Acquisitions

Blue Coat acquisition

On August 1, 2016, we acquired all of the outstanding common stock of Blue Coat, a provider of advanced web security solutions for global enterprises and governments. The addition of Blue Coat’s suite of network and cloud security products to our innovative Enterprise Security product portfolio has enhanced our threat protection and information protection products while providing us with complementary products, such as advanced web and cloud security solutions, that address the network and cloud security needs of enterprises. This augmentation of our product portfolio, together with the integration of Blue Coat’s large threat database with our global civilian cyber intelligence threat network, allows us to provide an integrated cyber defense platform, addressing both endpoint and network security, and offer differentiated security solutions. It also positions us well to introduce new cybersecurity solutions that address the ever-evolving threat landscape, the changes introduced by the shift to mobile and cloud along with the adoption of Internet of Things (IoT) devices. Our enhanced portfolio also positions us well to address the challenges created by regulatory and privacy concerns.

The total consideration for the acquisition of Blue Coat was approximately $4.7 billion, net of cash acquired, and consisted of the following:



(In millions)	August 1, 2016
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 August 1, 2016, we also issued 2.0% Convertible Senior Notes due 2021 for an aggregate principal amount of $1.25 billion, $750 million of which was to a selling shareholder. See Note 8 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, were as follows:



(In millions)	August 1, 2016
Assets:
Accounts receivable	$	125
Other current assets	65
Property and equipment	54
Intangible assets	1,608
Goodwill	4,083
Other long-term assets	9
Total assets acquired	5,944
Liabilities:
Other current liabilities	111
Deferred revenue	220
Long-term deferred tax liabilities	921
Other long-term obligations	19
Total liabilities assumed	1,271
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 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 7 for more information on goodwill.

Preliminary identified intangible assets and their respective useful lives, as of August 1, 2016, were as follows:



(In millions, except for useful lives)	Fair Value		Weighted-Average Estimated Useful Life
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 fiscal 2017 include $427 million of net revenues attributable to Blue Coat products beginning August 1, 2016. It is impracticable to determine the amounts of net income attributable to Blue Coat for fiscal 2017 as we have integrated Blue Coat with our ongoing operations. Net revenues and costs related to the Blue Coat products are included in our Enterprise Security segment results for fiscal 2017. Transaction costs of $48 million incurred by Symantec in connection with the Blue Coat acquisition are included in operating expenses in our Consolidated Statements of Operations for fiscal 2017. See Note 2 for more information on our segments.

LifeLock acquisition

On February 9, 2017, we completed the acquisition of LifeLock, a provider of proactive identity theft protection services for consumers and consumer risk management services for enterprises, for approximately $2.3 billion in total consideration. LifeLock’s services are provided on a monthly or annual subscription basis and primarily consist of identifying and notifying users of identity-related and other events and assisting users in remediating their impact. The addition of LifeLock’s identity and fraud protection offerings to our leading Consumer Digital Safety product portfolio will allow us to provide a comprehensive digital safety solution designed to protect information across devices, customer identities and the connected home and family.

The total consideration for the acquisition of LifeLock was approximately $2.3 billion, net of cash acquired, and consisted of the following:



(In millions)	February 9, 2017
Cash for outstanding LifeLock common shares and vested equity awards	$	2,298
Fair value of vested assumed LifeLock equity awards	10
Liability assumed for dissenting shareholders	68
Liability assumed for lost shareholders	1
Total consideration	2,377
Cash acquired	(94		)
Net consideration transferred	$	2,283

We funded a portion of the total purchase price with the issuance of 5.0% Senior Notes due 2025 for an aggregate principal amount of $1.1 billion. See Note 8 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, were as follows:



(In millions)	February 9, 2017
Assets:
Accounts receivable	$	20
Other current assets	110
Property and equipment	46
Intangible assets	1,247
Goodwill	1,401
Deferred tax assets	16
Other long-term assets	13
Total assets acquired	2,853
Liabilities:
Accounts payable	2
Deferred revenue	96
Income taxes payable	5
Other current liabilities	59
Long-term deferred tax liabilities	394
Other long-term obligations	14
Total liabilities assumed	570
Total purchase price	$	2,283

The preliminary goodwill of $1.4 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 LifeLock. Substantially all of the goodwill recognized is not expected to be deductible for tax purposes. See Note 7 for more information on goodwill.

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



(In millions, except for useful lives)	Fair Value		Weighted-Average Estimated Useful Life
Customer relationships	$	532	7.0 years
Developed technology	126		5.0 years
Finite-lived trade names and other	6		5.9 years
Total identified finite-lived intangible assets	664
Indefinite-lived trade names	583		N/A
Total identified intangible assets	$	1,247

Impact on operating results

Our results of continuing operations for fiscal 2017 include $72 million and $98 million, respectively, of net revenues and a pre-tax loss attributable to LifeLock beginning February 9, 2017. LifeLock’s revenues of $67 million and $5 million are included in our Consumer Digital Safety and Enterprise Security segment results, respectively. Transaction costs of $21 million incurred by Symantec in connection with the LifeLock acquisition are included in operating expenses in our Consolidated Statements of Operations for fiscal 2017. See Note 2 for more information on our segments.

Unaudited combined pro forma information

The unaudited pro forma financial results combine the historical results of Symantec, Blue Coat and LifeLock for fiscal years 2017 and 2016. The results include the effects of pro forma adjustments as if Blue Coat and LifeLock were acquired at the beginning of our 2016 fiscal year. The pro forma results for fiscal years 2017 and 2016 include 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 these pro forma adjustments.

The unaudited pro forma financial results presented below do not include any anticipated synergies or other expected benefits of the acquisitions. 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:



	Year Ended
(In millions)	March 31, 2017			April 1, 2016
Net revenues	$	4,817		$	4,803
Net income (loss)	$	(174	)	$	1,791