Apple 1998 Annual Report Download - page 52

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--SPECIAL CHARGES (CONTINUED)
TECHNOLOGY ACQUISITION
In May 1998, the Company acquired certain technology that was under development that had no alternative future use. The acquisition resulted
in the recognition of $7 million of purchased in-process research and development, which was charged to operations upon acquisition.
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 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. The purchase price was comprised of
approximately 4.2 million shares of the Company's common stock valued at $80 million, forgiveness of $28 million of receivables due from
PCC, and assumption by the Company of $2 million of certain customer support liabilities of PCC.
NEXT ACQUISITION
On February 4, 1997, the Company acquired all of the outstanding shares of NeXT Software, Inc. (NeXT). NeXT, headquartered in Redwood
City, California, 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. The total purchase price was $427 million and was comprised
of cash payments of $319 million and the issuance of 1.5 million shares of the Company's common stock to the NeXT shareholders valued at
approximately $25 million according to the terms of the purchase agreement; the issuance of approximately 1.9 million options to purchase the
Company's common stock to the NeXT optionholders valued at approximately $16 million; cash payments of $56 million to the NeXT
debtholders; cash payments of $9 million for closing and related costs, and $2 million of net liabilities assumed. The acquisition was accounted
for as a purchase and, accordingly, the operating results pertaining to NeXT subsequent to the date of acquisition have been included in the
Company's consolidated operating results. The total purchase price was allocated to purchased in-process research and development ($375
million) and to goodwill and other intangible assets ($52 million). 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.
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