EMC 2008 Annual Report Download - page 72
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Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following represents the aggregate allocation of the purchase price for the aforementioned acquisitions to intangible assets (table in thousands):
Developed technology (weighted-average useful life of 5.5 years) $ 48,260
Customer relationships (weighted-average useful life of 9.3 years) 73,800
Tradename and trademark (weighted-average useful life of 10.4 years) 3,860
Non-competition agreement (weighted-average useful life of 2.4 years) 760
Backlog (weighted-average useful life of 0.5 years) 3,300
IPR&D 1,150
Total intangible assets $131,130
The fair value of intangible assets was primarily based upon the income approach. The rates used to discount the net cash flows to their present values for
each acquisition were based upon weighted average costs of capital that ranged from 8.3% – 21.0%. The discount rates were determined after consideration of
market rates of return on debt and equity capital, the weighted average returns on invested capital and the risk associated with achieving forecasted sales
related to the technology and assets acquired. The total weighted average amortization period for the intangible assets is 7.6 years. The intangible assets are
being amortized based upon the pattern in which the economic benefits of the intangible assets are being utilized.
2006 Acquisitions
Acquisition of RSA Security Inc.
In the third quarter of 2006, we acquired all of the outstanding capital stock of RSA. RSA provides technologies to secure information no matter where it
resides or travels inside or outside of an organization and throughout its lifecycle. The acquisition adds industry-leading identity and access management
solutions and encryption and key management software to our product offerings.
The purchase price, net of cash received, was approximately $2.0 billion, which consisted of $2.0 billion of cash, $27.9 million in fair value of our stock
options and $11.6 million of transaction costs, which primarily consisted of fees incurred by us for financial advisory, legal and accounting services. The fair
value of our stock options issued to employees of RSA was estimated using a Black-Scholes option-pricing model. The fair value of the stock options was
estimated assuming no expected dividends and the following weighted-average assumptions:
Expected term (in years) 1.6
Expected volatility 31.0%
Risk-free interest rate 5.0%
The consolidated financial statements include the results of RSA from the date of acquisition. The purchase price has been allocated to the assets
acquired and the liabilities assumed based on estimated fair values as of the acquisition date.
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