Symantec 2000 Annual Report Download - page 26

We assumed that revenue attributable to L-3’s in-process tech-
nology would be approximately $1million in the first year and
increase in the second and third years of the six-year projection
period at annual rates of 543%and 82%, respectively, and then
decrease at rates of 3%, 20%and 45%, over the remaining three
years. We projected annual revenues to range from approximately
$1million to $13 million over the projected period. These projec-
tions were based on:
•aggregate growth rates for the business as a whole;
•individual product revenues;
•anticipated product development cycles; and
•the life of the underlying technology.
We estimated selling, general and administrative expenses for the
in-process technology to be 221%of revenue in the first year,
reducing to 45%in each of the remaining five years of the six-year
projection period.
We projected operating results before acquisition related amor-
tization charges to range from a $2million loss during the first
year to a $3million profit during the third year. The operating prof-
its would then decrease 3%in the fourth year to 45%by the sixth
year, resulting in profits of approximately $3million, $3million
and $1million, respectively. Because we assumed that most prod-
uct development costs would be incurred in the first year, thereby
reducing operating expenses as a percentage of revenue in later
years, we anticipate that operating profit will increase faster than
revenue in the early years.
We estimated costs to be incurred to reach technological feasi-
bility of the in-process technologies from L-3as of the date of the
acquisition to total approximately $0.3million. We estimated the
in-process technology to be between 68%to 77%complete at that
time. In addition, we began building an intrusion detection product
leveraging L-3’s core technology, which we plan to release in the
second half of fiscal 2001.
We used a discount rate of 25%for valuing the in-process tech-
nologies from L-3, which we believe reflects the risk associated
with the completion of these research and development projects
and the estimated future economic benefits to be generated sub-
sequent to their completion. This discount rate is higher than the
weighted average cost of capital of 20%, 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 technologies
acquired from L-3were 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 iden-
tified in the risk factors set forth in our previously filed Form 10K
for the year ended March 31, 2000.
URLabs This discussion contains forward-looking statements of
certain aspects of our future operating results from URLabs.
Actual results may differ from the estimates expressly or implic-
itly referred to by these forward-looking statements.
The in-process technology acquired in the URLabs acquisition pri-
marily consisted of research and development related to the next
generation of URLabs’ two main products, I-Gear 3.5and Mail
Gear 1.2. The I-Gear and Mail Gear product lines are designed for
content management use in URL filtering and e-mail filtering,
respectively. URLabs’ research and development was focused on
providing more robust features in its development of the next gen-
eration products of I-Gear 3.5and Mail Gear 1.2.
We assumed that revenue attributable to URLabs’ in-process technol-
ogy would be approximately $4 million in the first year and increase
in the second and third years of the five-year projection period at
annual rates of 77% and 40%, respectively, and then decrease at rates
of 2% and 38% over the remaining two years. We projected annual rev-
enues to range from approximately $4 million to $11 million over the
projected period. These projections were based on:
•aggregate growth rates for the business as a whole;
•individual product revenues;
•anticipated product development cycles; and
•the life of the underlying technology.
We estimated selling, general and administrative expenses for the
in-process technology to be approximately 69%of revenue in the
first year, reducing to approximately 50%in each of the remain-
ing four years of the five-year projection period.
We projected operating profit before acquisition related amorti-
zation charges to increase from less than $1million during the
first year to approximately $2.5million during the third year. We
projected that operating profits would then decrease from 7%to
35%during the remaining two years, resulting in profits of approx-
imately $2.4million and $1.5million, respectively. 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, we anticipate operating profit to increase
faster than revenue in the early years.
We estimated costs to be incurred to reach technological feasi-
bility of the in-process technologies from URLabs as of the date of
the acquisition to total approximately $0.2million. We estimated
the in-process technology to be between 30%to 40%complete at
that time. We projected the introduction of acquired in-process
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