Oracle 2009 Annual Report Download - page 195

ACQUISITIONS
ACQUISITIONS
(USD $)
12 Months Ended
05/31/2010
ACQUISITIONS 2.ACQUISITIONS
Acquisition of Sun Microsystems, Inc.
On January 26, 2010 we completed our acquisition of Sun Microsystems, Inc., a provider of hardware systems, software and services, by
means of a merger of one of our wholly owned subsidiaries with and into Sun such that Sun became a wholly owned subsidiary of Oracle.
We acquired Sun to, among other things, expand our product offerings by adding Sun's existing hardware systems business and broadening
our software and services offerings. We have included the financial results of Sun in our consolidated financial statements from the date of
acquisition. For fiscal 2010, we estimate that Sun's contribution to our total revenues was $2.8 billion, which included allocations of revenues
from our software and services businesses that were not separately identifiable due to our integration activities. For fiscal 2010, Sun reduced
our operating income by $620 million, which included management's allocations and estimates of revenues and expenses that were not
separately identifiable due to our integration activities, intangible asset amortization, restructuring expenses and stock-based compensation
expenses.
The total purchase price for Sun was approximately $7.3 billion and was comprised of:
(in millions, except per share amounts)
Acquisition of approximately 757 million shares of outstanding common stock of Sun at $9.50 per share in
cash
$ 7,196
Fair values of stock options and restricted stock-based awards assumed 99
Total purchase price $ 7,295
The fair values of stock options assumed were estimated using a Black-Scholes-Merton option-pricing model. The fair values of unvested
Sun stock options and restricted stock-based awards as they relate to post combination services will be recorded as operating expense over
the remaining service periods, while the fair values of vested stock options and restricted stock-based awards, as they relate to pre
combination services, are included in the total purchase price.
Preliminary Purchase Price Allocation
Pursuant to our business combinations accounting policy, the total purchase price for Sun was allocated to the preliminary net tangible and
intangible assets based upon their preliminary fair values as of January 26, 2010 as set forth below. The excess of the purchase price over the
preliminary net tangible assets and intangible assets was recorded as goodwill. The preliminary allocation of the purchase price was based
upon a preliminary valuation and our estimates and assumptions are subject to change within the measurement period (up to one year from
the acquisition date). The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair values of
certain tangible assets and liabilities acquired, certain legal matters, income and non-income based taxes and residual goodwill. We expect to
continue to obtain information to assist us in determining the fair values of the net assets acquired at the acquisition date during the
measurement period. Our preliminary purchase price allocation for Sun is as follows:
(in millions)
Cash, cash equivalents and marketable
securities
$ 2,571
Trade receivables 1,120
Inventories 331
Goodwill 1,291
Intangible assets 3,347
In-process research and development 415
Other assets 2,035
Deferred tax assets, net 1,250
Accounts payable and other liabilities (3,950)
Deferred revenues (1,115)
Total preliminary purchase price $ 7,295
We generally do not expect the goodwill recognized to be deductible for income tax purposes.
Valuations of Intangible Assets Acquired
The following table sets forth the components of intangible assets acquired in connection with the Sun acquisition:
(Dollars in millions) Fair Value Useful
Life
Hardware systems support agreements and related
relationships
$ 771 7 years
Developed technology 1,349 4 years
Core technology 534 4 years
Customer relationships 467 3 years
Trademarks 226 7 years
Total intangible assets subject to amortization 3,347
In-process research and development 415 N.A.
Total intangible assets $ 3,762
Hardware systems support agreements and related relationships and customer relationships represent the fair values of the underlying
relationships and agreements with Sun's customers. Developed technology represents the fair values of Sun products that have reached
technological feasibility and are a part of Sun's product lines. Core technology represents the fair values of the Sun processes, patents and
trade secrets related to the design and development of Sun's products. This proprietary know-how can be leveraged to develop new
technology and improve our existing products. Trademarks represent the fair values of brand and name recognition associated with the
marketing of Sun's products and services. In-process research and development represents the fair values of incomplete Sun research and
development projects that had not reached technological feasibility as of the date of acquisition.
Preliminary Pre-Acquisition Contingencies Assumed
We have evaluated and continue to evaluate pre-acquisition contingencies relating to Sun that existed as of the acquisition date. We have
preliminarily determined that certain of these pre-acquisition contingencies are probable in nature and estimable as of the acquisition date
and, accordingly, have preliminarily recorded our best estimates for these contingencies as a part of the preliminary purchase price allocation
for Sun. We continue to gather information for and evaluate substantially all pre-acquisition contingencies that we have assumed from Sun. If
we make changes to the amounts recorded or identify additional pre-acquisition contingencies during the remainder of the measurement
period, such amounts recorded will be included in the purchase price allocation during the measurement period and, subsequently, in our
results of operations.
Other Fiscal 2010 Acquisitions and Proposed Acquisition of Phase Forward Incorporated and Others
Source: ORACLE CORP, 10-K, July 01, 2010 Powered by Morningstar® Document Research℠