Intel 2000 Annual Report Download - page 39

These purchase transactions are further described below:
Consideration includes the cash paid and the value of stock issued and options assumed, less any cash acquired and excluding any debt
assumed.
For 2000, 1999 and 1998, $109 million, $392 million and $165 million, respectively, were allocated to purchased in-process research and
development (IPR&D) and expensed upon acquisition of the above companies, because the technological feasibility of products under
development had not been established and no future alternative uses existed. The fair value of the IPR&D was determined using the income
approach, which discounts expected future cash flows from projects under development to their net present value. Each project was analyzed to
determine the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development;
any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated, taking into
account the expected life cycles of the products and the underlying technology, market sizes and industry trends. Discount rates were derived
from weighted average cost of capital analyses, adjusted to reflect the relative risks inherent in each entity's development process. The IPR&D
charge includes the fair value of IPR&D completed. The fair value assigned to developed technology is included in identified intangible assets,
and no value is assigned to IPR&D to be completed or to future development. Intel believes the amounts determined for IPR&D, as well as
developed technology, are representative of fair value and do not exceed the amounts an independent party would pay for these projects.
In addition to the transactions described above, Intel purchased other businesses in smaller transactions. The total amount allocated to
goodwill and identified intangibles for these transactions was $237 million ($175 million in 1999), which represents a substantial majority of
the consideration for these transactions.
The consolidated financial statements include the operating results of acquired businesses from the dates of acquisition. The operating results
of Ambient, GIGA, Basis, Trillium, Level One, Softcom and
NetBoost have been included in the Network Communications Group operating segment. The operating results of Picazo, Ziatech, Shiva,
Dialogic and IPivot have been included in the Communications Products Group operating segment. The operating results of DSP
Communications have been included in the Wireless Communications and Computing Group operating segment. All of these groups are part of
the "all other" category for segment reporting purposes. The operating results of Chips and Technologies have been included in the Intel
Architecture Group operating segment.
The unaudited pro forma information below assumes that companies acquired in 2000 and 1999 had been acquired at the beginning of 1999
and includes the effect of amortization of goodwill and other identified intangibles from that date. The impact of charges for IPR&D has been
(In millions) Consideration
Purchased
in-process
research
& devel-
opment
Goodwill
& other
identified
intangibles
Form of
consideration
2000
Ambient
$
148
$
10
$
135
Cash and options assumed
GIGA
$
1,247
$
52
$
1,184
Cash
Picazo
$
120
$
—
$
120
Cash and options assumed
Basis
$
453
$
21
$
472
Cash and options assumed
Trillium $
277
$
8
$
232
Common stock, cash and options
assumed
Ziatech
$
222
$
18
$
185
Cash and options assumed
1999
Shiva
$
132
$
—
$
99
Cash and options assumed
Softcom
$
149
$
9
$
139
Cash and options assumed
Dialogic
$
732
$
83
$
614
Cash and options assumed
Level One $
2,137
$
231
$
2,007
Common stock and options
assumed
NetBoost
$
215
$
10
$
205
Cash and options assumed
IPivot
$
496
$
—
$
505
Cash and options assumed
DSP Communications
$
1,599
$
59
$
1,491
Cash and options assumed
1998
Chips and Technologies
$
337
$
165
$
126
Cash and options assumed
Semiconductor operations of
Digital
$
585
$
—
$
32
Cash