Symantec 1999 Annual Report Download - page 32

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Note 3 of Notes to Consolidated Financial Statements in this Form 10-K. During fiscal 1998, software development
costs did not materially affect us.
Amortization of purchased product rights and capitalized software totaled approximately $11 million, $1 million and
$2 million in fiscal 1999, 1998 and 1997, respectively. The increase in fiscal 1999 from fiscal 1998 is primarily due to
additional amortization related to developed technologies acquired from Intel’s anti-virus business, Binary and
Quarterdeck from the date of acquisition. The amortization will occur over the next 3 to 5 years. See Note 4 of Notes
to Consolidated Financial Statements in this Form 10-K
Research and Development Expenses .
We charge research and development expenditures to operations as incurred. Research and development expenses
remained flat at 17% for fiscal 1999 compared to fiscal 1998 as a percentage of net revenues and represented 20% of
total company net revenues in fiscal 1997. The decrease in research and development expenses as a percentage of net
revenues in fiscal 1998 from fiscal 1997 largely resulted from our decision to cease development of certain software
products no longer actively marketed by us.
Research and development expenses increased 11% to $102 million in fiscal 1999 from $91 million in fiscal 1998 and
increased 3% in fiscal 1998 from $89 million in fiscal 1997. The increase in both years was a result of increased
spending on new product development.
Sales and Marketing Expenses .
Sales and marketing expenses were 48% as a percentage of net revenues for fiscal 1999, and remained flat at 49% as a
percentage of net revenues for both fiscal 1998 and 1997. The sales and marketing expenses were approximately $286
million, $261 million and $221 million in fiscal 1999, 1998 and 1997, respectively. This absolute increase in sales and
marketing dollars for fiscal 1999 over fiscal 1998 is primarily due to increased headcount, as well as increased
spending in advertising and promotional expenses. The increase in sales and marketing expenses in fiscal 1998 as
compared to fiscal 1997 is primarily related to increased international sales and marketing.
In-Process Research and Development Expenses .
As indicated in the overview, in fiscal 1999, we acquired IBM’s and Intel’s anti-virus businesses, Binary’s operations
and Quarterdeck. The following table outlines the value of the intangible assets recorded in connection with these
acquisitions:
We wrote-off approximately $28 million in in-process research and development associated with the IBM, Binary,
Intel and Quarterdeck purchases. These write-offs were necessary because the acquired technologies had not yet
reached technological feasibility and there were no alternative uses. We are using the acquired in-process research and
development associated with these acquisitions to create new anti-virus products and enhanced management and
administrative capabilities to be integrated into our suite of anti-virus offerings and other corporate products over the
next two years. This in-process technology will also be used to create new Uninstall and Disk Cloning products.
The efforts required to develop the purchased in-process technology principally relate to the completion of all
planning, designing, development and testing activities that are necessary to establish that the product or service can be
produced to meet its design specifications including features, functions and performance. We expect the acquired in-
process technology to be developed into commercially feasible products. However, there are no assurances that this
will occur. If we fail to complete these products in their entirety, or in a timely manner, we may not continue to attract
new users, we may be unable to retain our existing users and the value of the other intangible assets may become
impaired.
Allocated Purchase Price Components (in thousands)
Purchase In-Process Developed Customer Prepaid-
Price R&D Software Goodwill Base Workforce Tradename R&D
IBM 20,250$ 7,100$ -$ 11,850$ 100$ -$ -$ 1,200$
Binary 27,871 7,100 16,900 3,751 - 120 - -
Intel 16,525 5,017 10,697 - 811 - - -
63% of Quarterdeck 59,347 7,560 4,410 45,588 882 25 882 -
37% of Quarterdeck 25,960 740 4,070 20,210 407 15 518 -
Total 149,953$ 27,517$ 36,077$ 81,399$ 2,200$ 160$ 1,400$ 1,200$