Goodwill and Other Intangible Assets

12 Months Ended

Jun. 29, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

The following table summarizes the activity related to the carrying amount of goodwill:



	Carrying Amount
	(in millions)
Balance at July 1, 2016	$	9,951
Purchase price adjustments to goodwill	66
Foreign currency translation adjustment	(3		)
Balance at June 30, 2017	10,014
Goodwill recorded in connection with acquisitions	61
Balance at June 29, 2018	$	10,075

On September 15, 2017, the Company acquired substantially all the assets of Tegile Systems, Inc., a provider of flash and persistent-memory storage solutions for enterprise data center applications. On August 25, 2017, the Company acquired substantially all the assets of Upthere, Inc., a cloud services company. These acquisitions are primarily intended to help meet the evolving needs of customers, while driving long-term growth for the Company's existing data center and client solution products over the long term.

The aggregate purchase price of acquisitions during the year ended June 29, 2018 was $100 million in cash, with net assets acquired primarily consisting of developed technology and other intangible assets, of which $61 million was allocated to goodwill. Goodwill is primarily attributable to the benefits the Company expects to derive from diversifying product offerings to its Data Center Devices and Solutions and Client Solutions end markets as well as the acquired workforce. Goodwill is expected to be deductible for tax purposes because the acquisitions were structured as asset acquisitions but accounted for as business combinations. Concurrent with these acquisitions, the Company received $36 million in proceeds on previously outstanding notes receivable due from these acquired entities.

During the year ended June 29, 2018, the expenses incurred by the Company related to these acquisitions were immaterial and are primarily included within Selling, general and administrative expenses in the Consolidated Statements of Operations. Revenues and earnings related to these acquisitions was not material.

The purchase price adjustments in 2017 resulted from adjustments to the assessment of fair value for certain acquired intangible assets; inventory; property, plant and equipment; and a portion of the deferred tax liability related to the Merger.

The following tables present intangible assets as of June 29, 2018 and June 30, 2017:



	June 29, 2018
	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(in years)	(in millions)
Finite:
Existing technology	3	$	4,323	$	(2,528	)	$	1,795
Trade names and trademarks	7	648		(222		)	426
Customer relationships	6	635		(299		)	336
Other	2	180		(161		)	19
Leasehold interests	31	32		(8		)	24
Total finite intangible assets		5,818		(3,218		)	2,600
In-process research and development		80		—			80
Total intangible assets		$	5,898	$	(3,218	)	$	2,680



	June 30, 2017
	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(in years)	(in millions)
Finite:
Existing technology	3	$	3,478	$	(1,373	)	$	2,105
Trade names and trademarks	7	645		(134		)	511
Customer relationships	6	627		(227		)	400
Other	2	375		(288		)	87
Leasehold interests	31	35		(11		)	24
Total finite intangible assets		5,160		(2,033		)	3,127
In-process research and development		696		—			696
Total intangible assets		$	5,856	$	(2,033	)	$	3,823

As part of prior acquisitions, the Company recorded at the time of the acquisition acquired IPR&D for projects in progress that had not yet reached technological feasibility. IPR&D is initially accounted for as an indefinite-lived intangible asset. Once a project reaches technological feasibility, the Company reclassifies the balance to existing technology and begins to amortize the intangible asset over its estimated useful life. During 2018, two IPR&D projects reached technological feasibility totaling $616 million and commenced amortization over an estimated useful life of 4 years.

During 2018 and 2017, the Company did not record any impairment charges related to intangible assets. During 2016, the Company recorded $36 million of impairment charges related to intangible assets, which are recorded in Employee termination, asset impairment and other charges within the Consolidated Statements of Operations. The impairment charges primarily relate to acquired IPR&D projects that were abandoned and resulted in full impairment.

Intangible assets are amortized over the estimated useful lives based on the pattern in which the economic benefits are expected to be received. Intangible asset amortization was as follows:



	2018		2017		2016
	(In millions)
Intangible asset amortization	$	1,185	$	1,169	$	266

The following table presents estimated future amortization expense for intangible assets currently subject to amortization as of June 29, 2018:



	Future Intangible Asset Amortization Expense
	(in millions)
Fiscal year
2019	$	968
2020	755
2021	503
2022	230
2023 and thereafter	144
Total future amortization expense	$	2,600

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details