Business Combinations, Intangibles and Goodwill

Acquisition of Virtustream

On July 9, 2015, EMC acquired all of the outstanding capital stock of Virtustream Group Holdings, Inc. (“Virtustream”), a cloud software and services company that delivers mission-critical enterprise applications in the cloud. This acquisition represents a key element of EMC’s strategy to help customers move applications to cloud-based IT environments. The consideration paid for Virtustream was $1,219 million, net of cash acquired.

The following table summarizes the allocation of the consideration to the fair value of the assets acquired and net liabilities assumed, net of cash acquired (table in millions):



Current assets	$	18
Property, plant and equipment, net	14
Intangible assets:
Purchased technology (weighted-average useful life of 8.6 years)	302
Customer relationships and customer lists (weighted-average useful life of 12.3 years)	50
Trademarks and tradenames (weighted-average useful life of 7.6 years)	27
Total intangible assets, net, excluding goodwill	379
Goodwill	891
Other assets, net	12
Total assets acquired	1,314
Current liabilities	(27		)
Deferred income taxes	(61		)
Other liabilities	(7		)
Total net liabilities assumed	(95		)
Fair value of assets acquired and net liabilities assumed	$	1,219

The total weighted-average amortization period for the intangible assets is 9.0 years. The intangible assets are being amortized over the pattern in which the economic benefits of the intangible assets are being utilized, which in general reflects the cash flows generated from such assets. Goodwill is calculated as the excess of the consideration over the fair value of the net assets, including intangible assets, recognized and is primarily related to expected synergies from the transaction, including complementary products that will enhance our overall product portfolio, which we believe will result in incremental revenue and profitability. The goodwill associated with this acquisition is currently reported within our Information Storage segment. None of the goodwill is deductible for tax purposes. The results of this acquisition have been included in the consolidated financial statements from the date of purchase. Pro forma results of operations have not been presented as the results of the acquired company were not material to our consolidated results of operations for the nine months ended September 30, 2015 or 2014.

Other Acquisitions

During the nine months ended September 30, 2015, EMC acquired five businesses, excluding Virtustream, which were not material either individually or in the aggregate to our September 30, 2015 results. Complementing the Information Storage segment, we acquired all of the outstanding capital stock of Renasar Technologies, Inc., a provider of extensible physical middleware, CloudLink, a provider of cloud data security software and Graphite Systems, a developer of server-side flash storage. Complementing our Pivotal segment, we acquired all of the outstanding capital stock of Quickstep Technologies, LLC, a query execution technology developer. VMware acquired all of the outstanding capital stock of Immidio B.V.

The aggregate consideration for these five acquisitions was $89 million which represents cash consideration, net of cash acquired in the third quarter of 2015. The consideration was allocated to the fair value of the assets acquired and liabilities assumed based on estimated fair values as of the respective acquisition dates. The aggregate allocation to goodwill, intangibles, and net liabilities was approximately $64 million, $33 million and $8 million, respectively.

The intangible assets acquired were primarily comprised of purchased developed technology which have a weighted-average amortization period of 3.6 years. Most of our intangible assets are being amortized based upon the pattern in which the economic benefits of the intangible assets are being utilized; the remainder are amortized on a straight-line basis. Goodwill is calculated as the excess of the consideration over the fair value of the net assets, including intangible assets, and is primarily related to expected synergies from the transaction. The goodwill is not deductible for U.S. federal income tax purposes. The results of these acquisitions have been included in the consolidated financial statements from the date of purchase. Pro forma results of operations have not been presented as the results of the acquired companies were not material to our consolidated results of operations for the three and nine months ended September 30, 2015 or 2014.

Intangible Assets

Intangible assets, excluding goodwill, as of September 30, 2015 and December 31, 2014 consist of (tables in millions):



	September 30, 2015
	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Purchased technology	$	3,266	$	(1,845	)	$	1,421
Patents	225		(128		)	97
Software licenses	111		(94		)	17
Trademarks and tradenames	253		(151		)	102
Customer relationships and customer lists	1,523		(1,060		)	463
Leasehold interest	152		(19		)	133
Other	46		(40		)	6
Total intangible assets, excluding goodwill	$	5,576	$	(3,337	)	$	2,239



	December 31, 2014
	Gross Carrying Amount		Accumulated Amortization			Net Book Value
Purchased technology	$	2,935	$	(1,668	)	$	1,267
Patents	225		(117		)	108
Software licenses	108		(93		)	15
Trademarks and tradenames	226		(136		)	90
Customer relationships and customer lists	1,473		(974		)	499
Leasehold interest	152		(16		)	136
Other	44		(34		)	10
Total intangible assets, excluding goodwill	$	5,163	$	(3,038	)	$	2,125

Goodwill

Changes in the carrying amount of goodwill, net, on a consolidated basis and by segment, for the nine months ended September 30, 2015 consist of (table in millions):



	Nine Months Ended September 30, 2015
	Information Storage		Enterprise Content Division			RSA Information Security		Pivotal		VMware Virtual Infrastructure		Total
Balance, beginning of the period	$	8,266	$	1,486		$	2,203	$	171	$	4,008	$	16,134
Goodwill resulting from acquisitions	935		—			—		3		17		955
Finalization of purchase price allocations and other, net	2		(8		)	—		—		—		(6		)
Balance, end of the period	$	9,203	$	1,478		$	2,203	$	174	$	4,025	$	17,083