Acquisitions and Divestiture

Fiscal 2018 acquisitions

Fireglass and Skycure acquisitions

In July 2017, we completed our acquisitions of Israel-based Fireglass, Ltd. (“Fireglass”) and Skycure, Ltd. (“Skycure”). Fireglass provides agentless isolation solutions that prevent ransomware, malware and phishing threats in real-time from reaching user endpoints or the corporate network. With this acquisition, we further strengthened our enterprise security strategy to deliver an Integrated Cyber Defense Platform and extended our participation in the Secure Web Gateway and Email protection markets delivered both on premises and in the cloud. Skycure provides mobile threat defense for devices running modern operating systems, including iOS and Android. This acquisition extends our endpoint security capabilities. With the addition of Skycure our Integrated Cyber Defense Platform now has visibility into and control over all endpoint devices, including mobile devices, whether corporate owned or bring your own device. The total aggregate consideration for these acquisitions, primarily consisting of cash, was $345 million, net of $15 million cash acquired.

Our preliminary allocation of the aggregate purchase price for these two acquisitions, based on the estimated fair values of the assets acquired and liabilities assumed in July 2017, and the related weighted-average estimated useful lives, is as follows:



(In millions, except useful lives)	July 24, 2017			Weighted-Average Estimated Useful Life
Developed technology	$	123		5.5 years
Customer relationships	11			7 years
Goodwill	247
Deferred income tax liabilities	(35		)
Other liabilities	(1		)
Total purchase price	$	345

The preliminary allocation of the aggregate purchase price for the two acquisitions described above was based upon preliminary valuations, 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 allocations may require adjustments to goodwill prospectively. The primary areas of the preliminary purchase price allocations that are not yet finalized are certain tax matters, intangible assets, and identification of contingencies.

The preliminary goodwill arising from the acquisitions is attributed to the expected synergies, including revenue benefits that are expected to be generated by combining Fireglass and Skycure with Symantec. A portion of the goodwill recognized is expected to be deductible for tax purposes. See Note 7 for more information on goodwill.

Pro forma results of operations for these acquisitions have not been presented because they were not material to our consolidated results of operations, either individually or in the aggregate.

Other fiscal 2018 acquisitions

During the nine months ended December 29, 2017, in addition to the acquisitions mentioned above, we completed acquisitions of other companies for an aggregate purchase price of $66 million, net of $1 million cash acquired. Of the aggregate purchase price, $48 million was preliminarily recorded to goodwill. The primary areas of the preliminary purchase price allocations that are not yet finalized are certain tax matters, intangible assets, and identification of contingencies. These acquisitions were not material to our consolidated results of operations, either individually or in the aggregate.

Fiscal 2017 Blue Coat acquisition

During our second quarter of fiscal 2017, we acquired all of the outstanding common stock of Blue Coat, Inc. (“Blue Coat”). The total consideration for the acquisition was approximately $4.67 billion, net of cash acquired. The Blue Coat results are included in our Enterprise Security segment. See Note 2 for more information related to our segments.

Unaudited pro forma information

The unaudited pro forma financial results combine the historical results of Symantec and Blue Coat for the three and nine months ended December 30, 2016 and include the effects of pro forma adjustments as if Blue Coat were acquired in the beginning of our 2016 fiscal year. The pro forma results for the three and nine months ended December 30, 2016 include nonrecurring adjustments to 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 the income tax effect of the 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:



	December 30, 2016
(In millions)	Three Months Ended		Nine Months Ended
Net revenues	$	1,041	$	3,127
Net income (loss)	$	55	$	(64	)

LifeLock acquisition-related shareholder settlement

On February 9, 2017, we completed the acquisition of LifeLock, Inc. (“LifeLock”). In connection with this acquisition, we recognized a liability of $68 million for a claim related to appraisal rights by a LifeLock stockholder, which we settled in the second quarter of fiscal 2018 for $74 million in cash. The $6 million paid in addition to the recognized liability was recorded to general and administrative expense in our Condensed Consolidated Statements of Operations.

Divestiture

Website Security and Public Key Infrastructure solutions

On October 31, 2017, we completed the sale of our WSS and PKI solutions in our Enterprise Security segment to DigiCert. In accordance with the terms of the agreement, we received aggregate consideration of $1.1 billion, consisting of approximately $960 million in cash and shares of common stock representing an approximate 28% interest in the outstanding common stock of DigiCert valued at $160 million as of October 31, 2017. The cash consideration is subject to adjustment for WSS and PKI closing date cash and working capital as specified in the purchase agreement.

We determined the estimated fair value of our equity investment with the assistance of valuations performed by third party specialists and estimates made by management. We utilized a combination of the income approach based on a discounted cash flow method and market approach based on the guideline public company method that focuses on comparing DigiCert to reasonably similar publicly traded companies. The equity interest received is being accounted for under the equity method. We record our interest in the net earnings (loss) of DigiCert based on the most recently available financial statements of DigiCert, which are provided to us on a three month lag, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, in Income (loss) from equity interests in our Condensed Consolidated Statement of Operations. Profits or losses related to intra-entity sales with DigiCert are eliminated until realized by us or DigiCert. Basis differences represent differences between the original fair value of the investment and the underlying equity in net assets of the investment and are generally amortized over the lives of the related assets that gave rise to them. The carrying amount of the investment in equity interest will be adjusted to reflect our interest in net earnings, dividends received and other-than-temporary impairments.

As of the transaction close date, the carrying amounts of the major classes of assets and liabilities associated with the divestiture of our WSS and PKI solutions were as follows:



(In millions)	October 31, 2017
Assets:
Cash and cash equivalents	$	2
Accounts receivable, net	34
Goodwill and intangible assets, net	670
Other assets	40
Total assets	746
Liabilities:
Deferred revenue	285
Other liabilities	11
Total liabilities	$	296

As of the transaction close date, we also had $8 million in cumulative currency translation losses related to subsidiaries that were sold, which was reclassified from Accumulated other comprehensive income (“AOCI”) to the gain on divestiture. In addition, we incurred direct costs of $8 million, which was netted against the gain on divestiture, and tax expense of $137 million.

The following table presents the gain before income taxes associated with the divestiture:



(In millions)
Gain on divestiture:
Gain on sale of short-term investment	$	7
Gain on sale of other assets and liabilities	651
Total gain on divestiture	$	658

The gain on sale of short-term investment represents the gain on the sale of a short-term investment that was included in the transaction and resulted in the reclassification on the transaction close date of $7 million of unrealized gains from AOCI to the gain on divestiture.

The following table presents the income before income taxes for our WSS and PKI solutions for the periods indicated:



	Three Months Ended				Nine Months Ended
(In millions)	December 29, 2017		December 30, 2016		December 29, 2017		December 30, 2016
Income before income taxes	$	8	$	49	$	66	$	157

In connection with the divestiture, we entered into a Transition Services Agreement ("TSA") with DigiCert pursuant to which we provide certain services including human resource services, financial support services and information technology services to DigiCert. The services under the TSA commenced with the close of the transaction and expire at various dates through fiscal 2019, with extension options. During the three and nine months ended December 29, 2017, we recorded income of $10 million and associated direct costs of $2 million for all services provided to DigiCert in Other income (expense) in our Condensed Consolidated Statement of Operations.