Logitech 2010 Annual Report Download - page 196

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SightSpeed
In October 2008, the Company acquired SightSpeed Inc., a privately held company providing high-quality
Internet video communications services. The acquisition of SightSpeed provided Logitech with video calling
technology and a software and services development team that is focused on future video calling initiatives to
enable cross-platform video communications.
Total consideration paid was $30.9 million, which includes $0.8 million in transaction costs. Under the terms
of the purchase agreement, the Company acquired all of the outstanding shares of SightSpeed.
The acquisition has been accounted for using the purchase method of accounting. Accordingly, the total
consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their
estimated fair values as of the acquisition date. Fair values were determined by Company management based on
information available at the date of acquisition. The results of operations of SightSpeed were included in Logitech’s
consolidated financial statements from the date of acquisition, and were not material to the Company’s reported
results.
The allocation of total consideration, including transaction costs, to the assets acquired and liabilities assumed
based on the estimated fair value of SightSpeed was as follows (in thousands):
November 3,
2008 Estimated Life
Tangible assets acquired ........................................ $370
Deferred tax asset, net ......................................... 6,622
Intangible assets acquired
Existing technology ........................................ 800 5 years
Patents and core technology .................................. 2,700 5 years
Trademark/trade name ...................................... 200 2 years
Customer relationships and other .............................. 1,200 4.9 years
In-process research and development ........................... 1,000 —
Goodwill ................................................. 18,751 —
31,643
Liabilities assumed ............................................ (756)
Total consideration ......................................... $30,887
The deferred tax asset relates to the tax benefit of a net operating loss carryforward, net of the deferred tax
liability related to intangible assets. The existing technology of SightSpeed relates to internet video communications
services that allow users to make video calls, computer-to-computer voice calls, and calls to regular telephones with
free and prepaid versions. In-process research and development had not reached technological feasibility at the time
of the acquisition and had no further alternative uses, and was expensed immediately to research and development
expense upon consummation of the acquisition. The value of the technology was determined based on the present
value of estimated expected cash flows attributable to the technology. The patents and core technology represent
awarded patents, filed patent applications and core architectures used in SightSpeed’s current and planned future
products. Trademark/trade name relates to the SightSpeed brand names. The value of the patents, core technology
and trademark/trade name was estimated by capitalizing the estimated profits saved as a result of acquiring or
licensing the asset. Customer relationships and other relates to the ability to sell existing, in-process, and future
versions of the technology to SightSpeed’s existing customer base, valued based on projected discounted cash
flows generated from customers in place. The intangible assets acquired are amortized on a straight-line basis over
their estimated useful lives. The goodwill associated with the acquisition is not subject to amortization and is not
expected to be deductible for income tax purposes.