Accounting Policies
Stock Split
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Cash and Short-Term Investments
Inventories
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Equity and Other Investments
Goodwill
Intangible Assets
Derivatives
Investment Income/(Loss)
Income Taxes
Stockholders' Equity
Other Comprehensive Income
Employee Stock and Savings Plans
Earnings Per Share
Acquisitions
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Segment Information
Note 18-Acquisitions
In fiscal year ended June 30, 2003,
we acquired all of the outstanding equity interests of Navision a/s, Rare Ltd.,
and Placeware, Inc. Navision, headquartered in Vedbaek, Denmark, is a provider
of integrated business solutions
software for small and mid-sized businesses in the European market and will
play a key role in the future development of the Microsoft Business
Solutions segment. We acquired Navision on July 12, 2002 for $1.465
billion consisting primarily of $662 million in cash and the issuance of 29.1
million common shares of Microsoft stock valued at $773 million. The value of
the common shares issued was determined based on the average market price of
our common shares over the 2-day period before and after terms of the
acquisition were agreed to and approved. Rare is a video game developer located
outside Leicestershire, England, that is expected to broaden
the portfolio of games available for the Xbox video game system. Rare was
acquired on September
24, 2002 for $377 million consisting primarily of $375 million in
cash. Placeware, located in Mountain View, CA, facilitates secure, highly
reliable, cross-firewall web conferencing experiences allowing users to conduct
business meetings online from a PC, and will become a part of Microsoft's Real
Time Collaboration business unit within the Information
Worker segment. Placeware was acquired on April 30, 2003 for $202
million, consisting primarily of $189 million in cash. Navision, Rare, and
Placeware have been consolidated into our financial statements since their
respective acquisition dates. None of the acquisitions, individually or in the
aggregate, are material to our consolidated results of operations. Accordingly,
pro forma financial information is not included in this note.
The following table summarizes the
estimated fair values of the assets acquired and liabilities assumed at the
date of the acquisitions (in millions):
(In millions) |
Navision a/s
At
July 12, 2002 |
|
Rare, Ltd.
At
September 24, 2002 |
|
Placeware, Inc.
At
April 30, 2003 |
Current assets |
$
240 |
|
$ 25 |
|
$
30 |
Property, plant, and equipment |
8 |
|
8 |
|
7 |
Intangible assets |
169 |
|
75 |
|
30 |
Goodwill |
1,197 |
|
281 |
|
180 |
Total assets acquired |
1,614 |
|
389 |
|
247 |
Current Liabilities |
(148) |
|
(12) |
|
(32) |
Long-term liabilities |
(1) |
|
- |
|
(13) |
Total liabilities assumed |
(149) |
|
(12) |
|
(45) |
Net Assets Acquired |
$
1,465 |
|
$ 377 |
|
$
202 |
Of the $169 million of acquired
intangible assets in the Navision acquisition, $2 million was assigned to
research and development assets that were written off in accordance with FIN 4.
Those write-offs are included in Research and Development expenses. The
remaining $167 million of acquired intangible assets have a weighted average
useful life of approximately five years. The intangible assets that make up that
amount include technology of $48 million (four-year weighted-average useful
life), contracts of $115 million (six-year weighted-average useful life), and
marketing of $4 million (three-year weighted-average useful life). The $1,197 million of goodwill
was assigned to the Microsoft Business Solutions
segment. Of that total amount, approximately $900 million is expected to
be deductible for tax purposes.
Of the $75 million of acquired
intangible assets in the Rare acquisition, $13 million was assigned to research
and development assets that were written off in accordance with FIN 4. Those
write-offs are included in Research and Development expenses. The remaining $62
million of acquired intangible assets have a weighted average useful life of
approximately five years. The intangible assets that make up that amount
include technology of $36 million (five-year weighted average useful life),
contracts of $16 million (five-year weighted average useful life), and
marketing of $10 million (five-year weighted average useful life). The $281
million of goodwill was assigned to the Home and
Entertainment segment. Of that total amount, approximately $270
million is expected to be deductible for tax purposes.
The $30 million of acquired
intangible assets in the Placeware acquisition have a weighted average useful
life of approximately eight years. The intangible assets that make up that
amount include technology of $4 million (four-year weighted-average useful
life), customers of $23 million (ten-year weighted-average useful life),
contracts of $1 million (six-year weighted-average useful life), and marketing
of $2 million (one-year weighted average useful life). The $180 million of
goodwill was assigned to the Information Worker
segment. None of the goodwill is expected to be deductible for tax purposes.
|