Symantec 2008 Annual Report Download - page 166

are included in the Security and Compliance segment. Pro forma disclosures of the financial results of
4FrontSecurity were not included as they were not deemed material.
Note 5. Investment in Joint Venture
On February 5, 2008, Symantec formed Huawei-Symantec, Inc. (“joint venture”) with a subsidiary of Huawei
Technologies Co., Ltd. (“Huawei”). The joint venture is domiciled in Hong Kong with principal operations in
Chengdu, China. We contributed cash of $150 million, licenses related to certain intellectual property and other
intangible assets in exchange for 49% of the outstanding common shares of the joint venture. The joint venture will
develop, manufacture, market and support security and storage appliances to global telecommunications carriers
and enterprise customers. We recorded our initial investment in the joint venture at $150 million, reflecting our
carrying value of the assets contributed in exchange for the common shares received. Huawei contributed its
telecommunications storage and security business assets, engineering, sales and marketing resources, personnel,
and licenses related intellectual property in exchange for a 51% ownership interest in the joint venture.
At March 28, 2008, our carrying value of the investment in the joint venture exceeded our proportionate share
in the underlying net assets of the joint venture. This excess primarily relates to differences in the carrying value of
the net assets contributed by Symantec and Huawei upon the formation of the joint venture which will be amortized
over the useful life of the related assets.
On February 5, 2011, we have a one-time option to purchase an additional two percent ownership interest from
Huawei for $28 million. We determined the value of the option using the Black-Scholes option-pricing model. The
value of the option is not considered material to the financial statements and is recorded in Investment in joint
venture on the Balance Sheet. We have concluded that the option does not meet the definition of a derivative under
SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities”. Symantec and Huawei each have
the right to purchase all of the other partner’s ownership interest through a bid process upon certain triggering events
set to occur as early as February 5, 2011.
We account for our investment in the joint venture under the equity method of accounting. Under this method,
we record our proportionate share of the joint venture’s net income or loss based on the quarterly financial
statements of the joint venture. We will record our proportionate share of net income or loss one quarter in arrears.
Therefore, the financial results of the joint venture for the period from February 5, 2008 through March 31, 2008
will be included in our financial statements in the quarter ending July 4, 2008.
Note 6. Loss on Sale of Business
During the second quarter of fiscal 2008, the Company determined that the Application Performance
Management (“APM”) business in the Storage and Server Management segment (formerly the Data Center
Management segment) did not meet the long-term strategic objectives of the segment. As a result, the Company
recognized losses related to the write down of intangible assets of $87 million and $6 million in the second and third
quarters of 2008, respectively. On March 8, 2008, we consummated an agreement to sell the tangible and intangible
assets of approximately $103 million and liabilities of approximately $9 million related to the APM business to a
third-party buyer. The Company further recognized a loss of $2 million in the fourth quarter yielding a total loss of
$95 million recognized during 2008. The APM business did not have separately identifiable financial and cash flow
information and the loss is therefore considered a loss from continuing operations. The Company maintains the
legal liability to fulfill customer contracts that existed as of the sale date; however, the Company has subcontracted
this responsibility to the third-party buyer until the contracts have expired.
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SYMANTEC CORPORATION
Notes to Consolidated Financial Statements — (Continued)