HP 2005 Annual Report Download - page 92

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 5: Acquisitions (Continued)
the purchase price of its acquisitions to the tangible assets, liabilities and intangible assets acquired,
including in-process research and development (‘‘IPR&D’’), based on their estimated fair values. The
excess purchase price over those fair values is recorded as goodwill. The fair value assigned to assets
acquired is based on valuations using management’s estimates and assumptions. HP does not expect
goodwill recorded on a majority of these acquisitions to be deductible for tax purposes.
In fiscal 2005, HP acquired five companies for an aggregate purchase price of approximately
$648 million, which includes direct transaction costs and certain liabilities recorded in connection with
these acquisitions. The largest of these transactions were the acquisitions of SAC, LLC, doing business
as ‘‘Snapfish,’’ and AppIQ, Inc. (‘‘AppIQ’’), which HP completed on April 15, 2005 and October 24,
2005, respectively.
Snapfish is a leading online photo service. The acquisition of Snapfish is intended to enable HP to
capitalize on the growing market for online photo printing, with customers benefiting from a more
affordable, simpler and more comprehensive digital photography experience.
AppIQ is a leading provider of open storage area network management and storage resource
management solutions. The acquisition of AppIQ is intended to strengthen HP’s ability to give
customers a single integrated console that controls and better manages their storage and server
infrastructure.
HP recorded approximately $537 million of goodwill and $108 million of amortizable purchased
intangible assets in connection with these five acquisitions. HP also recorded approximately $2 million
of IPR&D charges related to these five acquisitions.
In fiscal 2005, HP paid approximately $8 million in cash for additional shares of Digital GlobalSoft
Limited, a consolidated subsidiary of HP (‘‘DGS’’), to increase HP’s ownership from approximately
97.2% to approximately 98.5%. In fiscal 2004, HP paid approximately $315 million in cash for shares of
DGS to increase HP’s ownership from 50.1% to approximately 97.2%. DGS is a globally-focused
software development and IT services company. This subsidiary has enhanced HP’s capability in IT
services, including expertise in life cycle services such as migration, technical and application services.
HP recorded approximately $7 million and $281 million of goodwill in connection with the share
purchases in fiscal 2005 and 2004, respectively.
On November 1, 2005, HP acquired substantially all of the assets of Scitex Vision Ltd., a market
leader in super-wide digital imaging, for $230 million in cash. This acquisition is expected to expand
HP’s leadership in printing into the industrial wide-format market.
On September 19, 2005, HP announced it signed a definitive agreement to acquire Peregrine
Systems, Inc. (‘‘Peregrine’’) in a cash merger for $26.08 per share, representing an aggregate equity
value of $425 million. The acquisition of Peregrine is intended to add key asset and service
management components to the HP OpenView portfolio, a distributed management software suite for
business operations and IT.
Synstar
In October 2004, HP acquired approximately 99.7% of the outstanding stock of UK-based Synstar
plc (‘‘Synstar’’). The purchase price was approximately $343 million, which included $298 million of
cash paid as well as direct transaction costs and certain liabilities recorded in connection with the
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