Adaptec 2001 Annual Report Download - page 25

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25
consumption of radio networks. At the date of acquisition, we estimated that Datum’s
technology was 59% complete and the costs to complete the project to be $1.8 million.
The above estimates were determined by comparing the time and costs spent to date and the
complexity of the technologies achieved to date to the total costs, time and complexities that
were expected to be expended to bring the technologies to completion.
Progress on the technology acquired from Malleable was slower than originally estimated and
as a result, costs incurred on this project exceeded our original estimates. In the second quarter
of 2001, we discontinued development of this technology and recorded an impairment charge
related to the Malleable goodwill and purchased intangible assets (see “ Amortization of
Goodw ill and Impairment of Intangibles” ).
Development of the chip incorporating the technology acquired from Datum was completed in
the fourth quarter of 2000 and the costs incurred to that date were in line with our initial
expectations. Since then, we have completed the required firmware related to this chip and
have extended development of the Datum technology to a follow-on product. The general
economic slowdown has delayed the introduction of the third generation base stations into
which we expect to incorporate our technology, but we expect these products to begin
generating revenues in the second quarter of 2002.
As a result of the delay in introduction of the third generation base stations, w e failed to
achieve the revenues, net income, and return on investment expected at the time that the
acquisition was completed. We recorded an impairment charge related to the Datum goodw ill
and purchased intangible assets during the fourth quarter of 2001 (see “ Amortization of
Goodw ill and Impairment of Intangibles” ).
Restructuring and other special charges
Restructuring – March 26, 2001
In the first quarter of 2001, we implemented a restructuring plan in response to the decline in
demand for our networking products and consequently recorded a restructuring charge of
$19.9 million. Prior to the end of the first quarter, management approved the restructuring plan
committing PMC to the termination of 223 employees, the consolidation of a number of
facilities and the curtailment of certain research and development projects. Employees
terminated under this plan were advised prior to the end of the quarter of the termination
benefits to w hich they were entitled.