Symantec 2003 Annual Report Download - page 35

Symantec 2003 33
general and administrative expenses during fiscal 2002 as compared to
fiscal 2001 was primarily due to AXENT related general and administra-
tive expenses, salary increases, legal fees, infrastructure related expen-
ditures and bad debt expense, offset by a reduction of other general and
administrative expenses.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES
FROM ACQUISITIONS
Amortization of goodwill and other intangibles from acquisitions
decreased 99% to approximately $2.8 million during fiscal 2003 from
$199.0 million during fiscal 2002. This decrease was due to the adop-
tion of SFAS No. 142 on April 1, 2002, under which the carrying values
of goodwill and intangible assets deemed to have indefinite lives are
no longer amortized, but are subject to an annual impairment test.
Amortization of goodwill and other intangibles from acquisitions
increased 173% to approximately $199.0 million during fiscal 2002
from $72.8 million during fiscal 2001. This increase was related prima-
rily to the amortization of goodwill and other intangibles associated with
the acquisition of AXENT in December 2000.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT EXPENSES
Acquired in-process research and development was $4.7 million during
fiscal 2003, due to the Riptech, SecurityFocus and Recourse acquisitions
in the September 2002 quarter. We recorded no acquired in-process
research and development charges during fiscal 2002. During fiscal
2001, we acquired AXENT and wrote off approximately $22.3 million of
acquired in-process research and development associated with this
acquisition. These write-offs were necessary because the acquired tech-
nologies had not yet reached technological feasibility and there were no
alternative uses.
The efforts required to develop the acquired in-process technology prin-
cipally related to the completion of all planning, design, development
and testing activities that are necessary to establish that the product or
service can be produced to meet its design specifications including fea-
tures, functions and performance. We expect the acquired in-process
technology to be developed into commercially feasible products.
However, there are no assurances that this will occur. If we fail to com-
plete these products in their entirety, or in a timely manner, we may not
continue to attract new users, we may be unable to retain our existing
users and the value of the other intangible assets may become impaired.
We determined the fair value of the acquired in-process technology for
each of the purchases by estimating the projected cash flows related to
these projects and future revenues to be earned upon commercialization
of the products. We discounted the resulting cash flows back to their
net present values. We based the net cash flows from such projects on
our analysis of the respective markets and estimates of revenues and
operating profits related to these projects.
A valuation specialist used our estimates to establish the amount of
acquired in-process research and development to be written off for
these acquisitions during fiscal 2003 and 2001. Actual spending on
these product development projects since our acquisition of the
companies discussed below did not differ materially from the original
assumptions and projections discussed in prior filings.
Riptech The in-process technology acquired in the Riptech acquisition
consisted primarily of research and development related to the fourth
generation of its Caltarian technology, which provides real-time infor-
mation protection through around-the-clock monitoring, analysis and
response. We plan to integrate this technology into our managed secu-
rity services.
SecurityFocus The in-process technology acquired in the SecurityFocus
acquisition consisted primarily of research and development related to
new versions of DeepSight Threat Management System and DeepSight
Analyzer products, which are threat management systems that provide
early warnings of attack, as well as countermeasures to defend these
attacks. We plan to integrate this technology into our security manage-
ment products.
Recourse The in-process technology acquired in the Recourse acquisi-
tion consisted primarily of research and development related to new
versions of ManHunt, a network intrusion detection system. We plan to
integrate this technology into our intrusion detection products.
AXENT The in-process technology acquired in the AXENT acquisition
consisted primarily of research and development related to the next
generation of ESM, Intruder Alert, Raptor Firewall, Webthority and other
projects. AXENT’s research and development was focused on providing
more robust features in its development of these next generation prod-
ucts. We have added these projects to our product offerings, with the
exception of Webthority, which was divested with our Web access man-
agement product line in August 2001.
RESTRUCTURING, SITE CLOSURES AND OTHER
Restructuring, site closures and other were approximately $11.1 million,
$20.4 million and $3.7 million during fiscal 2003, 2002 and 2001,
respectively. During fiscal 2003, we recorded approximately $8.7 million
for costs of severance, related benefits and outplacement services pri-
marily associated with the relocation of our Leiden, Netherlands opera-
tions to Dublin, Ireland, the relocation of certain development, sales and
finance activities, the outsourcing of our North American and European
consumer support functions, the realignment of certain worldwide mar-
keting efforts, and the reduction in operations in San Antonio, Texas.
As a result, we terminated 424 employees. In addition, we recorded
approximately $3.5 million for exit costs associated with the consolida-
tion of certain facilities in the United States. These expenses were offset
by a net reduction in expenses of approximately $1.1 million, due prima-
rily to revised estimates of certain fiscal 2002 facility related expenses.
During fiscal 2002, we incurred expenses related to consolidating
smaller sites into a larger facility in Newport News, Virginia, consolidat-
ing most of our United Kingdom facilities to Maidenhead, UK, consoli-
dating our European support functions by moving our Leiden,
Netherlands facility to Dublin, Ireland and relocating our North