Netgear 2008 Annual Report Download - page 66

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Table of Contents
plans, estimated the costs to develop the purchased in-process R&D into commercially viable products, estimated the resulting net cash flows
from the products when completed and discounted the net cash flows to their present values. The Company used a 32% discount rate in the
present value calculations, which was derived from a weighted-average cost of capital analysis, adjusted to reflect additional risks related to the
products’ development and success as well as the products’ stage of completion. The estimates used in valuing in-
process R&D were based upon
assumptions believed to be reasonable but which are inherently uncertain and unpredictable. These assumptions may be incomplete or
inaccurate, and unanticipated events and circumstances may occur. Accordingly, actual results may vary from the projected results.
A total of $1.2 million of the $3.9 million in acquired intangible assets was designated as existing technology. The value was calculated
based on the present value of the future estimated cash flows derived from projections of future revenue attributable to existing technology. This
$1.2 million will be amortized over its estimated useful life of three years.
A total of $900,000 of the $3.9 million in acquired intangible assets was designated as core technology. The value was calculated based on
the present value of the future estimated cash flows derived from estimated royalty savings attributable to the core technology. This $900,000
will be amortized over its estimated useful life of five years.
Infrant Technologies, Inc.
On May 16, 2007, the Company completed the acquisition of 100% of the outstanding shares of Infrant Technologies, Inc. (“Infrant”), a
developer of network attached storage products. The Company believes the acquisition will accelerate the Company’s participation in the
expanding market for network attached storage. The aggregate purchase price was $60 million, paid in cash. Under the terms of the acquisition
agreement, Infrant shareholders may receive a total additional payout of up to $20 million in cash over the three years following closure of the
acquisition if specific revenue targets are reached, of which $10 million was paid in November 2008. Any additional payout will primarily be
accounted for as additional purchase price and will be recorded as an increase in goodwill.
The results of Infrant’s operations have been included in the consolidated financial statements since the date of acquisition. The historical
results of Infrant prior to the acquisition were not material to the Company’s results of operations.
The accompanying consolidated financial statements reflect an initial purchase price of approximately $60.3 million, consisting of cash,
and other costs directly related to the acquisition as follows (in thousands):
64
Purchase price
$
60,000
Direct acquisition costs
254
Total consideration
$
60,254