Acquisitions

3 Months Ended

Feb. 02, 2020

Acquisition of Symantec Corporation’s Enterprise Security Business

On November 4, 2019 (the “Symantec Asset Purchase Date”), we completed the purchase of the Symantec Business, which was an established leader in cybersecurity, for $10.7 billion in cash. We acquired the Symantec Business to expand our footprint of mission critical infrastructure software with our existing customer base. The Symantec Business includes a deep and broad mix of products, services and solutions, unifying cloud and on-premises security to provide advanced threat protection and information protection across endpoints, network, email and cloud applications. We financed the Symantec Asset Purchase with the net proceeds from borrowings under the 2020 Term Loans, as defined in Note 8. “Borrowings”.

We allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values, which were based on estimates and assumptions made by management at the time of acquisition. As additional information becomes available, we may further revise our preliminary purchase price allocation during the remainder of the measurement period (which will not exceed 12 months from the Symantec Asset Purchase Date). Any such revisions or changes may be material.

The following table presents our preliminary allocation of the total purchase price:



	Estimated Fair Value
	(In millions)
Current assets	$	258
Goodwill	6,650
Intangible assets	5,413
Other long-term assets	93
Total assets acquired	12,414
Current liabilities	(1,126		)
Other long-term liabilities	(588		)
Total liabilities assumed	(1,714		)
Fair value of net assets acquired	$	10,700

Goodwill is primarily attributable to the assembled workforce and anticipated synergies and economies of scale expected from the integration of the Symantec Business. The synergies include certain cost savings, operating efficiencies, and other strategic benefits projected to be achieved as a result of the Symantec Asset Purchase. Substantially all goodwill is deductible for tax purposes.

Current assets and current liabilities included amounts held-for-sale related to the acquired Symantec Cyber Security Services (“CSS”) business. The CSS business was not aligned with our acquisition-date strategic objectives and in January 2020, we entered into an agreement to sell this business. Accordingly, the results of CSS are presented in discontinued operations.

Revenue attributable to the Symantec Business has been included in our infrastructure software segment. Transaction costs related to the Symantec Asset Purchase of $104 million were included in selling, general and administrative expense for the fiscal quarter ended February 2, 2020.

Intangible Assets



	Fair Value		Weighted-Average Amortization Periods
	(In millions)		(In years)
Developed technology	$	2,902	5
Customer contracts and related relationships	2,410		5
Trade names	90		6
Order backlog	11		3
Total identified intangible assets	$	5,413

Developed technology relates to products used for cybersecurity solutions, including data loss prevention, endpoint protection, network security, email security and cloud application security. We valued the developed technology using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the developed technology less charges representing the contribution of other assets to those cash flows. The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecast period.

Customer contracts and related relationships represent the fair value of future projected revenue that will be derived from sales of products to existing customers of the Symantec Business. Customer contracts and related relationships were valued using the with-and-without-method under the income approach. In the with-and-without method, the fair value was measured by the difference between the present values of the cash flows with and without the existing customers in place over the period of time necessary to reacquire the customers. The economic useful life was determined by evaluating many factors, including the useful life of other intangible assets, the length of time remaining on the acquired contracts and the historical customer turnover rates.

Order backlog represents business under existing contractual obligations. The fair value of backlog was determined using the multi-period excess earnings method under the income approach based on expected operating cash flows from future contractual revenue. The economic useful life was determined based on the expected life of the backlog and the cash flows over the forecast period.

Trade name relates to the “Symantec” trade name. The fair value was determined by applying the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue under the trade name. The economic useful life was determined based on the expected life of the trade name and the cash flows anticipated over the forecast period.

We believe the amounts of purchased intangible assets recorded above represent the fair values of, and approximate the amounts a market participant would pay for, these intangible assets as of the Symantec Asset Purchase Date.

Unaudited Pro Forma Information

The following unaudited pro forma financial information presents combined results of operations for each of the periods presented, as if we had completed the Symantec Asset Purchase as of the beginning of fiscal year 2019. The unaudited pro forma information includes adjustments to amortization and depreciation for intangible assets and property, plant and equipment acquired, adjustments to interest expense for the additional indebtedness incurred to complete the acquisition, restructuring charges related to the acquisition and transaction costs. For fiscal year 2019, non-recurring pro forma adjustments directly attributable to the Symantec Asset Purchase included transaction costs of $130 million. The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2019 or of the results of our future operations of the combined business.



	Fiscal Quarter Ended
	February 2, 2020		February 3, 2019

	(In millions)
Pro forma net revenue	$	5,639	$	6,333
Pro forma net income attributable to common stock	$	229	$	316

Other Acquisitions

During the fiscal quarter ended February 2, 2020, we also completed three other acquisitions qualifying as business combinations for total consideration of $201 million, of which $108 million was allocated to goodwill and $46 million was allocated to intangible assets. We do not consider these acquisitions to be material, individually or in the aggregate, to our condensed consolidated statements of operations and comprehensive income.

Acquisition of CA, Inc.

On November 5, 2018, we acquired CA for total consideration of $16.1 billion, net of cash acquired (“CA Merger”). CA was a leading provider of information technology management software and solutions. We acquired CA to enhance our infrastructure software capabilities.

Unaudited Pro Forma Information

The following unaudited pro forma financial information presents combined results of operations for the period presented, as if CA had been acquired as of the beginning of our fiscal year ended November 4, 2018 (“fiscal year 2018”). The unaudited pro forma information includes adjustments to amortization and depreciation for intangible assets and property, plant and equipment acquired, adjustments to stock-based compensation expense, interest expense for the additional indebtedness incurred to complete the acquisition, restructuring charges related to the acquisition and transaction costs. The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2018 or of the results of our future operations of the combined business.



	Fiscal Quarter Ended
	February 3, 2019


Pro forma net revenue	$	5,561
Pro forma net income attributable to common stock	$	795