Adobe 2001 Annual Report Download - page 73

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share data)
Note 2. Acquisitions (Continued)
products. We released new products that contained the purchased technology in April 2001, with Acrobat
eBook Reader 2.1 and Adobe Content Server 2.0.
During the fourth quarter of fiscal 1999, we acquired substantially all of the assets, consisting of
intellectual property, of Attitude Software, LLC (‘‘Attitude Software’’). The acquisition was accounted for
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 existing Adobe products to further enhance the feature sets and user interface contained
within the products. We are incorporating the purchased technology into one of our products, which has
not yet been released. 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 eighteen 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 our products, finalization of coding, and completion testing. The value of the
in-process technology was determined by estimating the projected net cash flows related to products the
technology will 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 Technology. In connection with the acquisition of
Photomerge Technology, 100% of the purchase price, or $0.6 million cash, was allocated to in-process
research and development, due to the state of completion and the uncertainty of the technology. This
purchased technology was incorporated into our Photoshop Elements product, which we released in
April 2001.
On December 22, 1998, we acquired substantially all of the assets, consisting of intellectual property
and a minimal amount of fixed assets, of both GoLive Systems, Inc., a Delaware corporation, and GoLive
Systems GmbH and Co. KG, a German limited partnership (together ‘‘GoLive Systems’’). GoLive Systems
creates Web site development software, which enables users to effectively use the Internet for professional
publishing and communication. The acquisition was accounted for under the purchase method of
accounting in accordance with APB 16. The initial purchase price of the acquisition was approximately
$31.0 million cash, plus additional contingency payments of up to $8.0 million based on achieving certain
technical and employment milestones. We determined that certain milestones had been reached as of
March 5, 1999, and as such, $4.0 million in contingent payments were recorded as additional purchase
price and paid throughout fiscal 1999. Approximately $11.4 million of the purchase price was allocated to
the developed technology, and the remaining $23.6 million was allocated to trademark, the value of the
assembled workforce, and goodwill. These are amortized on a straight-line basis over a five-year period.
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