Dell 2009 Annual Report Download - page 78

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Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The goodwill of $2.3 billion represents the value that is expected from combining Perot Systems with Dell to provide customers with a
broader range of IT services and solutions as well as optimizing how these solutions are delivered. The acquisition enables Dell to supply
even more Perot Systems customers with Dell products and extends the reach of Perot Systems' capabilities to Dell customers around the
world. Goodwill of $679 million, $1,613 million, and $35 million was assigned to the Large Enterprise, Public, and SMB segments,
respectively.
Identifiable intangible assets include customer relationships, internally developed software, non-compete agreements, and trade names
and other assets. These intangible assets are being amortized over their estimated useful lives based on the pattern of expected future
economic benefit, which is generally on a non-straight-line basis based upon their expected future cash flows. The following table
summarizes the cost of amortizable intangible assets related to the acquisition of Perot Systems:
Estimated Weighted-Average
Cost Useful Life
(in millions) (years)
Customer relationships $ 1,081 11.0
Technology 44 3.0
Non-compete agreements 39 5.2
Tradenames 10 1.5
Total amortizable intangible assets $ 1,174 10.4
Accounts receivable is comprised primarily of customer trade receivables. As such, the fair value of accounts receivable approximates its
carrying value of $410 million. The gross amount due is $423 million, of which $13 million is expected to be uncollectible.
In conjunction with the acquisition, Dell incurred $93 million in cash compensation payments made to former Perot Systems employees
who accepted positions with Dell related to the acceleration of Perot Systems unvested stock options and other cash compensation
payments. These cash compensation payments were expensed as incurred and are recorded in selling, general, and administrative
expenses in the Consolidated Statements of Income for Fiscal 2010. Dell incurred $116 million in acquisition-related costs for Perot
Systems during Fiscal 2010, including the payments above, and an additional $23 million in other acquisition-related costs such as
bankers' fees, consulting fees, other employee-related charges, and integration costs.
There were no contingent considerations related to the acquisition.
The amounts of revenue and earnings from Perot Systems included in the Dell's results since November 3, 2009, were $613 million and
$31 million, respectively. These earnings exclude the effects of amortization of intangible assets and acquisition-related expenses.
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