Adaptec 2001 Annual Report Download - page 31

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31
We have incurred losses and other costs that can be applied against future taxable earnings to
reduce our tax liability on those earnings. A s we are uncertain of realizing the future benefit of
those losses and expenditures, we have taken a valuation allowance against all domestic
deferred tax assets and recorded only deferred tax assets that can be applied in currently
taxable foreign jurisdictions.
Goodwill
As part of our restructuring plan, w e discontinued further development of the technology
acquired in the purchase of Malleable Technologies, Inc. We estimated that we would not
receive any future cash flows related to these assets, and recorded an impairment of the
remaining net book value of the goodwill and intangible assets related to Malleable of $189
million.
We also performed a review of the technology and assets acquired in the purchase of Datum
Telegraphic, Inc. We estimated the future cash flows of those assets in light of continued weak
industry conditions, lower market growth expectations, and delays in our customers’ clients
moving to next generation w ireless services where the Datum technology can be used. Based
on the discounted values of those cash flows, we recorded an impairment charge of $79.3
million of the remaining net book value of goodwill and intangible assets related to Datum.
Failure to achieve the revised levels of revenues and net income will negatively impact the
revised return on investment and may result in further impairment of the goodwill and
purchased intangible assets related to Datum.
Investment in Non-Public Entities
We have invested in non-public companies and in venture capital funds, w hich we review
periodically to determine if there has been a non-temporary decline in the market value of
those investments below our carrying value. Our assessment of impairment in carrying value
is based on the market value trends of similar public companies, the current business
performance of the entities in which we have invested, and if available, the estimated future
market potential of the companies and venture funds. We recorded an impairment of our
investments in non-public entities of $17.5 million in the fourth quarter of 2001. When we
perform future assessments of these investments, a further decline in the value of these
companies and venture funds may require us to recognize additional impairment on the
remaining $12.4 million investment.