Acquisitions

LaCie S.A.

On August 3, 2012 the Company acquired 23,382,904 (or approximately 64.5%) of the outstanding shares of LaCie S.A. (“LaCie”) for a price of €4.05 per share with a price supplement of €0.12 per share, which would have been payable if the Company had successfully acquired at least 95% of the outstanding shares of LaCie within 6 months of the acquisition. Of the amount paid at the acquisition date, €9 million is treated as compensation cost to one of the selling shareholders, who is now an employee of the Company, to be recognized over a period of 36 months from the acquisition date, and may be refunded to the Company if the selling shareholder is no longer employed at the end of that period. The transaction and related agreements are expected to accelerate the Company's growth strategy in the expanding consumer storage market, particularly in Europe, Japan and in premium distribution channels.

The acquisition-date fair value of the consideration transferred for the business combination totaled $111 million, including cash paid of $107 million, and contingent consideration of $4 million.

The following table summarizes the estimated fair values of the assets acquired, liabilities assumed, and noncontrolling interest at the acquisition date (in millions):



Cash and cash equivalents	$	71
Accounts receivable	29
Marketable securities	27
Inventories	46
Other current and non-current assets	19
Property, plant and equipment	12
Intangible assets	45
Goodwill	13
Total assets	262
Accounts payable and accrued expenses	(73		)
Current and non-current portion of long-term debt	(6		)
Total liabilities	(79		)
Noncontrolling interest	(72		)
Total	$	111

The following table shows the fair value of the separately identifiable intangible assets at the time of acquisition and the period over which each intangible asset will be amortized:



(Dollars in millions)	Fair Value		Weighted- Average Amortization Period
Customer relationships	$	31	5.0 years
Existing technology	1		5.0 years
Trade name	13		5.0 years
Total acquired identifiable intangible assets	$	45

Since the acquisition date, the Company recorded adjustments to the fair value of certain assets acquired and liabilities assumed with LaCie S.A. that resulted in a net increase of $1 million to Goodwill, and a corresponding decrease in Intangible assets.

The goodwill recognized is attributable primarily to the benefits the Company expects to derive from LaCie's brand recognition and the acquired workforce, and is not deductible for income tax purposes. The acquisition date fair value of the noncontrolling interest is based on the market price of their publicly traded shares as of the first trading date subsequent to the acquisition, as the shares did not trade on the acquisition date.

The Company incurred $1 million of expenses related to the acquisition of LaCie during fiscal year 2013, which are included within Marketing and administrative expense on the Consolidated Statement of Operations. Additionally, the €0.12 supplement was not paid as only 94.5% of the LaCie business was acquired within six months of the acquisition date, resulting in a reversal of the contingent consideration liability which was recorded as a reduction of Marketing and administrative expenses of $4 million.

The amounts of revenue and earnings of LaCie included in the Company's Consolidated Statement of Operations from the acquisition date are not significant.

The Company deposited $72 million into an escrow account with the intention of acquiring the remaining publicly held shares of LaCie through public and private transactions. As of June 28, 2013, a total of $61 million of the Company's deposit had been used to acquire an additional 30% of the outstanding shares, resulting in an ending ownership interest of approximately 94.5%. The use of this deposit is treated as a non-cash financing activity and excluded from the Statement of Cash Flows.

Samsung Hard Disk Drive Operations

On December 19, 2011, the Company completed the acquisition of Samsung Electronics Co., Ltd's (“Samsung”) hard disk drive business pursuant to an Asset Purchase Agreement (“APA”) by which the Company acquired certain assets and liabilities of Samsung relating to the research and development, manufacture and sale of hard-disk drives. The transaction and related agreements are expected to improve the Company's position as a supplier of 2.5-inch products; position the Company to better address rapidly evolving opportunities in markets including, but not limited to, mobile computing, cloud computing and solid state storage; expand the Company's customer access in China and Southeast Asia; and accelerate time to market for new products.

The acquisition-date fair value of the consideration transferred totaled $1,140 million, which consisted of $571 million of cash, $10 million of which was paid as a deposit upon signing the APA in the fourth quarter of fiscal year 2011, and 45.2 million ordinary shares with a fair value of $569 million. The fair value of the ordinary shares issued was determined based on the closing market price of the Company's ordinary shares on the acquisition date, less a 16.5% discount for lack of marketability as the shares issued are subject to a restriction that limits their trade or transfer for approximately a one year period.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):



Inventories	$	141
Equipment	76
Intangible assets	580
Other assets	28
Total identifiable assets acquired	825
Warranty liability	(72		)
Other liabilities	(45		)
Total liabilities assumed	(117		)
Net identifiable assets acquired	708
Goodwill	432
Net assets acquired	$	1,140

The following table shows the fair value of the separately identifiable intangible assets at the time of acquisition and the period over which each intangible asset will be amortized:



(Dollars in millions)	Fair Value		Weighted- Average Amortization Period

Existing technology	$	137	2.0 years
Customer relationships	399		5.8 years
Total amortizable intangible assets acquired	536		4.8 years
In-process research and development	44
Total acquired identifiable intangible assets	$	580

During fiscal year 2012, the Company recorded adjustments to the fair value of certain assets acquired and liabilities assumed with the Samsung HDD business that resulted in a net decrease of $5 million to goodwill. These adjustments included a $7 million increase in other assets for spare parts and a $3 million increase to equipment, offset by a $3 million increase in warranty liability and a $2 million increase in other liabilities related to certain assumed vendor obligations. These adjustments were based on information about facts and circumstances that existed at the acquisition date.

The $432 million of goodwill recognized is attributable primarily to the benefits the Company expects to derive from enhanced scale and efficiency to better serve its markets and expanded customer presence in China and Southeast Asia. Except for approximately $4 million of goodwill relating to assembled workforce in Korea, none of the goodwill is expected to be deductible for income tax purposes.

The Company incurred a total of $22 million of expenses related to the acquisition of Samsung in fiscal year 2012, which are included within Marketing and administrative expense on the Consolidated Statement of Operations.

The amounts of revenue and earnings of the acquired assets of Samsung's HDD business included in the Company's Consolidated Statement of Operations from the acquisition date to the period ended June 29, 2012, were as follows:



(Dollars in millions)
Revenue	$	970
Net income	$	104

The unaudited pro forma financial results presented below for fiscal years ended June 29, 2012 and July 1, 2011, include the effects of pro forma adjustments as if the acquisition date occurred as of the beginning of the prior fiscal year on July 3, 2010. The pro forma results combine the historical results of the Company for the fiscal years ended June 29, 2012 and July 1, 2011, respectively, and the historical results of the acquired assets and liabilities of Samsung's HDD business, and include the effects of certain fair value adjustments and the elimination of certain activities excluded from the transaction. The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the earliest period presented, nor is it intended to be a projection of future results.



	Fiscal Years Ended
(Dollars in millions)	June 29, 2012		July 1, 2011
Revenue	$	16,113	$	13,853
Net income	$	2,761	$	370

The pro forma results for the fiscal years ended June 29, 2012 and July 1, 2011, include adjustments of $65 million and $115 million, respectively, to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied on July 3, 2010.