IBM 2000 Annual Report Download - page 75

The following table presents the allocation of the purchase
price of the 2000 acquisitions.
(dollars in millions) LGS Other
Purchase price $«190 $«321
Tangible net assets 31 68
Identifiable intangible assets —36
Goodwill «159 «««220
In-process research
and development —9
Deferred tax liabilities
related to identifiable
intangible assets «— «««(12)
1999
In 1999, the company completed 17 acquisitions at a cost of
approximately $1,551 million. Three of the major acquisi-
tions for the year are detailed in the following discussion.
On September 24, 1999, the company acquired all of the
outstanding capital stock of Sequent Computer Systems,
Inc., an acknowledged leader in systems based on NUMA
(non-uniform memory access) architecture, for approxi-
mately $837 million.
On September 29, 1999, the company acquired all of the
outstanding stock of Mylex Corporation, a leading developer
of technology for moving, storing, protecting and managing
data in desktop and networked environments, for approxi-
mately $259 million.
On September 27, 1999, the company acquired all
the outstanding stock of DASCOM, Inc., an industry
leader in Web-based and enterprise-security technology, for
approximately $115 million.
The following table presents the allocation of the purchase
price of the 1999 acquisitions.
(dollars in millions) Sequent Mylex DASCOM Other
Purchase price $«837*$«259 $«115 $«340
Tangible net assets/
(liabilities) 382 «67 (17) «45
Identifiable intangible
assets 187 «35 13 «—
Current technology «87 26 «19 9
Goodwill 192*«145 «92 286
In-process research
and development 85 7 19 «—
Deferred tax liabilities
related to identifiable
intangible assets (96) (21) «(11) —
*In 2000, the total purchase price and goodwill numbers were adjusted primarily
for increased stock options being exercised versus being converted to IBM options
and at a higher gain per option than originally assumed.
1998
In 1998, the company completed nine acquisitions at a cost of
approximately $828 million. In January 1998, the company
acquired all of the outstanding stock of Software Artistry,
Inc., a leading provider of both consolidated service desk and
customer relationship management solutions for distributed
enterprise environments for approximately $203 million. In
2000, the company sold most of Software Artistry, represent-
ing the part of the business that is no longer considered
strategic. In March 1998, the company acquired all of the
outstanding stock of CommQuest Technologies, Inc., a com-
pany that designs and markets advanced semiconductors for
wireless communications applications such as cellular phones
and satellite communications for approximately $183 million.
The following table presents the allocation of the pur-
chase price of the 1998 acquisitions.
Software
(dollars in millions) Artistry CommQuest Other
Purchase price «$«203 $«183 $«442
Tangible net assets «22 2 «188
Identifiable intangible assets «24 79 «—
Current technology «46 «12 —
Goodwill 66 «81 254
In-process research
and development 70 41 «—
Deferred tax liabilities
related to identifiable
intangible assets (25) «(32) —
All of these acquisitions were accounted for as purchase
transactions, and accordingly, the assets and liabilities of the
acquired entities were recorded at their estimated fair value at
the date of acquisition. The effects of these acquisitions on the
company’s consolidated financial statements were not material.
Hence, the company has not provided pro forma financial
information as if the companies had combined at the beginning
of the current period or the immediately preceding period.
The tangible net assets comprise primarily cash, accounts
receivable, land, buildings and leasehold improvements. The
identifiable intangible assets comprise primarily patents,
trademarks, customer lists, assembled workforce, employee
agreements and leasehold interests. The identifiable intangi-
ble assets and goodwill will be amortized on a straight-line
basis, generally not to exceed five years.
In connection with these acquisitions, the company
recorded pre-tax charges of $9 million, $111 million and
$111 million for acquired in-process research and develop-
ment (IPR&D) for 2000, 1999 and 1998, respectively. At the
date of the acquisitions, the IPR&D projects had not yet
reached technological feasibility and had no alternative
future uses. The value of the IPR&D reflects the relative
value and contribution of the acquired research and devel-
opment to the company’s existing research or product lines.
notes to consolidated financial statements
international business machines corporation
and Subsidiary Companies
page no.
seventy-three