Business Acquisition

9 Months Ended

Sep. 28, 2014

Business Combinations [Abstract]

Business Acquisition

Business Acquisition

Fusion‑io, Inc. On July 23, 2014, the Company acquired 100% of Fusion‑io, a leading developer of flash-based PCIe hardware and software solutions that enhance application performance in enterprise and hyperscale data centers. The Company expects this acquisition to accelerate its efforts to enable the flash-transformed data center, helping companies better manage increasingly heavy data workloads at a lower total cost of ownership. The total aggregate consideration to acquire Fusion-io was $1.26 billion and comprised of the following (in thousands):

	Purchase Price
Cash consideration	$	1,256,502
Fair value of assumed equity attributed to pre-combination service	7,041
Total purchase price	$	1,263,543

The total aggregate consideration net of cash assumed was $1.07 billion.

The Company assumed all of Fusion‑io’s outstanding unvested stock option awards with an exercise price less than or equal to the acquisition price of $11.25 per share and unvested RSU awards. The assumed unvested stock options converted into 427,388 options to purchase the Company’s common stock and the assumed unvested RSUs converted into 445,072 RSU awards.

The weighted-average fair value of the assumed unvested stock option awards was $35.02 and was determined using the Black-Scholes-Merton valuation model and included the following assumptions:

Dividend yield	1.14%
Expected volatility	0.32
Risk-free interest rate	1.00%
Weighted average expected life	2.6 years

The fair value of the assumed unvested RSU awards was based on the Company’s acquisition-date share value of $94.35 per share.

The fair value of the assumed unvested stock option and RSU awards attributed to post-combination services of $49.9 million was not included in the consideration transferred and will be recognized over the awards’ remaining requisite service periods.

Fusion‑io’s tangible and intangible assets were based upon their estimated fair values as of July 23, 2014. The fair values are preliminary and the measurement period is open pending final adjustments to the valuation of certain assets acquired and liabilities assumed, including income taxes. Based on a preliminary assessment, the Company recorded provisional amounts for these items in its Condensed Consolidated Financial Statements as of September 28, 2014. During the measurement period, the Company may record adjustments to the provisional amounts recognized in the Company’s initial accounting for the acquisition.

The following table presents the fair values of the tangible and intangible assets acquired and liabilities assumed from, and goodwill attributed to, the Fusion-io acquisition as of July 23, 2014 (in thousands):

Cash	$	190,336
Accounts receivable, net	67,666
Inventory	76,780
Deferred tax asset, net	23,254
Finite-lived intangible assets	382,000
IPR&D	61,000
Goodwill	542,690
Other assets	34,908
Other current liabilities	(96,482		)
Other non-current liabilities	(18,609		)
Total purchase price	$	1,263,543

The following table presents the fair value of the intangible assets acquired (in thousands):

	Weighted-Average Useful Lives	Fair Value
Intangible assets:
Developed technology	5 years	$	271,000
Trademark and trade names	5 years	54,000
Customer relationships	1.5 years	57,000
IPR&D		61,000
Total intangible assets acquired, excluding goodwill		$	443,000

The weighted-average amortization period for finite-lived intangible assets is 4.5 years. The intangible assets are amortized on a straight-line basis over the period which the economic benefits of the intangible assets are expected to be utilized. Management believes that the goodwill represents the synergies expected from combining the technologies of Fusion-io with those of the Company, including complementary products that will enhance the Company’s overall product portfolio. Goodwill is not deductible for tax purposes.

The Condensed Consolidated Financial Statements include the operating results of Fusion-io from the date of acquisition. Pro forma results of operations have not been presented as Fusion-io’s prior-period financial results are not considered material to the Company.

Total acquisition-related costs of $11.5 million during the nine months endedSeptember 28, 2014 were related to legal, banker, accounting and tax fees, of which $2.6 million were expensed to General and administrative expense in the second quarter of fiscal year 2014, and $8.9 million were expensed to Restructuring and other expense in the third quarter of fiscal year 2014 in the Company’s Condensed Consolidated Statement of Operations.