IBM 2009 Annual Report Download - page 86

Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
between IBM and PSI and recorded in SG&A expense. See
note O, “Contingencies and Commitments,” on pages 99 to
101 for additional information regarding this litigation. Also, the
company recorded a $24 million in-process research and devel-
opment (IPR&D) charge related to this acquisition in the second
quarter. The acquisition of Transitive Corporation (Transitive)
was completed in the fourth quarter. Transitive’s cross-platform
technology will allow clients to consolidate their Linux-based
applications onto the IBM systems that make the most sense
for their business needs.
Purchase price consideration for the “Other Acquisitions”
was paid all in cash. All acquisitions are reported in the Consol-
idated Statement of Cash Flows net of acquired cash and cash
equivalents.
2008 ACQUISITIONS
($ in millions)
Amortization Other
Life (in Years) Cognos Telelogic Acquisitions
Current assets $ 504 $ 242 $ 185
Fixed assets/noncurrent 126 7 75
Intangible assets:
Goodwill N/A 4,207 690 676
Completed technology 3 to 7 534 108 94
Client relationships 3 to 7 512 127 39
In-process R&D N/A — — 24
Other 3 to 7 78 15 19
Total assets acquired 5,960 1,189 1,112
Current liabilities (798) (141) (233)
Noncurrent liabilities (141) (163) (14)
Total liabilities assumed (939) (304) (247)
Settlement of prexisting litigation — — 24
Total purchase price $5,021 $ 885 $ 889
N/A—Not applicable
The table above reflects the purchase price related to these
acquisitions and the resulting purchase price allocations as of
Decem ber 31, 2008.
The acquisitions were accounted for as purchase transac-
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 4.3 years. With the
exception of goodwill, these identified intangible assets will
be amortized on a straight-line basis over their useful lives.
Goodwill of $676 million has been assigned to the Software
($328 million), Global Technology Services ($68 million) and
Systems and Technology ($280 million) segments. Substantially,
all of the goodwill related to “Other Acquisitions” is not deduct-
ible for tax purposes.
2007
In 2007, the company completed 12 acquisitions at an aggre-
gate cost of $1,144 million.
The Software segment completed six acquisitions: in the first
quarter, Consul Risk Management International BV and Vallent
Cor por ation, both privately held companies. Four acquisitions
were completed in the third quarter: Watchfire Corporation,
WebDialogs Inc. and Princeton Softech Inc., all privately held
companies, and DataMirror Corporation, a publicly held com-
pany. Each acquisition further complemented and enhanced the
software product portfolio.
Global Technology Services completed four acquisitions: in
the first quarter, Softek Storage Solutions Corporation (Softek)
and DM Information Systems, Ltd. (DMIS), both privately held
companies. Two acquisitions were completed in the fourth
quarter: Novus Consulting Group, Inc. and Serbian Business
Systems, both privately held companies. Softek augments the
company’s unified data mobility offerings and worldwide delivery
expertise for managing data in storage array, host and virtual-
ized IT environments. DMIS will enhance and complement the
Technology Service offerings. Novus CG, a storage solution
company, will provide improved access to business information,
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