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
Citrix Systems, Inc.  Annual Report
Product License revenue and Technical Services revenue
in the accompanying consolidated statements of income.
In connection with the 2005 Acquisitions, we allocated
$230.0 million to goodwill, $40.2 million to core technology
and $35.8 million to other intangible assets. We assigned
all of the goodwill to our Americas segment.
2004 Acquisitions
During 2004, we acquired all of the issued and outstanding
capital stock of two privately held companies, Net6,
Inc., a leader in providing secure access gateways and
Expertcity.com, Inc., a leader in Web-based desktop
access, as well as, a leader in Web-based meeting
and customer assistance services, together, the 2004
Acquisitions. The consideration for the 2004 Acquisitions
was $291.0 million, comprised of $161.8 million in cash,
$6.1 million of direct transaction costs and 5.8 million
shares of our common stock valued at $124.8 million.
The common stock valued at $124.8 million included
$118.0 million related to the initial purchase price and
the remaining balance is primarily related to additional
common stock earned by the former stockholders of
Expertcity.com, Inc. upon the achievement of certain
revenue and other financial milestones during 2004
pursuant to the applicable merger agreement, which was
issued in March 2005. The fair value of the common stock
earned as additional purchase price consideration was
recorded as goodwill on the date earned. In connection
with the 2004 Acquisitions, we allocated $195.1 million to
goodwill, $38.7 million to core and product technology
and $32.4 million to other intangible assets. We assigned
$31.7 million of the goodwill to our Americas segment and
$163.4 million of the goodwill to our Citrix Online Division.
The sources of funds for consideration paid in these
transactions consisted of available cash and investments
and our authorized common stock. There is no additional
contingent consideration related to these acquisitions.
Purchase Accounting for Acquisitions
The fair values used in determining the purchase price
allocation for certain intangible assets for our acquisitions
were based on estimated discounted future cash flows,
royalty rates and historical data, among other information.
Purchased in-process research and development, or
IPR&D, of $1.0 million, $7.0 million and $19.1 million was
expensed immediately upon the closing of our 2006
Acquisitions, 2005 Acquisitions and 2004 Acquisitions,
respectively, in accordance with FASB Interpretation
No. 4, Applicability of FASB Statement No. 2 to Business
Combinations Accounted for by the Purchase Method,
due to the fact that it pertained to technology that was
not currently technologically feasible, meaning it had not
reached the working model stage, did not contain all of
the major functions planned for the product, was not ready
for initial customer testing and had no alternative future
use. The fair value assigned to in-process research and
development was determined using the income approach,
which includes estimating the revenue and expenses
associated with a project’s sales cycle and by estimating
the amount of after-tax cash flows attributable to the
projects. The future cash flows were discounted to present
value utilizing an appropriate risk-adjusted rate of return,
which ranged from 17%–25%. The rate of return included a
factor that takes into account the uncertainty surrounding
the successful development of the IPR&D.
Ardence Delaware, Inc., Acquisition
On January 5, 2007, we acquired all of the issued and
outstanding capital stock of Ardence Delaware, Inc., or
Ardence, a leading provider of solutions that allow IT
administrators to set up and configure PCs, servers, and
Web servers in real time from a centrally managed source.
This acquisition strengthens our application delivery
capabilities with more robust streaming and provisioning
technologies that improve IT agility, increase security and
reliability, and offer new options for how businesses deliver
applications and desktops to end-users. The consideration
paid to the stockholders of Ardence in this transaction
was cash of approximately $50.6 million. In addition, we
incurred approximately $2.0 million in acquisition related
costs and we assumed approximately 0.2 million unvested
stock-based instruments, each of which will be exercisable
for the right to receive one share of our common stock
upon vesting.