Acquisition

On the close date, we acquired all of the outstanding common stock of Blue Coat, a provider of advanced web security solutions for global enterprises and governments. With this acquisition we are positioned to introduce new cybersecurity solutions, to address the ever-evolving threat landscape, the changes introduced by the shift to mobile and cloud, and the challenges created by regulatory and privacy concerns.

The total consideration for the acquisition of Blue Coat was approximately $4.67 billion, net of cash acquired, and consisted of the following:



	August 1, 2016
	(In millions)
Cash and equity consideration for outstanding Blue Coat common shares and restricted stock awards	$	2,006
Cash consideration for outstanding Blue Coat debt	1,910
Issuance of Symantec 2.0% convertible debt to Bain Capital Funds (selling shareholder)	750
Fair value of vested assumed Blue Coat stock options	102
Cash consideration for acquiree acquisition-related expenses	51
Total consideration	4,819
Cash acquired	(146		)
Net consideration transferred	$	4,673

The cash consideration for the retirement of Blue Coat debt included the repayment of the associated principal, accrued interest, premiums and other costs.

We funded a portion of the total purchase price through debt financing, including borrowings of an aggregate principal amount of $2.8 billion under an amended and restated credit facility and a new term loan facility. On the close date, we also issued 2.0% Convertible Unsecured Notes due 2021 for an aggregate principal amount of $1.25 billion, $750 million of which was to a selling shareholder. See Note 5 for more information on these debt instruments.

Our preliminary allocation of the purchase price, based on the estimated fair values of the assets acquired and liabilities assumed on the close date, is as follows:



	August 1, 2016
	(In millions)
Assets
Accounts receivable	$	125
Other current assets	65
Property and equipment	54
Intangibles	1,608
Goodwill	4,086
Other long-term assets	9
Total assets acquired	5,947
Liabilities
Deferred revenue	144
Other current liabilities	111
Long-term deferred revenue	76
Long-term deferred tax liabilities	924
Other long-term obligations	19
Total liabilities assumed	1,274
Total purchase price	$	4,673

The allocation of the purchase price was based upon a preliminary valuation, and our estimates and assumptions are subject to refinement within the measurement period (up to one year from the close date). Adjustments to the purchase price allocation may require adjustments to goodwill prospectively. The primary areas of the preliminary purchase price allocation that are not yet finalized are certain tax matters, intangible assets, and identification of contingencies.

The preliminary goodwill of $4.1 billion arising from the acquisition is attributed to the expected synergies, including future cost efficiencies, and other benefits that are expected to be generated by combining Symantec and Blue Coat. Substantially all of the goodwill recognized is not expected to be deductible for tax purposes. See Note 4 for more information on goodwill.

Preliminary identified intangible assets and their respective useful lives are as follows:



	Fair Value		Weighted-average Estimated Useful Life
	(In millions)
Customer relationships	$	844	7 years
Developed technology and patents	739		4.3 years
Finite-lived trade names	4		2 years
Product backlog	2		4 months
Total identified finite-lived intangible assets	1,589
In-process research and development	19		N/A
Total identified intangible assets	$	1,608

The fair value of in-process research and development was determined using the relief-from-royalty method. A key assumption of this method is a hypothetical technology licensing rate applied to forecasted revenue. The premise associated with this valuation method is that, in lieu of ownership of the asset, a market participant would be willing to pay a licensing fee for the use of that asset.

Impact on operating results

Our results of continuing operations for the three and six months ended September 30, 2016 include $88 million of net revenues and $105 million of loss before income taxes attributable to Blue Coat beginning August 1, 2016. The Blue Coat results are included in our Enterprise Security segment. See Note 9 for more information on our segments. Additionally, transaction costs of $40 million incurred by Symantec in connection with the Blue Coat acquisition are included in general and administrative expense in the Condensed Consolidated Statements of Operations for the three and six months ended September 30, 2016.

Unaudited pro forma information

The unaudited pro forma financial results combine the historical results of Symantec and Blue Coat for the three and six months ended September 30, 2016 and October 2, 2015. The results include the effects of pro forma adjustments as if Blue Coat were acquired at the beginning of our 2016 fiscal year. The pro forma results for the three and six months ended September 30, 2016 and October 2, 2015 include nonrecurring adjustments for amortization of acquired intangible assets, stock-based compensation, commissions, interest on debt used to finance the acquisition, and acquisition-related transaction costs, as well as for the income tax effect of the other pro forma adjustments.

The unaudited pro forma financial results presented below do not include any anticipated synergies or other expected benefits of the acquisition. These pro forma results are presented for informational purposes only and are not indicative of future operations or results that would have been achieved had the acquisition been completed as of the beginning of our 2016 fiscal year. The following table summarizes the pro forma financial information:



	Three Months Ended					Six Months Ended
	September 30, 2016			October 2, 2015		September 30, 2016			October 2, 2015
	(In millions)
Net revenues	$	1,023		$	1,041	$	2,086		$	2,078
Net income (loss)	$	(158	)	$	40	$	(119	)	$	—