EMC 2008 Annual Report Download - page 73

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following represents the final allocation of the purchase price (table in thousands):
Current assets $ 60,860
Property, plant and equipment 66,991
Other long-term assets 20,517
Goodwill 1,693,149
Intangible assets:
Developed technology (weighted-average useful life of 5.1 years) 231,600
Customer relationships (weighted-average useful life of 8.6 years) 162,900
Tradename and trademark (weighted-average useful life of 10.0 years) 77,500
Non-competition agreement (weighted-average useful life of 3.0 years) 1,400
IPR&D 10,500
Total intangible assets 483,900
Current liabilities (174,763)
Deferred income taxes (80,274)
Long-term liabilities (21,893)
Total purchase price $2,048,487
In determining the purchase price allocation, we considered, among other factors, our intention to use the acquired assets and historical and estimated
future demand of RSA products and services. The fair value of intangible assets was primarily based upon the income approach. The rate used to discount the
net cash flows to their present values was based upon a weighted average cost of capital of 13.0%. The discount rate was determined after consideration of
market rates of return on debt and equity capital, the weighted average return on invested capital and the risk associated with achieving forecasted sales
related to the technology and assets acquired from RSA.
The total weighted average amortization period for the intangible assets is 7.1 years. The intangible assets are being amortized based upon the pattern in
which the economic benefits of the intangible assets are being utilized, which in general reflects the cash flows generated from such assets. None of the
goodwill is deductible for income tax purposes. Of the total goodwill acquired from the acquisition of RSA, $1,273.4 million was allocated to our RSA
Information Security segment and $419.7 million was allocated to our Information Storage segment.
Of the $483.9 million of acquired intangible assets, $10.5 million was allocated to IPR&D which was written off at the date of acquisition because the
IPR&D had no alternative uses and had not reached technological feasibility. The value assigned to IPR&D was determined utilizing the income approach by
determining cash flow projections relating to the identified IPR&D projects. The stage of completion of each in-process project was estimated to determine
the discount rates to be applied to the valuation of the in-process technology. Based upon the level of completion and the risk associated with in-process
technology, we applied a discount rate of 18.0% to value the IPR&D projects.
Other 2006 Acquisitions
In the second quarter of 2006, we acquired all of the outstanding capital stock of Kashya, Inc., a provider of enterprise-class data replication and data
protection software. This acquisition allows us to expand our software portfolio for replication across heterogeneous environments within our Information
Storage segment.
In the second quarter of 2006, we acquired all of the outstanding capital stock of Interlink Group, Inc., an IT professional services firm that specializes in
application development, IT infrastructure, enterprise integration, enterprise content management and customer relationship management for Microsoft
environments. This acquisition strengthens and expands our Microsoft Solutions Practice within our Information Storage segment.
In the second quarter of 2006, we acquired all of the outstanding capital stock of nLayers Ltd., a leader in application discovery and mapping software.
This acquisition further expands our resource management portfolio, enabling automated
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