Symantec 1999 Annual Report Download - page 35

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88.1% complete at that time. We projected the introduction of acquired in-process technologies in early/mid 1999 and
this has been completed.
We used a discount rate of 30% for valuing the in-process technology from Intel, which we believe reflected the risk
associated with the completion of these research and development projects and the estimated future economic benefits
to be generated subsequent to their completion. This discount rate is higher than our weighted average cost of capital
of 17% due to the fact that the technology had not reached technological feasibility as of the date of the valuation.
The assumptions and projections discussed for the LANDesk anti-virus technology acquired from Intel were made
based on information available at the time and should not be taken as indications of actual results, which could vary
materially based on the risks and uncertainties identified in the risk factors set forth in this Form 10-K.
QUARTERDECK. The in-process technology acquired in our acquisition of Quarterdeck consisted of projects related
to Quarterdeck’s CleanSweep product line. The CleanSweep product line is designed to enhance the performance of
the Windows operating system by finding and removing outdated, unnecessary, or unwanted files, applications and
system components, thereby freeing up disk space.
The following discussion relates to our purchase of a 63% interest in November 1998:
We assumed revenue attributable to the in-process technology to be approximately $24 million during the first year and
then declining at annual rates of 5% to 65% during the remaining periods of the six year projection period as other
technologies are released into the marketplace. We projected annual revenues to range from approximately $24
million to $3 million over the projected period. We based these projections on:
• aggregate revenue estimates for the business as a whole;
• anticipated revenue derived from being able to increase our penetration in the uninstaller market;
• anticipated growth rates in the utilities suites markets;
• anticipated product development cycles; and
• the life of the underlying technology.
Based on indications from similar companies, we estimated overall sales, marketing and general and administrative
expenses to be 30% throughout the valuation period.
We assumed operating profit before acquisition related amortization charges to be approximately $11 million during
the first year, increasing by 1% during the second year and then declining at annual rates ranging from 17% to 69%
during the remaining periods, resulting in annual operating profits ranging between approximately $11 million and $1
million. Because we assumed that most product development costs would be incurred in the first year, reducing
operating expenses as a percentage of revenue in later years, operating profit in early years increases as revenue
declines.
We estimated costs to be incurred to reach technological feasibility as of the date of acquisition for Quarterdeck in-
process technologies to total approximately $1 million. We estimated the in-process technology to be 80% complete as
of the date of the acquisition. We projected the introduction of acquired in-process technologies in early/mid 1999 and
this is now expected to take place in the second half of 1999.
We used a discount rate of 20% for valuing the in-process technology from Quarterdeck, which we believe reflected
the risk associated with the completion of these research and development projects and the estimated future economic
benefits to be generated subsequent to their completion. This discount rate reflects a premium above that of the risk
associated with the acquired developed technology and is higher than our weighted average cost of capital.
The following discussion relates to our purchase of the remaining 37% interest in March 1999:
We assumed revenue attributable to the in-process technology to be approximately $9 million during the first year,
increasing to approximately $23 million during the second year and then declining at annual rates of 14% to 45%
during the remaining periods of the six year projection period as other technologies are released into the marketplace.
We projected annual revenues to range from $9 million to $23 million over the projected period. We based these
projections on:
• aggregate revenue estimates for the business as a whole;
• anticipated revenue derived from being able to increase our penetration in the uninstaller market;
• anticipated growth rates in the utilities suites markets;