Intel 2002 Annual Report Download - page 58

Other business combinations in the above summary represent 7 business combination transactions in 2001 that were not individually
significant (13 in 2000).
Purchase consideration for acquisitions in 2001 included 21.0 million unregistered shares of Intel common stock. Of these shares,
5.2 million were contingent upon the continued employment of certain employees and/or meeting performance criteria, and approximately
2.8 million of the contingent shares have subsequently been issued. An additional 900,000 registered shares are issuable to certain employees
contingent upon meeting certain performance criteria and are not included in purchase consideration. Of these shares, approximately 600,000
have subsequently been issued, and approximately 200,000 have been forfeited as certain milestones were not met. Further, $224 million in cash
compensation was contingent upon the continued employment of certain employees and/or meeting performance criteria and was not included in
purchase consideration, of which approximately $85 million had been paid and approximately $10 million had been forfeited. Of the
$129 million remaining to be paid, approximately $75 million was not recorded in the company's balance sheet.
For 2000, purchase consideration included 2.6 million unregistered shares of Intel common stock, of which 1.2 million shares were
contingent upon the continued employment of certain employees and have subsequently been issued. Additionally, $37 million in cash
compensation was contingent upon the continued employment of certain employees, of which approximately $34 million had been paid.
During 2002, the company recognized a $75 million tax benefit related to sales of the stock of certain previously acquired companies,
primarily Ziatech. Also during 2002, the company wrote off acquisition-related identified intangibles of $127 million, related to a portion of the
developed technology acquired with the Xircom and Trillium acquisitions. In 2001, the company wrote off acquisition-related identified
intangibles of $26 million and goodwill of $98 million, related to acquisitions made prior to 2000.
For 2001, $198 million was allocated to purchased in-process research and development (IPR&D) and expensed upon acquisition of the
above companies ($109 million for 2000), because the technological feasibility of products under development had not been established and no
future alternative uses existed. The fair value of the IPR&D was determined using the income approach, which discounts expected future cash
flows from projects under development to their net present value. Each project was analyzed to determine the technological innovations
included; the utilization of core technology; the complexity, cost and time to complete
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development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated,
taking into account the expected life cycles of the products and the underlying technology, relevant market sizes and industry trends. The
company determined a discount rate for each project based on the relative risks inherent in the project's development horizon, the estimated costs
of development, and the level of technological change in the project and the industry, among other factors.
Note 14: Acquisition of Development-Stage Operations
During 2002, the company acquired three development-stage operations in exchange for total consideration of approximately $57 million.
Approximately $35 million of the consideration was allocated to acquisition-
related developed technology, $20 million was allocated to IPR&D,
and the remaining amount represented the value of net tangible assets. There was no allocation of purchase consideration to goodwill. The
operating results of each of these acquisitions since the date of acquisition have been included in the operating results of the acquiring business
unit within either the Intel Communications Group operating segment or the "all other" category, as appropriate, for segment reporting purposes.
Note 15: Goodwill
Goodwill by operating segment was adjusted for the years ended December 29, 2001 and December 28, 2002, as follows:
$
228
$
22
$
153
$
—
options assumed
2000
GIGA A/S
$
1,247
$
52
$
1,041
$
138
Cash
Basis Communications
Corporation
$
453
$
21
$
353
$
117
Cash and options assumed
Trillium Digital Systems, Inc.
$
277
$
8
$
129
$
98
Cash, common stock and
options assumed
Ziatech Corporation
$
222
$
18
$
147
$
38
Cash and options assumed
Other
$
513
$
10
$
477
$
5
Cash and options assumed
(In Millions)
Intel Communications
Group
Wireless
Communications and
Computing Group
Intel
Architecture
Business
All Other Total
December 30, 2000
$
3,926
$
953
$
92
$
6
$
4,977
Additions
1,148
14
23
6
1,191