Acquisitions

Prior Fiscal Year Acquisitions

Acquisition of Ruckus Wireless, Inc. (“Ruckus”)

On May 27, 2016 (“Acquisition Date”), the Company completed its acquisition of Ruckus, a public company incorporated in the state of Delaware, to strengthen its Internet Protocol (“IP”) Networking product portfolio by adding Ruckus’ wireless products and services to the Company’s networking solutions.

Immediately prior to the completion of the acquisition, there were 92.2 million outstanding shares of Ruckus common stock, which included 3.2 million shares of Ruckus common stock owned by a dissenting former Ruckus stockholder who has filed a petition in Delaware Court of Chancery seeking appraisal of the fair value of those shares under Delaware law. As a result, no cash payment had been made and no shares had been issued to the dissenting stockholder as of January 28, 2017.

Based on the $8.60 per share closing price of the Company’s common stock on the Acquisition Date, the total purchase consideration paid or payable was $1.3 billion, which includes the amount relating to the appraisal petition filed by the dissenting former Ruckus stockholder, which was accrued as of January 28, 2017, and reported within “Other accrued liabilities” on the Company’s Condensed Consolidated Balance Sheets.

For the three months ended January 28, 2017, the Company recorded direct acquisition costs of $0.9 million and integration costs of $3.9 million. These costs were expensed as incurred and are presented in the Company’s Condensed Consolidated Statements of Operations for the three months ended January 28, 2017, as “Acquisition and integration costs.”

In connection with the acquisition of Ruckus, the Company allocated the total purchase consideration to the net assets acquired and liabilities assumed, including identifiable intangible assets, based on their respective fair values at the Acquisition Date. The following table summarizes the allocation of the total purchase consideration to the fair value of the assets acquired and liabilities assumed (in thousands):



Assets acquired:
Cash and cash equivalents	$	95,515
Short-term investments	150,257
Accounts receivable, net of allowances for doubtful accounts of $2,100	41,339
Inventories	64,000
Prepaid expenses and other current assets	5,201
Property and equipment, net	27,060
Identifiable intangible assets	418,000
Other assets	1,697
Total assets acquired	803,069
Liabilities assumed:
Accounts payable	16,375
Accrued employee compensation	17,514
Deferred revenue	14,520
Other accrued liabilities	33,809
Non-current deferred revenue	9,767
Non-current deferred tax liabilities	64,233
Other non-current liabilities	40,561
Total liabilities assumed	196,779
Net assets acquired, excluding goodwill (a)	606,290
Total purchase consideration (b)	1,275,060
Estimated goodwill (b) - (a)	$	668,770

Goodwill represents the excess of the total purchase consideration over the fair value of the underlying assets acquired and liabilities assumed. Goodwill is attributable to planned growth in new markets and synergies expected to be achieved from the combined operations of the Company and Ruckus. Goodwill of $349.4 million was assigned to the IP Networking Products reporting unit, and goodwill of $319.4 million was assigned to the Global Services reporting unit. Goodwill recognized in the acquisition is not deductible for tax purposes.

The fair value of identified intangible assets and their respective useful lives are as follows (in thousands, except for estimated useful life):



	Approximate Fair Value		Estimated Useful Life (In years)
Trade name/trademark	$	42,000	11
Customer relationships	118,000		1 - 7
Developed technology	230,000		6 - 7
In-process research and development (“IPR&D”) ⁽¹⁾	28,000		N/A ⁽¹⁾
Total intangible assets	$	418,000


⁽¹⁾	IPR&D will be accounted for as an indefinite-lived intangible asset until the underlying projects are completed or abandoned.

The total purchase consideration allocation reflects the Company’s preliminary estimates and is subject to revision as additional information in relation to the tax liabilities becomes available during the remainder of the measurement period. This period is not to exceed 12 months from the acquisition date. During the three months ended January 28, 2017, the Company obtained additional information related to the fair value of inventories, property and equipment, identifiable intangible assets, deferred revenue, and deferred tax liabilities. As a result, the Company recorded a measurement period adjustment resulting in a net decrease in goodwill of $5.0 million. The impact on the line items “Cost of revenues” and “Acquisition and integration costs” on the Company’s Condensed Consolidated Statements of Operations was immaterial during the three months ended January 28, 2017.