Motorola 2005 Annual Report Download - page 126

Download and view the complete annual report

Please find page 126 of the 2005 Motorola annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 142

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142

119
The Company recorded approximately $93 million in goodwill, none of which was deductible for tax
purposes, a $32 million charge for acquired in-process research and development, and $54 million in other
intangibles. The acquired in-process research and development will have no alternative future uses if the products
are not feasible. At the date of the acquisition, a total of eight projects were in process. The average risk adjusted
rate used to value these projects ranged from 25% to 28%. The allocation of value to in-process research and
development was determined using expected future cash flows discounted at average risk adjusted rates reflecting
both technological and market risk as well as the time value of money. These research and development costs were
written off at the date of acquisition and have been included in Other Charges in the Company's consolidated
statements of operations. Goodwill and intangible assets are included in Other Assets in the Company's
consolidated balance sheets. The intangible assets will be amortized over periods ranging from 3 to 5 years on a
straight-line basis.
The results of operations of Winphoria have been included in the Networks segment in the Company's
consolidated financial statements subsequent to the date of acquisition. The pro forma effects of this acquisition on
the Company's consolidated financial statements were not significant.
Intangible Assets
Amortized intangible assets, excluding goodwill were comprised of the following:
2005
2004
Gross
Gross
Carrying Accumulated
Carrying Accumulated
December 31
Amount Amortization
Amount Amortization
Intangible assets:
Licensed technology $113 $105 $113 $103
Completed technology 412 288 419 246
Other intangibles 152 51 76 26
$677 $444 $608 $375
Amortization expense on intangible assets was $69 million, $53 million and $101 million for the years ended
December 31, 2005, 2004 and 2003, respectively. Future amortization expense is estimated to be as follows: 2006Ì
$75 million; 2007Ì$61 million; 2008Ì$42 million; 2009Ì$30 million and 2010Ì$14 million.
The following tables display a rollforward of the carrying amount of goodwill from January 1, 2004 to
December 31, 2005, by business segment:
January 1, December 31,
Segment 2005 Acquired Adjustments 2005
Mobile Devices $ 17 $Ì $ Ì $ 17
Government and Enterprise Mobility Solutions 257 73 (7) 323
Networks 251 Ì (18) 233
Connected Home Solutions 758 16 2 776
$1,283 $89 $(23) $1,349
January 1, December 31,
Segment 2004 Acquired Adjustments 2004
Mobile Devices $ 17 $ Ì $ Ì $ 17
Government and Enterprise Mobility Solutions 123 134 Ì 257
Networks 192 59 Ì 251
Connected Home Solutions 758 Ì Ì 758
Other 125 Ì (125) Ì
$1,215 $193 $(125) $1,283
The goodwill impairment test is performed at the reporting unit level and is a two-step analysis. First, the fair
value (FV) of each reporting unit is compared to its book value. If the FV of the reporting unit is less than its
book value, the Company performs a hypothetical purchase price allocation based on the reporting unit's fair value