Business Combinations and Divestitures

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Business Combinations and Divestitures

Business Combinations and Divestitures

Acquisitions

On October 27, 2014, the Company completed the Acquisition from MSI for a purchase price of $3.45 billion. The Acquisition enables the Company to further sharpen its strategic focus on providing mission-critical Enterprise Asset Intelligence solutions for its customers. Certain assets and liabilities historically associated with the Enterprise business were retained by MSI, including MSI’s iDEN infrastructure business. The Acquisition was completed pursuant to the Master Acquisition Agreement dated April 14, 2014, as amended (the “Master Acquisition Agreement”) and was structured as a combination of stock and asset acquisitions and a merger of certain US entities, resulting in 100% ownership of Enterprise.

The Company financed the Acquisition through a combination of cash on hand and borrowings of $3.25 billion (the “Indebtedness”), including the sale of 7.25% senior notes due 2022 in an aggregate principal amount of $1.05 billion and a credit agreement with various lenders that provided a term loan of $2.2 billion due 2021. See Note 9 Long-Term Debt. The consideration paid to MSI was 100% cash in the amount of $3.45 billion. During the year ended December 31, 2015, the Company paid additional consideration of $52 million to MSI, which included a $2 million opening cash adjustment and settlement of working capital adjustments.

Goodwill represents the consideration paid in excess of the fair value of the net tangible and intangible assets acquired. The Company paid this premium for a number of reasons, including acquiring an experienced workforce and enhanced technology capabilities as further described above.

The purchase price was allocated to identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values resulting in goodwill of $2.3 billion. See Note 4 Goodwill and Other Intangibles, net. Certain intangible assets including goodwill are denominated in foreign currency and, as such, include the effects of foreign currency translation.

Divestitures

On September 13, 2016, the Company entered into an Asset Purchase Agreement with Extreme Networks, Inc. to dispose of its wireless LAN (“WLAN”) business (“Divestiture Group”) for a gross purchase price of $55 million. The Company recorded net proceeds of $39 million as of December 31, 2016. Final working capital adjustments are expected to be completed in 2017.

In the third quarter of 2016, the Company incurred a non-cash pre-tax charge of $62 million related to the divestiture group consisting of impairments of goodwill for $32 million and other intangibles for $30 million and is shown separately on the Consolidated Statements of Operations. The sale price of the divestiture group was used as fair value in determining the impairment of the assets held for sale. Since the sales price of the divestiture group was less than its carrying value, the resulting loss was recorded as an impairment.

WLAN operating results are reported in the Enterprise segment through the closing date of the WLAN divestiture of October 28, 2016. Within the fiscal year ended December 31, 2016 Consolidated Statement of Operations, the Company generated revenue and gross profit from these assets of $78 million and $37 million, respectively.

On October 28, 2016, the Company completed the disposition of the Divestiture Group. There are no significant remaining assets or liabilities held on the Company’s Consolidated Balance Sheet related to the Divestiture Group as of December 31, 2016.