HP 2007 Annual Report Download - page 112

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 4: Balance Sheet Details (Continued)
Long-term deferred revenue represents service and product deferred revenue to be recognized after one year from the
balance sheet date. Deferred revenue represents amounts received or billed in advance for fixed-price support or maintenance
contracts, software customer support contracts, outsourcing services start-up or transition work, consulting and integration
projects, product sales and leasing income. The fixed-price support or maintenance contracts include stand-alone product
support packages, routine maintenance service contracts, upgrades or extensions to standard product warranty, as well as high
availability services for complex, global, networked, multi-vendor environments. HP defers these service amounts at the time
HP bills the customer, and HP then recognizes the amounts ratably over the contract life or as HP renders the services.
Note 5: Supplemental Cash Flow Information
Supplemental cash flow information was as follows for the following fiscal years ended October 31:
2007 2006 2005
In millions
Cash paid for income taxes, net ............................................................................................................... $956 $637 $884
Cash paid for interest ............................................................................................................................... $489 $299 $447
Non-cash investing and financing activities:
Issuance of common stock and options assumed in business acquisitions............................................ $41 $13 $12
Purchase of assets under financing arrangement................................................................................... $57 $— $—
Purchase of assets under capital leases ................................................................................................. $— $19 $—
Note 6: Acquisitions
HP has recorded all acquisitions using the purchase method of accounting and, accordingly, included the results of
operations in HP’ s consolidated results as of the date of each acquisition. HP allocates the purchase price of its acquisitions to
the tangible assets, liabilities and intangible assets acquired, including in-process research & development (“IPR&D”)
charges, 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. HP has not presented pro
forma results of operations because these acquisitions are not material to HP’ s consolidated results of operations on either an
individual or an aggregate basis.
Mercury Acquisition
On November 2, 2006, HP completed its tender offer for Mercury Interactive Corporation (“Mercury”), a leading IT
management software and services company, and acquired approximately 96% of Mercury common shares for cash
consideration of $52 per share. On November 6, 2006, HP acquired the remaining outstanding common shares, and Mercury
became a wholly owned subsidiary of HP. This acquisition combines Mercury’ s application management, application
delivery and IT governance capabilities with HP’ s broad portfolio of management solutions.
The aggregate purchase price of approximately $4.9 billion consisted of cash paid for outstanding stock, vested in-the-
money stock options and direct transaction costs. In addition, the purchase price
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