Citrix 2009 Annual Report Download - page 30

impairment annually, or sooner if events or changes in circumstances indicate that the carrying amount could
exceed fair value, at the reporting unit level (operating segment). As of December 31, 2009, we had $899.8
million of goodwill. Fair values are based on discounted cash flows using a discount rate determined by our
management to be consistent with industry discount rates and the risks inherent in our current business model.
Due to uncertain market conditions and potential changes in our strategy and product portfolio, it is possible that
the forecasts we use to support our goodwill and other intangible assets could change in the future, which could
result in non-cash charges that would adversely affect our results of operations and financial condition.
Furthermore, impairment testing requires significant judgment, including the identification of reporting
units based on our internal reporting structure that reflects the way we manage our business and operations and to
which our goodwill and intangible assets would be assigned. Significant judgments are required to estimate the
fair value of our goodwill and intangible assets, including estimating future cash flows, determining appropriate
discount rates, estimating the applicable tax rates, foreign exchange rates and interest rates, projecting the future
industry trends and market conditions, and making other assumptions. Changes in these estimates and
assumptions, including changes in our reporting structure, could materially affect our determinations of fair
value.
We recorded approximately $266.1 million of goodwill and intangible assets in connection with our 2007
Acquisitions and our 2008 Acquisitions. If the actual revenues and operating profit attributable to acquired
intangible assets are less than the projections we used to initially value these intangible assets when we acquired
them, then these intangible assets may be deemed to be impaired. If we determine that any of the goodwill or
other intangible assets associated with our recent acquisitions is impaired, then we would be required to reduce
the value of those assets or to write them off completely by taking a related charge to earnings. If we are required
to write down or write off all or a portion of those assets, or if financial analysts or investors believe we may
need to take such action in the future, our stock price and operating results could be materially and adversely
affected.
At December 31, 2009, we had $213.2 million, net, of unamortized intangibles, which include product
related technology we purchased in acquisitions or under third-party licenses. These intangibles are primarily
associated with our Datacenter and Cloud Solutions. However, our VADs and entities with which we have
technology relationships, customers or prospective customers may not purchase or widely accept our new
products. If we fail to complete the development of our anticipated future product and service offerings,
including product offerings acquired through our acquisitions, if we fail to complete them in a timely manner, or
if we are unsuccessful in selling any new lines of products, appliances and services, we could determine that the
value of the purchased technology is impaired in whole or in part and take a charge to earnings. We could also
incur additional charges in later periods to reflect costs associated with completing those projects that could not
be completed in a timely manner. An impairment charge could have a material adverse effect on our results of
operations. If the actual revenues and operating profit attributable to acquired product and core technologies are
less than the projections we used to initially value product and core technologies when we acquired it, such
intangible assets may be deemed to be impaired. If we determine that any of our intangible assets are impaired,
we would be required to take a related charge to earnings that could have a material adverse effect on our results
of operations.
Our business could be adversely affected if we are unable to expand and diversify our distribution channels.
We currently intend to continue to expand our distribution channels by leveraging our relationships with
independent hardware and software vendors and system integrators to encourage them to recommend or
distribute our products. In addition, an integral part of our strategy is to diversify our base of channel
relationships by adding and training more channel members with abilities to reach larger enterprise customers
and to sell our newer products. This strategy will require additional resources, as we will need to expand our
internal sales and service coverage of these customers. If we fail in these efforts and cannot expand, train or
diversify our distribution channels, our business could be adversely affected. In addition to this diversification of
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