Salesforce.com 2012 Annual Report Download - page 92

4. Preferred Stock
The Company’s board of directors has the authority, without further action by stockholders, to issue up to
5,000,000 shares of preferred stock in one or more series. The Company’s board of directors may designate the
rights, preferences, privileges and restrictions of the preferred stock, including dividend rights, conversion rights,
voting rights, terms of redemption, liquidation preference, sinking fund terms, and number of shares constituting
any series or the designation of any series. The issuance of preferred stock could have the effect of restricting
dividends on the Company’s common stock, diluting the voting power of its common stock, impairing the
liquidation rights of its common stock, or delaying or preventing a change in control. The ability to issue
preferred stock could delay or impede a change in control. At January 31, 2012 and 2011, no shares of preferred
stock were outstanding.
5. Business Combinations
Radian6 Technologies Inc.
In May 2011, the Company acquired the outstanding stock of Radian6 for cash and the Company’s common
stock. Radian6 is a cloud application vendor based in Canada that provides customers with social media
monitoring, measurement and engagement solutions. The Company acquired Radian6 to, among other things,
expand its social enterprise market opportunities. The Company has included the financial results of Radian6 in
the consolidated financial statements from the date of acquisition, which have not been material to date. The
acquisition date fair value of the consideration transferred for Radian6 was approximately $336.6 million, which
consisted of the following:
Fair value of consideration transferred (in thousands, except number of share data):
Cash .................................................................... $282,600
Common stock (436,167 shares) .............................................. 49,319
Fair value of stock options assumed ........................................... 4,729
Total .................................................................... $336,648
The value of the share consideration for the Company’s common stock was based on the closing price of
$136.19 on the day of the acquisition. The fair value of the stock options assumed by the Company was
determined using the Black-Scholes option pricing model and the share conversion ratio of 0.196 was applied to
convert Radian6 options to the Company’s options.
The following table summarizes the estimated fair values of assets acquired and liabilities assumed as of the
date of acquisition:
(in thousands)
Tangible assets ............................................................ $ 12,364
Current and noncurrent liabilities .............................................. (12,757)
Deferred revenue .......................................................... (680)
Deferred tax liability ....................................................... (27,306)
Intangible assets ........................................................... 103,000
Goodwill ................................................................. 262,027
Net assets acquired ......................................................... $336,648
The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets
acquired was recorded as goodwill. The fair values assigned to tangible and identifiable intangible assets acquired
and liabilities assumed are based on management’s estimates and assumptions. The estimated fair values of assets
acquired and liabilities assumed are considered preliminary and are based on the information that was available as of
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