Netgear 2012 Annual Report Download - page 69

Table of Contents NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting. The results of AVAAK
have been included in the consolidated financial statements since the date of acquisition. Pro forma results of operations for the acquisition are not
presented as the financial impact to the Company's consolidated results of operations is not material.
The allocation of the purchase price was as follows (in thousands):
The estimation of fair values for tangible assets and intangible assets acquired and liabilities assumed was subject to estimates, assumptions and
other uncertainties, and it is possible that the allocation of the purchase consideration reflected in the foregoing table may change.
None
of the goodwill recognized related to AVAAK is deductible for income tax purposes. The goodwill recognized, which was assigned to
the Company's retail business unit, is primarily attributable to expected synergies resulting from the acquisition.
In connection with the acquisition, the Company recorded $5.9 million
of deferred tax assets net of deferred tax liabilities. The deferred tax
assets arise from the tax benefit of the estimated net operating losses as of the date of the acquisition after consideration of limitations on the use
under U.S. Internal Revenue Code section 382. The deferred tax assets are reduced by deferred tax liabilities recorded for the book basis in intangible
assets and in-process research and development ("IPR&D") for which the Company has no tax basis.
The Company designated $2.3 million
of the acquired intangible assets as technology. The value was calculated based on the present value of
the future estimated cash flows derived from estimated savings attributable to the existing technology and discounted at 14.0%
. The acquired
existing technology is being amortized over its estimated useful life of 5 years .
The Company designated $0.3 million
of the acquired intangible assets as customer relationships. The value was calculated based on the
present value of the future estimated cash flows derived from projections of future operations attributable to existing customer relationships and
discounted at 14.0% . The acquired customer relationships are being amortized over an estimated useful life of 5 years .
The Company designated $1.4 million
of the acquired intangible assets as trade name and trademarks. The value was calculated based on the
present value of the future estimated cash flows derived from projections of future operations attributable to existing trade name and trademarks and
discounted at 16.0% . The acquired trade name and trademarks are being amortized over an estimated useful life of 5 years .
In addition, $2.0 million
of the consideration paid represents the fair value of acquired IPR&D projects. The IPR&D acquired is considered
indefinite lived intangible assets until research and development efforts associated with the projects are completed or abandoned. The most
significant of the acquired IPR&D projects relate to camera technology and applications. As of December 31, 2012, $1.0 million
of the acquired
IPR&D had reached technical feasibility and as a result, was reclassified from IPR&D to technology. Refer to the "Intangibles, net" section of Note
3, Balance Sheet Components , for further discussion of our acquired IPR&D.
Firetide, Inc.
On June 4, 2012 , the Company acquired certain intellectual property of Firetide, Inc. (“Firetide”) for an aggregate purchase price of
$7.2
million
in cash. The acquisition included intangible assets that existed at the closing date, including IP contracts, technology assets, business
technology, and goodwill. The Company believes the acquisition will bolster its wireless product offerings in its commercial business unit and
strengthen its market position in the small to medium size campus wireless LAN market.
The acquisition qualified as a business combination and was accounted for using the acquisition method of accounting. The results of Firetide
have been included in the consolidated financial statements since the date of acquisition. Pro forma results of
65
Net tangible assets acquired
$
172
Deferred tax assets, net
5,937
Intangible assets, net
6,000
Goodwill
11,895
Total consideration
$
24,004