Computer Associates 2006 Annual Report Download - page 133

Note 2 — Acquisitions, Divestitures and Restructuring (Continued)
During the first quarter of fiscal year 2006, the Company acquired the common stock of Concord, including its
Aprisma Management Technologies subsidiary, for an aggregate purchase price of approximately $359 million.
The Company converted options to acquire the common stock of Concord and incurred acquisition costs of
approximately $15 million and $7 million, respectively. Concord was a provider of network service management
software solutions, and the Company is in the process of making Concord’s network management products
available both as independent products and as integrated components of the Company’s Unicenter Enterprise
Systems Management suite. The acquisition of Concord has been accounted for as a purchase and, accordingly, its
results of operations have been included in the Consolidated Financial Statements since the date of its acquisition,
June 7, 2005 (the Concord Acquisition Date). The pro-forma results shown above do not include the results of
Concord as Concord was not considered a significant subsidiary at the time of acquisition.
The acquisition cost of Concord has been allocated to assets acquired, liabilities assumed, and in-process research
and development based on estimated fair values as follows:
(in millions)
Cash ............................................................... $ 18
Marketable securities ................................................... 58
Deferred tax assets .................................................... 27
Other assets acquired................................................... 44
Purchased software products ............................................. 18
In-process research and development ....................................... 4
Customer relationships . . . .............................................. 19
Trademarks/tradenames . . . .............................................. 3
Goodwill............................................................ 357
Deferred revenue...................................................... (19)
Deferred tax liabilities .................................................. (25)
3% convertible notes payable............................................. (86)
Other liabilities assumed . . .............................................. (59)
Purchase price........................................................ $359
Approximately $4 million of the purchase price represents the estimated fair value of projects that, as of Concord
Acquisition Date, had not reached technological feasibility and had no alternative future use. Accordingly, this
amount was immediately expensed and has been included in the “Charge for in-process research and development
costs” line item in the Consolidated Statements of Operations.
Purchased software products are being amortized over five years, trademarks/tradenames are being amortized over
six years, and customer relationships will be amortized over seven years.
The allocation of a significant portion of the Concord purchase price to goodwill was predominantly due to the
relatively short lives of the developed technology assets; whereby a substantial amount of the purchase price was
based on earnings beyond the estimated lives of the intangible assets.
Based upon additional information received subsequent to the Concord Acquisition Date, net liabilities assumed
and goodwill were both increased by approximately $12 million. This adjustment has been included in the
allocation presented above.
The allocation of the purchase price is based upon estimates which may be revised within one year of the date of
acquisition as additional information becomes available. It is anticipated that the final purchase price allocation will
not differ materially from the preliminary allocation plus the subsequent adjustment presented above.
In connection with the acquisition of Concord, the Company assumed $86 million in 3% convertible senior notes
payable due 2023. In accordance with the notes’ terms, the Company paid off the notes in full in July 2005.
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