VMware 2014 Annual Report Download - page 78

Table of Contents VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Fiscal Year 2013
During the year ended December 31, 2013 , VMware completed two business combinations. On October 10, 2013, VMware acquired
Desktone, Inc. (“Desktone”), a provider of desktop-as-a-service for delivering Windows desktops and applications as a cloud service. On
February 15, 2013, VMware acquired Virsto Software (“Virsto”), a provider of software that optimizes storage performance and utilization in
virtual environments.
The aggregate consideration for these two acquisitions was $289 million , net of cash acquired. The following table summarizes the
allocation of the consideration to the fair value of the assets acquired and net liabilities assumed (table in millions):
The excess of the consideration for Desktone and Virsto over the fair values assigned to the assets acquired and liabilities assumed
represents the goodwill resulting from the acquisitions. Management believes that the goodwill represents the synergies expected from
combining the technologies of VMware with those of Desktone and Virsto, including complementary products that will enhance the Company’s
overall product portfolio. 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 acquisitions of Desktone
and Virsto (amounts in table in millions):
As of December 31, 2013 , $9 million of the $10 million in IPR&D shown in the table above was completed and transferred to purchased
technology with a weighted-average life of 5 years . The remaining IPR&D was completed and transferred to purchased technology during the
year ended
December 31, 2014 .
The results of operations of Desktone and Virsto described above have been included in VMware’s consolidated financial statements from
their respective date of purchase. Pro forma results of operations have not been presented as the results of the acquired businesses were not
material to VMware’s consolidated results of operations in the year ended December 31, 2013 or 2012 .
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
73
Intangible assets
$
62
Goodwill
233
Deferred tax assets, net
4
Total assets acquired
299
Other assumed liabilities, net of other acquired assets
(10
)
Total net liabilities assumed
(10
)
Fair value of assets acquired and net liabilities assumed
$
289
Weighted-Average
Useful Lives
(in years)
Fair Value
Amount
Purchased technology 6
$
49
Vendor contracts 8
3
In-process research and development (“IPR&D”)
10
Total intangible assets, net, excluding goodwill
$
62