Adobe 2000 Annual Report Download - page 36

Download and view the complete annual report

Please find page 36 of the 2000 Adobe annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 79

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79

9
using the purchase method of accounting in accordance with APB 16, and substantially all
of the purchase price of $3.0 million cash was allocated to in-process research and
development and expensed at the time of acquisition. The ongoing project at Attitude
Software at the time of the purchase included the development of the 3D Anarchy
authoring product. We purchased this technology to incorporate it into future versions of
our existing Adobe products to further enhance the feature sets and user interface
contained within the products. At the date we acquired Attitude Software, it was estimated
that 50% of the development effort had been completed and that the remaining 50% of
the development effort would take approximately 18 months to complete and would cost
$1.8 million. The efforts required to complete the development of the technology primarily
related to additional design efforts to integrate the technology into several of Adobe’s
products, finalization of coding, and completion testing. The value of the in-process tech-
nology was determined by estimating the projected net cash flows related to products the
technology would be integrated into, including costs to complete the development of the
technology and the future net revenues that may be earned from the products, excluding
the value attributed to the existing technology with the products prior to the integration
of the purchased technology. These cash flows were discounted back to their net present
value using a discount rate of 20%, exclusive of the value attributable to the use of the
in-process technologies in future products.
Additionally, during the fourth quarter of fiscal 1999, we acquired substantially all of the
assets, consisting of intellectual property, of Photomerge. In connection with the acquisi-
tion of Photomerge, 100% of the purchase price, or $600,000 cash, was allocated to
in-process research and development due to the state of completion and the uncertainty of
the technology.
Amortization of Goodwill and Purchased Intangibles
2000 CHANGE 1999 CHANGE 1998
Amortization of goodwill and
purchased intangibles $ 7.0 45% $ 4.8 (38)% $ 7.7
Percentage of total revenue 0.6% 0.5% 0.9%
Amortization of goodwill and purchased intangibles in fiscal 2000 and 1999 primarily
related to the acquisition of substantially all of the assets of GoLive Systems, Inc. and a
related partnership (together “GoLive Systems”) in December 1998. Amortization of
goodwill and purchased intangibles was higher in fiscal 2000 compared to fiscal 1999
primarily due to the additional amortization related to the acquisition of Glassbook in
September 2000. (For further information, see Note 2 of the Notes to Consolidated
Financial Statements.)
NONOPERATING INCOME
Investment Gain
2000 CHANGE 1999 CHANGE 1998
Investment gain $ 14.3 (84)% $ 88.9 493% $ 15.0
Percentage of total revenue 1.1% 8.8% 1.7%
Investment gain consists principally of realized gains or losses from direct investments as
well as mark-to-market valuation adjustments for investments held by Adobe Incentive
Partners, L.P. (“AIP”).
8