EMC 2008 Annual Report Download - page 74

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
comprehensive root-cause and impact analysis across all technology domains, including networks, applications and storage within our Information Storage
segment.
In the second quarter of 2006, we acquired the assets of ProActivity Software Solutions Ltd., a provider of content management software for business
process management. ProActivity Software Solutions Ltd. provides tools to monitor, analyze and optimize business processes. This acquisition further
expands the EMC Documentum product suite's process modeling, process execution and process integration capabilities within the Content Management and
Archiving segment.
In the third quarter of 2006, we acquired all of the outstanding capital stock of Network Intelligence. Network Intelligence specializes in transforming
enterprise-wide data into automated compliance and security information and, together with the acquisition of RSA, enables us to assist customers in securing
their information throughout its lifecycle and reduce the associated cost of regulatory compliance. This acquisition further enhances and expands the offerings
we provide within our RSA Information Security segment.
In the fourth quarter of 2006, we acquired all of the outstanding capital stock of Avamar Technologies, Inc., a leading provider of enterprise data
protection software that allows corporations to efficiently move, store, and leverage information for business value. This acquisition advances EMC's core
strengths in information protection and recovery management, changing the way customers protect their data and accelerating the transition from tape to disk-
based recovery solutions within our Information Storage segment.
In the second quarter of 2006, our VMware subsidiary acquired all of the outstanding capital stock of one business, a developer of software that builds
upon and leverages virtualization technology to improve the efficiency and effectiveness of enterprise application development operations and the IT
organizations that support them. Through this acquisition, we enhanced our capabilities for virtualizing information by providing virtualization solutions to
the development and test environments.
The aggregate purchase price, net of cash received, for all 2006 acquisitions other than RSA was $624.7 million, which consisted of $598.8 million of
cash, $13.3 million in fair value of our stock options issued in exchange for the acquirees' stock options and $12.6 million of transaction costs, which
primarily consisted of fees incurred by us for financial advisory, legal and accounting services.
The consolidated financial statements include the results of each of the aforementioned companies from their respective dates of acquisition. The
purchase price for each company has been allocated to the assets acquired and the liabilities assumed based on estimated fair values as of the respective
acquisition dates. The total goodwill recognized from the aforementioned acquisitions was $478.3 million, of which $6.3 million is deductible for income tax
purposes. Of this amount, we allocated $223.1 million to our Information Storage segment, $55.5 million to our Content Management and Archiving segment,
$77.3 million to our VMware Virtual Infrastructure segment and $122.4 million to our RSA Information Security segment. None of these acquisitions were
individually material to EMC.
The following represents the aggregate allocation of the purchase price for the aforementioned companies to intangible assets (table in thousands):
Developed technology (weighted-average useful life of 5.6 years) $ 89,147
Customer relationships (weighted-average useful life of 7.0 years) 16,600
Tradenames and trademarks (weighted-average useful life of 0.5 years) 26
Non-competition agreement (weighted-average useful life of 3.0 years) 200
Backlog (weighted-average useful life of 2.0 years) 900
Acquired IPR&D 24,910
Total intangible assets $131,783
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 5.3% – 25.0%. The discount rates were determined after consideration of
market rates of return on debt and equity capital,
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