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33
Acquired In-Process Research and Development
2002 Change 2001 Change 2000
Acquired in-process research and development ...... $ 5.
8
100% $
—
(100)% $ 0.
5
Percentage of total revenue...................................... 0.5%
—
—
On April 12, 2002, we acquired 100% of the outstanding common stock of Accelio Corporation. Accelio was a
provider of Web-enabled solutions that help customers manage business processes driven by electronic forms. We
obtained an independent appraiser’s valuation to determine the amounts allocated to purchased technology and in-
process research and development. The valuation analysis utilized the Income Approach that takes into
consideration discounted future cash flows. Based on this valuation $0.4 million was allocated to in-process research
and development. The amount allocated to in-process research and development of $0.4 million was expensed as of
the date of the acquisition due to the state of the development of certain products and the uncertainty of
the technology.
In December 2001, we acquired Fotiva, Inc. (“Fotiva”). Substantially all of Fotiva’s assets were intellectual
property. Fotiva was a development stage software company that created solutions to help consumers manage, store,
enrich, and share digital photographs and other related personal media. In connection with the acquisition,
substantially all of the purchase price of $5.4 million cash was allocated to in-process research and development and
expensed at the time of acquisition due to the in-process state of the technology. At the date we acquired Fotiva, it
was estimated that 50% of the development effort had been completed and that the remaining 50% of the
development effort would take approximately eleven months to complete. The efforts required to complete the
development of the technology primarily include finalization of coding, internationalization, and extensive quality
assurance testing. We developed a new product, Adobe Photoshop Album, that we released in the first quarter of
fiscal 2003 using Fotiva's image management technology with our digital imaging and ePaper technologies.
In fiscal 2000, we recorded $0.5 million of acquired in-process research and development related to our
acquisition of Glassbook, Inc. (“Glassbook”). The acquisition was accounted for under the purchase method of
accounting in accordance with Accounting Principles Board Opinion No. 16 (“APB 16”). Based on an independent
appraiser’s valuation, $0.5 million of the total $28.0 million purchase price was allocated to in-process research and
development due to the state of the development and the uncertainty of the technology. The ongoing projects 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.
Amortization and Impairment of Goodwill and Purchased Intangibles
2002 Change 2001 Change 2000
Amortization and impairment of goodwill
and purchased intangibles ............................ $ 21.
0
47% $ 14.3 104% $ 7.
0
Percentage of total revenue.............................. 1.8% 1.2% 0.6%
Amortization of goodwill and purchased intangibles increased $6.7 million, or 47%, in fiscal 2002 compared to
fiscal 2001, primarily due to the goodwill impairment charge for the remaining book value of the Glassbook
acquisition. The impairment charge was determined based on discounted future cash flows.
As part of the acquisition of Accelio in April 2002, we allocated $75.0 million to goodwill which, in accordance
with Statement of Financial Accounting Standards No. 142 (“SFAS No. 142”), “Goodwill and Other Intangible
Assets,” will not be amortized. During the fourth quarter of fiscal 2002, we revised our estimate of certain costs
associated with our acquisition of Accelio, resulting in an increase to goodwill of approximately $2.6 million. The
adjustment primarily reflected higher than estimated transaction costs and costs related to closing redundant
facilities. The goodwill associated with the acquisitions of Accelio and GoLive will be reviewed for impairment on
an annual basis.
Amortization of goodwill and purchased intangibles increased $7.3 million, or 104%, in fiscal 2001 compared
to fiscal 2000, due to a full year of amortization of Glassbook goodwill totaling $7.2 million and purchased
intangibles of $0.1 million.