Intangible Assets and Goodwill

9 Months Ended

May 26, 2023

Goodwill and Intangible Assets Disclosure [Abstract]


	As of May 26, 2023				As of August 26, 2022
	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
Intangible assets:
Technology	$	151,050	$	(38,168)	$	61,594	$	(18,473)
Customer relationships	85,300		(42,953)		57,500		(32,238)
Trademarks/trade names	29,200		(13,014)		19,200		(9,771)
	$	265,550	$	(94,135)	$	138,294	$	(60,482)

Goodwill by segment:
Intelligent Platform Solutions	$	148,771			$	40,401
Memory Solutions	34,318				33,608
	$	183,089			$	74,009

In the first nine months of 2023 and 2022, we capitalized $127.3 million, primarily in connection with our acquisition of Stratus Technologies, and $1.1 million, respectively, for intangible assets with weighted-average useful lives of 6.1 years and 17.5 years, respectively. Amortization expense for intangible assets was $11.8 million and $33.6 million in the third quarter and first nine months of 2023, respectively, and $5.9 million and $18.2 million in the third quarter and first nine months of 2022, respectively. Amortization expense is expected to be $11.1 million for the remainder of 2023, $40.5 million for 2024, $35.6 million for 2025, $30.2 million for 2026, $29.5 million for 2027 and $24.6 million for 2028 and thereafter.

Goodwill of our IPS segment increased in the first nine months of 2023, primarily due to the addition of $125.9 million in connection with our acquisition of Stratus Technologies. See “Business Acquisition – Stratus Technologies.” In the second quarter of 2023, we assessed goodwill associated with our Penguin Edge business within our IPS segment and concluded it was partially impaired. As a result, we recognized a charge of $17.6 million in the first nine months of 2023 to impair the carrying value of goodwill. See “Impairment of Penguin Edge Goodwill.”

Goodwill of our Memory Solutions segment increased by $0.7 million in the first nine months of 2023 and decreased in all of 2022 by $0.2 million from translation adjustments.

Impairment of Penguin Edge Goodwill

During the second quarter of 2023, we initiated a plan within our IPS segment pursuant to which we intend to wind down manufacturing and discontinue the sale of certain legacy products offered through our Penguin Edge business by approximately the end of calendar 2024. In connection therewith and with the preparation of the financial statements for our second quarter of 2023, we performed a quantitative assessment of the fair value of goodwill using an income approach with assumptions that are considered Level 3 measurements and concluded that the carrying value of the Penguin Edge reporting unit goodwill exceeded its fair value. As a result, we recorded a charge of $17.6 million in the second quarter of 2023 to impair the carrying value of IPS goodwill. The fair value of the Penguin Edge reporting unit was determined primarily by discounting estimated future cash flows, which were determined based on revenue and expense assumptions over the next two years, at a weighted-average cost of capital of 14.5%. We concluded that long-lived assets other than goodwill, primarily consisting of customer relationship intangible assets, had fair values in excess of their carrying amounts, and accordingly recorded no impairments of such assets. These assets will continue to be amortized over their remaining useful lives through the date of our anticipated completion of wind-down activities.

At each reporting date through the end of the wind-down period, we will reassess the estimated remaining cash flows of the Penguin Edge business. As of the end of the third quarter of 2023, there was no further impairment of Penguin Edge goodwill. However, we currently anticipate that the remaining goodwill of the Penguin Edge reporting unit of $17.6 million as of the end of the third quarter of 2023 may become further impaired in future periods.