Autodesk 2000 Annual Report Download - page 22

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Autodesk, Inc. FY 00
In valuing the developed and in-process technologies,
Autodesk used a discounted cash flow analysis based
on projected net revenues, cost of revenues,operating
expenses and income taxes resulting from such tech-
nologies over a 5-year period. The projected financial
results were discounted using a 15 percent rate for
the developed technology and a 20 percent rate
for the in-process technology.
The revenue projections for the developed technol-
ogy, which considered historical product life cycles
and anticipated product release dates, assumed a
gradual decline over the 5-year period. The revenue
projections for the IPR&D assumed higher than his-
torical average sales due to the integration and expan-
sion of Genius products into Autodesk’s worldwide
sales channels, particularly in North America and Asia
Pacific, which historically had not contributed signifi-
cant revenues to Genius.
Autodesk believed that the assumptions used in the
valuations were reasonable at the time of the acquisi-
tion. Actual revenue results to date have been lower
than forecasted due primarily to the reduced demand
for AutoCAD-related products in fiscal 2000.
Softdesk
On March 31, 1997, Autodesk exchanged 2.9 million
shares of its common stock for all of the outstanding
stock of Softdesk, a supplier of AutoCAD-based appli-
cations software for the architecture,engineering,and
construction market. Based on the value of Autodesk
stock and options exchanged, the transaction, includ-
ing associated costs, was valued at approximately
$94.1 million.
Of the $94.1 million purchase price, $19.2 million was
allocated to IPR&D and expensed in fiscal 1998;
$9.2 million was allocated to an intangible asset, pur-
chased technologies; $6.7 million was allocated to
other intangible assets; and $48.0 million was allo-
cated to goodwill.
As of the acquisition date, Softdesk had spent a sig-
nificant amount of research and development effort
related to the reprogramming of all its existing
products to a new ARX technology (AutoCAD Runtime
Extension) code base. The new ARX technology was
expected to provide significant improvement in the
orientation of objects in CAD products.As of the acqui-
sition date, Softdesk had completed improvements of
ARX technology in various development projects
associated within the following technology categories:
(1) AutoCAD Architectural/Structural, (2) AutoCAD
Civil,(3) AutoCAD Imaging,(4) AutoCAD maintenance,
(5) AutoCAD Productivity and (6) AutoCAD Retail.
The research and development projects were in vary-
ing stages of completion, ranging from 65 percent to
90 percent complete as of the acquisition date, with
total estimated costs to complete of $1.8 million to
reach technological feasibility at the time. These
in-process projects were completed two years ago at
an aggregate amount approximately equal to the
original estimated costs to complete.
In valuing the developed and in-process technologies,
Autodesk used a discounted cash flow analysis based
on projected net revenues, cost of revenues, operat-
ing expenses and income taxes over a 7-year period.
The projected financial results were discounted using
a 15 percent rate for the developed technology and a
20 percent rate for the in-process technology.
The revenue projections for the developed and in-
process technologies were based on (1) aggregate
revenue growth rates for the business as a whole,
(2) individual product revenues, (3) growth rates for
the CAD software market, (4) the aggregate size of the
CAD software market, (5) anticipated product devel-
opment and introduction schedules, (6) product sales
cycles and (7) the estimated life of a product’s under-
lying technology.
Autodesk believed that the assumptions used in the
valuations were reasonable at the time of the acquisi-
tion. Actual results to date, however, have been lower
than forecasted. This shortfall reflects the reduced
demand for AutoCAD-related products, competitive
factors related to price, difficulties in developing
robust commercial applications in the new ObjectARX
environment, functionality and performance in the
architecture, engineering and construction software
industry, particularly in regard to localized building
services applications.
Lightscape Technologies,Inc.(“Lightscape”)
On December 2, 1997, Discreet entered into an Agree-
ment and Plan of Merger and Reorganization with
Lightscape, a Delaware corporation. The merger
closed on December 30, 1997. As a result of the
merger, Discreet acquired, among other products,
the Lightscape™ product, a software application
which integrates radiosity and raytracing with physi-
cally based lighting, including related know-how and
goodwill. The aggregate purchase consideration of
$7.6 million consisted primarily of $6.4 million of
assumed liabilities.
Of the $7.6 million purchase price, $1.7 million was
allocated to IPR&D and was expensed during fiscal
1998; and $4.3 million was allocated to goodwill.