36334][added: Number: 001-36334]

[removed: Keysight] [added: Keysight] Technologies, [removed: Inc.][added: Inc.]

[removed: (Exact] [added: *(Exact] name of registrant as specified in its [removed: charter)][added: charter)*]

| [removed: Delaware] [added: Delaware] | | [removed: 46-4254555] [added: 46-4254555] |

| [removed: State] [added: *State] or other jurisdiction [removed: of Incorporation] [added: of* *Incorporation] or [removed: organization] [added: organization*] | | [removed: I.R.S. Employer Identification No.] [added: *I.R.S. Employer* *Identification No.*] |

[removed: Address] [added: Address] of principal executive [removed: offices: 1400] [added: offices: 1400] Fountaingrove [removed: Parkway, Santa Rosa, CA 95403][added: Parkway, Santa Rosa, CA 95403]

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

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of each [removed: class] [added: class] | [added: Trading Symbol] | [removed: Name] [added: Name] of each exchange on which [removed: registered] [added: registered] |

| [removed: Common] [added: Common] Stock par value $0.01 per [removed: share] [added: share] | [added: KEYS] | [removed: New] [added: New] York Stock [removed: Exchange, Inc.] [added: Exchange] |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the Act: [removed: None][added: None]

Yes [removed: x] [added: ☒] No [removed: o][added: ☐]

Yes [removed: o] [added: ☐] No [removed: x][added: ☒]

Yes [removed: x] [added: ☒] No [removed: o][added: ☐]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate website, if any,] every Interactive Data File required to be submitted [removed: 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 [removed: x] [added: ☒] No [removed: o][added: ☐]

| Large accelerated filer [removed: x] | [added: ☒] | [added: |] Accelerated filer [removed: o] [added: ☐] | [added: |]

| Non-accelerated filer [removed: o] | [added: ☐] | [added: |] Smaller reporting company [removed: o] | [added: ☐ |]

| [added: | | |] Emerging growth company [removed: o] | [removed: | (do not check if a smaller reporting company)] [added: ☐] |

Yes [removed: o] [added: ☐] No [removed: x][added: ☒]

The aggregate market value of common equity held by non-affiliates as of April 30, [removed: 2018] [added: 2019] was approximately [removed: $6] [added: $11] billion, based upon the closing price of the Registrant's common stock as quoted on New York Stock Exchange on such date.

As of December [removed: 10, 2018,] [added: 16, 2019,] there were [removed: 187,641,764] [added: 188,447,566] shares of our common stock outstanding.

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

| [removed: Document Description] [added: Document Description] | | [removed: 10-K Part] [added: 10-K Part] |

| Portions of the Proxy Statement for the Annual Meeting of Stockholders (the "Proxy Statement") to be held on March [removed: 21, 2019] [added: 19, 2020] and to be filed pursuant to Regulation 14A within 120 days after registrant's fiscal year ended October 31, [removed: 2018] [added: 2019] are incorporated by reference into Part III of this Report. | | III |

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

| | | [removed: Page] [added: Page] |

[removed: | [Forward-Looking Statements](#sB407D55F21C75D6AA3B3F57ADDDD56DC) | | [3](#sB407D55F21C75D6AA3B3F57ADDDD56DC) |][added: Forward-Looking Statements]

[removed: | [PART I](#s3FF69638490857DA9FD119CDF04D5B5D) | | |][added: PART I]

| [Item [removed: 1A](#s64D1EE6D1BB555B596E773E34124282F)] [added: 1A](#s879A3FD6152F5B3B9E020A6CD510C87C)] | [Risk [removed: Factors](#s64D1EE6D1BB555B596E773E34124282F)] [added: Factors](#s879A3FD6152F5B3B9E020A6CD510C87C)] | [removed: [16](#s64D1EE6D1BB555B596E773E34124282F)] [added: [17](#s879A3FD6152F5B3B9E020A6CD510C87C)] |

| [Item [removed: 1B](#s72E97774E54E500DB7D3ABA28CEF6C75)] [added: 1B](#s7E9F472C7DDC595EA17D517FCEE24F65)] | [Unresolved Staff [removed: Comments](#s72E97774E54E500DB7D3ABA28CEF6C75)] [added: Comments](#s7E9F472C7DDC595EA17D517FCEE24F65)] | [removed: [28](#s72E97774E54E500DB7D3ABA28CEF6C75)] [added: [28](#s7E9F472C7DDC595EA17D517FCEE24F65)] |

or

| | | | | |

| --- | --- | --- | --- | --- |

| | | | | |

| [Item 1](#sC3F5E9E67D315624B97688A8FAFAB207) | [Business](#sE0FDED96DEF35353BF1ABB880EB0F311) | [3](#sE0FDED96DEF35353BF1ABB880EB0F311) |

| [PART II](#s7A698328E4AF5793927C99D0242649A0) | | |

| [PART IV](#s67DF7E34DFEC51148A0D26479A24255D) | | |

10-K 1 keys-10312018x10k.htm 10-K

| | | |

| --- | --- | --- |

| | | |

| or | | |

| | | |

| --- | --- | --- |

| | | |

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. o

| [Item 1](#s3FF69638490857DA9FD119CDF04D5B5D) | [Business](#sE7B6A94A051F5823A388659000CEB963) | [3](#sE7B6A94A051F5823A388659000CEB963) |

| [PART II](#s50AF3220CD9A550F80A7F5AC19C0B071) | | |

| [PART IV](#sF85B09661D8B573D994DECBC20E7FFD1) | | |

We own or lease a total of approximately [removed: 130] [added: 134] operating facilities located throughout the world that handle manufacturing production, research and development, administration, assembly, sales, quality, assurance testing, distribution and packaging of our products.

These facilities are primarily located in the following countries: [added: United States, Malaysia, Japan,] China, Germany, India, [removed: Japan, Malaysia, Romania, Singapore, Spain, Taiwan,] United [removed: Kingdom] [added: Kingdom, Taiwan, Romania, Spain] and [removed: the United States.][added: Singapore.]

As of October 31, [removed: 2018,] [added: 2019,] we own or lease approximately 6.2 million square feet of space worldwide, of which we own approximately [removed: 4.2] [added: 4.1] million square feet and lease [removed: 2.0] [added: 2.1] million square feet.

Our sales [removed: and support] facilities occupy a total of approximately [removed: 0.5] [added: 0.3] million square feet.

Our manufacturing plants, R&D facilities and warehouse and administrative facilities occupy approximately [removed: 5.7] [added: 5.9] million square feet.

[removed: PART II][added: PART II]

There were [removed: 21,227] [added: 19,924] shareholders of record of Keysight common stock as of December [removed: 10, 2018.][added: 16, 2019.]

The information required by this item with respect to equity compensation plans will be included under the caption Equity Compensation Plans in our proxy statement for the [removed: 2019] [added: 2020] annual meeting of stockholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, and is incorporated herein by reference.

[removed: ISSUER] [added: ISSUER] PURCHASES OF EQUITY [removed: SECURITIES][added: SECURITIES]

The table below summarizes information about the company’s purchases, based on trade date; of its equity securities registered pursuant to Section 12 of the Exchange Act during the quarterly period ended October 31, [removed: 2018.][added: 2019.]

The total number of shares of common stock purchased by the company during the fiscal year ended October 31, [removed: 2018] [added: 2019] is [removed: 2,075,460] [added: 2,093,570] shares.

| [removed: Period] [added: Period] | | [removed: Total] [added: Total] Number of Shares of Common Stock [removed: Purchased (1)] [added: Purchased (1)] | | | [removed: Weighted] [added: Weighted] Average Price Paid per Share of Common [removed: Stock (2)] [added: Stock (2)] | | [removed: Total] [added: Total] Number of Shares of Common Stock Purchased as Part of Publicly Announced Plans or [removed: Programs (1)] [added: Programs (1)] | | | [removed: Maximum] [added: Maximum] Approximate Dollar Value of Shares of Common Stock that May Yet Be Purchased Under the [removed: Program (1)] [added: Program (1)] | | |

| (1) | On [removed: March 6, 2018,] [added: May 29, 2019,] the Board of Directors approved a new stock repurchase program authorizing the purchase of up to [removed: $350] [added: $500] million of the company’s common stock, replacing a previously approved [removed: 2016] [added: 2018] program authorizing the purchase of up to [removed: $200] [added: $350] million of the company’s common [removed: stock and] [added: stock,] of which [removed: $139] [added: $160] million remained. Under the new program, shares may be purchased from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions or other means. All such shares and related costs are held as treasury stock and accounted for at trade date using the cost method. |

| August 1, 2019 through August 31, 2019 | | 51,900 | | | $95.67 | | 51,900 | | | $ | 435,049,814 | |

| September 1, 2019 through September 30, 2019 | | 151,000 | | | $98.83 | | 151,000 | | | $ | 420,126,205 | |

| October 1, 2019 through October 31, 2019 | | 100,250 | | | $98.79 | | 100,250 | | | $ | 410,222,249 | |

| Total | | 303,150 | | | | | 303,150 | | | | | |

| August 1, 2018 through August 31, 2018 | | — | | | N/A | | — | | | $ | 269,846,917 | |

| September 1, 2018 through September 30, 2018 | | 151,501 | | | $65.99 | | 151,501 | | | $ | 259,850,059 | |

| October 1, 2018 through October 31, 2018 | | 482,349 | | | $62.18 | | 482,349 | | | $ | 229,859,564 | |

| Total | | 633,850 | | | $63.09 | | 633,850 | | | | | |

The following table presents the selected [removed: combined and] consolidated financial data, which should be read in conjunction with our 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, [removed: 2018] [added: 2019] and for each of the fiscal years in the three-year period ended October 31, [removed: 2018] [added: 2019] from our audited consolidated financial statements included elsewhere in this Form 10-K.

We derived the selected financial data as of October 31, [removed: 2015] [added: 2016] and October 31, [removed: 2014] [added: 2015] from audited [removed: combined] [added: consolidated] financial statements that are not included in this Form 10-K.

| | [removed: Years] [added: Years] Ended October [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | |

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| | [removed: (in] [added: (in] millions, except per share [removed: data)] [added: data)] | | | | | | | | | | | | | | | | | | |

| [removed: Combined and Consolidated] [added: Consolidated] Statement of Operations [removed: Data:(a)] [added: Data:(a)] | | | | | | | | | | | | | | | | | | | |

| Net revenue | $ | [removed: 3,878] [added: 4,303] | | | $ | [removed: 3,189] [added: 3,878] | | | $ | [removed: 2,918] [added: 3,189] | | | $ | [removed: 2,856] [added: 2,918] | | | $ | [removed: 2,933] [added: 2,856] | |

| Income (loss) before taxes | $ | [removed: (411] [added: 715] | [removed: )] | | $ | [removed: 179] [added: (411] | [added: )] | | $ | [removed: 366] [added: 179] | | | $ | [removed: 388] [added: 366] | | | $ | [removed: 475] [added: 388] | |

| Net income | $ | [removed: 165] [added: 621] | | | $ | [removed: 102] [added: 165] | | | $ | [removed: 335] [added: 102] | | | $ | [removed: 513] [added: 335] | | | $ | [removed: 392] [added: 513] | |

| Net income per [removed: share(b)] [added: share] | | | | | | | | | | | | | | | | | | | |

| Basic | $ | [removed: 0.88] [added: 3.31] | | | $ | [removed: 0.57] [added: 0.88] | | | $ | [removed: 1.97] [added: 0.57] | | | $ | [removed: 3.04] [added: 1.97] | | | $ | [removed: 2.35] [added: 3.04] | |

| Diluted | $ | [removed: 0.86] [added: 3.25] | | | $ | [removed: 0.56] [added: 0.86] | | | $ | [removed: 1.95] [added: 0.56] | | | $ | [removed: 3.00] [added: 1.95] | | | $ | [removed: 2.35] [added: 3.00] | |

| Weighted average shares used in computing net income per [removed: share:(b)] [added: share:] | | | | | | | | | | | | | | | | | | | |

| Basic | [removed: 187] [added: 188] | | | | [removed: 180] [added: 187] | | | | [removed: 170] [added: 180] | | | | [removed: 169] [added: 170] | | | | [removed: 167] [added: 169] | | |

| Diluted | 191 | | | | [removed: 182] [added: 191] | | | | [removed: 172] [added: 182] | | | | [removed: 171] [added: 172] | | | | [removed: 167] [added: 171] | | |

(a) Fiscal years [added: 2019,] 2018 and 2017 financial data includes our acquisition of Ixia on April 18, 2017.

| | [removed: October 31,] [added: October 31,] | | | | | | | | | | | | | | | | | | |

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| | [removed: (in millions)] [added: (in millions)] | | | | | | | | | | | | | | | | | | |

| [removed: Combined and Consolidated] [added: Consolidated] Balance Sheet [removed: Data:(a)] [added: Data:(a)] | | | | | | | | | | | | | | | | | | | |

| Cash and cash equivalents [removed: and short-term investments] | $ | [removed: 913] [added: 1,598] | | | $ | [removed: 818] [added: 913] | | | $ | [removed: 783] [added: 818] | | | $ | [removed: 483] [added: 783] | | | $ | [removed: 810] [added: 483] | |

| Working capital | $ | [removed: 916] [added: 2,212] | | | $ | [removed: 1,358] [added: 916] | | | $ | [removed: 1,210] [added: 1,358] | | | $ | [removed: 893] [added: 1,210] | | | $ | [removed: 1,081] [added: 893] | |

| Total assets | $ | [removed: 5,824] [added: 6,623] | | | $ | [removed: 5,933] [added: 5,824] | | | $ | [removed: 3,796] [added: 5,933] | | | $ | [removed: 3,501] [added: 3,796] | | | $ | [removed: 3,041] [added: 3,501] | |

| Long-term debt | $ | [removed: 1,291] [added: 1,788] | | | $ | [removed: 2,038] [added: 1,291] | | | $ | [removed: 1,093] [added: 2,038] | | | $ | [removed: 1,092] [added: 1,093] | | | $ | [removed: 1,090] [added: 1,092] | |

| Stockholders' equity | $ | [removed: 2,433] [added: 3,004] | | | $ | [removed: 2,310] [added: 2,433] | | | $ | [removed: 1,513] [added: 2,310] | | | $ | [removed: 1,302] [added: 1,513] | | | $ | [removed: 769] [added: 1,302] | |

(a) Fiscal years [added: 2019,] 2018 and 2017 financial data reflect the impact of our acquisition of Ixia on April 18, 2017.

Our historical combined and consolidated financial statements before November 1, 2014 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 costs we have incurred or 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.

(b) 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 6 of the consolidated financial statements for information regarding net income per share.

| [removed: Index] [added: Index] to Consolidated Financial [removed: Statements] [added: Statements] | | [removed: Page] [added: Page] |

[removed: | [Report of Independent Registered Public Accounting Firm](#sD4E6B2CDCC48581CAC7098A964F069F4) | | [51](#sD4E6B2CDCC48581CAC7098A964F069F4) |][added: REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM]

| [Consolidated Statement of Operations for each of the three years in the period ended October 31, [removed: 2018](#s41CA119913ED5AD1A0C9D888A43383F6)] [added: 2019](#sA59160AF0D24514F965272CC3E7076BA)] | | [removed: [53](#s41CA119913ED5AD1A0C9D888A43383F6)] [added: [53](#sA59160AF0D24514F965272CC3E7076BA)] |

| [Consolidated Statement of Comprehensive Income for each of the three years in the period ended October 31, [removed: 2018](#sC35D4F1F523F558E90AE618888DA12EE)] [added: 2019](#sB9DCDCD28B88512889F22F495DE1B2C9)] | | [removed: [54](#sC35D4F1F523F558E90AE618888DA12EE)] [added: [54](#sB9DCDCD28B88512889F22F495DE1B2C9)] |

| [Consolidated Balance Sheet at October 31, [removed: 2018] [added: 2019] and [removed: 2017](#s91DD248941F2588E8CC1F1A4DE2F1882)] [added: 2018](#s71FDACEAAABA548E99C831DD33F98D7C)] | | [removed: [55](#s91DD248941F2588E8CC1F1A4DE2F1882)] [added: [55](#s71FDACEAAABA548E99C831DD33F98D7C)] |

| [Consolidated Statement of Cash Flows for each of the three years in the period ended October 31, [removed: 2018](#s3FF81282141055198B9C56F5342EA8EE)] [added: 2019](#s3CB8860D567950DCB196AB135A562FE6)] | | [removed: [56](#s3FF81282141055198B9C56F5342EA8EE)] [added: [56](#s3CB8860D567950DCB196AB135A562FE6)] |

| [Consolidated Statement of Equity for each of the three years in the period ended October 31, [removed: 2018](#s4112FFCF02B35604A646C71AE80179FE)] [added: 2019](#sDD53C6C577825C8298934BE1B615A026)] | | [removed: [57](#s4112FFCF02B35604A646C71AE80179FE)] [added: [57](#sDD53C6C577825C8298934BE1B615A026)] |

[removed: | [Notes to Consolidated Financial Statements](#s1A815863A92052E7AE63F0DD3DC8FCB0) | | [58](#s1A815863A92052E7AE63F0DD3DC8FCB0) |][added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS]

| [Quarterly Summary [removed: (unaudited)](#s635C22EB4A2650E9A0936D0F05CA334A)] [added: (unaudited)](#sCFA155C8BBB950DEB0265DB3B7D1A3EC)] | | [removed: [101](#s635C22EB4A2650E9A0936D0F05CA334A)] [added: [102](#sCFA155C8BBB950DEB0265DB3B7D1A3EC)] |

[removed: REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM][added: | [Report of Independent Registered Public Accounting Firm](#s40CC3065EAA25226ACC929127CD9E16B) | | [50](#s40CC3065EAA25226ACC929127CD9E16B) |]

[removed: Opinions] [added: Opinions] on the Financial Statements and Internal Control over Financial [removed: Reporting][added: Reporting]

We have audited the accompanying consolidated balance sheets of Keysight Technologies, Inc. and its subsidiaries (the “Company”) as of October 31, [removed: 2018] [added: 2019] and [removed: October 31, 2017,] [added: 2018,] and the related consolidated statements of operations, of comprehensive income, of equity and of cash flows for each of the three years in the period ended October 31, [removed: 2018,] [added: 2019,] including the related notes and financial statement schedule of valuation and qualifying accounts for each of the three years in the period ended October 31, [removed: 2018] [added: 2019] appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of October 31, [removed: 2018] [added: 2019] based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 31, [removed: 2018] [added: 2019] and [removed: October 31, 2017] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended October 31, [removed: 2018] [added: 2019] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, [removed: 2018,] [added: 2019,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for [removed: stock-based compensation] [added: pension costs and the manner] in [removed: 2018.][added: which it accounts for revenues from contracts with customers in 2019.]

[removed: Basis] [added: Basis] for [removed: Opinions][added: Opinions]

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in [removed: the accompanying] Management’s Report on Internal Control over Financial Reporting [added: appearing] under Item 9A.

[removed: Definition] [added: Definition] and Limitations of Internal Control over Financial [removed: Reporting][added: Reporting]

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 [added: preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and]

[removed: 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.

San [removed: Jose,] [added: Francisco,] California

[removed: KEYSIGHT] [added: KEYSIGHT] TECHNOLOGIES, [removed: INC.][added: INC.]

[removed: CONSOLIDATED] [added: CONSOLIDATED] STATEMENT OF [removed: OPERATIONS][added: OPERATIONS]

[removed: (in] [added: (in] millions, except per share [removed: data)][added: data)]

| | [removed: Year] [added: Year] Ended October [removed: 31,] [added: 31,] | | | | | | | | | | |

| | [removed: 2018] [added: 2018] | | | | [removed: 2017] | | | | [removed: 2016] | | | [added: | 2017 | | | | | | | | | | |]

| Products | $ | [removed: 3,229] [added: 3,554] | | | $ | [removed: 2,664] [added: 3,229] | | | $ | [removed: 2,440] [added: 2,664] | |

| Services and other | [removed: 649] [added: 749] | | | | [removed: 525] [added: 649] | | | | [removed: 478] [added: 525] | | |

| Total net revenue | [removed: 3,878] [added: 4,303] | | | | [removed: 3,189] [added: 3,878] | | | | [removed: 2,918] [added: 3,189] | | |

| Cost of products | [added: $ |] 1,440 | | | [added: $] | [added: 1,449 | | | $ | 9 | | | $ |] 1,206 | | | [added: $] | [removed: 1,042] [added: 1,210] | | | [added: $ | 4 | |]

| Cost of services and other | 316 | | | | [added: 318 | | | | 2 | | | |] 281 | | | | [removed: 252] [added: 282] | | | [added: | 1 | | |]

| Research and development | 607 | | | | [added: 624 | | | | 17 | | | |] 498 | | | | [removed: 425] [added: 507] | | | [added: | 9 | | |]

| Selling, general and administrative | 1,185 | | | | [added: 1,205 | | | | 20 | | | |] 1,049 | | | | [removed: 818] [added: 1,058] | | | [added: | 9 | | |]

| Goodwill impairment | [removed: 709] [added: —] | | | | [removed: —] [added: 709] | | | | — | | |

| Other operating expense (income), net | [removed: (33] [added: (20] | | ) | | [removed: (84] [added: (33] | | ) | | [removed: (25] [added: (16] | | ) |

| Total costs and expenses | [removed: 4,224] [added: 3,592] | | | | [removed: 2,950] [added: 3,586] | | | | [removed: 2,512] [added: 6] | | |

| Income (loss) from operations | [removed: (346] [added: $] | [added: (17] | ) | | [removed: 239] [added: $] | [added: 86] | | | [removed: 406] [added: $] | [added: 117] | | [added: | $ | (580 | ) |]

| Interest income | [removed: 12] [added: 23] | | | | [removed: 7] [added: 12] | | | | [removed: 3] [added: 7] | | |

| Interest expense | [removed: (83] [added: (80] | | ) | | [removed: (80] [added: (83] | | ) | | [removed: (47] [added: (80] | | ) |

*Changes in Accounting Principles*

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

*Goodwill Impairment Assessment - Ixia Solutions Group (“ISG”) Reporting Unit*

As described in Notes 1 and 11 to the consolidated financial statements, the Company’s consolidated goodwill balance was $1,209 million as of October 31, 2019, and the goodwill associated with the ISG reportable segment, which only includes the ISG reporting unit, was $407 million.

Management determined the fair value of the ISG reporting unit based on the income and market approaches, weighted at 60 and 40 percent, respectively.

As disclosed by management, determining fair value requires the exercise of significant judgment, including judgments about appropriate discount rates, revenue growth rates, and the amount and timing of expected future cash flows.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the ISG reporting unit is a critical audit matter are there was significant judgment by management when determining the fair value measurement of the ISG reporting unit.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating evidence related to management’s cash flow projections and significant assumptions related to the revenue growth rates and the discount rate.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Company’s reporting units.

These procedures also included, among others, (i) testing management’s process for developing the fair value estimate, (ii) evaluating the appropriateness of the income approach, (iii) testing the completeness, accuracy, and relevance of underlying data used in the income approach, and (iv) evaluating the significant assumptions used by management, including the revenue growth rates and the discount rate.

Evaluating management’s assumptions related to the revenue growth rates involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s income approach and certain significant assumptions, including the discount rate.

*Income Tax Reserves - Unrecognized Tax Benefits*

As described in Note 6 to the consolidated financial statements, as of October 31, 2019, the total amount of gross unrecognized tax benefits was $226 million.

The calculation of the tax liabilities involves dealing with uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions.

Potential liabilities for anticipated tax audit issues are recognized based on management’s estimate of whether, and the extent to which, additional taxes and interest will be due, and

management applies significant judgment in determining whether an uncertain tax position has met the recognition and measurement thresholds.

The principal considerations for our determination that performing procedures relating to unrecognized tax benefits is a critical audit matter are there was significant judgment by management when determining the uncertain tax positions that met the recognition and measurement thresholds, including a high degree of estimation uncertainty relative to the complex tax law and regulations in a multitude of jurisdictions, and the potential for significant adjustments as a result of tax audits.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s assessment of the identified uncertain tax positions that met the recognition and measurement thresholds.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to recognition of unrecognized tax benefits.

These procedures also included, among others, (i) testing the information used in the calculation of the liability for unrecognized tax benefits, (ii) testing the calculation of the liability for unrecognized tax benefits by jurisdiction, including management’s assessment of the technical merits of uncertain tax positions, (iii) testing the completeness of management’s assessment of both the identification of uncertain tax positions and possible outcomes of each uncertain tax position, and (iv) evaluating the status and results of tax audits with the relevant tax authorities.

Procedures were also performed to evaluate the reasonableness of management’s assessment of whether tax positions are more-likely-than-not of being sustained and the amount of potential benefit to be realized, and the application of relevant tax laws.

| Cost of products | 1,439 | | | | 1,449 | | | | 1,210 | | |

| Cost of services and other | 330 | | | | 318 | | | | 282 | | |

| Total costs | 1,769 | | | | 1,767 | | | | 1,492 | | |

| Selling, general and administrative | 1,155 | | | | 1,205 | | | | 1,058 | | |

| Total costs and expenses | 3,592 | | | | 4,272 | | | | 3,041 | | |

| Inventory | 705 | | | | 619 | | |

| Net cash used in investing activities | (196 | | ) | | (108 | | ) | | (1,722 | | ) |

| Payment of acquisition-related contingent consideration | — | | | | (6 | | ) | | — | | |

| Cash, cash equivalents, and restricted cash at end of year | $ | 1,600 | | | $ | 917 | | | $ | 820 | |

| Adjustment due to adoption of new accounting standards | — | | | — | | | | — | | | | — | | | — | | | | (10 | | ) | | — | | | | (10 | | ) |

| Adjustment due to adoption of new accounting standards | — | | | — | | | | — | | | | — | | | — | | | | 6 | | | | — | | | | 6 | | |

| Adjustment due to adoption of new accounting standards | — | | | — | | | | — | | | | — | | | — | | | | 76 | | | | — | | | | 76 | | |

| Balance as of October 31, 2019 | 193,769 | | | $ | 2 | | | $ | 2,013 | | | (6,458 | ) | | $ | (342 | ) | | $ | 1,909 | | | $ | (578 | ) | | $ | 3,004 | |

Change in Accounting Principle

December 18, 2018

| Total costs | 1,756 | | | | 1,487 | | | | 1,294 | | |

| Balance as of October 31, 2015 | 169,591 | | | $ | 2 | | | $ | 1,165 | | | — | | | $ | — | | | $ | 614 | | | $ | (479 | ) | | $ | 1,302 | |

| Tax deficiency from share-based awards issued | — | | | — | | | | (5 | | ) | | — | | | — | | | | — | | | | — | | | | (5 | | ) |

| Adjustment due to adoption of ASU 2016-16 | — | | | — | | | | — | | | | — | | | — | | | | (10 | | ) | | — | | | | (10 | | ) |

| Adjustment due to adoption of ASU 2016-09 | — | | | — | | | | — | | | | — | | | — | | | | 6 | | | | — | | | | 6 | | |

Overview.

In addition, we provide testing, visibility, and security solutions, strengthening applications across physical and virtual networks.

Basis of Presentation.

Principles of consolidation.

Use of Estimates.

Acquisitions.

See Note 3, "Acquisitions," for further discussion of the company's acquisitions.

We enter into agreements to sell products (hardware and/or software), services and other arrangements (multiple-element arrangements) that include combinations of products and services.

We recognize revenue, net of trade discounts and allowances, provided that (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the price is fixed or determinable and (4) collectability is reasonably assured.

Delivery is considered to have occurred when title and risk of loss have transferred to the customer, for products, or when the service has been provided.

We consider the price to be fixed or determinable when the price is not subject to refund or adjustments.

We consider arrangements with extended payment terms not to be fixed or determinable, and accordingly we defer revenue until amounts become due.

At the time of the transaction, we evaluate the creditworthiness of our customers to determine the appropriate timing of revenue recognition.

Product revenue.

Product revenue, including sales to resellers and distributors, is reduced for estimated returns, when appropriate.

For sales or arrangements that include customer-specified acceptance criteria, including those where acceptance is required upon achievement of performance milestones, revenue is recognized after the acceptance criteria have been met.

For products that include installation, if the installation meets the criteria to be considered a separate element, product revenue is recognized upon delivery, and recognition of installation revenue is delayed until the installation is complete.

Otherwise, neither the product nor the installation revenue is recognized until the installation is complete.

Where software is licensed separately, revenue is recognized when the software is delivered and has been transferred to the customer or, in the case of electronic delivery of software, when the customer is given access to the licensed software programs.

We also evaluate whether collection of the receivable is probable, the fee is fixed or determinable and whether any other undelivered elements of the arrangement exist on which a portion of the total fee would be allocated based on vendor-specific objective evidence ("VSOE").

When VSOE is not available, we use third-party evidence ("TPE") or management's best estimate of selling price ("ESP").

Service revenue.

Revenue from services includes repair and calibration services, extended warranty, customer and software support, consulting, training and education.

For example, customer support contracts are recognized ratably over the contractual period, while training revenue is recognized as the training is provided to the customer.

In addition, the four revenue recognition criteria described above must be met before service revenue is recognized.

Revenue recognition for arrangements with multiple deliverables.

Our multiple-element arrangements are generally comprised of a combination of measurement instruments, installation or other start-up services, and/or software and/or support or services.

Hardware and software elements are typically delivered at the same time, and revenue is recognized upon delivery and acceptance, if required, once title and risk of loss pass to the customer.

Delivery of installation, start-up services and other services varies based on the complexity of the equipment, staffing levels in a geographic location and customer preferences, and can range from a few days to a few months.

Service revenue is deferred and recognized over the contractual period or as services are rendered and accepted by the customer.

Revenue from the sale of software products that are not required to deliver the tangible product's essential functionality are accounted for under software revenue recognition rules, which require VSOE of fair value to allocate revenue in a multiple-element arrangement.

Our arrangements generally do not include any provisions for cancellation, termination or refunds that would significantly impact recognized revenue.

We evaluate the deliverables in our multiple-element arrangements and conclude that they are separate units of accounting if it is determined the delivered item or items have value to the customer on a standalone basis.

[removed: Evaluation] [added: *Evaluation] of Disclosure Controls and [removed: Procedures][added: 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, [removed: 2018,] [added: 2019,] 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, [removed: 2018,] [added: 2019,] 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.

[removed: Management's] [added: *Management's] Report on Internal Control over Financial [removed: Reporting][added: Reporting*]

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 [removed: Internal] [added: *Internal] Control - Integrated [removed: Framework] [added: 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, [removed: 2018.][added: 2019.]

The effectiveness of our internal control over financial reporting as of October 31, [removed: 2018] [added: 2019] 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.

[removed: Changes] [added: *Changes] in Internal Control Over Financial [removed: Reporting][added: Reporting*]

There were no [added: other] changes in our internal control over financial reporting [removed: that occurred] during [removed: our last fiscal quarter] [added: the year ended October 31, 2019] that [removed: has] [added: have] materially affected, or [removed: is] [added: are] reasonably likely to materially affect, our internal control over financial reporting.