EMC 2009 Annual Report Download - page 61

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2007 Acquisitions
During 2007, we acquired fourteen companies. EMC acquired ten of the companies for its Information Infrastructure business. These acquisitions have
helped us further enhance and expand our offerings within our Information Storage, Content Management and Archiving and RSA Information Security
segments. VMware acquired four of the companies. These acquisitions have helped VMware expand in its virtualization capabilities and software
development and enables VMware customers to standardize and automate their IT management processes on VMware's infrastructure.
The aggregate purchase price, net of cash acquired for all 2007 acquisitions was $696.6 million, which consisted of $689.9 million of cash, $4.6 million
in fair value of our stock options issued in exchange for the acquirees' stock options and $2.1 million of transaction costs, which primarily consisted of fees
incurred by us for financial advisory, legal and accounting services. 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) 2.6
Expected volatility 29.8%
Risk-free interest rate 4.4%
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) $ 48,260
Customer relationships (weighted-average useful life of 9.3 years) 73,800
Tradename and trademark (weighted-average useful life of 10.4 years) 3,860
Non-competition agreement (weighted-average useful life of 2.4 years) 760
Backlog (weighted-average useful life of 0.5 years) 3,300
IPR&D 1,150
Total intangible assets $131,130
The total weighted average amortization period for the intangible assets is 7.6 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 $537.9
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 19% to 25% to
value the IPR&D projects acquired.
Pro forma Effects of the Acquisitions
The following gives pro forma effect as if the 2009 acquisitions, 2008 acquisitions and the 2007 acquisitions had been consummated as of the
beginning of the fiscal year in the year the transactions closed and the beginning of the prior fiscal years. The pro forma results are not necessarily indicative
of what actually would have occurred had the acquisitions been in effect for the periods presented (table in thousands, except per share data):
(unaudited)
Year Ended December 31,
2009
2008
(As Adjusted)
2007
(As Adjusted)
Revenue $ 14,231,845 $ 15,202,624 $ 13,734,941
Net income attributable to EMC Corporation $ 1,051,533 1,162,891 1,557,634
Net income per weighted average share, basic attributable to EMC Corporation common shareholders $ 0.52 $ 0.56 $ 0.75
Net income per weighted average share, diluted attributable to EMC Corporation common shareholders $ 0.51 $ 0.56 $ 0.72
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