Intangible Assets and Goodwill

The Company accounts for acquisitions using purchase accounting with the results of operations for each acquiree included in the Company's condensed consolidated financial statements for the period subsequent to the date of acquisition.

Guardian Digital Communications Limited

On February 19, 2016, the Company completed the acquisition of Guardian Digital Communications Limited ("GDCL"), a holding company of Airwave Solutions Limited (collectively referred to as "Airwave"), the largest private operator of a public safety network in the world. All of the outstanding equity of Airwave was acquired for the sum of £1, after which the Company invested into Airwave £698 million, net of cash acquired, or approximately $1.0 billion, to settle all third party debt. The Company will make a deferred cash payment of £64 million on November 15, 2018.

The acquisition of Airwave enables the Company to geographically diversify its global Managed & Support services offerings, while offering a proven service delivery platform to build on for providing innovative, leading, mission-critical communications solutions and services to customers.

The acquisition of Airwave has been accounted for at fair value as of the acquisition date, based on the fair value of the total consideration transferred which has been attributed to all identifiable assets acquired and liabilities assumed and measured at fair value.

The total consideration for the acquisition of Airwave was approximately $1.1 billion, consisting of cash payments of $1.0 billion, net of cash acquired, and deferred consideration valued at fair value on the date of the acquisition of $82 million. The fair value of deferred consideration has been determined based on its net present value, calculated using a discount rate of 4.2%, which is reflective of the credit standing of the combined entity. The following table summarizes fair values of assets acquired and liabilities assumed as of the February 19, 2016 acquisition date:



Cash	$	86
Accounts receivable, net	55
Other current assets	36
Property, plant and equipment, net	245
Deferred income taxes	82
Accounts payable	(18		)
Accrued liabilities	(181		)
Other liabilities	(289		)
Goodwill	191
Intangible assets	875
Total consideration	$	1,082
Net present value of deferred consideration payment to former owners	(82		)
Net cash consideration at purchase	$	1,000

Acquired intangible assets consist of $846 million of customer relationships and $29 million of trade names. All intangibles have a useful life of seven years, over which amortization expense will be recognized on a straight line basis. Acquired goodwill of $191 million is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized. Goodwill is not deductible for tax purposes.

Other Acquisitions

On July 28, 2017, the Company announced its intention to purchase Plant Holdings, Inc., which owns the Airbus DS Communications business. This acquisition will expand the Company's software portfolio in the Command Center with additional solutions for Next Gen 9-1-1.

On May 1, 2017, the Company announced its intention to purchase Kodiak Networks, a provider of broadband push-to-talk (PTT) for commercial customers. The acquisition of Kodiak Networks reflects Motorola Solutions' strategy to build its communications and collaboration software portfolio. The acquisition is expected to be completed later this year.

On March 13, 2017, the Company completed the acquisition of Interexport, a company that provides Managed & Support services for communications systems to public safety and commercial customers in Chile, for a gross purchase price of $98 billion Chilean Pesos, or approximately $147 million U.S. Dollars based on cash proceeds of $55 million, net of cash acquired, and assumed liabilities of $92 million, primarily related to capital leases. As a result of the acquisition, the Company recognized $7 million of goodwill, $61 million of identifiable intangible assets, $70 million of acquired property, plant and equipment and $9 million of net other tangible assets. The estimated identifiable intangible assets were classified as $56 million of customer-related intangibles and $5 million of other intangibles and will be amortized over a period of seven years.

On November 10, 2016, the Company completed the acquisition of Spillman Technologies, Inc., a provider of comprehensive law enforcement and public safety software solutions, for a gross purchase price of $221 million. As a result of the acquisition, the Company recognized $144 million of goodwill, $115 million of identifiable intangible assets, and $38 million of acquired liabilities. The identifiable intangible assets were classified as $49 million of completed technology, $59 million of customer-related intangibles, and $7 million of other intangibles and will be amortized over a period of seven to ten years.

During the year ended December 31, 2016, the Company completed the acquisition of several software and service-based providers for a total of $30 million, recognizing $6 million of goodwill, $15 million of intangible assets, and $9 million of tangible net assets related to these acquisitions. Under the preliminary purchase accounting, the $15 million of identifiable intangible assets were classified as: (i) $7 million of completed technology and (ii) $8 million of customer-related intangibles and will be amortized over a period of five years. During the first quarter of 2017, the Company completed the purchase accounting and recorded an additional $11 million completed technology intangible asset that will be amortized over a period of eight years.

Intangible Assets

Amortized intangible assets were comprised of the following:



	July 1, 2017				December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Completed technology	$	128	$	46	$	116	$	38
Patents	8		7		8		6
Customer-related	918		167		810		101
Other intangibles	54		20		49		17
	$	1,108	$	240	$	983	$	162

Amortization expense on intangible assets was $37 million for the three months ended July 1, 2017 and $73 million for the six months ended July 1, 2017. Amortization expense on intangible assets was $38 million for the three months ended July 2, 2016 and $52 million for the six months ended July 2, 2016. The increase in amortization expense is primarily due to the acquisition of Airwave, Spillman Technologies, Inc. and Interexport. As of July 1, 2017, annual amortization expense is estimated to be $144 million in 2017, $148 million in 2018, $147 million in 2019, $144 million in 2020, $143 million in 2021, and $140 million in 2022.

Amortized intangible assets, excluding goodwill, were comprised of the following by segment:



	July 1, 2017				December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Products	$	178	$	73	$	178	$	63
Services	930		167		805		99
	$	1,108	$	240	$	983	$	162

Goodwill

The following table displays a rollforward of the carrying amount of goodwill by segment from January 1, 2017 to July 1, 2017:



	Products		Services		Total
Balance as of January 1, 2017
Goodwill, net of impairment losses	$	316	$	412	$	728
Goodwill acquired	—		7		7
Purchase accounting adjustments	1		3		4
Foreign currency	—		10		10
Balance as of July 1, 2017
Goodwill, net of impairment losses	$	317	$	432	$	749