Goodwill, Capitalized Software and Other Intangible Assets

6 Months Ended

Sep. 30, 2011

Goodwill, Capitalized Software and Other Intangible Assets [Abstract]

Goodwill, Capitalized Software and Other Intangible Assets

Note 9 – Goodwill, Capitalized Software and Other Intangible Assets

Goodwill

In previous fiscal years, the Company operated in four business segments in the technology industry: products, web application performance management services, professional services and application services. Effective April 1, 2011, the Company realigned its business unit structure which resulted in a change in the Company's segment reporting and reporting unit structure (see Note 10 for additional information). The following reporting units were created as a result of this change: Application Performance Management (“APM”), Mainframe (“MF”), Changepoint (“CP”), Uniface (“UF”), Professional Services (“PS”) and Application Services (“AS”).

As of April 1, 2011, the Company performed a valuation to determine the reallocation of the goodwill balance from the prior period reporting units (products, web performance services, professional services and application services) to the new reporting units based on our estimated relative fair value. This valuation and reallocation resulted in the following as of April 1, 2011:

The goodwill balance of $221.1 million related to the products reporting unit as of March 31, 2011 was proportionally allocated to APM, Mainframe, Changepoint and Uniface (collectively “software solutions”) using the estimated relative fair value of each respective reporting unit.

The goodwill balance of $219.5 million related to the web performance services reporting unit is now included within the APM reporting unit.

As of March 31, 2011, the professional services reporting unit consisted of traditional professional services and software related professional services. The fiscal 2012 business unit structure realignment transferred the software related professional services to APM, Mainframe, Changepoint and Uniface. As a result, the goodwill balance of $141.8 million related to the professional services reporting unit was allocated between traditional professional services, APM, Mainframe, Changepoint and Uniface based on the estimated relative fair value of each respective reporting unit. The portion of goodwill allocated to the traditional professional services is reported in the professional services reporting unit.

The goodwill balance of $25.4 million related to the Covisint application services reporting unit continues to be reported in the application services reporting unit during fiscal 2012.

Following the allocation of goodwill to the new reporting units, the Company performed impairment evaluations of each reporting unit's goodwill as of April 1, 2011 which indicated the goodwill carrying values were not impaired. There has been no triggering event since April 1, 2011.

The change in the carrying amount of goodwill by reporting unit during the six months ended September 30, 2011 is summarized as follows (in thousands):

	APM			MF			CP			UF			PS			AS		Total
Goodwill as of April 1, 2011	$	282,815		$	141,020		$	22,151		$	21,350		$	115,044		$	25,385	$	607,765

Acquisition (1)		210,908			-			-			-			-			-		210,908

Effect of foreign currency translation		(14,814	)		(106	)		(17	)		(16	)		(431	)				(15,384	)

Goodwill as of September 30, 2011	$	478,909		$	140,914		$	22,134		$	21,334		$	114,613		$	25,385	$	803,289

(1)The Company acquired dynaTrace on July 1, 2011. See Note 2 for information related to the purchase accounting that resulted in the recording of goodwill.

Capitalized software and other intangible assets

The components of the Company's capitalized software and other intangible assets are as follows (in thousands):

	As of September 30, 2011
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Unamortized intangible assets:
Trademarks	$	4,403				$	4,403

Amortized intangible assets:
Capitalized software
Internally developed	$	203,745		(167,835	)	$	35,910
Purchased (1)		167,001		(128,647	)		38,354
Customer relationship (2)		52,064		(18,797	)		33,267
Other (2)		20,271		(10,895	)		9,376
Total amortized intangible assets	$	443,081	$	(326,174	)	$	116,907

	As of March 31, 2011
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Unamortized intangible assets:
Trademarks	$	4,467				$	4,467

Amortized intangible assets:
Capitalized software
Internally developed	$	194,770	$	(161,671	)		33,099
Purchased		136,469		(125,118	)		11,351
Customer relationship		48,813		(16,729	)		32,084
Other		11,162		(9,162	)		2,000
Total amortized intangible assets	$	391,214	$	(312,680	)	$	78,534

	(1) In July 2011, the Company acquired developed technology valued at $28.5 million as part of the dynaTrace acquisition (see Note 2 for additional information). Additionally, the Company acquired developed technology valued at $4.2 million during fiscal 2012.

	(2) In July 2011, the Company acquired customer relationship agreements valued at $3.7 million and trade names valued at $9.8 million as part of the dynaTrace acquisition (see Note 2 for additional information).

Capitalized software includes the costs of internally developed software technology and software technology purchased through acquisitions. Internally developed capitalized software costs and capitalized purchased software technology are being amortized over periods up to five years.

Customer relationship agreements are related to acquisition activity and are being amortized over periods up to ten years.

Other amortized intangible assets include amortizable trademarks and patents relating to acquisition activity and are being amortized over periods up to three years.

Unamortized trademarks were acquired as part of the Covisint and Changepoint acquisitions in fiscal 2004 and fiscal 2005. These trademarks are deemed to have an indefinite life.

Amortization of intangible assets

Amortization expense of capitalized software, customer relationship and other intangible assets were as follows (in thousands):

	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
Amortized intangible assets:
Capitalized software
Internally developed	$	3,185	$	2,706	$	6,160	$	5,444
Purchased		2,545		1,119		3,727		2,335
Customer relationship		1,176		1,089		2,263		2,219
Other		1,287		469		1,775		935

Total amortization expense	$	8,193	$	5,383	$	13,925	$	10,933

Capitalized software amortization related to our product software is reported as “Cost of software license fees”, amortization related to our web performance services (Gomez SaaS) is reported as “Cost of maintenance and subscription” and amortization related to our application services (Covisint SaaS) is reported as “Cost of professional services” in the condensed consolidated statements of operations.

Customer relationship amortization related to our software solutions segments is reported as “Sales and marketing” and amortization related to our application services segment is reported as “Cost of professional services” in the condensed consolidated statements of operations.

Amortization expense associated with trademarks and trade names is reported as “Administrative and general” in the condensed consolidated statements of operations.

Based on the capitalized software, customer relationship and other intangible assets recorded through September 30, 2011, the annual amortization expense over the next four fiscal years and thereafter is expected to be as follows (in thousands):

	Fiscal Year Ended March 31,
	2012		2013		2014		2015		Thereafter
Amortized intangible assets:
Capitalized software	$	22,035	$	20,760	$	17,248	$	12,097	$	12,011
Customer relationship		4,477		4,179		4,132		4,132		18,610
Other		3,790		3,524		3,078		759		-

Total amortization expense	$	30,302	$	28,463	$	24,458	$	16,988	$	30,621

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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