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Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company used the Black-Scholes-Merton valuation model to determine the fair value of the assumed options. The fair value of the
assumed options and nonvested shares exchanged was valued using the measurement date share price, while the stock-
based compensation was
valued using the share price on the closing date of the acquisition.
Goodwill
Goodwill represents the premium the Company paid over the fair values of the assets acquired and liabilities assumed. Approximately
$2.5 billion of the purchase price paid for Maxtor has been allocated to goodwill. Goodwill is not tax deductible.
Goodwill reflects the benefits the Company expects to derive from the enhanced scale and capacity to better serve the addressable market,
the ability to leverage Seagate’s existing research and development platforms to accelerate delivery of a wide range of differentiated products
and cost-effective solutions to a growing customer base, and cost synergies arising from scaling production and operating infrastructure.
Goodwill also includes the value of the assembled workforce, which does not meet the criteria described in SFAS 141 for separate
identification from goodwill.
Pro Forma Financial Information
The unaudited financial information in the table below summarizes the combined results of operations of the Company and the results of
Maxtor prior to the Merger, on a pro forma basis, as though the companies had been combined as of July 3, 2004 for each period presented. Pro
forma financial information for our other acquisitions have not been presented, as the effects were not material to our historical consolidated
financial statements either individually or in aggregate. The pro forma financial information for all periods presented also includes the business
combination accounting effect on conforming Maxtor’s revenue recognition policy to the Company’s, adjustments related to the fair value of
acquired inventory and fixed assets, amortization charges from acquired intangible assets, stock-based compensation charges for unvested
options assumed and nonvested shares exchanged and related tax effects of these adjustments. The pro forma financial information is presented
for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken
place at the beginning of the earliest period presented, nor does it intend to be a projection of future results.
The unaudited pro forma financial information for the fiscal year ended June 30, 2006 combines the Company’s historical results for the
fiscal year ended June 30, 2006 and, due to differences in our reporting periods, the historical results of Maxtor for the period from July 3, 2005
to May 19, 2006. The unaudited pro forma financial information for the fiscal year ended July 1, 2005 combines the Company’s historical
results for the fiscal year ended July 1, 2005 and the historical results of Maxtor for the four fiscal quarters ending July 2, 2005.
98
Fiscal Years Ended
June 30, 2006
July 1, 2005
(in millions, except per share data)
(Unaudited)
Revenue
$
12,199
$
11,452
Net income
$
489
$
419
Basic net income per share
$
0.99
$
0.74
Diluted net income per share
$
0.93
$
0.70