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Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Changes in the carrying amount of goodwill, net, on a consolidated basis and by segment for the years ended December 31, 2011 and 2010 consist of
the following (tables in thousands):
Year Ended December 31, 2011
Information
Storage
Information
Intelligence
Group
RSA
Information
Security
VMware
Virtual
Infrastructure Total
Balance, beginning of the year $ 7,029,341 $ 1,467,903 $ 1,663,213 $ 1,612,193 $ 11,772,650
Goodwill acquired — — 187,445 188,395 375,840
Tax deduction from exercise of stock options (73) (852) (95) — (1,020)
Finalization of purchase price allocations 4,697 2,165 (1,447) 2,085 7,500
Balance, end of the year $ 7,033,965 $ 1,469,216 $ 1,849,116 $ 1,802,673 $ 12,154,970
Year Ended December 31, 2010
Information
Storage
Information
Intelligence
Group
RSA
Information
Security
VMware
Virtual
Infrastructure Total
Balance, beginning of the year $ 5,045,086 $ 1,476,520 $ 1,529,408 $ 1,159,362 $ 9,210,376
Goodwill acquired 2,287,712 — 140,013 178,201 2,605,926
Tax deduction from exercise of stock options (548) (2,424) (1,103) — (4,075)
Other adjustments (275,405) — — 275,405 —
Finalization of purchase price allocations (27,504) (6,193) (5,105) (775) (39,577)
Balance, end of the year $ 7,029,341 $ 1,467,903 $ 1,663,213 $ 1,612,193 $ 11,772,650
Other adjustments to goodwill include the transfer of the goodwill related to the Ionix information technology management business from the
Information Storage segment to the VMware Virtual Infrastructure segment during 2010. The goodwill transfer related to the common control acquisition of
certain software product technology and related capabilities of our Ionix business by VMware. See Note S for additional details.
Valuation of Goodwill and Intangibles
We perform an assessment of the recoverability of goodwill, at least annually, in the fourth quarter of each year. Our assessment is performed at the
reporting unit level which, for certain of our operating segments, is one step below our operating segment level. During 2011, we early adopted the new
accounting guidance that allows entities to perform, on a reporting unit by reporting unit basis, a qualitative assessment on goodwill impairment to determine
whether a quantitative assessment is necessary and, in doing so, we evaluated goodwill for certain reporting units in a qualitative manner and determined there
was no impairment. For the reporting units that we evaluated using a quantitative model, there was sufficient market value above the carrying value of those
reporting units so that we would not expect any near term changes in the operating results that would trigger an impairment. The determination of relevant
comparable industry companies impacts our assessment of fair value. Should the operating performance of our reporting units change in comparison to these
companies or should the valuation of these companies change, this could impact our assessment of the fair value of the reporting units. Our discounted cash
flow analyses factor in assumptions on revenue and expense growth rates. These estimates are based upon our historical experience and projections of future
activity, factoring in customer demand, changes in technology and a cost structure necessary to achieve the related revenues. Additionally, these discounted
cash flow analyses factor in expected amounts of working capital and weighted average cost of capital. Changes in judgments on any of these factors could
materially impact the value of the reporting unit. There was no impairment in 2011, 2010 or 2009.
Other intangible assets are evaluated based upon the expected period the asset will be utilized, forecasted cash flows, changes in technology and
customer demand. Changes in judgments on any of these factors could materially impact the value of the asset.
E. Convertible Debt
In November 2006, we issued our Notes for total gross proceeds of $3.45 billion. The Notes are senior unsecured obligations and rank equally with all
other existing and future senior unsecured debt.
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