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2007 Annual Report 59
Notes to Consolidated Financial Statements
Acquisition of Variable Interest Entities
In fiscal 2005, the Company completed acquisitions of companies which had been consolidated prior to acquisition because the Company
was deemed to be the primary beneficiary under FIN 46(R). The total purchase price of these acquisitions was an aggregate of $76 million.
The purchase consideration consisted of cash, stock, and fully vested stock options assumed. There were no significant acquisitions of
variable interest entities in fiscal 2007 or 2006.
Compensation Expense Related to Acquisitions and Investments
The following table presents the compensation expense related to acquisitions and investments (in millions):
Years Ended July 28, 2007 July 29, 2006 July 30, 2005
Share-based compensation expense $ 34 $ 87 $ 154
Cash compensation expense 59 36 11
Total $ 93 $ 123 $ 165
Share-Based Compensation Expense Beginning in fiscal 2006, share-based compensation related to acquisitions and investments
is measured under SFAS 123(R) and included deferred share-based compensation relating to acquisitions completed prior to fiscal 2006.
As of July 28, 2007, the remaining balance of share-based compensation related to acquisitions and investments to be recognized over
the vesting periods was approximately $309 million.
Prior to fiscal 2006, a portion of the purchase consideration for purchase acquisitions was recorded as deferred share-based
compensation and reflected as a reduction to additional paid-in capital. The following table presents the activity of deferred share-based
compensation for the fiscal year ended July 30, 2005 (in millions):
Amount
Balance at July 31, 2004 $ 153
Purchase acquisitions 128
Amortization (140)
Canceled unvested options (4)
Balance at July 30, 2005 $ 137
Cash Compensation Expense In connection with the Company’s purchase acquisitions, asset purchases, and acquisitions of variable
interest entities, the Company has agreed to pay certain additional amounts in cash contingent upon achieving certain agreed-upon
technology, development, product, or other milestones; or continued employment of certain employees with the Company. In each
case, any additional amounts paid will be recorded as compensation expense. As of July 28, 2007, the Company had remaining potential
payments of up to $209 million pursuant to these agreements.