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Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Property, equipment and leasehold improvements
In general, plant and equipment that will continue to be used is valued at current replacement cost for similar capacity while plant and
equipment to be sold or held and not used, is valued at fair value less cost to sell. Land and buildings are valued using the replacement cost
approach if they will continue to be used or the market approach if they will be sold. The following table summarizes the estimated fair value
of the property, plant and equipment and leasehold improvements acquired from Maxtor and their estimated useful lives:
Inventories
Estimated Fair
Value
Estimated Weighted-
Average Remaining
Useful Life
(in years)
($ in millions)
Land
$
8
N/A
Equipment
71
2
Building and leasehold improvements
59
41
Total property, equipment and leasehold improvements
$
138
The Company allocated $347 million of the purchase price to inventories acquired. Finished goods and work-in-process inventories were
valued based on the Income Method, which is based on the projected cash flows derived from selling the finished goods inventory, adjusted for
costs of disposition and the profit commensurate with the amount of investment and degree of risk, and in the case of the work-in-process, also
the expected costs of completion. Raw materials are valued based on the Replacement Cost Method. The recorded fair values of the inventories
are charged to Cost of Revenue as the inventories are sold.
Identifiable Intangible Assets Acquired
In accordance with SFAS 141, the Company identified intangible assets apart from goodwill if one of the following criteria was met: 1)
the asset arises from contractual or other legal rights; or 2) the asset is capable of being separated or divided from the acquired enterprise and
sold, transferred, licensed, rented, or exchanged, either individually or in conjunction with a related contract, asset, or liability. The recorded
values and estimated useful lives of the intangibles acquired from Maxtor were:
Existing technology relates to Maxtor’s products across all of their product lines that have reached technological feasibility as well as a
combination of Maxtor’s processes, patents, and trade secrets developed through years of experience in design and development of their
products. Existing technology was valued using the Excess Earnings Method under the Income Approach. This approach reflects the present
value of projected cash flows that a market participant would expect to generate from these technologies less charges related to the contribution
of other assets to those cash flows. The fair value of the existing technology is amortized to Cost of Revenue on a straight-line basis over the
estimated useful lives of these technologies as the Company expects to phase out the use of these technologies and transition to Seagate-
designed products within one to two years.
95
Estimated Fair
Value
Estimated Weighted-
Average Remaining
Useful Life (in years)
($ in millions)
Existing technology
$
143
1.4
Customer relationships
139
3.5
Trade names
33
4
Total acquired identifiable intangible assets
$
315