Intel 1999 Annual Report Download - page 56

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cost of capital analysis, adjusted to reflect the relative risks inherent in each entity's development process, including the probability of
achieving technological success and market acceptance. The IPR&D charge includes the fair value of IPR&D completed. The fair value
assigned to developed technology is included in identifiable 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. Failure to deliver new products to the market on a timely basis, or to
achieve expected market acceptance or revenue and expense forecasts, could have a significant impact on the financial results and operations of
the acquired businesses.
The total charge for IPR&D for the Dialogic Corporation acquisition, completed in July 1999, was approximately $83 million. Dialogic
designs, manufactures and markets computer hardware and software enabling technology for computer telephony systems. Twelve IPR&D
projects were identified and valued, with two projects under the Springware and CT Server product groups accounting for 65% of the value
assigned to IPR&D. Springware is a line of voice and intelligent network interface boards that provides signal processing features that can be
reconfigured by developers for special applications. The next-generation Springware project was estimated to be approximately 60% complete,
with estimated costs to complete of $3 million and an estimated completion date of the first quarter of 2000. The CT Server project is designed
to converge voice, media and packet communications within enterprise or public networking systems by providing a single platform for
telecommunications switching, media processing and other communications services. The CT Server project was estimated to be approximately
55% complete, with estimated costs to complete of $11.5 million. The estimated completion date for the CT Server project was originally the
first quarter of 2000 but is now estimated to be the second quarter of 2000. Dialogic's other IPR&D projects ranged from 10% to 90% complete
and averaged approximately 60% complete. Total estimated costs to complete all other projects were $17.5 million, with expected completion
dates from the third quarter of 1999 through the third quarter of 2000. Projects expected to complete during 1999 completed on schedule. The
average discount rates used were 22% for IPR&D projects and 14% for developed technology. Dialogic's weighted average cost of capital was
17%.
The total charge for IPR&D for the Level One Communications, Inc. acquisition, completed in August 1999, was approximately $231 million.
Level One Communications provides silicon connectivity, switching and access solutions for high-speed telecommunications and networking
applications. Eight IPR&D projects were identified and valued, with each project representing from 5% to 18% of the total IPR&D value for
this acquisition. Current Level One Communications products provide silicon connectivity, local area network (LAN) switching and wide area
network (WAN) access solutions for high-speed telecommunications and networking applications. In-process projects include transceivers,
routers and switch chipsets using current and emerging technologies for the networking and telecommunications markets. These projects
ranged from 39% to 86% complete, with total remaining costs to complete of $19.1 million. Expected project completion dates ranged from the
third quarter of 1999 through the third quarter of 2000, and projects expected to complete during 1999 completed on schedule. The discount
rates used were 30% for IPR&D projects and 20% for developed technology. Level One Communications' weighted average cost of capital was
23%.
The total charge for IPR&D for the DSP Communications,Inc. acquisition, completed in November 1999, was approximately $59 million. DSP
Communications develops and supplies form-fit reference designs, chipsets and software for mobile telephone manufacturers. Four IPR&D
projects were identified and valued, with each project representing from 9% to 31% of the total IPR&D value. The in- process projects are
enhancements of DSP Communications' existing digital cellular chipsets, new third-generation chipsets and new products designed for use in
other emerging wireless personal communications services. These projects ranged from 10% to 90% complete, with expected project
completion dates from 2000 to 2003, and total remaining costs to complete of $13 million. The average discount rates used for DSP
Communications were 20% for IPR&D projects and 11% for developed technology. DSP Communications' weighted average cost of capital
was 17%.
In the first quarter of 1998, the company purchased Chips and Technologies, Inc. and recorded a charge for IPR&D of $165 million. Chips and
Technologies had a product line of mobile graphics controllers based on 2D and video graphics
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