Adaptec 2007 Annual Report Download - page 78

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Table of Contents
Intangible assets acquired, and their respective estimated remaining useful lives, over which each asset will be amortized on a straight-line basis, are:
(in thousands)
Estimated
fair value
Estimated
average remaining
useful life
Core technology $ 114,300 8 years
Customer relationships 46,300 10 years
Trademarks 3,600 indefinite
Backlog 3,200 six months
In-process research and development 14,800 N/A
Total intangible assets acquired $ 182,200
The amount allocated to in-process research and development (IPR&D) represented an estimate of the fair value of research projects that had not reached
technological feasibility and had no alternative future use. The estimated fair value of IPR&D was expensed immediately following the consummation of the
acquisition.
PMC acquired three next-generation Tachyon storage protocol IPR&D projects related to the Storage Semiconductor Business. One of the projects is a
multi-protocol storage controller which was in the early stage of development, and two projects were next-generation Tachyon projects in later stages of
development. The value assigned to IPR&D was calculated using the income approach by determining cash flow projections related to the identified projects.
The assumptions included information on revenues from existing products and future expected trends for each technology, with an estimated useful life of 5 to 9
years. The rates used to discount the net cash flows to their present values were based upon a weighted average cost of capital of 19%. The discount rate was
determined after consideration of market rates of return on debt and equity capital and the risk associated with achieving forecasted sales related to the assets
acquired.
The fair value, expected costs to complete, and anticipated completion date for each project was as follows:
(in thousands)
Estimated
fair value
Next generation Tachyon products $ 9,400
Multi-protocol storage controller 5,400
Total in-process research and development $ 14,800
72
Source: PMC SIERRA INC, 10-K, February 22, 2008