Apple 1998 Annual Report Download - page 16

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SPECIAL CHARGES
IN-PROCESS RESEARCH AND DEVELOPMENT
In May 1998, the Company acquired certain technology that was under development and had no alternative future uses. The acquisition
resulted in the recognition of $7 million of purchased in-process research and development, which was charged to operations upon acquisition.
In February 1997, the Company acquired all of the outstanding shares of NeXT Software, Inc. (NeXT). NeXT had developed, marketed, and
supported software that enables customers to implement business applications on the Internet/World Wide Web, intranets and enterprise-wide
client/server networks. Of the total purchase price of $427 million, $375 million was allocated to purchased in-process research and
development and $52 million was allocated to goodwill and other intangible assets. The purchased in-process research and development was
charged to operations upon acquisition, and the goodwill and other intangible assets are being amortized on a straight-line basis over two to
three years.
RESTRUCTURING COSTS
In 1996, the Company announced, and began to implement, a restructuring plan aimed at reducing costs and returning the Company to
profitability. These actions resulted in a net charge during 1996 of $179 million. During 1997, the Company announced and began to
implement supplemental restructuring actions to meet the objectives of the plan. The Company recognized a $217 million charge during 1997
for the estimated incremental costs of those actions. The combined restructuring actions consist of terminating approximately 4,200 full-time
employees, approximately 4,000 of whom have been terminated from the second quarter of 1996 through September 25, 1998; canceling or
vacating certain facility leases as a result of those employee terminations; writing down certain land, buildings, and equipment to be sold as a
result of downsizing operations and outsourcing various operational functions; and canceling contracts for projects and technologies that are
not critical to the Company's core business strategy. As of September 25, 1998, a balance of $31 million remains in accrued restructuring costs
of which $10 million remains for severance payments to employees who have already been terminated as of September 25, 1998, or who will
be terminated in the first quarter of fiscal 1999, and $21 million for payments over the next three years on leases and contracts that have already
been terminated.
TERMINATION OF LICENSE AGREEMENT
In August 1997, the Company agreed to acquire certain assets of Power Computing Corporation (PCC), a licensed distributor of the Mac OS
operating system, including PCC's customer database and its license to distribute the Mac OS. The agreement with PCC also included a release
of claims between the parties. On January 28, 1998, the Company completed its acquisition of those certain assets from PCC. The total
purchase price was approximately $110 million, of which $75 million was expensed in the fourth quarter of 1997 as "termination of license
agreement" and $35 million was recorded as goodwill in the second quarter of 1998. The goodwill will be amortized over three years.
INTEREST AND OTHER INCOME (EXPENSE), NET
Total interest and other income (expense), net, increased $43 million or 172% to a total of $68 million in 1998 compared to $25 million in
1997. The primary cause of this increase was gains recognized on the sale of an equity investment. As of September 26, 1997, the Company
owned 42.3% of the outstanding stock of ARM Holdings plc (ARM), a then privately held company in the United Kingdom involved in the
design of high performance microprocessors and related technology. The Company has accounted for this investment using the equity method
through September 25, 1998. On April 17, 1998, ARM completed an initial public offering of its stock on the London Stock Exchange and the
NASDAQ National Market. The Company sold 18.9% of its shares in the offering for a gain before foreign taxes of approximately $24 million,
which was recognized as other income. Foreign tax recognized on this gain was approximately
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