VMware 2013 Annual Report Download - page 73

Table of Contents VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Fiscal Year 2012
Acquisition of Nicira, Inc.
On August 24, 2012 , VMware acquired all of the outstanding capital stock of Nicira, a developer of software-defined networking solutions. This
acquisition expanded VMware’s product portfolio to provide a suite of software-defined networking capabilities.
The aggregate consideration was $1,100 million , net of cash acquired, including cash of $1,083 million
and the fair value of assumed equity attributed to
pre-combination services of $17 million . VMware assumed all of Nicira’s unvested stock options and restricted stock outstanding at the completion of the
acquisition. The fair value of the assumed equity awards for post-combination services was $152 million and was not included in the consideration
transferred. The $152 million is being recognized over the awards' remaining requisite service periods, which extend through the first half of 2016.
In accordance with the merger agreement, the assumed unvested stock options converted into 1 million stock options to purchase VMware Class A
common stock. The weighted-average acquisition-date fair value of the stock options was determined using the Black-Scholes option pricing model with the
following weighted-average assumptions: i) market price of $92.21 per share, which was the closing price of VMware’s Class A common stock on the
acquisition date; ii) expected term of 2.7 years ; iii) risk-free interest rate of 0.3% ; iv) annualized volatility of 35.7% ; and v) no dividend yield. The
weighted-average acquisition-date fair value per share of the assumed stock options was $88.39 . The assumed restricted stock converted into 1 million
shares
of restricted VMware Class A common stock. The fair value of the restricted stock was based on the acquisition-date closing price of $92.21 per share for
VMware’s Class A common stock.
The following table summarizes the allocation of the consideration to the fair value of the intangible assets acquired and net liabilities assumed on
August 24, 2012 , and reflects adjustments made through the measurement period to finalize the purchase price allocation (table in millions):
No goodwill was deductible for tax purposes.
The following table summarizes the fair value of the intangible assets acquired by VMware in conjunction with the Nicira acquisition (amounts in table
in millions):
As of December 31, 2012 , the $49 million of IPR&D shown in the table above was completed and transferred to purchased technology with a weighted-
average life of 8 years.
70
Intangible assets
$
335
Goodwill
893
Total intangible assets acquired
1,228
Deferred tax liabilities, net
(77
)
Income taxes payable
(50
)
Other assumed liabilities, net of other acquired assets
(1
)
Total net liabilities assumed
(128
)
Fair value of intangible assets acquired and net liabilities assumed
$
1,100
Weighted-Average
Useful Lives
(in years)
Fair Value
Amount
Purchased technology
7
$
266
Trademarks and trade names
10
20
IPR&D
49
Total intangible assets acquired, net, excluding goodwill
$
335