IBM 2012 Annual Report Download - page 92

Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
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Unica, a leading provider of software and services used to auto-
mate marketing processes, expanded the company’s ability to help
organizations analyze and predict customer preferences and
develop more targeted marketing campaigns. PSS Systems is a
leading provider of legal information governance and information
management software. OpenPages is a leading provider of software
that helps companies more easily identify and manage risk and
compliance activities across the enterprise through a single man-
agement system. Clarity Systems delivers financial governance
software that enables organizations to automate the process of col-
lecting, preparing, certifying and controlling financial statements for
electronic filing. Wilshire’s mortgage servicing platform continues
the strategic focus on the mortgage services industry and
strengthens the commitment to deliver mortgage business process
outsourcing solutions. National Interest Security Company strength-
ens the ability to deliver advanced analytics and IT solutions to the
public sector. Storwize, a provider of in-line data compression appli-
ance solutions, helps the company to make it more affordable for
clients to analyze massive amounts of data in order to provide new
insights and business outcomes. BLADE provides server and top-
of-rack switches as well as software to virtualize and manage cloud
computing and other workloads.
For the “Other Acquisitions,” the overall weighted-average life
of the identified intangible assets acquired was 6.4 years. These
identified intangible assets will be amortized on a straight-line basis
over their useful lives. Goodwill of $2,312 million was assigned to
the Software ($1,653 million), GTS ($32 million), GBS ($252 million)
and STG ($375 million) segments. As of the acquisition dates, it
was expected that none of the goodwill would be deductible for
tax purposes.
Divestitures
2012
On April 17, 2012, the company announced that it had signed a
definitive agreement with Toshiba TEC for the sale of its Retail Store
Solutions business to Toshiba TEC. As part of the transaction,
Toshiba TEC and the company also signed a multi-year business
partner agreement to integrate retail store solutions for Smarter
Commerce. The transaction price was $850 millon, and the com-
pany will receive approximately $800 million in cash, net of closing
date working capital adjustments.
Through December 31, 2012, the company completed the first
three phases of the sale. For the completed phases, the company
received net proceeds of $546 million, recorded a note receivable
of $251 million and recognized a net pre-tax gain of $446 million.
The gain was net of the fair value of certain contractual terms, certain
transaction costs and the assets and liabilities sold. The gain was
recorded in other (income) and expense in the Consolidated State-
ment of Earnings and the net proceeds are reflected within
divestitures of businesses, net of cash transferred within cash flows
from investing activities in the Consolidated Statement of Cash
Flows. In addition, in the third quarter, the company acquired a 19.9
percent ownership interest for $161 million in Toshiba Global Com-
merce Solutions Holding Corporation, the new holding company
that Toshiba TEC established for the business. The company will
retain this ownership for a period of three years at which time
Toshiba TEC will purchase the company’s equity interest for the
initial acquisition value. This investment was recorded in investments
and sundry assets in the Consolidated Statement of Financial Posi-
tion and the payment was reflected within purchases of marketable
securities and other investments within cash flows from investing
activities in the Consolidated Statement of Cash Flows.
The company expects to close the next phase of the divestiture
in the first quarter of 2013 with subsequent closings expected in
future periods. Overall, the company expects to recognize a total
pre-tax gain on the sale of approximately $500 million.
2011
During the fourth quarter of 2011, the company completed the
divestiture of the iCluster business to Rocket Software. iCluster,
which was acquired in the Data Mirror acquisition in 2007, was
part of the Software business. This transaction was not material
to the Consolidated Financial Statements.
During the second quarter of 2011, the company completed two
divestitures related to subsidiaries of IBM Japan. The impact of
these transactions was not material to the Consolidated Financial
Statements.
2010
On March 31, 2010, the company completed the sale of its activities
associated with the sales and support of Dassault Systemes’ (Das-
sault) product lifecycle management (PLM) software, including
customer contracts and related assets to Dassault. The company
received net proceeds of $459 million and recognized a net gain
of $591 million on the transaction in the first quarter of 2010. The
gain was net of the fair value of certain contractual terms, certain
transaction costs and the assets and liabilities sold. The gain was
recorded in other (income) and expense in the Consolidated State-
ment of Earnings and the net proceeds were reflected in proceeds
from disposition of marketable securities and other investments
within cash flow from investing activities in the Consolidated State-
ment of Cash Flows.