EMC 2005 Annual Report Download - page 60

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Acquisition of LEGATO Systems, Inc.
In October 2003, we acquired all of the shares of outstanding common stock of LEGATO. LEGATO developed, marketed and supported software
products and services for information protection and recovery, hierarchal storage management, automated availability, e-mail and content management. We
determined that the acquisition would expand our portfolio of open storage software, provide software-focused sales expertise, extensive channel partner
relationships and strong service capabilities. The aggregate purchase price was approximately $1.4 billion, which consisted of $1.2 billion of our common
stock, $141.5 million in fair value of our stock options and $15.4 million of transaction costs, which primarily consisted of fees paid for financial advisory,
legal and accounting services. We issued approximately 106 million shares of our common stock, the fair value of which was based upon a five-day average
of the closing price two days before and two days after the terms of the acquisition were agreed to and publicly announced.
The purchase price allocation resulted in goodwill of $1.1 billion, other intangible assets of $176.8 million and an IPR&D charge of $19.6 million.
In connection with the LEGATO acquisition, we commenced integration activities which have resulted in involuntary terminations and lease and
contract terminations. The following summarizes the obligations recognized in connection with the LEGATO acquisition and activity to date (table in
thousands):
Year Ended December 31, 2005
Category
Beginning
Balance
Adjustments Utilization
Ending
Balance
Involuntary termination benefits $ 10,282 $ (3,954) $ (4,486) $ 1,842
Lease and other contractual terminations 32,187 (409) (6,698) 25,080
Total $ 42,469 $ (4,363) $ (11,184) $ 26,922
Year Ended December 31, 2004
Category
Beginning
Balance
Adjustments Utilization
Ending
Balance
Involuntary termination benefits $ 1,337 $ 18,578 $ (9,633) $ 10,282
Lease and other contractual terminations 28,185 13,805 (9,803) 32,187
Total $ 29,522 $ 32,383 $ (19,436) $ 42,469
Year Ended December 31, 2003
Category
Beginning
Balance Adjustments Utilization
Ending
Balance
Involuntary termination benefits $ 2,700 $ — $ (1,363) $ 1,337
Lease and other contractual terminations 29,084 — (899) 28,185
Total $ 31,784 $ — $ (2,262) $ 29,522
We expect to pay the remaining balance for involuntary termination benefits through 2007. The liability for lease and other contractual termination benefits
will be paid over the remaining contract periods through 2011.
Acquisition of Documentum, Inc.
In December 2003, we acquired all of the shares of outstanding common stock of Documentum. Documentum provided enterprise content management
software, enabling organizations to organize and manage unstructured data. We determined that the acquisition would provide us the opportunity to expand
our product offerings, enabling customers to implement a total information storage solution for managing unstructured content. Additionally, the acquisition
expanded our software-focused sales expertise and provided strong service capabilities. The aggregate purchase price was approximately $1.8 billion, which
consisted of $1.6 billion of common stock, $207.6 million in fair value of our stock options and $20.5 million of transaction costs, which primarily consisted
of fees paid for financial advisory, legal and accounting services. We issued approximately 115 million shares of our common stock, the fair value of which
was based upon a five-day average of the closing price two days before and two days after the terms of the acquisition were agreed to and publicly announced.
The purchase price allocation resulted in goodwill of $1.4 billion, other intangible assets of $234.6 million and an IPR&D charge of $9.5 million.
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