
3.	Business Combinations


(a)	Acquisition Summary

The Company completed eight business combinations during fiscal 2014. A summary of the allocation of the total purchase consideration is presented as follows (in millions):



Fiscal 2014	Purchase Consideration		Net Tangible Assets Acquired (Liabilities Assumed)			Purchased Intangible Assets		Goodwill
Composite Software, Inc.	$	160	$	(10	)	$	75	$	95
Sourcefire, Inc.	2,449		81			577		1,791
WhipTail Technologies, Inc.	351		(34		)	105		280
Tail-f Systems	167		(7		)	61		113
All others (four in total)	54		(5		)	20		39
Total acquisitions	$	3,181	$	25		$	838	$	2,318

On July 29, 2013, the Company completed its acquisition of privately held Composite Software, Inc. (“Composite Software”), a provider of data virtualization software and services. Composite Software provides technology that connects many types of data from across the network and makes it appear as if the data is in one place. With its acquisition of Composite Software, the Company intends to extend its next-generation services platform by connecting data and infrastructure. Revenue from the Composite Software acquisition has been included in the Company's Service category.

On October 7, 2013, the Company completed its acquisition of Sourcefire, Inc. (“Sourcefire”), a provider of intelligent cybersecurity solutions. Sourcefire delivers innovative, highly automated security through continuous awareness, threat detection, and protection across its portfolio, including next-generation intrusion prevention systems, next-generation firewalls, and advanced malware protection. With the Sourcefire acquisition, the Company aims to accelerate its security strategy of defending, discovering, and remediating advanced threats to provide continuous security solutions to the Company’s customers in more places across the network. Product revenue from the Sourcefire acquisition has been included in the Company's Security product category.

On October 28, 2013, the Company completed its acquisition of privately held WhipTail Technologies, Inc. (“WhipTail”), a provider of high-performance, scalable solid state memory systems. With its WhipTail acquisition, the Company aims to strengthen its Unified Computing System (UCS) strategy and enhance application performance by integrating scalable solid-state memory into the UCS’s fabric computing architecture. Product revenue from the WhipTail acquisition has been included in the Company's Data Center product category.

On July 8, 2014, the Company completed its acquisition of privately held Tail-f Systems ("Tail-f"), a provider of multi-vendor network service orchestration solutions for traditional and virtualized networks. Tail-f's products help customers implement applications, network services, and solutions across networking devices. With the Tail-f acquisition, the Company intends to advance its cloud virtualization strategy.

The total purchase consideration related to the Company’s business combinations completed during fiscal 2014 consisted of either cash consideration or cash consideration along with vested share-based awards assumed. The total cash and cash equivalents acquired from these business combinations was approximately $134 million.

Fiscal 2013 Business Combinations

Allocation of the purchase consideration for business combinations completed in fiscal 2013 is summarized as follows (in millions):



Fiscal 2013	Purchase Consideration		Net Liabilities Assumed			Purchased Intangible Assets		Goodwill
NDS Group Limited	$	5,005	$	(185	)	$	1,746	$	3,444
Meraki, Inc.	974		(59		)	289		744
Intucell, Ltd.	360		(23		)	106		277
Ubiquisys Limited	280		(30		)	123		187
All others (nine in total)	363		(25		)	127		261
Total acquisitions	$	6,982	$	(322	)	$	2,391	$	4,913

Acquisition of NDS Group Limited

On July 30, 2012, the Company completed its acquisition of NDS Group Limited (“NDS”), a provider of video software and content security solutions that enable service providers and media companies to securely deliver and monetize new video entertainment experiences. The acquisition of NDS will be combined with the delivery of Cisco Videoscape, the Company’s comprehensive content delivery platform that enables service providers and media companies to deliver next-generation entertainment experiences. The Company has included revenue from the NDS acquisition, subsequent to the acquisition date, in its Service Provider Video product category.

Under the terms of the acquisition agreement, the Company paid total cash consideration of approximately $5.0 billion, which included the repayment of $993 million of pre-existing NDS debt to third party creditors at the closing of the acquisition. The following table summarizes the purchase consideration for the NDS acquisition (in millions):



	Fair Value
Cash consideration to seller	$	4,012
Repayment of NDS debt to third party creditors	993
Total purchase consideration	$	5,005

The payment of the total purchase consideration of approximately $5.0 billion shown above, net of cash and cash equivalents acquired, is classified as a use of cash under investing activities in the Consolidated Statements of Cash Flows.

The total purchase allocation for NDS is summarized as follows (in millions):



	Fair Value
Cash and cash equivalents	$	98
Accounts receivable, net	199
Other tangible assets	268
Goodwill	3,444
Purchased intangible assets	1,746
Deferred tax liabilities, net	(378		)
Liabilities assumed	(372		)
Total purchase consideration	$	5,005

Other Fiscal 2013 Business Combinations

The Company acquired privately held Meraki, Inc. (“Meraki”) in the second quarter of fiscal 2013. Prior to its acquisition, Meraki offered mid-market customers on-premise networking solutions centrally managed from the cloud. With its acquisition of Meraki, the Company intends to address the shift to cloud networking as a key part of the Company’s overall strategy to accelerate the adoption of software-based business models that provide new consumption options for customers and revenue opportunities for partners. The Company has included revenue from the Meraki acquisition, subsequent to the acquisition date, in its Wireless product category.

The Company acquired privately held Intucell, Ltd. (“Intucell”) in the third quarter of fiscal 2013. Prior to its acquisition, Intucell provided advanced self-optimizing network software for mobile carriers. With its acquisition of Intucell, the Company intends to enhance its commitment to global service providers by adding a critical network intelligence layer to manage and optimize spectrum, coverage, and capacity, and ultimately the quality of the mobile experience. The Company has included revenue from the Intucell acquisition, subsequent to the acquisition date, in its NGN Routing product category.

The Company acquired privately held Ubiquisys Limited (“Ubiquisys”) in the fourth quarter of fiscal 2013. Prior to its acquisition, Ubiquisys offered service providers intelligent 3G and long-term evolution (LTE) small-cell technologies for seamless connectivity across mobile networks. With its acquisition of Ubiquisys, the Company intends to strengthen its commitment to global service providers by enabling a comprehensive small-cell solution that supports the transition to next-generation radio access networks. The Company has included revenue from the Ubiquisys acquisition, subsequent to the acquisition date, in its NGN Routing product category.

The total purchase consideration related to the Company’s business combinations completed during fiscal 2013 consisted of cash consideration, repayment of debt, and vested share-based awards assumed. The total cash and cash equivalents acquired from these business combinations was approximately $156 million.

Fiscal 2012 Business Combinations

Allocation of the purchase consideration for business combinations completed in fiscal 2012 is summarized as follows (in millions):



Fiscal 2012	Purchase Consideration		Net Liabilities Assumed			Purchased Intangible Assets		Goodwill
Total acquisitions (seven in total)	$	398	$	(39	)	$	200	$	237


(b)	Other Acquisition/Divestiture Information

Total transaction costs related to the Company’s business combination activities during fiscal 2014, 2013, and 2012 were $7 million, $40 million, and $15 million, respectively. These transaction costs were expensed as incurred in general and administrative (G&A) expenses in the Consolidated Statements of Operations.

The Company’s purchase price allocation for business combinations completed during recent periods is preliminary and subject to revision as additional information about fair value of assets and liabilities becomes available. Additional information, which existed as of the acquisition date but at that time was unknown to the Company, may become known to the Company during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date. Adjustments in the purchase price allocation may require a recasting of the amounts allocated to goodwill retroactive to the period in which the acquisition occurred.

The goodwill generated from the Company’s business combinations completed during fiscal 2014 is primarily related to expected synergies. The goodwill is generally not deductible for income tax purposes.

The Consolidated Financial Statements include the operating results of each business combination from the date of acquisition. Pro forma results of operations for the acquisitions completed during the fiscal years presented have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to the Company’s financial results.

During the third quarter of fiscal 2013, the Company completed the sale of its Linksys product line to a third party. The financial statement impact of the Company’s Linksys product line and its resulting sale were not material for any of the fiscal years presented.


(c)	Insieme Networks, Inc.

In the second quarter of fiscal 2014, the Company acquired the remaining interest in Insieme Networks, Inc. See Note 12.