IBM 2013 Annual Report Download - page 99

Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
98
2011 Acquisitions
($ in millions)
Amortization
Life (in Years)
Tot a l
Acquisitions
Current assets $ 251
Fixed assets/noncurrent assets 88
Intangible assets
Goodwill N/A 1,291
Completed technology 7 320
Client relationships 7 222
Patents/trademarks 1—7 17
Total assets acquired 2,190
Current liabilities (191)
Noncurrent liabilities (150)
Total liabilities assumed (341)
Total purchase price $1,849
N/A—Not applicable
Divestitures
2014
On January 23, 2014, IBM and Lenovo Group Limited (Lenovo)
announced a definitive agreement in which Lenovo will acquire the
company’s x86 server portfolio for $2.3 billion, consisting of approxi-
mately $2 billion in cash, with the balance in Lenovo stock. The stock
will represent less than 5 percent equity ownership in Lenovo. The
company will sell to Lenovo its System x, BladeCenter and Flex
System blade servers and switches, x86-based Flex integrated sys-
tems, NeXtScale and iDataPlex servers and associated software,
blade networking and maintenance operations.
IBM and Lenovo plan to enter into a strategic relationship which
will include a global OEM and reseller agreement for sales of IBM’s
industry-leading entry and midrange Storwize disk storage systems,
tape storage systems, General Parallel File System software, Smart-
Cloud Entry offering, and elements of IBM’s system software,
including Systems Director and Platform Computing solutions. Fol-
lowing the closing of the transaction, Lenovo will assume related
customer service and maintenance operations. IBM will continue to
provide maintenance delivery on Lenovo’s behalf for an extended
period of time.
The transaction will be completed as soon as is practical, subject
to the satisfaction of regulatory requirements, customary closing
conditions and any other required approvals. The transaction is
expected to be completed in phases, with the initial closing in the
second half of 2014. Subsequent local closings will occur subject to
similar conditions, agreements and the information and consultation
process in applicable countries.
The company expects to recognize a pre-tax gain on the sale.
This gain will be recognized consistent with the closing schedule for
the transaction. The exact amount of the gain and the breakdown
by closing date is not yet determinable. The variables that can
impact the final gain include the valuation of the final balance sheet
transferred, the valuation of other related agreements and transac-
tion-related expenses. See “Looking Forward” on page 64 for
additional information.
2011
In 2011, the company completed five acquisitions of privately held
companies at an aggregate cost of $1,849 million.
These acquisitions were completed as follows: in the second
quarter, TRIRIGA, Inc. (TRIRIGA); and in the fourth quarter, i2, Algo-
rithmics, Inc. (Algorithmics), Q1 Labs and Curam Software Ltd.
(Curam Software). TRIRIGA was integrated into the Software and
GBS segments upon acquisition. All acquisitions were integrated
into the Software segment upon acquisition. All acquisitions
reflected 100 percent ownership of the acquired companies.
TRIRIGA is a provider of facility and real estate management soft-
ware solutions, which help clients make strategic decisions regarding
space usage, evaluate alternative real estate initiatives, generate
higher returns from capital projects and assess environmental impact
investments. The acquisition added advanced real estate intelligence
to the company’s smarter buildings initiative. i2 expanded the com-
pany’s Big Data analytics software for Smarter Cities by helping both
public and private entities in government, law enforcement, retail,
insurance and other industries access and analyze information they
need to address crime, fraud and security threats. Algorithmics pro-
vides software and services for improved business insights at
financial and insurance institutions to assess risk and address regula-
tory challenges. Q1 Labs is a provider of security intelligence software
and accelerates efforts to help clients more intelligently secure their
enterprises by applying analytics to correlate information from key
security domains and creating security dashboards for their organi-
zations. Curam Software is a provider of software and services which
help governments improve the efficiency, effectiveness and acces-
sibility of social programs for Smarter Cities.
The overall weighted-average life of the indentified intangible
assets acquired was 6.9 years. These identified intangible assets
will be amortized on a straight-line basis over their useful lives.
Goodwill of $1,291 million was assigned to the Software ($1,277 mil -
lion) and GBS ($14 million) segments. As of the acquisition dates, it
was expected that approximately 25 percent of the goodwill would
be deductible for tax purposes.
The following table reflects the purchase price related to these
acquisitions and the resulting purchase price allocations as of
December 31, 2011.