Electronic Arts 2005 Annual Report Download - page 130

England, Criterion is a developer of video games and a provider of middleware solutions for the game
development and publishing industry. The results of operations of Criterion and the estimated fair market
values of the acquired assets and assumed liabilities have been included in the Consolidated Financial
Statements since the date of acquisition. Except for acquired in-process technology, which is discussed below,
the acquired intangible assets are being amortized on a straight-line basis over estimated lives ranging from
two to four years.
Acquired in-process technology includes the value of products in the development stage that are not
considered to have reached technological feasibility or have alternative future use. Accordingly, the acquired
in-process technology was expensed in the Consolidated Statement of Operations upon consummation of the
acquisition. Stock-based employee compensation represents the intrinsic value of certain unvested employee
stock options that were assumed as part of the transaction. The stock option awards were considered modiÑed
for accounting purposes and were fully amortized over the remaining vesting period in the Consolidated
Statement of Operations for the year ended March 31, 2005.
Digital Illusions C.E.
In 2003 we acquired: (1) approximately 1,911,403 shares of Class B common stock representing a 19 percent
equity interest in DICE; and (2) a warrant to acquire an additional 2,327,602 shares of to-be-issued Class A
common stock at an exercise price of SEK 43.23. Based in Sweden, DICE develops games for personal
computers and video game consoles. DICE's products are primarily sold through co-publishing agreements
with us. The transactions between DICE and us have been recorded at an arms-length basis. Prior to the
fourth quarter of Ñscal 2005, we accounted for our Class B common stock investment in DICE under the
equity method of accounting, as prescribed by APB No. 18. Separately, the warrants valued at $5 million as of
March 31, 2005 are included in investments in aÇliates in the Consolidated Balance Sheets. See Note 2 of the
Notes to Consolidated Financial Statements.
On January 27, 2005 we completed a tender oÅer by acquiring 3,235,053 shares of Class A common stock at a
price of SEK 61 per share, representing 32 percent of the outstanding Class A common stock of DICE.
During the tender oÅer period and subsequently, we acquired, through open market purchases at an average
price of SEK 60.33, an additional 1,190,658 shares of Class A common stock, representing approximately
12 percent of the outstanding Class A common stock in DICE. Accordingly, on a cumulative basis as of
March 31, 2005, we owned approximately 63 percent of DICE on an undiluted basis (excluding the warrants
discussed above). As a result, we have included the assets, liabilities and results of operations of DICE in our
consolidated Ñnancial statements since January 27, 2005. DICE's 37 percent ownership is reÖected as
minority interest on our Consolidated Balance Sheets as of March 31, 2005 and the Consolidated Statement of
Operations for the year ended March 31, 2005. The preliminary purchase price allocation, including the
allocation of goodwill, will be updated as additional information becomes available.
Except for acquired-in-process technology, the acquired intangible assets are being amortized on a straight-
line basis over estimated lives ranging from one to four years. The acquired in-process technology was
expensed in the Consolidated Statement of Operations upon consummation of the acquisition.
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