Adaptec 2002 Annual Report Download - page 25

The technology acquired from Datum is a digitally controlled amplifier architecture, which was designed to
increase base station system capacities, while reducing cost, size and power 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 $1.8 million.
The above estimates were determined by comparing the time and costs spent to date and the complexity of the
technologies achieved to date to the total costs, time and complexities that were expected to be expended to
bring the technologies to completion.
Progress on the technology acquired from Malleable was slower than originally estimated and as a result,
costs incurred on this project exceeded our original estimates. In the second quarter of 2001, we
discontinued development of this technology and recorded an impairment charge related to the Malleable
goodwill and purchased intangible assets (see "Amortization of Goodwill and Impairment of Intangibles").
Development of the chip incorporating the technology acquired from Datum was completed in the fourth quarter
of 2000 and the costs incurred to that date were in line with our initial expectations. Since then, we have
completed the required firmware related to this chip and have extended development of the Datum technology
to a follow−on product. The general economic slowdown has delayed our customers' introduction of the third
generation base stations into which we had expected the Datum technology to be incorporated. It is currently
uncertain when the Datum products will begin to generate significant revenues.
As a result of the delay in introduction of the third generation base stations, we failed to achieve the
revenues, net income, and return on investment expected at the time that the acquisition was completed. We
recorded an impairment charge related to the Datum goodwill and purchased intangible assets during the
fourth quarter of 2001 (see "Amortization of Goodwill and Impairment of Intangibles").
Interest and Other Income, Net ($ 000,000)
2002 Change 2001 Change 2000
−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−
Interest and other income, net $ 5.0 (64%) $ 13.9 (26%) $ 18.9
Percentage of net revenues 2% 4% 3%
Net interest and other income declined in 2002 by $8.9 million, or 64%.
Excluding interest expense and the amortization of debt financing costs, interest and other income for 2002
was $17.1 million as compared to $19.0 million in 2001. While our interest income declined by approximately
$5.5 million as a result of a decline of average yields on our cash, short term and long term investments,
this decline was partially offset by an additional $3.6 million in interest income from an overall increase
in our average cash balances.
Our interest expense and amortization of our debt issuance costs increased to $12.1 million in 2002, from
$5.0 million in 2001, because our convertible subordinated notes were outstanding for the entire year of
2002 compared to less than five months in 2001.
Our net interest income decreased to $13.9 million in 2001 from $18.9 million in 2000. While our interest
income declined by approximately $3.2 million as a result of a decline of average yields on our cash, short
term and long term investments, this decline was offset by an additional $3.0 million in interest income
from an overall increase in our cash balances. Interest expense increased by $3.6 million and we incurred
$0.6 million in amortized debt issuance costs in 2001 compared to 2000 due to the issuance of our
convertible subordinated notes in August 2001. Other income in 2000 included income from an equity interest
in another company of $0.6 million.
24