Business Combination

9 Months Ended

Aug. 31, 2011

Business Combination

Business Combination

3. BUSINESS COMBINATION

While we use our best estimates and assumptions as part of the purchase price allocation process to value assets acquired and liabilities assumed at the business combination date, our estimates and assumptions are subject to refinement. As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. We record adjustments to assets acquired or liabilities assumed subsequent to the purchase price allocation period in our operating results in the period in which the adjustments were determined.

The total purchase price allocated to the tangible assets acquired was assigned based on the fair values as of the date of the acquisition. The fair value assigned to identifiable intangible assets acquired was determined using the income approach which discounts expected future cash flows to present value using estimated assumptions determined by management. We believe that these identified intangible assets will have no residual value after their estimated economic useful lives.

LoyaltyLab, Inc.

On December 7, 2010, we acquired LoyaltyLab, Inc. ("Loyalty Lab"), a private company incorporated in Delaware. Loyalty Lab is an independent provider of loyalty management solutions allowing marketers to manage loyalty programs from their desktop. This acquisition provides us international presence in the customer loyalty market. We paid $23.5 million in cash to acquire all of the outstanding shares of capital stock of Loyalty Lab. We have also incurred $0.4 million of acquisition related and other expenses associated with the acquisition. As a result of the acquisition, we assumed facility leases and certain liabilities and commitments of Loyalty Lab. We are currently evaluating the purchase price allocation for this transaction.

The preliminary allocation of the purchase price for the Loyalty Lab acquisition, as of the date of the acquisition, is as follows (in thousands):

Cash	$	905
Accounts receivable (approximate contractual value)		5,118
Deferred income tax assets, net		3,369
Other assets		729
Identifiable intangible assets		6,600
Goodwill		12,355
Liabilities		(5,590	)
Total preliminary purchase price	$	23,486

The identifiable intangible assets are subject to amortization on a straight-line basis as this best approximates the benefit period related to these assets (in thousands, except amortization period):

	Gross Amount at  Acquisition Date		Weighted Average Amortization Period
Existing technology	$	2,000		5.0 years
Customer base		4,100		5.0 years
Trademarks		500		5.0 years
	$	6,600		5.0 years

The excess of the purchase price over the identified tangible and intangible assets, less liabilities assumed, was recorded as goodwill. We anticipate that none of the goodwill recorded in connection with the Loyalty Lab acquisition will be deductible for income tax purposes.

Acquisitions in Fiscal Year 2010

OpenSpirit Corporation

On September 22, 2010, we acquired OpenSpirit Corporation ("OpenSpirit"), a private company incorporated in Delaware. OpenSpirit is a leading independent provider of data and application integration solutions for the exploration and production segment of the global oil and gas market. OpenSpirit's vendor-neutral approach is designed to enable companies to pursue an architectural model to both better leverage legacy investments and exploit new technologies which reduce the time and risk associated with decision making. We paid $18.4 million in cash to acquire all of the outstanding shares of capital stock of OpenSpirit. In the first quarter of fiscal year 2011, we recorded a decrease in goodwill of $0.2 million net of tax as a result of the adjustment of certain accrued liabilities. In the third quarter of fiscal year 2011, we recorded a decrease in goodwill of $0.5 million as a result of the adjustment of deferred income tax assets. We have also incurred $0.5 million of acquisition related and other expenses associated with the acquisition.

The preliminary allocation of the purchase price for the OpenSpirit acquisition, as of the date of the acquisition, is as follows (in thousands):

Cash	$	3,479
Accounts receivable (approximate contractual value)		1,486
Deferred income tax assets, net		674
Other assets		2,252
Identifiable intangible assets		9,400
Goodwill		5,300
Liabilities		(4,173	)
Total preliminary purchase price	$	18,418

The identifiable intangible assets are subject to amortization on a straight-line basis as this best approximates the benefit period related to these assets (in thousands, except amortization period):

	Gross Amount at Acquisition Date		Weighted Average Amortization Period
Existing technology	$	3,900		4.0 years
Customer base		700		5.0 years
Trademarks		400		5.0 years
Core technology		1,200		5.0 years
Maintenance agreements		1,500		6.0 years
Total intangible assets subject to amortization		7,700		4.7 years
In-process research and development		1,700		N/A
Total intangible assets	$	9,400

The excess of the purchase price over the identified tangible and intangible assets, less liabilities assumed, was recorded as goodwill. We anticipate that none of the goodwill recorded in connection with the OpenSpirit acquisition will be deductible for income tax purposes.

Proginet Corporation

On September 15, 2010, we acquired Proginet Corporation ("Proginet"), a public company incorporated in Delaware. Proginet is a provider of managed file transfer solutions. This acquisition augments our broader software infrastructure offerings and we believe it will help customers across industries more efficiently manage the information and processes that run their business. We paid $22.0 million in cash to acquire all of the outstanding shares of capital stock of Proginet. In the third quarter of fiscal year 2011, we recorded an increase in goodwill of $0.2 million as a result of the adjustment of deferred income tax assets. We have also incurred $0.6 million of acquisition related and other expenses associated with the acquisition. Also see Note 10 to our Condensed Consolidated Financial Statements for a discussion of the Proginet Merger Litigation.

The preliminary allocation of the purchase price for the Proginet acquisition, as of the date of the acquisition, is as follows (in thousands):

Cash	$	931
Accounts receivable (approximate contractual value)		1,126
Deferred income tax assets, net		946
Other assets		131
Identifiable intangible assets		12,200
Goodwill		9,869
Liabilities		(3,217	)
Total preliminary purchase price	$	21,986

The identifiable intangible assets are subject to amortization on a straight-line basis as this best approximates the benefit period related to these assets (in thousands, except amortization period):

	Gross Amount at Acquisition Date		Weighted Average Amortization Period
Existing technology	$	6,700		6.0 years
Customer base		1,400		7.0 years
Core technology		2,300		5.0 years
Trademarks		100		4.0 years
Maintenance agreements		1,700		8.0 years
	$	12,200		6.2 years

The excess of the purchase price over the identified tangible and intangible assets, less liabilities assumed, was recorded as goodwill. We anticipate that none of the goodwill recorded in connection with the Proginet acquisition will be deductible for income tax purposes.

Kabira Technologies, Inc.

On April 20, 2010, we acquired Kabira Technologies, Inc. ("Kabira"), a private company incorporated in Delaware and a provider of high performance transaction processing software solutions for communications service providers globally. Kabira's products and solutions support key infrastructure capabilities such as subscriber provisioning, value-based charging, and mobile payments. Its in-memory approach to supporting transactions complements our abilities in handling events and adds to our broader suite of in-memory infrastructure software products. We paid $3.9 million of cash to acquire all of the outstanding equity of Kabira. In the first quarter of fiscal year 2011, we recorded an increase in goodwill of $0.5 million as a result of the adjustment of deferred income tax assets. We have also incurred $0.5 million of acquisition related and other expenses associated with the acquisition.

The allocation of the purchase price for the Kabira acquisition, as of the date of the acquisition, is as follows (in thousands):

Cash	$	931
Accounts receivable (approximate contractual value)		2,942
Other assets		1,763
Identifiable intangible assets		10,680
Goodwill		2,548
Deferred income tax liabilities, net		(78	)
Liabilities		(14,916	)
Total purchase price	$	3,870

The identifiable intangible assets are subject to amortization on a straight-line basis as this best approximates the benefit period related to these assets (in thousands, except amortization period):

	Gross Amount at Acquisition Date		Weighted Average Amortization Period
Existing technology	$	2,600		4.0 years
Customer base		1,700		4.0 years
Trademarks		180		2.0 years
Maintenance agreements		6,200		4.0 years
	$	10,680		4.0 years

The excess of the purchase price over the identified tangible and intangible assets, less liabilities assumed, was recorded as goodwill. We anticipate that $1.3 million of the goodwill recorded in connection with the Kabira acquisition will be deductible for income tax purposes.

Netrics.com, Inc.

On March 8, 2010, we acquired Netrics.com, Inc. ("Netrics"), a private company incorporated in Delaware and a provider of data quality software and services. Netrics' in-memory-based approach to pattern matching and detection complements our core integration and business optimization offerings and adds to our broader suite of in-memory infrastructure software products. We paid $10.5 million of cash to acquire all of the outstanding equity of Netrics. We have also incurred $0.4 million of acquisition related and other expenses associated with the acquisition.

The allocation of the purchase price for the Netrics acquisition, as of the date of the acquisition, is as follows (in thousands):

Cash	$	40
Accounts receivable (approximate contractual value)		78
Deferred income tax assets, net		631
Other assets		259
Identifiable intangible assets		6,400
Goodwill		3,873
Liabilities		(781	)
Total purchase price	$	10,500

The identifiable intangible assets are subject to amortization on a straight-line basis as this best approximates the benefit period related to these assets (in thousands, except amortization period):

	Gross Amount at Acquisition Date		Weighted Average Amortization Period
Existing technology	$	4,890		6.0 years
Core technology		1,210		6.0 years
Customer base		100		5.0 years
Maintenance agreements		200		8.0 years
	$	6,400		6.0 years

The excess of the purchase price over the identified tangible and intangible assets, less liabilities assumed, was recorded as goodwill. We anticipate that none of the goodwill recorded in connection with the Netrics acquisition will be deductible for income tax purposes.

Foresight Corporation

On December 31, 2009, we acquired Foresight Corporation ("Foresight"), a private company incorporated in Delaware and a leading provider of Electronic Data Interchange ("EDI") productivity tools and transaction automation solutions. Foresight's products connect partners and validate transactions, reducing administrative inefficiencies, and addressing mandates. Foresight also expands our expertise in the healthcare and EDI markets, where its ability to support and validate transactions across a range of standards complements our core business-to-business abilities. We paid $30.0 million of cash to acquire all of the outstanding equity of Foresight. In the fourth quarter of fiscal year 2010, we recorded a decrease in goodwill of $1.1 million net of tax as a result of the adjustment of certain accrued liabilities. We have also incurred $0.8 million of acquisition related and other expenses associated with the acquisition.

The allocation of the purchase price for the Foresight acquisition, as of the date of the acquisition, is as follows (in thousands):

Cash	$	821
Accounts receivable (approximate contractual value)		593
Current assets		92
Identifiable intangible assets		16,700
Goodwill		21,717
Liabilities		(3,191	)
Deferred income tax liabilities, net		(6,732	)
Total purchase price	$	30,000

The identifiable intangible assets are subject to amortization on a straight-line basis as this best approximates the benefit period related to these assets (in thousands, except amortization period):

	Gross Amount at  Acquisition Date		Weighted Average Amortization Period
Existing technology	$	9,800		7.3 years
Core technology		1,300		7.0 years
Customer base		1,500		8.2 years
Trademarks		600		8.0 years
Non-compete agreements		100		1.5 years
Subscription base/Service agreements		1,000		7.6 years
Maintenance agreements		2,400		8.0 years
	$	16,700		7.3 years

The excess of the purchase price over the identified tangible and intangible assets, less liabilities assumed, was recorded as goodwill. We anticipate that none of the goodwill recorded in connection with the Foresight acquisition will be deductible for income tax purposes.

The results of operations of the Loyalty Lab, OpenSpirit, Proginet, Kabira, Netrics and Foresight acquisitions have been included in the Consolidated Financial Statements subsequent to the acquisition dates. Pro forma results of operations for these acquisitions have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to our consolidated financial results.