EMC 2009 Annual Report Download - page 60

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The total weighted average amortization period for the intangible assets is 4.9 years. The intangible assets are being amortized based upon the pattern in
which the economic benefits of the intangible assets are being utilized. The total goodwill recognized from the aforementioned acquisitions was $2,189.2
million.
In-process research and development
We acquired four IPR&D projects in 2009 as part of the Configuresoft and Data Domain acquisitions. One of the products valued at $58.1 million was
completed in the fourth quarter of 2009. The three remaining projects are expected to be completed in 2010.
The value assigned to the IPR&D projects was determined utilizing the income approach by determining cash flow projections relating to the projects.
We applied discount rates ranging from 17% to 21% to determine the value of the IPR&D projects. Under new business combination guidance effective in
2009, each IPR&D project is capitalized and will be assessed for impairment until completed. Upon completion, the project will be amortized over its
estimated useful life over the pattern in which the economic benefits of the intangible assets are being utilized.
2008 Acquisitions
During 2008, we acquired twelve companies. EMC acquired six of the companies for its Information Infrastructure business. These acquisitions have
helped us further enhance and expand our Information Storage and Content Management and Archiving segments. VMware acquired six of the companies. In
connection with these acquisitions, VMware acquired technologies that are complementary to VMware's core virtualization technology.
The aggregate purchase price, net of cash acquired for all 2008 acquisitions was $759.6 million, which consisted of $713.5 million of cash, $4.1 million
in fair value of our stock options issued in exchange for the acquirees' stock options, $12.0 million of transaction costs, which primarily consisted of fees
incurred by us for financial advisory, legal and accounting services and $30.0 million payable in 2010. None of these acquisitions were individually material
to EMC. The fair value of our stock options was estimated assuming no expected dividends and the following weighted-average assumptions:
Expected term (in years) 2.2
Expected volatility 38.2%
Risk-free interest rate 2.4%
The following represents the aggregate allocation of the purchase price for the aforementioned acquisitions to intangible assets (table in thousands):
Developed technology (weighted-average useful life of 5.5 years) $ 65,335
Customer relationships (weighted-average useful life of 6.8 years) 53,224
Tradename and trademark (weighted-average useful life of 8.8 years) 27,270
Non-competition agreement (weighted-average useful life of 2.5 years) 2,463
Backlog (weighted-average useful life of 1.0 year) 800
Assembled workforce (weighted-average useful life of 4.9 years) 5,455
IPR&D 85,780
Total intangible assets $240,327
The total weighted average amortization period for the intangible assets is 6.4 years. The intangible assets are being amortized based upon the pattern in
which the economic benefits of the intangible assets are being utilized. The total goodwill recognized from the aforementioned acquisitions was $485.6
million.
The IPR&D was written off at the respective dates of each acquisition because the IPR&D had no alternative uses and had not reached technological
feasibility. The value assigned to IPR&D was determined utilizing the income approach by determining cash flow projections relating to identified IPR&D
projects. The stage of completion of each in-process project was estimated to determine the discount rates to be applied to the valuation of the in-process
technology. Based upon the level of completion and the risk associated with in-process technology, we applied discount rates that ranged from 20% to 60% to
value the IPR&D projects acquired.
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