Salesforce.com 2006 Annual Report Download - page 73

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Table of Contents
salesforce.com, inc.
Notes to Consolidated Financial Statements—(Continued)
Management's allocation of the purchase price consideration, based on a valuation of the acquired assets and liabilities performed in part by an
unrelated third-party appraiser, is as follows (in thousands):
Net tangible assets $ 447
Developed technology 5,710
Customer relationships 690
Goodwill 6,705
Deferred taxes 2,650
Deferred revenue (700)
Total purchase price consideration $ 15,502
The goodwill balance of $6.7 million is not deductible for tax purposes and is the result of the premium paid for an established wireless solution.
The deferred revenue balance of $0.7 million reflects the estimated fair value of the fulfillment of the existing service arrangements assumed from
Sendia in connection with the acquisition plus a reasonable profit margin. The arrangements assumed from Sendia were substantially fulfilled by January 31,
2007.
In performing the purchase price allocation, the Company considered, among other factors, its intention for future use of the acquired assets, analyses of
historical financial performance and estimates of future performance of Sendia's products. The fair value of intangible assets was primarily based on the
income approach. The cost approach was also utilized when appropriate. The rate of return utilized to discount the net cash flows to their present values was
25 percent. At January 31, 2007, identifiable intangible assets purchased in the Sendia acquisition consisted of the following (in thousands, except for useful
life):
Gross Fair Value
Accumulated
Amortization Net Book Value Useful Life
Developed technology $ 5,710 $ (1,528) $ 4,182 3 years
Customer relationships 690 (184) 506 3 years
$ 6,400 $ (1,712) $ 4,688
The expected future amortization expense for these intangible assets is as follows (in thousands):
Fiscal Period:
Fiscal 2008 $2,164
Fiscal 2009 2,164
Fiscal 2010 360
$4,688
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