Apple 10-Q reveals acquisition costs, component issues

Apple’s latest 10-Q filing, a document the company files periodically with the federal Securities and Exchange Commission (SEC), reveals the cost of Apple’s recent acquisitions as well as manufacturing-related issues that may affect its future relationship with an Asian fabricator.

Apple noted that its acquisition earlier this year of Nothing Real LLC, the developer of Shake, will cost the company about US$15 million in cash spread over five years. Shake is a high-end compositing and visual effects solution used by filmmakers and video producers. In fact, Apple recently unveiled details about its continuing plans for Shake and is anticipating the release of Shake 2.5 shortly.

Apple’s acquisitions this past quarter largely focus on expanding the company’s influence in the digital video and film editing realms. Apple noted its acquisition of Prismo Graphics, a motion graphics developer whose products are also used in film and video. Apple also acquired Silicon Grail, the cinema compositing software developer responsible for RAYZ and Chalice.

Video and film aren’t Apple’s only area of concern when it comes to strategic acquisitions either. The company noted its acquisition of Zayante, Inc., a manufacturer of FireWire hardware whose assets Apple is leveraging in a recently released free Software Development Kit (SDK) that it hopes will stimulate further FireWire support from third party manufacturers.

All told, said Apple, it incurred about $21 million in cash charges related to the Prismo, Silicon Grail and Zayante acquisitions. The cost will be amortized over the next three years, except for some Zayante-related assets “associated with patent royalty streams” that will be amortized over a decade.

Apple also noted its $30 million acquisition of music production software company Emagic GmbH, developer of Logic. At the time of the acquisition, Apple said that it plans to discontinue Windows development of Emagic’s products by the end of September.

As part of the 10-Q filing, Apple said that it’s having some problems acquiring components from an unidentified Asian supplier. The company made a US$100 million prepayment to the supplier in April for components that Apple was to use in its manufacturing over the following nine months; Apple said that by the end of June, about $83 million of the deposit had remained unused. Apple admitted that the supplier’s situation could put some of Apple’s own deposit at risk, but there’s a light at the end of the tunnel: their contract calls for Apple to be refunded the money at the end of January if it’s not used.

All told, Apple said that it’s expecting to report “a slight profit” for the fourth quarter before non-recurring charges, but there’s a warning, too: On expectations of flat earnings quarter-to-quarter, if Apple determines that “declines in the market value of certain of its non-current investments are other than temporary,” it may be required write down certain investments that would cause the company to report a net loss.