Adobe 1999 Annual Report Download - page 12

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11
Private Public
Adobe Ventures II, L.P. Equity Investments
2Way Corporation .................................... X
AvantGo, Inc. ....................................... X
Cascade Systems International ........................... X
Cogito Learning Media, Inc. ............................ X
Digital Intelligence, Inc. ............................... X
DigitalThink, Inc. .................................... X
Extensis Corporation .................................. X
Glyphica ........................................... X
HAHT Software, Inc. ................................. X
Salon.com ......................................... X
Virage, Inc. ........................................ X
Adobe Ventures III, L.P. Equity Investments
2Way Corporation .................................... X
Cascade Systems International ........................... X
Digital Fountain ..................................... X
DigitalThink, Inc. .................................... X
Glyphica ........................................... X
Impresse Corporation ................................. X
Virtualis Systems, Inc. ................................. X
We intend to continue investing in new markets, through limited partnerships as well as through direct
investments, although we currently do not anticipate investing further through AIP.
PRODUCT DEVELOPMENT
Since the personal computer software industry is characterized by rapid technological change, a
continuous high level of expenditures is required for the enhancement of existing products and the
development of new products. We primarily develop our software internally. We occasionally acquire
products developed by others by purchasing the stock or assets of the business entity that held ownership
rights to the technology. In other instances, we have licensed or purchased the intellectual property
ownership rights of programs developed by others with license or technology transfer agreements that may
obligate us to pay royalties, typically based on a percentage of the revenues generated by those programs.
During the fiscal years ended December 3, 1999, November 27, 1998, and November 28, 1997, our
research and development expenses, including costs related to contract development, were $197.5 million,
$188.3 million, and $165.9 million, respectively. During fiscal 1999, we acquired substantially all of the
assets of two software companies, through separate purchase transactions, for an aggregate consideration
of approximately $3.6 million. All of the purchase price was allocated to in-process research and
development and expensed at the time of acquisition. Additionally, during fiscal year 1997, we acquired,
through purchase transactions, three software companies, in which $6.0 million of the purchase price was
allocated to in-process research and development and expensed at the time of the acquisition. See
Management’s Discussion and Analysis for further information.
PRODUCT PROTECTION
We regard our software as proprietary and protect it with copyrights, patents, trademarks, trade secret
laws, internal and external nondisclosure precautions, and restrictions on disclosure and transferability that
are incorporated into our software license agreements. We protect the source code of our software
programs as trade secrets, and make source code available to OEM customers only under limited
circumstances and specific security and confidentiality constraints.