Netgear 2008 Annual Report Download - page 68

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Table of Contents
A total of $2.6 million of the $22.7 million in acquired intangible assets was designated as trademarks. The value was calculated based on
the present value of the future estimated cash flows derived from estimated royalty savings attributable to use of the trademarks. This $2.6
million will be amortized over its estimated useful life of six years.
In November 2008, the Company made an additional $10 million payment in connection with the Company’
s 2007 acquisition of Infrant in
connection with the achievement of certain revenue targets. This resulted in an increase in goodwill of $8.7 million, the recognition of
compensation expense of $650,000, and a reduction in taxes payable of $620,000.
Skipjam Corp.
On August 1, 2006, the Company completed the acquisition of SkipJam Corp. (“SkipJam”), a developer of networkable media devices for
home entertainment and control. The Company believes the acquisition enhances its strategically important digital home entertainment and
control business by strengthening the Company’s ability to expand its multimedia product portfolio. The aggregate purchase price was $7.6
million, paid in cash.
The results of SkipJam’
s operations have been included in the consolidated financial statements since the date of acquisition. The historical
results of SkipJam prior to the acquisition were not material to the Company’s results of operations.
The accompanying consolidated financial statements reflect total consideration of approximately $7.7 million, consisting of cash, and other
costs directly related to the acquisition as follows (in thousands):
In accordance with the purchase method of accounting, the Company allocated the total purchase price to tangible assets, liabilities and
identifiable intangible assets based on their estimated fair values. The excess of purchase price over the aggregate fair values was recorded as
goodwill. Purchased intangibles are amortized on a straight-line basis over their respective useful lives. The total allocation of the purchase price
is as follows (in thousands):
$2.9 million of the $4.0 million in acquired intangible assets was designated as in-process research and development (“in-process R&D”).
In-process R&D was expensed upon acquisition because technological feasibility has not been established and no future alternative uses exist.
The Company acquired only one in-process R&D project, which is related to the development of a multimedia product that had not reached
technological feasibility and had no alternative use.
The fair value assigned to in-process R&D was determined using the income approach, under which the Company considered the
importance of products under development to the Company’s overall development 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
66
Purchase price
$
7,600
Direct acquisition costs
133
Total consideration
$
7,733
Fair Value on
August 1, 2006
Prepaid expenses and other current assets
$
6
Intangibles
4,000
Goodwill
3,243
Non
-
current deferred income taxes
484
Total purchase price allocation
$
7,733