Autodesk 2000 Annual Report Download - page 23

22 FY 00 Autodesk, Inc.
As of the acquisition date, the in-process research
and development project involved next generation
Lightscape technology, which was 25 percent com-
plete at the time with estimated costs to complete of
$2.0 million. In valuing the in-process technology,
Discreet used a discounted cash flow analysis based
on projected net revenues, cost of revenues, operat-
ing expenses and income taxes resulting from the
project over a 5-year period. The projected financial
results were discounted using a 40 percent rate. The
development project has not yet been completed.
Management is currently assessing how the technol-
ogy will be integrated with the 3D Studio MAX ren-
dering system.
The revenue projection was based on estimates of
relevant market sizes and growth factors, expected
trends in technology and the nature and expected
timing of new product introductions by Discreet and
its competitors.
Discreet believed that the assumptions used in valu-
ing the in-process technology were reasonable at the
time of the acquisition. While the next generation
product has been released, actual financial results
have been lower than originally projected due to the
following factors: (1) unanticipated delays in the inte-
gration of the Lightscape product into Discreet’s cor-
porate branding initiatives, resulting in a longer than
anticipated period of reduced marketing effort;
(2) slow progress in the development of a distribution
channel; and (3) delays in integrating retained Light-
scape personnel into Discreet’s research and develop-
ment and sales and marketing groups. As a result of
these factors, Discreet missed market opportunities
and anticipates greater uncertainty regarding future
revenue levels from Lightscape products.
D-Vision
On July 15, 1997, Discreet acquired all of the out-
standing shares of capital stock of D-Vision, an Illinois
corporation,pursuant to a Stock Purchase Agreement.
As a result of this acquisition, Discreet acquired the
D-Vision ONLINE and PRO software products for non-
linear video and digital media editing solutions includ-
ing related know-how and goodwill.The $27.2 million
purchase price was primarily paid through a combi-
nation of 0.2 million newly issued common shares
that had a value of $10.7 million, and approximately
$10.8 million in cash.
Of the $27.2 million purchase price, $5.3 million was
allocated to IPR&D and was expensed during fiscal
1998;$3.1 million was allocated to an intangible asset,
purchased technology; and $16.7 million was allo-
cated to goodwill.
As of the acquisition date, the in-process research
and development project involved next generation
D-Vision technology, which was 26 percent complete
at the time with estimated costs to complete of
$2.6 million. The development project was later com-
pleted and the product was released in fiscal 2000 at
an aggregate amount approximately equal to the
original estimated costs to complete.
In valuing the acquired D-Vision ONLINE and PRO
software products and the in-process technology,
Discreet used a discounted cash flow analysis based
on projected net revenues, cost of revenues, operat-
ing expenses and income taxes resulting from such
technologies over a 5-year period.The projected finan-
cial results were discounted using a 20 percent rate for
the developed technology and a 25 percent rate for
the in-process technology.
The revenue projections for the developed tech-
nologies, which considered the release dates of new
products, assumed a gradual decline over the 5-year
period. The revenue projections for the IPR&D were
based on expected trends in technology and the
timing of new product introductions by Discreet.
Discreet believed that the assumptions used in the
valuations were reasonable at the time of the acquisi-
tion. Actual results to date have been lower than fore-
casted. This has been primarily due to the following
factors: (1) unanticipated delays in the integration of
the D-Vision product into Discreet’s corporate brand-
ing initiatives, resulting in a longer than anticipated
period of reduced marketing effort; (2) slow progress
in resolving disputes with D-Vision’s existing resellers
and the development of a distribution channel;(3) fol-
lowing the acquisition, Discreet generated revenues
solely from the sale of D-Vision software and not from
the sale of software/hardware bundles (including
D-Vision software and Truevision graphics boards) as
originally forecasted; (4) following the acquisition,
Truevision discontinued selling D-Vision software,
however, the forecasts were prepared using the
assumption that these sales would continue;(5) delays
in the realization of synergies from fully integrated
products based on the D-Vision technology due
to delays in the completion and integration of this
technology; and (6) delays in completing research