Electronic Arts 2001 Annual Report Download - page 23

Download and view the complete annual report

Please find page 23 of the 2001 Electronic Arts annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 72

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72

ELECTRONIC ARTS
21
• An increase in development spending for next generation console products including development for the
PlayStation 2 console, Xbox and Nintendo GameCube.
• The increase is also due to research and development expenses related to the acquisition of DreamWorks
Interactive, a software development company, in the fourth quarter of the prior fiscal year.
• Increased headcount related costs associated with the formation of our customer relationship management
organization for the live game site.
We released a total of 55 new packaged goods products in fiscal 2001 compared to 69 new products in fiscal
2000. In addition, the EA.com website launched in October 2000, and has over 80 live games.
NETWORK DEVELOPMENT AND SUPPORT The increase in network development and support expenses was pri-
marily due to increased spending for the network infrastructure, and the Games Channel on the AOL service and
the amortization of capitalized costs as required under SOP 98-1 associated with the pre-launch network infra-
structure build. As a result, we expect network development and support expenses to increase in absolute dollars
in the future.
CHARGE FOR ACQUIRED IN-PROCESS TECHNOLOGY
Fiscal 2001
In connection with the acquisition of Pogo in the fourth fiscal quarter of fiscal 2001, we allocated and
expensed $2,719,000 of the $43,333,000 purchase price to acquired in-process technology. At the date of acquisi-
tion, this amount was expensed as a non-recurring charge as the in-process technology had not yet reached tech-
nological feasibility and had no alternative future uses. Pogo had various projects in progress at the time of the
acquisition. As of the acquisition date, costs to complete Pogo projects acquired were expected to be approximately
$1,200,000 in future periods. We believe there have been no significant changes to these estimates as of March 31,
2001. We currently expect to complete the development of these projects at various dates through fiscal 2002 and
to publish the projects upon completion. In conjunction with the acquisition of Pogo, we accrued approximately
$100,000 related to direct transaction and other related costs.
Fiscal 2000
• In connection with the acquisition of Kesmai by EA.com in the fourth quarter of fiscal 2000, we allocated and
expensed $3,869,000 of the purchase price to acquired in-process technology.
• In connection with the acquisitions of two development companies by EA Core, made in the 2nd and 4th quarters
of fiscal 2000, we allocated and expensed $2,670,000 of the purchase price to acquired in-process technology.
These charges were made after we concluded that the in-process technology had not reached technological fea-
sibility and had no alternative future use after taking into consideration the potential for usage of the software in
different products and resale of the software.
AMORTIZATION OF INTANGIBLES The amortization of intangibles results primarily from the acquisitions of
Westwood, Kesmai, DreamWorks Interactive, ABC Software, Pogo and other acquisitions. Amortization of intangi-
bles was $12,829,000 for EA Core and $6,494,000 for EA.com for fiscal 2001. Amortization of intangibles was
$10,866,000 for EA Core and $1,123,000 for EA.com for fiscal 2000.