Salesforce.com 2011 Annual Report Download - page 90

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Developed product technology represents the fair value of the Heroku platform technology. Trade name and
trademark represents the fair values of brand and name recognition associated with the marketing of Heroku’s
services. The goodwill balance is not deductible for tax purposes. The goodwill balance is primarily attributable
to Heroku’s assembled workforce and the Company’s ability to now access a large community of developers and
independent software vendors (“ISVs”) who are building applications in the cloud using the Ruby language.
Additionally, the goodwill balance also reflects the value of expanded market share opportunities that are
expected to occur when combining the Company’s cloud platform with Heroku’s platform and enhancing the
joint platform to allow developers and ISV’s the freedom to choose among a variety of programming languages.
The fair value of intangible assets was based on the cost approach using a replacement cost method to value
the developed technology. The replacement cost method estimates the fair value based upon an estimate of the
costs that would be incurred to replace the developed technology. The acquisition costs which were expensed
were not material.
DimDim, Inc.
In January 2011 the Company acquired for cash the stock of DimDim, Inc. (“DimDim”), a provider of
online meeting solutions for business collaboration. The Company has included the financial results of DimDim
in the consolidated financial statements from the date of acquisition. The total cash consideration for DimDim
was approximately $37.1 million.
The total preliminary purchase price was allocated to the net tangible and intangible assets based upon their
fair values as of January 6, 2011 as set forth below. The excess of the preliminary purchase price over the net
tangible and intangible assets was recorded as goodwill. The following table summarizes the estimated fair
values of the assets and liabilities assumed at the acquisition date. The primary areas of the preliminary purchase
price allocation that are not yet finalized relate to both current and noncurrent deferred tax liabilities which are
subject to change, pending the finalization of certain tax returns.
(in thousands)
Net tangible assets .......................................................... $ 1,951
Developed technology ....................................................... 14,450
Deferred tax liability ........................................................ (2,648)
Goodwill .................................................................. 23,373
Total purchase price ......................................................... $37,126
The developed technology acquired in connection with the DimDim acquisition represents the fair value of
the developed technology. The goodwill balance is not deductible for tax purposes. The goodwill balance is
primarily attributable to DimDim’s assembled workforce and the expected synergies and expanded market
leadership opportunities when integrating DimDim’s on-line meeting solution technology with the Company’s
collaboration cloud offering.
The fair value of intangible assets was based on the income approach. The acquisition costs which were
expensed were not material.
Other Acquisitions
During fiscal 2011, the Company acquired three privately-held companies for $18.1 million in aggregate
cash and $2.8 million in contingent consideration. The Company accounted for these transactions as business
combinations. Of the $20.9 million, the Company allocated $10.0 million to acquired intangible assets with
useful lives of 3 to 5 years and $10.3 million to goodwill. The goodwill balances are not deductible for tax
purposes. These transactions were not material, individually or in aggregate.
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