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Table of Contents VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The excess of the purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as
goodwill. Management believes that the goodwill represents the synergies expected from combining the technologies of VMware with those of
AirWatch. The estimated fair value assigned to the tangible assets, identifiable intangible assets, and assumed liabilities were based on
management’s estimates and assumptions.
Management expects that the majority of goodwill and identifiable intangible assets will be deductible for U.S. income tax purposes.
The following table summarizes the components of the identifiable intangible assets acquired and their estimated useful lives by VMware in
conjunction with the acquisitions of AirWatch (amounts in table in millions):
The following pro forma financial information summarizes the combined net income for VMware and AirWatch, which was significant for
purposes of the unaudited pro forma financial information disclosure, as though the companies were combined at the beginning of the
Company’s fiscal year 2013. The amount of revenue from AirWatch was not considered material, and as such, has not been included in the
unaudited pro forma financial information disclosure below.
Supplemental information on an unaudited pro forma basis, as if AirWatch had been acquired on January 1, 2013 , is presented as follows
(table in millions):
Pro forma adjustments primarily include compensation expense for certain key employees subject to specified future employment
conditions, intangible amortization, stock-based compensation and related tax effects.
Other 2014 Business Combinations
During the year ended December 31, 2014 , VMware completed three business combinations in addition to AirWatch, which were not
material to VMware’s consolidated financial statements, either individually or in the aggregate. On August 20, 2014, VMware acquired
CloudVolumes, Inc. (“CloudVolumes”), a provider of real-time application delivery technology that enables enterprises to deliver native
applications to virtualized environments on-demand. Additionally, in the fourth quarter of 2014, VMware completed two other immaterial
business combinations. The aggregate purchase price for these three acquisitions was $91 million , net of cash acquired. The preliminary
purchase price primarily included $19 million of identifiable intangible assets and approximately $73 million of goodwill. Of the goodwill
acquired, $28 million is expected to be deductible for income tax purposes.
72
Useful Lives
(in years)
Weighted-Average
Useful Lives
(in years)
Fair Value
Amount
Purchased technology 2 – 6
5.9
$
118
Customer relationships and customer lists 2 – 8
7.9
78
Trademarks and tradenames 8
8
40
Other 2 – 8
3.2
14
Total identifiable intangible assets
$
250
For the Year
Ended December 31,
2014
2013
Pro forma adjusted net income
$
849
$
781