Motorola 2008 Annual Report Download - page 136

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is expected to be deductible for tax purposes, a $12 million charge for acquired in-process research and
development costs, and $30 million in identifiable intangible assets. The acquired in-process research and
development will have no alternative future uses if the products are not feasible. At the date of the acquisition, two
projects were in process. During the year ended December 31, 2008, one of the projects was completed while the
other project was abandoned. The average risk adjusted rate used to value this project was 22%. The allocation of
value to in-process research and development was determined using expected future cash flows discounted at
average risk adjusted rates reflecting both technological and market risk as well as the time value of money. These
research and development costs were expensed at the date of acquisition. Intangible assets are included in Other
assets in the Company’s consolidated balance sheets. The intangible assets are being amortized over periods
ranging from 3 to 5 years on a straight-line basis.
The results of operations of Broadbus have been included in the Home and Networks Mobility segment in the
Company’s consolidated financial statements subsequent to the date of acquisition. The pro forma effects of this
acquisition on the Company’s consolidated financial statements were not significant.
TTP Communications plc
In August 2006, the Company acquired TTP Communications plc (“TTPCom”), a provider of wireless
software platforms, protocol stacks and semiconductor solutions, for $193 million in cash. The Company recorded
$52 million in goodwill, a portion of which is expected to be deductible for tax purposes, a $17 million charge for
acquired in-process research and development costs, and $118 million in identifiable intangible assets. The
acquired in-process research and development will have no alternative future uses if the products are not feasible.
At the date of the acquisition, a total of four projects were in process. The average risk adjusted rate used to value
these projects was 18%. These projects have since been completed. The allocation of value to in-process research
and development was determined using expected future cash flows discounted at average risk adjusted rates
reflecting both technological and market risk as well as the time value of money. These research and development
costs were expensed at the date of acquisition. However, due to changes in software platform strategy, impairment
charges of $89 million were recorded for the year ended December 31, 2007, representing write-downs of:
(i) $81 million of intangible assets, primarily relating to completed technology and other intangibles, and
(ii) $8 million of property, plant and equipment.
The results of operations of TTPCom have been included in the Mobile Devices segment in the Company’s
consolidated financial statements subsequent to the date of acquisition. The pro forma effects of this acquisition on
the Company’s consolidated financial statements were not significant.
Kreatel Communications AB
In February 2006, the Company acquired Kreatel Communications AB (“Kreatel”), a leading developer of
innovative Internet Protocol (“IP”) based digital set-tops and software, for $108 million in cash. The Company
recorded $79 million in goodwill, a portion of which is expected to be deductible for tax purposes, a $1 million
charge for acquired in-process research and development costs, and $22 million in identifiable intangible assets.
The acquired in-process research and development will have no alternative future uses if the products are not
feasible. At the date of the acquisition, a total of two projects were in process. These projects have since been
completed. The average risk adjusted rate used to value these projects was 19%. The allocation of value to in-
process research and development was determined using expected future cash flows discounted at average risk
adjusted rates reflecting both technological and market risk as well as the time value of money. These research and
development costs were expensed at the date of acquisition. Intangible assets are included in Other assets in the
Company’s consolidated balance sheets. The intangible assets are being amortized over periods ranging from 2 to
4 years on a straight-line basis.
The results of operations of Kreatel have been included in the Home and Networks Mobility segment in the
Company’s consolidated financial statements subsequent to the date of acquisition. The pro forma effects of this
acquisition on the Company’s consolidated financial statements were not significant.
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