Business Combinations

6 Months Ended

Sep. 30, 2011

Business Combinations [Abstract]

Business Combinations

(6) BUSINESS COMBINATIONS

PopCap Games Inc. Acquisition

In August 2011, we acquired all of the outstanding shares of PopCap for an aggregate purchase price of approximately (1) $645 million in cash and (2) $87 million in privately-placed shares of our common stock to the founders and chief executive officer of PopCap. In addition, we agreed to grant over a four year period to PopCap's employees up to $50 million in long-term equity retention arrangements in the form of restricted stock unit awards and options to acquire our common stock. These awards will be accounted for as stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation. PopCap is a leading provider of games for mobile phones, tablets, PCs, and social network sites. This acquisition strengthens our participation in casual gaming and contributes to the growth of our digital product offerings. The following table summarizes the acquisition date fair value of the consideration transferred which consisted of the following (in millions):

Cash	$	645
Equity		87
Total purchase price	$	732

The equity included in the consideration above consisted of privately-placed shares of our common stock, whose fair value was determined based on the quoted market price of our common stock on the date of acquisition.

In addition, we may be required to pay additional variable cash consideration that is contingent upon the achievement of certain performance milestones through December 31, 2013 and is limited to a maximum of $550 million based on achievement of certain non-GAAP earnings before interest and tax targets. The preliminary estimated fair value of the contingent consideration arrangement at the acquisition date was $95 million. We estimated the fair value of the contingent consideration using probability assessments of expected future cash flows over the period in which the obligation is expected to be settled, and applied a discount rate that appropriately captures a market participant's view of the risk associated with the obligation.

The preliminary allocation of the purchase price was based upon preliminary valuations for the intangible assets, deferred taxes, and contingent consideration liabilities, and will be completed during the third quarter of fiscal year 2012. The preliminary allocation of the purchase price may have material adjustments when the valuations have been completed. The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of September 30, 2011 (in millions):

Current assets	$	62
Property and equipment, net		6
Goodwill		565
Finite-lived intangibles assets		302
Contingent consideration		(95	)
Deferred income taxes, net		(55	)
Other liabilities		(53	)
Total purchase price	$	732

All of the goodwill was assigned to our EA Brands Segment. None of the goodwill recognized upon acquisition is deductible for tax purposes. See Note 7 for additional information related to the changes in the carrying amount of goodwill and Note 17 for segment information.

The results of operations of PopCap and the estimated fair market values of the assets acquired and liabilities assumed have been included in our Condensed Consolidated Financial Statements since the date of acquisition.

Finite-lived intangible assets acquired in this transaction are being amortized on a straight-line basis over their estimated lives ranging from three to nine years. The intangible assets as of the date of the acquisition include:

	Gross Carrying Amount (in millions)		Weighted-Average Useful Life (in years)
Developed and core technology	$	245	6
Trade names and trademarks		40	9
In-process research and development		15	5
Other intangibles		2	4
Total finite-lived intangibles	$	302	6

In connection with our acquisition of PopCap, we acquired in-process research and development assets valued at approximately $15 million in relation to game software that had not reached technical feasibility as of the date of acquisition. The fair value of PopCap's products under development was determined using the income approach, which discounts expected future cash flows from the acquired in-process technology to present value. The discount rates used in the present value calculations were derived from an average weighted average cost of capital of 13 percent. Should the in-process software not be successfully completed, completed at a higher cost, or the development efforts go beyond the timeframe estimated by management, we may not receive the full benefits anticipated from the acquisition. Benefits from the development efforts are expected to begin to be received in fiscal year 2012 and the development efforts are expected to be completed in fiscal year 2013.

There were six in-process research and development projects acquired as of the acquisition date each with $4 million or less of assigned fair value and $15 million of aggregate fair value. Additionally each project had less than $2 million of estimated costs to complete and $5 million aggregate cost to complete. As of the acquisition date, the weighted-average estimated percentage completion of all six projects combined was 36 percent.

Our Condensed Consolidated Financial Statements included the results of operations of PopCap from the date of acquisition. Pro forma results of operations have not been presented because the effect of the acquisition was not material to our Condensed Consolidated Statements of Operations.

Other Acquisitions

During the six months ended September 30, 2011, we completed three acquisitions that did not have a significant impact on our Condensed Consolidated Financial Statements.