Symantec 2006 Annual Report Download - page 91

SYMANTEC CORPORATION
Notes to Consolidated Financial Statements Ì (Continued)
estimates and assumptions provided by management. The following represents the allocation of the purchase
price to the acquired net assets of Veritas and the associated estimated useful lives:
Estimated
Amount Useful Life
(In thousands)
Net tangible assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 2,300,199 n/a
Identifiable intangible assets:
Acquired product rights ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,301,600 4 to 5 years1
Customer contracts and relationships ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 1,419,400 8 years
Trade name ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 96,800 10 years
GoodwillÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 8,597,768 n/a
In-process research and development ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 284,000 n/a
Deferred stock-based compensation ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 63,092 2.8 years2
Deferred tax liabilityÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (827,218) n/a
Total purchase price ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $13,235,641
1The Veritas backlog included in Acquired product rights was charged to Cost of revenues in the September
2005 quarter.
2Estimated weighted-average remaining vesting period.
The purchase price allocation may be adjusted in future periods pending resolution of the Veritas pre-
acquisition income tax matters discussed in Note 13.
Net tangible assets
Veritas' tangible assets and liabilities as of July 2, 2005 were reviewed and adjusted to their fair value as
necessary, including a write down in the amount of $113 million relating to land owned in various locations.
Net tangible assets include net deferred tax assets of $223 million and income taxes payable of $269 million.
Deferred revenue
In connection with the acquisition of Veritas, we assumed Veritas' contractual obligations related to its
deferred revenue. Veritas' deferred revenue was derived from licenses, maintenance, consulting, education,
and other services. We estimated our obligation related to the Veritas deferred revenue using the cost build-up
approach. The cost build-up approach determines fair value by estimating the costs relating to fulfilling the
obligation plus a normal profit margin. The sum of the costs and operating profit approximates, in theory, the
amount that we would be required to pay a third party to assume the support obligation. The estimated costs to
fulfill the support obligation were based on the historical direct costs related to providing the support. As a
result, we recorded an adjustment to reduce the carrying value of deferred revenue by $359 million to
$173 million, which represents our estimate of the fair value of the contractual obligations assumed.
Identifiable intangible assets
Acquired product rights include developed and core technology, patents, and backlog. Developed
technology relates to Veritas' products across all of their product lines that have reached technological
feasibility. Core technology and patents represent a combination of Veritas processes, patents, and trade
secrets developed through years of experience in design and development of their products. Backlog relates to
firm customer orders that generally are scheduled for delivery within the next quarter, as well as OEM
revenues that are reported in the next quarter. We amortized the fair value of the backlog to Cost of revenues
in the September 2005 quarter. We are amortizing the fair values of all other Acquired product rights to Cost
of revenues on a straight-line basis over their estimated lives of four to five years.
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