IBM 2009 Annual Report Download - page 85

Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
The acquisitions were accounted for as business combina-
tions, 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 synergies between the acquired companies and IBM
and the acquired assembled workforce, neither of which qualify
as an amortizable intangible asset. For the “Other Acquisitions”,
the overall weighted-average life of the identified amortizable
intangible assets acquired is 6.5 years. With the exception of
goodwill, these identified intangible assets will be amortized on
a straight-line basis over their useful lives. Goodwill of $255 mil-
lion has been assigned to the Software ($246 million) and Global
Technology Services ($10 million) segments. Substantially all of
the goodwill is not deductible for tax purposes.
On October 5, 2009, the company announced that it had
signed an agreement with Bank of America Corporation to
acquire the core operating assets of Wilshire Credit Corporation,
including the Wilshire mortgage servicing platform. This acquisi-
tion continues the company’s strategic focus on the mortgage
services industry and strengthens its commitment to deliver
mortgage business process outsourcing solutions. The agree-
ment is subject to customary closing conditions and is not
expected to close until the first quarter of 2010.
2008
In 2008, the company completed 15 acquisitions at an aggre-
gate cost of $6,796 million. The Cognos, Inc. and Telelogic, AB
acquisitions are shown separately given their significant pur-
chase prices.
COGNOS, INC. (COGNOS)—On January 31, 2008, the company
ac quired 100 percent of the outstanding common shares
of Cognos for consideration of $5,021 million consisting of
$4,998 million of cash and $24 million of equity instruments.
Through this acquisition, IBM and Cognos will become a lead-
ing provider of technology and services for business intelligence
and performance management, delivering the industry’s most
complete, open standards-based platform with the broadest
range of expertise to help companies expand the value of their
information, optimize their business processes and maximize
performance across their enterprises. The company acquired
Cognos to accelerate its Information on Demand strategy, a
cross-company initiative that combines the company’s strength
in information integration, content and data management and
business consulting services to unlock the business value of
information. Cognos was integrated into the Software segment
upon acquisition, and goodwill, as reflected in the table on
page 84, has been entirely assigned to the Software segment.
Approximately 25 – 30 percent of the goodwill was deductible
for tax purposes. The overall weighted-average useful life of
the intangible assets acquired, excluding goodwill, is 6.5 years.
TELELOGIC, AB (TELELOGIC)—On April 3, 2008, IBM acquired 100
percent of the outstanding common shares of Telelogic for cash
consideration of $885 million. Telelogic is a leading global pro-
vider of solutions that enable organizations to align the develop-
ment of products, complex systems and software with business
objectives and customer needs. This results in improved quality
and predictability, while reducing time-to-market and overall
costs. Clients will benefit from the combined technologies and
services of both companies, providing them a wider range of
software and system development capabilities used to build
complex systems. Telelogic was integrated into the Software
segment upon acquisition, and goodwill, as reflected in the table
on page 84 has been entirely assigned to the Software segment.
Substantially all of the goodwill is not deductible for tax pur-
poses. The overall weighted-average useful life of the intangible
assets acquired, excluding goodwill, is 7.0 years.
OTHER ACQUISITIONS—The company acquired 13 additional
companies at an aggregate cost of $889 million that are pre-
sented in the table on page 84 as “Other Acquisitions.”
The Software segment completed eight other acquisitions,
seven of which were privately held companies: in the first quarter;
AptSoft Corporation, Solid Information Technology, Net Integration
Tech nologies Inc., and Encentuate, Inc; in the second quarter;
Infodyne, Beijing Super Info and FilesX. In the fourth quarter,
ILOG S.A. (ILOG), a publicly held company, was acquired for
$295 million. ILOG adds significant capability across the com-
pany’s entire software platform and bolsters its existing rules
management offerings.
Global Technology Services completed one acquisition in the
first quarter: Arsenal Digital Solutions, a privately held company.
Arsenal provides global clients with security rich information
protection services designed to handle increasing data retention
requirements.
Global Business Services completed one acquisition in the first
quarter: u9consult, a privately held company. u9consult comple-
ments the company’s existing capabilities in value chain consulting.
Systems and Technology completed three acquisitions:
in the second quarter; Diligent Technologies Corporation and
Platform Solutions, Inc (PSI), both privately held companies.
Diligent will be an important component of IBM’s New Enterprise
Data Center model, which helps clients improve IT efficiency
and facilitates the rapid deployment of new IT services for
future business growth. PSI’s technologies and skills, along
with its intellectual capital, will be integrated into the company’s
mainframe product engineering cycles and future product
plans. In the second quarter, $24 million of the purchase price
of PSI was attributed to the settlement of a preexisting lawsuit
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