Electronic Arts 2001 Annual Report Download - page 29

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ELECTRONIC ARTS
27
NETWORK DEVELOPMENT AND SUPPORT The increase in network development and support expenses was due
to increased EA.com spending for network infrastructure in preparation for new online products and the EA.com
game site. In addition, we incurred higher infrastructure costs related to increased server capacity for Ultima
Online, allowing EA.com to serve a higher number of active subscribers.
CHARGE FOR ACQUIRED IN-PROCESS TECHNOLOGY
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. Kesmai had various projects in
progress at the time of the acquisition. As of the acquisition date, costs to complete Kesmai projects acquired
were expected to be approximately $10,550,000 in future periods. During fiscal 2001, some of these develop-
ment projects were completed and launched on the EA.com gamesites. In addition, as certain games are com-
pleted, we expect resources to be redirected to ongoing live game operations or to building the EA.com
publishing platform. As a result, we do not anticipate incurring significant future development costs in relation
to these projects after fiscal 2002. We believe there have been no significant changes to these estimates. We cur-
rently 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 merger of Kesmai, we accrued approximately $200,000
related to direct transaction and other related costs.
• 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.
Fiscal 1999
• In connection with the acquisition of Westwood by EA Core in September 1998, we allocated and expensed
$41,836,000 of the purchase price to acquired in-process technology.
• Additionally, in connection with the acquisition of two software development companies by EA Core, in the first
quarter of fiscal 1999, we incurred a total charge of $2,279,000 for 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, ABC Software and other acquisitions made in fiscal 2000. Amortization of intangibles was
$10,866,000 for EA Core and $1,123,000 for EA.com in fiscal 2000. For fiscal 1999, amortization of intangibles was
$5,880,000 resulting from the acquisitions of Westwood and ABC Software by EA Core.
INTEREST AND OTHER INCOME, NET Interest and other income, net, increased in absolute dollars primarily
due to realized gains on sales of marketable securities and the sale of our interest in an affiliate. Those gains were
partially offset by a write-off of a note receivable from an affiliate in fiscal 2000 as well as a gain on sale of land
recognized in fiscal 1999.