The Channel logo

News

By | Chris Mellor 3rd February 2009 14:43

Seagate kisses Maxtor goodwill goodbye

$2.3bn down in ink, up in smoke

In a telling move, Seagate is writing off $2.3bn goodwill from its Maxtor acquisition and other intangible items.

Maxtor was purchased for $1.9bn in May, 2006, so Seagate is writing the entire acquisition value off and a bit more besides. There will be a $2.3bn non-cash charge for the second quarter results this financial year which finished on January 2. The Maxtor goodwill write-off accounts for $2.2bn of that. The Q2 results report mentioned a $2.3bn - $2.6bn impairment charge, so the damage isn't quite as large as feared.

Goodwill is a sort of funny money. It reflects the value of an acquired company to make a profit above and beyond the raw value of its tangible assets, such as its manufacturing plants and machinery. The impairment charges for lost goodwill will not result in any current or future cash expenditures. However, when Seagate bought Maxtor there was an amount in the acquisition cost which corresponded to the goodwill item.

The Maxtor entity's ability to make a profit beyond the book value of its tangible assets has evaporated. Seagate paid for something two and half years ago that is now worthless. ®

comment icon Read 13 comments on this article alert Send corrections

Opinion

Merlin Data Center Interior

Trevor Pott

Enterprises want them, but they're still a pain in the ASCII
WWI French tank picture via Shutterstock
Vinod_Khosla

Chris Mellor

A VC with startup agenda slams established suppliers. Surprised? Neither were we
ZenPad_RealRacing

Features

Eclipse image via Shutterstock
The Azure Portal: Microsoft is betting on cloud for its future business
container_ship_hamburg_shutterstock_648
Michael Dell. Pic by Joi Ito
Cool Texas dude is just your average billionaire