HP 2012 Annual Report Download - page 116

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 7: Goodwill and Purchased Intangible Assets (Continued)
on the information available at the time of the review, HP determined that there was no future value
for the carrier relationships and the trade name but that the carrying value of the webOS technology
approximated its fair value. HP estimated the fair value of the webOS technology based on several
methods, including the market approach using recent comparable transactions and the discounted cash
flow approach using estimated cash flows from potential licensing agreements. Based on that analysis,
HP recognized an impairment loss of $72 million primarily related to the carrier relationships and the
trade name. HP then performed a goodwill impairment test by comparing the carrying value of the
relevant reporting unit to the fair value of that reporting unit. The fair value of the reporting unit was
significantly below the carrying value due to HP’s decision to wind down the sale of all webOS devices.
As a result, HP recorded a goodwill impairment charge of $813 million. Both the goodwill impairment
charge and the intangible asset impairment charge were included in the Impairment of Goodwill and
Purchased Intangible Assets line item in the Consolidated Statement of Earnings.
Purchased Intangible Assets
HP’s purchased intangible assets associated with completed acquisitions for each of the following
fiscal years ended October 31 are composed of:
October 31, 2012 October 31, 2011
Accumulated Accumulated
Accumulated Impairment Accumulated Impairment
Gross Amortization Loss Net Gross Amortization Loss Net
In millions
Customer contracts,
customer lists and
distribution agreements . . $ 5,807 $(2,625) $ (856) $2,326 $ 6,409 $(2,390) (49) $ 3,970
Developed and core
technology and patents . . 6,580 (2,501) (2,138) 1,941 7,226 (1,944) — 5,282
‘‘Compaq’’ trade name .... 1,422 (18) (1,227) 177 1,422 — — 1,422
Other product trademarks . . 310 (137) (109) 64 367 (129) (23) 215
In-process research and
development (‘‘IPR&D’’) . 7 — — 7 9 — — 9
Total purchased intangible
assets .............. $14,126 $(5,281) $(4,330) $4,515 $15,433 $(4,463) (72) $10,898
For fiscal 2012, the majority of the decrease in gross intangibles was related to $944 million of fully
amortized intangible assets that have been eliminated from both the gross and accumulated amounts
and a first quarter $293 million decrease in the estimated fair value of Autonomy’s purchased
intangible assets recognized in conjunction with the finalization of the purchase price allocation.
Additionally, HP recorded total intangible asset impairment charges of $4.3 billion, of which
$3.1 billion is related to the Autonomy reporting unit as described above. The remaining $1.2 billion is
related to a change in the Compaq branding strategy as discussed below.
On May 23, 2012, HP approved a change to its branding strategy for personal computers, which
will result in a more limited and focused use of the ‘‘Compaq’’ trade name acquired in fiscal 2002. In
conjunction with the change in branding strategy, HP revised its assumption as to the useful life of that
intangible asset, which resulted in a reclassification of the asset from an indefinite-lived intangible to a
finite-lived intangible with a remaining useful life of approximately five years. These changes triggered
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