IBM 2007 Annual Report Download - page 79

77
Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
($ in millions)
AMORTIZATION
2007 ACQUISITIONS LIFE (IN YEARS) ACQUISITIONS
Current assets $ 184
Fixed assets/noncurrent 31
Intangible assets:
Goodwill N/A 999
Completed technology 3 to 7 93
Client relationships 3 to 7 91
Other 2 to 5 17
Total assets acquired 1,415
Current liabilities (136)
Noncurrent liabilities (135)
Total liabilities assumed (271)
Total purchase price $1,144
N/A — Not applicable
The acquisitions were accounted for as purchase transactions, and
accordingly, the assets and liabilities of the acquired entities were
recorded at their estimated fair values at the date of acquisition. The
primary items that generated the Goodwill are the value of the syner-
gies between the acquired companies and IBM and the acquired
assembled workforce, neither of which qualify as an amortizable
intangible asset. Substantially all of the Goodwill is not deductible
for tax purposes. The overall weighted-average life of the identified
amortizable intangible assets acquired is 5.4 years. With the excep-
tion of Goodwill, these identified intangible assets will be amortized
over their useful lives. Goodwill of $999 million was assigned to the
Software ($639 million), Global Business Services ($14 million),
Global Technology Services ($76 million) and Systems and Technology
($269 million) segments.
See note A, “Significant Accounting Policies,” on page 69 for
further description of the company’s accounting policies related to
business combinations and intangible assets, including Goodwill.
2006
In 2006, the company completed 13 acquisitions at an aggregate cost
of $4,817 million, which was paid in cash. The cost of these acquisi-
tions are reported in the Consolidated Statement of Cash Flows net
of acquired cash and cash equivalents. The tables on page 79 represent
the purchase price allocations for all of the 2006 acquisitions. The
Micromuse Inc., FileNet Corporation, Internet Security Systems,
Inc. and MRO Software, Inc. acquisitions are shown separately given
their significant purchase prices.
Micromuse, Inc. — On February 15, 2006, the company acquired
100 percent of the outstanding common shares of Micromuse, Inc. for
cash consideration of $862 million. Micromuse is a leading provider
of network management software used by banks, telecommunications
carriers, governments, retailers and other organizations to monitor
and manage their sophisticated technology infrastructures. The soft-
ware helps customers manage increasingly complex IT systems that
support the proliferation of voice, data and video traffic due to the
growing adoption of voice over IP (VoIP)-based audio and video
services delivered over the Internet. The combination of Micromuse’s
software and the company’s IT services management technology can
provide a comprehensive approach to help customers reduce the
complexity of their IT environments, lower operational costs and
address compliance mandates. Micromuse was integrated into the
Software segment upon acquisition and Goodwill, as reflected in the
table on page 79, has been entirely assigned to the Software segment.
The overall weighted-average useful life of the intangible assets pur-
chased, excluding Goodwill, is 4.0 years.
In the fourth quarter of 2006, as a result of completing the inte-
gration of Micromuse’s legal and intercompany structure into the
company’s legal structure, the company recorded an increase in
current assets and current liabilities with a corresponding offset in
Goodwill totaling $137 million. These increases relate to an increase
in both Deferred tax assets and Current tax liabilities. These adjust-
ments are reflected in the table on page 79.