BUSINESS COMBINATIONS (Tables)

9 Months Ended

Oct. 28, 2016

Schedule of Business Acquisitions, by Acquisition

The following table summarizes the consideration transferred to effect the EMC merger transaction:



	Purchase Price
	(in millions)
Consideration transferred:
Cash	$	47,694
Expense and other (a)	968
Class V Common Stock (b)	10,041
Total consideration transferred	58,703
Non-controlling interests (c)	6,097
Less: Post-merger stock compensation expense (d)	(800		)
Total purchase price to allocate	$	64,000

____________________

(a) Expense and other primarily consists of cash payment for post-merger stock compensation expense, as described in footnote (d), and the value related to pre-merger services of EMC equity awards converted to deferred cash awards

(b)

The fair value of the Class V Common Stock is based on the issuance of approximately 223 million shares with a per-share fair value of $45.07 (the opening share price of the Class V Common Stock on the NYSE on September 7, 2016, the first day of trading), which shares are intended to track the economic performance of approximately 65% of the Company’s economic interest in the VMware business, as of the closing date of the EMC merger transaction.

(c)

Non-controlling interests in VMware and Pivotal was $6.1 billion as of September 7, 2016. The fair value of the non-controlling interest relating to VMware was calculated by multiplying outstanding shares of VMware common stock that were not owned by EMC by $73.28 (the opening share price of VMware common stock on the NYSE on September 7, 2016). The fair value of the non-controlling interest relating to Pivotal was calculated based on the fair value of Pivotal, the ownership percentage of the non-controlling interests, and a discount for lack of control related to the non-controlling interest.


(d)	Pursuant to the guidelines of ASC 805, a portion of the consideration related to accelerated EMC equity awards was recorded as post-merger day one stock compensation expense. This expense is attributable to post-merger services not rendered due to the acceleration.

From inception through October 28, 2016, the Company incurred $1.2 billion of acquisition-related costs in connection with the EMC merger transaction. Of this amount, $0.8 billion are capitalized debt issuance costs which were primarily presented as a direct reduction of the carrying amount of the related debt liability in the Condensed Consolidated Statements of Financial Position. The remaining $0.4 billion of costs were recognized in the Condensed Consolidated Statements of Income (Loss) for the periods presented as follows:



	Three Months Ended				Nine Months Ended
	October 28, 2016		October 30, 2015		October 28, 2016		October 30, 2015
	(in millions)
Acquisition-related costs:
Selling, general, and administrative expenses (a)	$	211	$	11	$	252	$	11
Interest and other, net (b)	98		—		98		—
Total	$	309	$	11	$	350	$	11

____________________

(a) Acquisition-related costs recognized in selling, general, and administrative expenses primarily consist of advisory fees.

(b) Acquisition-related costs recognized in interest and other, net consist of expensed debt issuance costs.

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed by major class as of the transaction date. Due to the timing of this acquisition, these amounts are preliminary estimates and subject to change. Any changes resulting from the facts and circumstances that existed as of the transaction date may result in retrospective adjustments to the preliminary amounts recognized at the transaction date. The Company expects to finalize these amounts as soon as practicable, but not later than one year from the transaction date.



	Preliminary Allocation
	(in millions)
Preliminary purchase price allocation (a):
Current assets:
Cash and cash equivalents	$	10,080
Short-term investments	1,765
Accounts receivable (b)	2,810
Short-term financing receivables	64
Inventories, net	1,993
Other current assets	903
Total current assets	17,615
Property, plant, and equipment	4,490
Long-term investments	4,317
Long-term financing receivables, net	65
Goodwill (c)	31,275
Purchased intangibles (d)	31,218
Other non-current assets	522
Total assets	$	89,502
Current liabilities:
Short-term debt (e)	$	905
Accounts payable	728
Accrued and other	3,259
Short-term deferred revenue	4,954
Total current liabilities	9,846
Long-term debt (e)	5,474
Long-term deferred revenue	3,469
Deferred tax liabilities	6,389
Other non-current liabilities	324
Total liabilities	$	25,502
Total net assets	$	64,000

____________________


(a)	Includes amounts allocated to ECD, which were classified as held for sale as of October 28, 2016. See Note 4 of the Notes to the Unaudited Condensed Consolidated Financial Statements for more information on discontinued operations.


(b)	Accounts receivable is comprised primarily of customer trade receivables. As such, the fair value of accounts receivable approximates the net carrying value of $2,810 million. The gross amount due is $2,919 million, of which $109 million is not expected to be collected.

(c)

The Company recorded $31.3 billion in goodwill related to this transaction, which is primarily related to expected synergies from the transaction. This amount represents the excess of the purchase price over the fair value of the assets acquired and liabilities assumed associated with this transaction. This goodwill is not deductible for tax purposes. See Note 10 of the Notes to the Unaudited Condensed Consolidated Financial Statements for preliminary goodwill allocation by reportable segment.

(d)

Identifiable intangible assets are required to be measured at fair value. The fair value of identifiable intangible assets is determined primarily using variations of the income approach, which is based on the present value of the future after-tax cash flows attributable to each identifiable intangible asset. Some of the more significant assumptions inherent in the development of intangible asset values, from the perspective of a market participant, include, but are not limited to, the amount and timing of projected future cash flows (including revenue and profitability); the discount rate selected to measure the risks inherent in the future cash flows; the assessment of the asset’s life cycle; the competitive trends impacting the asset; technology migration factors; and customer turnover.

(e) Deferred revenue represents the fair value of remaining performance obligations and was determined based on estimates of costs incurred to-date by the acquiree or costs to be incurred by the Company and a reasonable profit margin. Profit margins were determined based on comparable service provider margins, and the resulting profits were discounted using market participant discount rates to determine fair value.

Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination

The preliminary fair values of EMC’s identifiable intangible assets and their weighted-average useful lives have been estimated as follows:



	Estimated Fair Value		Weighted Average Useful Life
	(in millions)		(in years)
Developed technology	$	13,460	6
Customer relationships	13,440		11
Trade names (Indefinite lived)	2,320		Indefinite
Trade names (Definite lived)	980		8
In-process research and development	890		Indefinite
Leasehold assets (liabilities)	128		25
Total identifiable intangible assets	$	31,218

Business Acquisition, Pro Forma Information

The following table provides unaudited pro forma results of operations for the periods presented as if the transaction date had occurred on January 31, 2015, the first day of the fiscal year ended January 29, 2016.



	Three Months Ended						Nine Months Ended
	October 28, 2016			October 30, 2015			October 28, 2016			October 30, 2015
	(in millions; except per share amounts)
Total net revenue	$	17,826		$	18,068		$	53,860		$	53,709
Net loss attributable to Dell Technologies Inc.	$	(931	)	$	(721	)	$	(2,140	)	$	(4,205	)

Earnings (loss) per share attributable to Dell Technologies Inc. - basic (a):
Continuing operations - Class V Common Stock	$	0.75		$	0.60		$	1.75		$	1.45
Continuing operations - DHI Group	$	(1.94	)	$	(1.51	)	$	(4.47	)	$	(8.01	)

Earnings (loss) per share attributable to Dell Technologies Inc. - diluted (a):
Continuing operations - Class V Common Stock	$	0.75		$	0.60		$	1.74		$	1.44
Continuing operations - DHI Group	$	(1.94	)	$	(1.51	)	$	(4.47	)	$	(8.01	)

____________________

(a) For purposes of calculating pro forma earnings (loss) per share, the Company used the two-class method. Earnings are allocated between the Class V Common Stock and the DHI Group on a basis consistent with historical earnings (loss) per share.