Adobe 2008 Annual Report Download - page 79

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79
Assets acquired and liabilities assumed were recorded at their fair values as of December 3, 2005. The total $3.5 billion
purchase price is comprised of the following:
Value of Adobe stock issued (109 million shares) .......................
$
3,209,121
Fair value of stock options assumed ...................................
227,604
Direct transaction costs .............................................
29,060
Restructuring costs .................................................
72,728
Total purchase price ..............................................
$
3,538,513
Purchase Price Allocation
The table below represents the allocation of the purchase price to the acquired net assets of Macromedia based on their
estimated fair values as of December 3, 2005 and the associated estimated useful lives at that date. The fair values assigned to
tangible and intangible assets acquired and liabilities assumed are based on estimates and assumptions of management.
Amount
Estimated
Useful Life
Net tangible assets ......................................................
$
713,164
N/A
Identifiable intangible assets:
Acquired product rights ...............................................
365,500
4 years
Customer contracts and relationships ....................................
183,800
6 years
Non-competition agreements ...........................................
500
2 years
Trademarks .........................................................
130,700
5 years
Goodwill .............................................................
1,993,898
N/A
Stock-based compensation ...............................................
150,951
2.18 years†
Total purchase price ..................................................
$
3,538,513
_________________________________________
† Estimated weighted-average remaining vesting period as of December 3, 2005.
See Note 5 for information regarding subsequent adjustments to the purchase price allocation for goodwill associated
with Macromedia.
Net tangible assets—Macromedia’ s tangible assets and liabilities were reviewed and adjusted to their fair value as
necessary, including an increase to market value of $18.4 million related to owned land and a building, $11.5 million related
to an investment and $21.5 million for receivables related to future payments from existing customers. We also acquired
$488.4 million in cash and cash equivalents and $109.8 million in property, plant and equipment, and assumed $103.2
million in accrued expenses and $186.9 million in deferred tax liabilities.
Deferred revenue—Macromedia’ s deferred revenue was derived from licenses, maintenance and support, hosting and
consulting contracts. We recorded an adjustment to reduce Macromedia’ s carrying value of deferred revenue by $49.1
million to $14.9 million, which represents our estimate of the fair value of the contractual obligations assumed. This estimate
of the fair value of deferred revenue is included in net tangible assets.
Identifiable intangible assets—Acquired product rights include developed and core technology and patents. Developed
technology relates to Macromedia products across all of their product lines that have reached technological feasibility. Core
technology and patents represent a combination of Macromedia’ s processes, patents and trade secrets developed through
years of experience in design and development of its products. We amortize the acquired product rights based on the pattern
in which the economic benefits of the intangible asset is being consumed.
Customer contracts and relationships represent existing contracts and the underlying customer relationships. We
amortize these assets based on the pattern in which the economic benefits of the intangible asset is being consumed.
Trademarks primarily relate to the Flash trade name and other product names and is amortized based on the pattern in
which the economic benefits of the intangible asset is being consumed.
In-process research and development—As of the acquisition date, no amounts were allocated to in-process research and
development. In-process research and development is dependent on the status of new projects on the date the acquisition is