Business Acquisitions and Divestitures

Acquisition-related costs were $4.2 million, $3.1 million and $5.8 million during the years ended December 31, 2014, 2013 and 2012, respectively, and are included in general and administrative expense in the consolidated statements of income. Pro forma results of operations for the acquisitions completed in 2014, 2013 and 2012 have not been presented because the effects of the acquisitions, individually or in the aggregate, are not material to the Company's consolidated financial results. Revenue and earnings since the date of the acquisitions included in the Company's consolidated statements of operations are also not included because they are not material.

2014 Acquisitions

Prolexic Acquisition

On February 18, 2014, the Company acquired all of the outstanding capital stock of Prolexic in exchange for $392.1 million in cash and the assumption of unvested stock options. The goal of acquiring Prolexic was to provide customers with a comprehensive portfolio of security solutions designed to defend an enterprise’s web and IP infrastructure against application-layer, network-layer and data center attacks delivered via the Internet. The consolidated financial statements include the operating results of Prolexic from the date of acquisition.

The purchase price allocation was finalized in the fourth quarter of 2014. The Company recorded an increase of $2.2 million to goodwill upon the finalization of measurement period adjustments related to certain tax-related assets and liabilities in the fourth quarter of 2014.

The following table presents the final allocation of the purchase price for Prolexic (in thousands):



Total purchase consideration	$	392,104

Allocation of the purchase consideration:
Cash	$	33,072
Accounts receivable	11,208
Property and equipment	12,225
Identifiable intangible assets	87,040
Goodwill	293,926
Deferred tax assets	16,340
Other current and long-term assets	5,664
Total assets acquired	459,475
Other current liabilities	(5,940		)
Current deferred revenue	(5,812		)
Deferred tax liabilities	(36,203		)
Debt, capital leases and other long-term liabilities	(19,416		)
Total liabilities assumed	(67,371		)
Net assets acquired	$	392,104

The value of the goodwill can be attributed to a number of business factors, including a trained technical and sales workforce and the fair value of expected cost synergies to be realized. The total amount of goodwill related to the acquisition of Prolexic expected to be deducted for tax purposes is $62.4 million.

The following were the identified intangible assets acquired and their respective weighted average useful lives (in thousands, except for years):



	Gross Carrying Amount		Weighted Average Useful Life (in years)
Completed technologies	$	26,800	6.9
Customer-related intangible assets	58,500		10.4
Non-compete agreements	940		3.0
Trademark	800		4.9
Total	$	87,040

The total weighted average amortization period for the intangible assets acquired from Prolexic is 9.2 years. The intangible assets are being amortized based upon the pattern in which the economic benefits of the intangible assets are being utilized.

2013 Acquisitions

Velocius Acquisition

On November 8, 2013, the Company acquired Velocius in exchange for $4.3 million in cash. In addition, the Company recorded a liability of $2.6 million for contingent consideration related to expected achievement of post-closing milestones. The maximum potential payout of the contingent consideration is $3.0 million. As of December 31, 2014, the first of two milestones was achieved and the remaining contingent consideration has a fair value of $0.9 million.

The Company acquired Velocius with a goal of complementing its hybrid cloud optimization strategy for optimizing IP application traffic across the Internet for remote and branch-end users. The Company allocated $5.4 million of the cost of the acquisition to goodwill and $2.5 million to acquired intangible assets. The allocation of the purchase price was finalized in the first quarter of 2014. The total weighted average useful life of the intangible assets acquired from Velocius is 7.9 years. The value of the goodwill from the acquisition can be attributed to a number of business factors including a trained technical workforce and cost synergies. The total amount of goodwill related to the acquisition of Velocius expected to be deducted for tax purposes is $0.3 million.

Strategic Network Transaction

On November 30, 2012, the Company entered into a strategic alliance with AT&T. Under the agreement, AT&T became a reseller of the Company's services and the Company acquired certain assets and contracted to purchase bandwidth, co-location and related services from AT&T. The Company entered into the agreement with a goal of expanding its content delivery network customer base and developing a relationship with AT&T as a bandwidth and co-location service provider. The transaction meets the definition of a business combination, and it was determined that the Company obtained control of the acquired assets in July 2013. The total consideration is $55.0 million, of which $27.5 million was paid during the third quarter of 2013 and $27.5 million was paid during the first quarter of 2014.

The Company allocated $30.2 million of the consideration to goodwill and $16.1 million to acquired intangible assets. The allocation of the purchase price was finalized in the fourth quarter of 2013. The weighted average useful life of the intangible assets acquired is 9.8 years. The value of the goodwill acquired can be attributed to expected synergies between AT&T and the Company related to future customer expansion and cost reductions. The total amount of goodwill expected to be deducted for tax purposes is $30.2 million.

2012 Acquisitions

Verivue Acquisition

On December 4, 2012, the Company acquired all of the outstanding common and preferred stock of Verivue, Inc. ("Verivue") in exchange for $30.9 million in cash. In addition, the Company recorded a liability of $1.2 million for contingent consideration related to expected achievement of post-closing milestones. The Company acquired Verivue with a goal of complementing its network operator solutions and accelerating time to market in providing a comprehensive, licensed content delivery network solution for network operators. The Company allocated $14.9 million of the cost of the acquisition to goodwill and $7.5 million to acquired intangible assets. The purchase price was finalized in the third quarter of 2013. The Company recorded a reduction of $5.8 million to goodwill upon the finalization of measurement period adjustments related to deferred tax assets and liabilities in the third quarter of 2013 and revised prior period balances to reflect the change.

The total weighted average useful life of the intangible assets acquired from Verivue is 6.4 years. The value of the goodwill from the acquisition can be attributed to a number of business factors, including a trained technical workforce in place in the United States and expected cost synergies. The total amount of goodwill related to the acquisition of Verivue expected to be deducted for tax purposes is $3.0 million. As of March 31, 2013, the Company determined the agreed upon post-closing milestones were not expected to be achieved and therefore expensed the $1.2 million contingent consideration recorded at December 31, 2012 as general and administrative expense in the consolidated statement of operations. As of December 31, 2014, the milestones were not achieved.

FastSoft Acquisition

On September 13, 2012, the Company acquired all of the outstanding common and preferred stock of FastSoft, Inc. ("FastSoft") in exchange for $14.4 million in cash. The Company acquired FastSoft with a goal of complementing the Company's Media Delivery Solutions with technology for optimizing the throughput of video and other digital content across IP networks. The Company allocated $7.1 million of the cost of the acquisition to goodwill and $3.7 million to acquired intangible assets. The allocation of the purchase price was finalized in the third quarter of 2013. The Company recorded a reduction of $1.8 million to goodwill upon the finalization of measurement period adjustments related to deferred tax assets and liabilities in the third quarter of 2013, and revised prior period balances to reflect the change.

The total weighted average useful life of the intangible assets acquired from FastSoft is 9.0 years. The value of the goodwill from the acquisition can be attributed to a number of business factors including a trained technical workforce in place in the U.S and cost synergies. The total amount of goodwill related to the acquisition of FastSoft expected to be deducted for tax purposes is $1.7 million.

Cotendo Acquisition

On March 6, 2012, the Company acquired all of the outstanding equity, of Cotendo, Inc. ("Cotendo") in exchange for $278.9 million in cash and assumption of unvested stock options. The Company acquired Cotendo with the intention of increasing the Company’s pace of innovation in the areas of site acceleration and mobile optimization.

The purchase price allocation was finalized in the third quarter of 2013, and at that time, the Company recorded a reduction of $7.8 million to goodwill upon the finalization of measurement period adjustments primarily related to deferred tax liabilities.

The following table presents the final allocation of the purchase price of Cotendo (in thousands):



Total purchase consideration	$	278,877

Allocation of the purchase consideration:
Current assets, including cash and cash equivalents of $6,405	$	6,751
Trade receivables	2,920
Property and equipment	5,812
Indemnification assets	6,200
Long-term assets	75
Identifiable intangible assets	43,800
Goodwill	233,828
Deferred tax liabilities	(15,376		)
Other liabilities assumed	(5,133		)
Net assets acquired	$	278,877

The value of the goodwill from the acquisition of Cotendo can be attributed to a number of business factors including potential sales opportunities to provide the Company's services to Cotendo customers; a trained technical workforce in place in the U.S. and Israel; a trained sales force; and cost synergies expected to be realized. The total amount of goodwill related to the acquisition of Cotendo expected to be deducted for tax purposes is $44.4 million.

The following were the identified intangible assets acquired and their respective weighted average useful lives (in thousands, except for years):



	Gross Carrying Amount		Weighted Average Useful Life (in years)
Completed technology	$	24,100	5.8
Customer relationships	13,400		8.8
Non-compete agreements	3,900		6.0
Trademarks and trade names	2,400		9.8
Total	$	43,800

The total weighted average amortization period for the intangible assets acquired from Cotendo is 7.1 years. The intangible assets are being amortized based upon the pattern in which the economic benefits of the intangible assets are being utilized.

Blaze

On February 7, 2012, the Company acquired all of the outstanding common and preferred stock, including vested and unvested stock options, of Blaze, Inc. ("Blaze") in exchange for $19.3 million in cash and assumption of unvested stock options. The Company acquired Blaze with a goal of complementing the Company's site acceleration solutions with technology designed to optimize the speed at which a web page is rendered. The Company allocated $15.1 million of the cost of the acquisition to goodwill and $5.1 million to acquired intangible assets. The purchase price allocation was finalized during 2012. The total weighted average useful life of the intangible assets acquired from Blaze is 5.3 years. The value of the goodwill from this acquisition can be attributed to a number of business factors including a trained technical workforce in place in Canada and cost synergies expected to be realized. The total amount of goodwill related to the acquisition of Blaze expected to be deducted for tax purposes is $13.5 million.

Divestitures

ADS Divestiture

Consistent with its strategy to prioritize higher-margin businesses, the Company sold its ADS business to MediaMath, Inc. ("MediaMath") in exchange for a $25.0 million face value convertible note receivable (Note 3). The transaction closed during the first quarter of 2013. These operations were not material to the Company's annual net sales, net income or earnings per share, and no significant gains or losses were realized on the transaction. The accompanying consolidated financial statements for the year ended December 31, 2013 include the impact of approximately one month of ADS operations prior to the sale. All assets and liabilities used by the ADS operations have been excluded from the consolidated balance sheets. Simultaneously with the sale, the Company entered into a multi-year relationship agreement whereby MediaMath will have exclusive rights to leverage the Company's pixel-free technology for use within digital advertising and marketing applications.

During the second quarter of 2014, the convertible note receivable was amended. Under the terms of the amendment, the note became convertible into shares of preferred stock of the issuer valued at $12.5 million at the time of conversion and is included in other assets in the consolidated balance sheet as of December 31, 2014; the remaining $12.5 million was received in cash during the second and third quarters of 2014.