Seagate 2007 Annual Report Download - page 111

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
—
(
Continued)
Property, equipment and leasehold improvements
In general, plant and equipment that was to continue to be used was valued at current replacement cost for similar capacity while plant and
equipment to be sold or held and not used, was valued at fair value less cost to sell. Land and buildings were valued using the replacement cost
approach if they were to continue to be used or the market approach if they were to 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 Useful Life
(In millions) (In Years)
Land
$
8
N/A
Equipment
102
2
Building and leasehold improvements
69
41
Total property, equipment and leasehold Improvements
$
179
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 were valued based on the Replacement Cost Method. The recorded fair values of the inventories
have been charged to Cost of Revenue as the inventories were sold.
Identifiable Intangible Assets Acquired
In accordance with SFAS No. 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 was amortized to Cost of Revenue in fiscal year 2007 as the
Company phased out the use of these technologies and transitioned to Seagate-designed products.
110
Estimated Fair
Value
Weighted Average
Useful Life
(In millions)
(In Years)
Existing technology
$
143
1.4
Customer relationships
139
3.5
Trade names
33
4.0
Total acquired identifiable intangible assets
$
315
2.6