7. INTANGIBLE ASSETS AND GOODWILL
The changes in intangible assets for fiscal 2013 and the net book value of intangible assets at May 31, 2013 and 2012 were as follows:
|
| Intangible Assets, Gross |
| Accumulated Amortization |
| Intangible Assets, Net |
| Weighted | |||||||||||||||||||
(Dollars in millions) |
| May 31, |
|
| Additions |
| May 31, |
| May 31, |
| Expense |
| May 31, |
| May 31, |
| May 31, |
| Average | ||||||||
Software support agreements and related relationships |
| $ | 5,294 |
| $ | 4 |
| $ | 5,298 |
| $ | (3,330) |
| $ | (582) |
| $ | (3,912) |
| $ | 1,964 |
| $ | 1,386 |
| 5 years | |
Hardware systems support agreements and related relationships |
|
| 768 |
|
| 49 |
|
| 817 |
|
| (266) |
|
| (121) |
|
| (387) |
|
| 502 |
|
| 430 |
| 7 years | |
Developed technology |
|
| 6,908 |
|
| 558 |
|
| 7,466 |
|
| (4,651) |
|
| (826) |
|
| (5,477) |
|
| 2,257 |
|
| 1,989 |
| 7 years | |
Core technology |
|
| 2,549 |
|
| 30 |
|
| 2,579 |
|
| (1,609) |
|
| (329) |
|
| (1,938) |
|
| 940 |
|
| 641 |
| 3 years | |
Customer relationships and contract backlog |
|
| 2,260 |
|
| 175 |
|
| 2,435 |
|
| (1,287) |
|
| (350) |
|
| (1,637) |
|
| 973 |
|
| 798 |
| 6 years | |
Cloud software subscriptions and related relationships |
|
| 989 |
|
| 238 |
|
| 1,227 |
|
| (42) |
|
| (113) |
|
| (155) |
|
| 947 |
|
| 1,072 |
| 8 years | |
Trademarks |
|
| 597 |
|
| 38 |
|
| 635 |
|
| (292) |
|
| (64) |
|
| (356) |
|
| 305 |
|
| 279 |
| 8 years | |
Total intangible assets subject to amortization |
|
| 19,365 |
|
| 1,092 |
|
| 20,457 |
|
| (11,477) |
|
| (2,385) |
|
| (13,862) |
|
| 7,888 |
|
| 6,595 |
| 7 years | |
In-process research and development |
|
| 11 |
|
| 34 |
|
| 45 |
|
| — |
|
| — |
|
| — |
|
| 11 |
|
| 45 |
| N.A. | |
Total intangible assets, net |
| $ | 19,376 |
| $ | 1,126 |
| $ | 20,502 |
| $ | (11,477) |
| $ | (2,385) |
| $ | (13,862) |
| $ | 7,899 |
| $ | 6,640 |
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|
__________
(1) | Represents weighted average useful lives of intangible assets acquired during fiscal 2013. |
Total amortization expense related to our intangible assets was $2.4 billion in each of fiscal 2013, 2012 and 2011. As of May 31, 2013, estimated future amortization expenses related to intangible assets were as follows (in millions):
Fiscal 2014 | $ | 2,123 |
Fiscal 2015 |
| 1,656 |
Fiscal 2016 |
| 1,094 |
Fiscal 2017 |
| 523 |
Fiscal 2018 |
| 397 |
Thereafter |
| 802 |
Total intangible assets subject to amortization | $ | 6,595 |
In-process research and development |
| 45 |
Total intangible assets, net | $ | 6,640 |
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The changes in the carrying amounts of goodwill, which is generally not deductible for tax purposes, for our operating segments for fiscal 2013 and 2012 were as follows:
(Dollars in millions) |
| New Software Licenses and Cloud Software Subscriptions |
| Software License Updates and Product Support |
| Hardware Systems Support |
| Other(3) |
| Total | |||||
Balances as of May 31, 2011 |
| $ | 6,785 |
| $ | 12,052 |
| $ | 1,009 |
| $ | 1,707 |
| $ | 21,553 |
Goodwill from acquisitions |
|
| 658 |
|
| 461 |
|
| 184 |
|
| 2,378 |
|
| 3,681 |
Goodwill adjustments(1) |
|
| (76) |
|
| (34) |
|
| — |
|
| (5) |
|
| (115) |
Balances as of May 31, 2012 |
|
| 7,367 |
|
| 12,479 |
|
| 1,193 |
|
| 4,080 |
|
| 25,119 |
Allocation of goodwill(2) |
|
| 2,346 |
|
| — |
|
| — |
|
| (2,346) |
|
| — |
Goodwill from acquisitions |
|
| 933 |
|
| 27 |
|
| 62 |
|
| 1,341 |
|
| 2,363 |
Goodwill adjustments(1) |
|
| (113) |
|
| (32) |
|
| 4 |
|
| 2 |
|
| (139) |
Balances as of May 31, 2013 |
| $ | 10,533 |
| $ | 12,474 |
| $ | 1,259 |
| $ | 3,077 |
| $ | 27,343 |
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__________
(1) | Pursuant to our business combinations accounting policy, we recorded goodwill adjustments for the effect on goodwill of changes to net assets acquired during the measurement period (up to one year from the date of an acquisition). Goodwill adjustments were not significant to our previously reported operating results or financial position. |
(2) | Represents the allocation of goodwill to our operating segments upon completion of our intangible asset valuations. |
(3) | Represents goodwill allocated to our other operating segments and approximately $1.3 billion of goodwill for certain of our acquisitions that will be allocated based upon the finalization of valuations. |
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