Acquisitions and Divestitures

Fiscal 2018 acquisitions

Fireglass Ltd. and Skycure Ltd. acquisitions

In July 2017, we completed our acquisitions of Israel-based Fireglass Ltd. (“Fireglass”) and Skycure Ltd. (“Skycure”). Fireglass provides agentless isolation solutions that prevent ransomware, malware, and phishing threats in real-time from reaching user endpoints or the corporate network. With this acquisition, we further strengthened our enterprise security strategy to deliver an Integrated Cyber Defense platform and extended our participation in the Secure Web Gateway and Email protection markets delivered both on premises and in the cloud. Skycure provides mobile threat defense for devices running modern operating systems, including iOS and Android. This acquisition extends our endpoint security capabilities. With the addition of Skycure, our Integrated Cyber Defense Platform now enables visibility into and control over all endpoint devices, including mobile devices, whether corporate owned or bring your own device. The total aggregate consideration for these acquisitions, primarily consisting of cash, was $345 million, net of $15 million cash acquired.

Our allocation of the aggregate purchase price for these two acquisitions as of July 24, 2017, was as follows:



(In millions, except useful lives)	Fair Value			Weighted-Average Estimated Useful Life
Developed technology	$	123		5.5 years
Customer relationships	11			7.0 years
Goodwill	247
Deferred income tax liabilities	(35		)
Other liabilities	(1		)
Total purchase price	$	345

The goodwill arising from the acquisitions is attributed to the expected synergies, including revenue benefits that are expected to be generated by combining Fireglass and Skycure with Symantec. A portion of the goodwill recognized is expected to be deductible for tax purposes. See Note 4 for more information on goodwill.

Other fiscal 2018 acquisitions

During fiscal 2018, in addition to the acquisitions mentioned above, we completed acquisitions of other companies for an aggregate purchase price of $66 million, net of $1 million cash acquired. Of the aggregate purchase price, $48 million was recorded to goodwill.

Pro forma results of operations for our fiscal 2018 acquisitions have not been presented because they were not material to our consolidated results of operations, either individually or in the aggregate.

Fiscal 2017 acquisitions

Blue Coat, Inc. acquisition

On August 1, 2016, we acquired all of the outstanding common stock of Blue Coat, Inc. (“Blue Coat”), a provider of advanced web security solutions for global enterprises and governments. The addition of Blue Coat’s suite of network and cloud security products to our innovative Enterprise Security product portfolio has enhanced our threat protection and information protection products while providing us with complementary products, such as advanced web and cloud security solutions, that address the network and cloud security needs of enterprises.

The total consideration for the acquisition of Blue Coat was approximately $4.7 billion, net of cash acquired, and consisted of the following:



(In millions)
Cash payments, net of cash acquired	$	3,783
Issuance of Symantec 2.0% convertible debt to Bain Capital Funds (selling shareholder)	750
Fair value of vested assumed stock options	102
Common stock issued	38
Total	$	4,673

Our allocation of the purchase price, based on the fair values of the assets acquired and liabilities assumed was as follows:



(In millions)
Assets:
Current assets	$	190
Intangible assets	1,608
Goodwill	4,084
Other long-term assets	63
Liabilities:
Other current liabilities	(113		)
Deferred revenue	(220		)
Deferred tax liabilities	(920		)
Other long-term obligations	(19		)
Total	$	4,673

The goodwill of $4.1 billion arising from the acquisition is attributed to the expected synergies, including future cost efficiencies, and other benefits that are expected to be generated by combining Symantec and Blue Coat. The goodwill recognized is not deductible for tax purposes. See Note 4 for more information on goodwill.

Identified intangible assets and their respective useful lives were as follows:



(In millions, except for useful lives)	Fair Value		Weighted-Average Estimated Useful Life
Customer relationships	$	844	7.0 years
Developed technology and patents	739		4.3 years
Finite-lived trade names	4		2.0 years
Product backlog	2		0.3 years
Total identified finite-lived intangible assets	1,589
In-process research and development	19		N/A
Total identified intangible assets	$	1,608

The fair value of in-process research and development (“IPR&D”) was determined using the relief-from-royalty method. A key assumption of this method is a hypothetical technology licensing rate applied to forecasted revenue. The premise associated with this valuation method is that, in lieu of ownership of the asset, a market participant would be willing to pay a licensing fee for the use of that asset.

Our results of continuing operations in fiscal 2017 included $427 million of net revenues attributable to Blue Coat products beginning August 1, 2016. It was impracticable to determine the amounts of net income attributable to Blue Coat as we integrated Blue Coat with our ongoing operations. Net revenues and costs related to the Blue Coat products were included in our Enterprise Security segment results since the acquisition. Transaction costs of $48 million incurred by Symantec in connection with the acquisition were included in operating expenses in our Consolidated Statements of Operations during fiscal 2017. See Note 14 for more information on our segments.

LifeLock, Inc. acquisition

On February 9, 2017, we completed the acquisition of LifeLock, Inc. (“LifeLock”) a provider of proactive identity theft protection services for consumers and consumer risk management services for enterprises, for approximately $2.3 billion in total consideration. LifeLock’s services are provided on a monthly or annual subscription basis and provide identification and notification of identity-related and other events and assist users in remediating their impact.

The total consideration for the acquisition of LifeLock was approximately $2.3 billion, net of cash acquired, and consisted of the following:



(In millions)
Cash payments, net of cash acquired	$	2,204
Fair value of vested assumed equity awards	10
Liability assumed for dissenting shareholders	68
Other liabilities	1
Total	$	2,283

In connection with this acquisition, we recognized a liability of $68 million for a claim related to appraisal rights by a LifeLock stockholder, which we settled in the second quarter of fiscal 2018 for $74 million in cash. The $6 million paid in addition to the recognized liability was recorded to general and administrative expense in our Consolidated Statements of Operations.

Our allocation of the purchase price, based on the fair values of the assets acquired and liabilities assumed was as follows:



(In millions)
Assets:
Current assets	$	123
Intangible assets	1,247
Goodwill	1,397
Other long-term assets	75
Liabilities:
Deferred revenue	(96		)
Other current liabilities	(62		)
Deferred tax liabilities	(387		)
Other long-term obligations	(14		)
Total	$	2,283

The goodwill arising from the acquisition is attributed to the expected synergies, including future cost efficiencies, and other benefits that are expected to be generated by combining Symantec and LifeLock. The goodwill recognized is not deductible for tax purposes. See Note 4 for more information on goodwill.

Identified intangible assets and their respective useful lives were as follows:



(In millions, except for useful lives)	Fair Value		Weighted-Average Estimated Useful Life
Customer relationships	$	532	7.0 years
Developed technology	126		5.0 years
Finite-lived trade names and other	6		5.9 years
Total identified finite-lived intangible assets	664
Indefinite-lived trade names	583		N/A
Total identified intangible assets	$	1,247

The impact of this acquisition on our operating results for fiscal 2017 included $72 million and $98 million, of net revenues and a pre-tax loss, respectively, attributable to LifeLock beginning February 9, 2017. LifeLock’s revenues of $67 million and $5 million were included in our Consumer Digital Safety and Enterprise Security segment results, respectively, during fiscal 2017. Transaction costs of $21 million incurred by Symantec in connection with the acquisition were included in operating expenses in our Consolidated Statements of Operations during fiscal 2017. See Note 14 for more information on our segments.

Unaudited combined pro forma information

The unaudited pro forma financial results combine the historical results of Symantec, Blue Coat and LifeLock for fiscal years 2017 and 2016. The results include the effects of pro forma adjustments as if Blue Coat and LifeLock were acquired at the beginning of our 2016 fiscal year and include adjustments for amortization of acquired intangible assets, stock-based compensation, commissions, interest on debt used to finance the acquisition, and acquisition-related transaction costs, as well as for the income tax effect of these pro forma adjustments.

The unaudited pro forma financial results presented below do not include any anticipated synergies or other expected benefits of the acquisitions. These pro forma results are presented for informational purposes only and are not indicative of future operations or results that would have been achieved had the acquisition been completed as of the beginning of our 2016 fiscal year. The following table summarizes the pro forma financial information:



	Year Ended
(In millions)	March 31, 2017			April 1, 2016
Net revenues	$	4,817		$	4,803
Net income (loss)	$	(174	)	$	1,791

Fiscal 2018 Divestiture

Website Security and Public Key Infrastructure solutions

On October 31, 2017, we completed the sale of our WSS and PKI solutions of our Enterprise Security segment to DigiCert. In accordance with the terms of the agreement, we received aggregate consideration of $1.1 billion, consisting of approximately $951 million in cash and shares of common stock representing an approximate 28% interest in the outstanding common stock of DigiCert valued at $160 million as of October 31, 2017.

We determined the estimated fair value of our equity investment with the assistance of valuations performed by third party specialists and estimates made by management. We utilized a combination of the income approach based on a discounted cash flow method and market approach based on the guideline public company method that focuses on comparing DigiCert to reasonably similar publicly traded companies. See Note 6 for additional information regarding our equity investment.

As of the transaction close date, the carrying amounts of the major classes of assets and liabilities associated with the divestiture of our WSS and PKI solutions were as follows:



(In millions)
Assets:
Cash and cash equivalents	$	2
Accounts receivable, net	34
Goodwill and intangible assets, net	670
Other assets	40
Total assets	746
Liabilities:
Deferred revenue	285
Other liabilities	11
Total liabilities	$	296

As of the transaction close date, we also had $8 million in cumulative currency translation losses related to subsidiaries that were sold, which was reclassified from AOCI to the gain on divestiture. In addition, we incurred direct costs of $8 million, which was netted against the gain on divestiture, and tax expense of $123 million.

The following table presents the gain before income taxes associated with the divestiture:



(In millions)
Gain on sale of short-term investment	$	7
Gain on sale of other assets and liabilities	646
Total gain on divestiture	$	653

The gain on sale of short-term investment represents the gain on the sale of a short-term investment that was included in the transaction and resulted in the reclassification on the transaction close date of $7 million of unrealized gains from AOCI to the gain on divestiture.

The following table presents the income before income taxes for our WSS and PKI solutions for the periods indicated:



	Year Ended
(In millions)	March 30, 2018		March 31, 2017
Income before income taxes	$	66	$	206

Fiscal 2016 Divestiture

Veritas

On January 29, 2016, we completed the sale of Veritas. We received net consideration of $6.6 billion in cash excluding transaction costs and 40 million B common shares of Veritas, and Veritas assumed certain liabilities in connection with the acquisition. The disposition resulted in a net gain of $3.0 billion, which is presented as part of income from discontinued operations, net of income taxes in the Consolidated Statements of Operations for fiscal 2016. The results of Veritas are presented as discontinued operations in our Consolidated Statements of Operations and thus have been excluded from continuing operations and segment results for all reported periods.

In connection with the divestiture of Veritas, we entered into transition service agreements with Veritas pursuant to which we provide Veritas certain limited services including financial support services, information technology services, and access to facilities, and Veritas provides us certain limited financial support services. These agreements commenced with the close of the transaction and expire at various dates through fiscal 2019. Income, net of direct cost, for all services provided to Veritas were approximately $0 million, $22 million and $8 million during fiscal 2018, 2017 and 2016, respectively, which were presented as part of Other income (expense), net in the Consolidated Statements of Operations.

We have retained various customer relationships and contracts that were reported historically as a part of the Veritas business. Approximately $24 million and $71 million related to these relationships and contracts have been reported as part of our deferred revenue in the Consolidated Balance Sheets as of March 30, 2018 and March 31, 2017, respectively, along with an asset representing the service and maintenance rights we have under an agreement with Veritas of $8 million and $41 million, respectively. These balances are being amortized to discontinued operations through the remaining term of the underlying contracts.

The following table presents information regarding certain components of income from discontinued operations, net of income taxes:



	Year Ended
(In millions)	March 30, 2018			March 31, 2017			April 1, 2016
Net revenues	$	54		$	172		$	1,968
Cost of revenues	(23		)	(15		)	(334		)
Operating expenses	(21		)	(26		)	(1,270		)
Gain on sale of Veritas	—			31			4,060
Other income, net	—			1			3
Income from discontinued operations before income taxes	10			163			4,427
Income tax expense (benefit)	(1		)	33			1,118
Income from discontinued operations, net of income taxes	$	11		$	130		$	3,309

During fiscal 2017 we received additional payments which represented purchase price adjustments for the sale of Veritas.