Citrix 2000 Annual Report Download - page 20

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technologies in which it allocated a portion of the purchase price to IPR&D. The
Company allocated $2.7 million, $10.7 million and $2.4 million in 1998 for IPR&D
related to the Insignia, APM and VDOnet acquisitions, respectively, and $2.6
million in 1998 for IPR&D related to the licensing agreement with EPiCON.
Since the respective dates of acquisition and licensing, the Company has
used some of the acquired in−process technology to develop new product offerings
and enhancements, which have or will become part of the Company's suite of
products when completed. For projects completed, such as those associated with
the EPiCON and Insignia transactions, functionality included in products using
the acquired in−process technology have been introduced at various times
following the respective transaction dates of the acquired assets and licensing.
Acquired technology associated with the APM and VDOnet acquisitions were written
down in the fourth quarter of 2000, as further discussed below under
"−− Write−Down of Technology." The Company currently expects to complete the
development of the remaining projects associated with the ViewSoft acquisition
in 2001. Upon completion, the Company intends to offer the related products to
its customers.
The nature of the efforts required to develop and integrate the acquired
in−process technology into commercially viable products or features and
functionalities within the Company's suite of existing products principally
relate to the completion of all planning, designing and testing activities that
are necessary to establish that the products can be produced to meet design
requirements, including functions, features and technical performance
requirements. The Company currently expects that products utilizing the
remaining acquired in−process technology will be successfully developed, but
there can be no assurance that commercial viability of any of these products
will be achieved. Furthermore, future developments in the software industry,
particularly in the server−based computing environment, changes in technology,
changes in other products and offerings or other developments may cause the
Company to alter or abandon product plans.
Failure to complete the development of the ViewSoft project in its
entirety, or in a timely manner, could have a material adverse impact on the
Company's financial condition and results of operations. No assurance can be
given that actual revenues and operating profit attributable to acquired
in−process research and development will not deviate from the projections used
to initially value such technology when acquired. Ongoing operations and
financial results for acquired assets and licensed technology, and the Company
as a whole, are subject to a variety of factors, which may not have been known
or estimable at the date of such transactions.
A description of the in−process research and development and the estimates
made by the Company for each of the APM, VDOnet and ViewSoft transactions is
summarized below. All of the acquired projects were targeted for the
server−based computing market.
APM
The in−process research and development acquired in the APM acquisition
consisted primarily of one significant research and development project. The
project is a Windows NT−based application server for Java applications. At the
date of the acquisition, APM was shipping a Java application server solution
that allowed an enterprise user to access Java−applets from the Internet and
execute these applets outside the corporate firewall in a server−based computing
configuration in a fashion that was transparent to the enterprise user. APM was
in the process of modifying its software product to incorporate changes
necessary for it to interface with Java 2.0, which was a major new release that
included major rewrites to the Java desktop. Following the acquisition, the
Company planned on continuing the process of incorporating changes necessary to
interface with Java 2.0, and in addition, planned on further developing the
software product into an application server for Java 2.0 that would operate in a
MetaFrame server environment.
The Company estimated this project was less than 45% complete at the date
of acquisition. The aggregate value assigned to the in−process research and
development was $10.7 million. In the second quarter of 2000, management changed
the Java application server to a Java Performance Pack product, which adds
performance enhancements and management tools to other Citrix products.
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