IBM 2001 Annual Report Download - page 84

Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION
and Subsidiary Companies
82
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 of the
outstanding stock of DASCOM, Inc., an industry leader in
Web-based and enterprise-security technology, for approxi-
mately $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.
The company’s acquisitions were accounted for as pur-
chase 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 acquisi-
tions 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 at 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 intangible
assets have been amortized on a straight-line basis, generally
not to exceed five years. Except for Informix, goodwill has
been amortized over five years. Effective January 1, 2002,
any unamortized assembled workforce intangible asset will
be reclassified to goodwill and all goodwill will no longer be
amortized. See “New Standards to Be Implemented” on
pages 80 and 81 for a description of the new accounting rules
that eliminate the amortization of goodwill.
In connection with these acquisitions, the company
recorded pre-tax charges of $9 million and $111 million for
acquired in-process research and development (IPR&D) for
2000 and 1999, 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 development to the company’s existing
research or product lines.
DIVESTITURES
During 1999, the company completed the sale of its Global
Network business to AT&T for $4,991 million. More than
5,300 IBM employees joined AT&T as a result of these sales
of operations in 71 countries.
During 1999, the company recognized a pre-tax gain of
$4,057 million ($2,495 million after tax, or $1.33 per diluted
common share). The net gain reflects dispositions of plant,
rental machines and other property of $410 million, other
assets of $182 million and contractual obligations of $342 mil-
lion. The gain was recorded as a reduction of SG&A expense
in the Consolidated Statement of Earnings.