Adobe 2001 Annual Report Download - page 16

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Private Public
Adobe Ventures IV, L.P. Equity Investments
Biz 360, Inc. ..................................................... X
Cardiff Software, Inc. ............................................... X
Covio, Inc. ...................................................... X
Digital Fountain .................................................. X
HAHT Software, Inc. ............................................... X
Kinecta Corporation ............................................... X
Shutterfly.com, 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 fiscal years ended November 30, 2001, December 1, 2000 and December 3, 1999, our research
and development expenses, including costs related to contract development, were $224.1 million,
$240.2 million, and $197.5 million, respectively. During the first quarter of fiscal 2002, we acquired
Fotiva, Inc. for a total consideration of approximately $5.3 million. Fotiva is a digital photography software
company developing solutions to help consumers manage, store, enrich, and share digital photographs.
Also during the first quarter of fiscal 2002, we announced a proposed agreement to acquire Ottawa,
Canada-based Accelio Corporation (‘‘Accelio’’). Accelio is a provider of Web-enabled solutions that help
customers manage business processes driven by electronic forms. Under the terms of the agreement,
Adobe’s common stock valued at $72.0 (US) million on closing will be exchanged for all Accelio equity
securities. We expect to record a $12.0-$15.0 million accrual related to the acquisition, which will be added
to the purchase price. The proposed acquisition is subject to the execution of customary transaction
documents and the satisfaction of customary closing conditions, including the approval of Accelio’s
shareholders and clearance of the acquisition by U.S. and Canadian regulatory authorities. Initially the
transaction was expected to close in March 2002. However, due to certain regulatory and timing
requirements, we are now targeting to close in April 2002.
During fiscal 2000, we acquired Glassbook, Inc. for a total consideration of approximately
$28.0 million. Based on an independent appraiser’s valuation, $0.5 million was allocated to in-process
research and development related to this acquisition. The ongoing project at Glassbook at the time of the
purchase included the development of the Glassbook Reader and the Glassbook Content Server 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 fiscal 1999, we also acquired substantially all of the assets of two software companies, through
separate purchase transactions, for an aggregate consideration of approximately $3.6 million, which 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 are incorporating the purchased technology into one of our products, which has not
yet been released. Additionally, we acquired substantially all of the assets, consisting of intellectual
property, of Photomerge. This purchased technology was incorporated into our Photoshop Elements
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