Symantec 2000 Annual Report Download - page 40

The consolidated financial statements reflect the preliminary
allocations of the purchase price for these fiscal 2000 acquisitions.
The allocation has not been finalized due to certain pre-acquisi-
tion contingencies identified. Accordingly, in fiscal 2001 the
allocation of purchase price and its components may change, as
these contingencies are resolved.
Acquisition of Quarterdeck On October 15, 1998, we signed a
definitive merger agreement to acquire Quarterdeck. On Novem-
ber 17, 1998, we completed our tender offer for the common stock
of Quarterdeck acquiring an approximately 63% interest. On
March 29, 1999, we acquired Quarterdeck’s remaining shares
through a cash merger at the tender offer price of $0.52 per share
in accordance with the definitive merger agreement. The transac-
tion was accounted for as a purchase. Under the transaction, we
recorded approximately $8.3 million of acquired in-process
research and development, $8.5 million of acquired product
rights, $65.9 million of goodwill and $2.7 million of other intan-
gibles. A valuation specialist used our estimates to establish the
amount of acquired in-process research and development. The
amounts related to workforce in place are being amortized over
two years. The acquired product rights, goodwill and other intan-
gibles are being amortized over a five-year period. During fiscal
2000, we resolved certain pre-acquisition contingencies, and as
a result, we made final purchase price allocations and reduced
the purchase price and the amount allocated to goodwill by
approximately $1.7 million. In addition, we reclassified the amount
initially allocated to goodwill by $26 million due to a change in the
characterization of the purchase for tax purposes. As a result of
this change, goodwill was reduced and deferred tax assets were
increased by $ 26 million. In addition, Quarterdeck had issued $25
million of 6% convertible senior subordinated notes, due in 2001,
to an institutional investor in a private placement pursuant to the
terms of a Note Agreement dated March 1, 1996. The Notes were
paid in full without any premium on March 30, 1999.
Acquisition of Intel’s Anti-Virus Business On September 28,
1998, we entered into an agreement whereby we purchased Intel
Corporation’s anti-virus business for approximately $16.5million.
We also licensed Intel’s systems management technology. Intel
promoted Norton AntiVirus through its worldwide reseller chan-
nels. The transaction was accounted for as a purchase. Under the
transaction, we recorded approximately $5.0million for acquired
in-process research and development, $10.7million for acquired
product rights and $0.8million for certain intangible assets. A val-
uation specialist used our estimates to establish the amount of
acquired in-process research and development. The acquired
product rights and intangibles are being amortized over a five-year
period. During fiscal 2000, we resolved certain pre-acquisition
contingencies and as a result, we made final purchase price allo-
cations and reduced the purchase price and the amount allocated
to acquired product rights by approximately $0.9million.
Acquisition of Binary Operations On June 24,1998, we purchased
the operations of Binary, an Auckland, New Zealand-based
company, for approximately $27.9million. The transaction was
accounted for as a purchase. Under the transaction, we recorded
approximately $7.1million for acquired in-process research and
development and $16.9million for acquired product rights, with
the remaining $3.8million of the purchase price allocated to
goodwill and net tangible and intangible assets. A valuation spe-
cialist used our estimates to establish the amount of acquired
in-process research and development. The acquired product
rights, goodwill and intangibles are being amortized over a
four-year period. During fiscal 2000, we resolved certain pre-
acquisition contingencies and as a result, we made final purchase
price allocations and reduced the purchase price and the amount
allocated to goodwill by $2.3million.
Acquisition of IBM’s Anti-Virus Business Effective May 18, 1998,
we entered into a Master Agreement with IBM to acquire rights
to IBM’s digital immune technology. In addition, we assumed the
majority of IBM’s license arrangements with customers of IBM
anti-virus products. In return for the various rights we acquired
from IBM, we agreed to pay $16 million in installments over a
specified period as well as pay royalties on revenues received by
us from distribution of immune-enabled Symantec products and
immune services provided by us using the digital immune tech-
nology. The royalties are subject to specified maximums and vary
by time periods with ultimate termination of royalties as of a spec-
ified date. We also entered into a patent cross-licensing
agreement under which the parties licensed to each other their
respective patent portfolios. The transaction was accounted for as
a purchase. As of March 31, 2000, we paid the entire $16 million
to IBM. In addition, we assumed liabilities of $3.0million and
incurred additional expenses of approximately $1.0million as part
of the transaction. Under the transaction, we recorded approxi-
mately $7.1million for acquired in-process research and
development, $11.9million for goodwill and $1.2million for certain
prepaid research and development and other assets. A valuation
specialist used our estimates to establish the amount of acquired
in-process research and development. Goodwill will be amortized
over five years.
The following table outlines the value of the above referenced fis-
cal 1999 acquisitions’ net tangible and intangible assets, adjusted
for final purchase price allocations, as certain pre-acquisition
contingencies that existed upon acquisition have been resolved:
40 }0