Business Combinations

12 Months Ended

Jun. 30, 2016

Business Combinations [Abstract]

Business Combinations

2. Business Combinations

On October 31, 2013 (the “Acquisition Date”), the Company completed the acquisition of Enterasys Networks, Inc. ("Enterasys"), a privately held provider of wired and wireless network infrastructure and security solutions, for $180.0 million, net of cash acquired. The Company also assumed outstanding options and restricted stock units of Enterasys at the Acquisition Date, all of which were unvested.

The acquisition has been accounted for using the acquisition method of accounting. The purchase price allocation as of the Acquisition Date is set forth in the table below and reflects various fair value estimates. These estimates were determined through established and generally accepted valuation techniques, including work performed by third-party valuation specialists.  All valuations were considered finalized as of September 30, 2014.

The following table below summarizes the allocation as of September 30, 2014 of the tangible and identifiable intangible assets acquired and liabilities assumed:

	September30,2014
Cash	$	7,397
Receivables		23,271
Inventory		33,662
Other current assets		7,374
Property and equipment		21,293
Identifiable intangible assets		108,900
In-process research and development		3,000
Deferred tax assets		9
Other assets		7,343
Goodwill		70,877
Current liabilities		(81,535	)
Other long-term liabilities		(14,194	)
Total purchase price allocation	$	187,397
Less: Cash acquired from acquisition		(7,397	)
Total purchase price consideration, net of cash acquired	$	180,000

There were no adjustments to the allocation of assets acquired or liabilities assumed from June 30, 2014 through the time the Company finalized the allocation as of September 30, 2014.

The fair value of the acquired intangible assets was estimated using an income approach.  Under this method, an intangible asset's fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life.  To calculate fair value, the Company used cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset. The Company believes that the level and timing of cash flows appropriately reflect market participant assumptions. Cash flows were assumed to extend through the remaining economic useful life of each class of intangible asset.

The fair value of the acquired deferred revenue was estimated using the cost build-up approach.  The cost build-up approach determines fair value using estimates of the costs required to provide the contracted deliverables plus an assumed profit.  The total costs including the assumed profit were adjusted to present value using a discount rate considered appropriate. The resulting fair value approximates the amount that the Company would be required to pay a third party to assume the obligation. The fair value of the deferred revenue obligation is affected most significantly by the estimated costs required to support the obligation, but is also affected by the assumed profit and the discount rate.

The following table presents details of the identifiable intangible assets acquired as part of the acquisition (in thousands):

Intangible Assets	Estimated Useful Life (in years)	Amount
Developed technology	3	$	45,000
Customer relationships	3		37,000
Maintenance contracts	5		17,000
Trademarks	3		2,500
Order backlog	1		7,400
Total identifiable intangible assets	3	$	108,900

The amortization for the developed technology is recorded in “Cost of revenues” for product and the amortization for the remaining intangibles is recorded in “Amortization of intangibles” on the consolidated statement of operations.  The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Enterasys.  The Company anticipates both the goodwill and intangible assets to be fully deductible for tax purposes.

The Company had an indefinite-lived asset of $3.0 million as of the Acquisition Date which represents the fair value of in-process research and development activities.  The Company completed the research and development efforts in the fourth quarter of fiscal 2014 and has determined that the asset is an identifiable intangible asset with an estimated useful life of three years.  The results of operations of Enterasys are included in the consolidated results of operations beginning October 31, 2013. For the year ended June 30, 2014, $227.7 million of revenue and $13.5 million of operating income from Enterasys are included in the consolidated statement of operations.  The Company incurred $6.0 million of acquisition-related expenses for the year ended June 30, 2014. Such acquisition-related costs are included in "Acquisition and integration costs" on the consolidated statement of operations.  The costs, which the Company expensed as incurred, consist primarily of professional fees payable to financial and legal advisors.