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VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Scholesoptionpricingmodel.Pursuanttothepurchaseagreement,AirWatch’soutstandingstockawardswereconvertedintosharesofVMware’scommonstock
attheconversionratioof0.4.Theassumedunvestedoptionsconvertedinto1.4millionstockoptionstopurchaseVMwareClassAcommonstock.Theassumed
unvestedrestrictedstockconvertedintoanimmaterialnumberofsharesofrestrictedVMwareClassAcommonstock.
Thefollowingtablesummarizestheallocationoftheconsiderationtothefairvalueoftheassetsacquiredandliabilitiesassumed(tableinmillions):
Cash $ 36
Othercurrentassets 61
Intangibleassets 250
Goodwill 868
Otheracquiredassets 30
Totalassetsacquired 1,245
Unearnedrevenues (45)
Otherassumedliabilities (72)
Totalliabilitiesassumed (117)
Fairvalueofassetsacquiredandliabilitiesassumed $ 1,128
Theexcessofthepurchaseconsiderationoverthefairvalueofnettangibleandidentifiableintangibleassetsacquiredwasrecordedasgoodwill.Management
believesthatthegoodwillrepresentsthesynergiesexpectedfromcombiningthetechnologiesofVMwarewiththoseofAirWatch.Theestimatedfairvalue
assignedtothetangibleassets,identifiableintangibleassets,andassumedliabilitieswerebasedonmanagement’sestimatesandassumptions.
ThemajorityofgoodwillandidentifiableintangibleassetsisdeductibleforU.S.incometaxpurposes.
ThefollowingtablesummarizesthecomponentsoftheidentifiableintangibleassetsacquiredandtheirestimatedusefullivesbyVMwareinconjunctionwith
theacquisitionsofAirWatch(amountsintableinmillions):
Useful Lives
(in years)
Weighted-Average
Useful Lives
(in years)
Fair Value
Amount
Purchasedtechnology 2–6
5.9
$ 118
Customerrelationshipsandcustomerlists 2–8
7.9
78
Trademarksandtradenames 8
8
40
Other 2–8
3.2
14
Totalidentifiableintangibleassets
$ 250
ThefollowingproformafinancialinformationsummarizesthecombinednetincomeforVMwareandAirWatch,whichwassignificantforpurposesofthe
unauditedproformafinancialinformationdisclosure,asthoughthecompanieswerecombinedatthebeginningoftheCompany’sfiscalyear2013.Theamountof
revenuefromAirWatchwasnotconsideredmaterial,andassuch,hasnotbeenseparatelypresentedintheunauditedproformafinancialinformationdisclosure
below.
SupplementalinformationonanunauditedproformabasisasifAirWatchhadbeenacquiredonJanuary1,2013ispresentedasfollows(tableinmillions):
For the Year
Ended December 31,
2014
2013
Proformaadjustednetincome $ 849
$ 781
Proformaadjustmentsprimarilyincludecompensationexpenseforcertainkeyemployeessubjecttospecifiedfutureemploymentconditions,intangible
amortization,stock-basedcompensationandrelatedtaxeffects.
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