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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission File Number                               

Symyx Technologies, Inc.

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     þ Yes          o No

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

      The aggregate market value of voting Common Stock held by non-affiliates of the registrant (based on the closing price for the Common Stock on the Nasdaq National Market on March 14, 2002) was approximately $448.4 million. As of March 14, 2002, 30,680,500 shares of Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

      Certain sections of the Proxy Statement to be filed in connection with the 2002 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K Report where indicated.

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PART I

Item 1.     Business

      This discussion and other parts of this Form 10-K contain forward-looking statements that involve risks and uncertainties. These statements typically may be identified by the use of forward-looking words or phrases such as “believe,” “expect,” “intend,” “anticipate,” “should,” “planned,” “estimated,” and “potential,” among others. All forward-looking statements included in this document are based on our current expectations, and we assume no obligation to update any such forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for such forward-looking statements. In order to comply with the terms of the safe harbor, we note that a variety of factors could cause actual results and experience to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. The risks and uncertainties that may affect the operations, performance, development, and results of our businesses include but are not limited to (1) market acceptance of our products and services; (2) uncertainties relating to the pace, quality or number of discoveries of new materials; (3) the dependence on collaborators to successfully commercialize products; (4) uncertainties of patent protection and litigation; (5) future growth strategy; (6) general economic conditions in the United States and in major European and Asian markets; (7) earthquakes, power failures and other disasters; and (8) other factors that might be described from time to time in Symyx Technologies’ filings with the Securities and Exchange Commission and include those set forth in this Annual Report on Form 10-K as “Risk Factors”.

      We are a pioneer of high-speed technologies for the discovery of new materials. Our proprietary technologies, including instruments, software and methods, represent complete processes designed to cost-effectively accelerate and fundamentally change materials discovery. Through a combination of powerful miniaturization, automation and parallel processing technologies, our scientists are able to generate hundreds to thousands of materials at a time and screen these materials rapidly and automatically for desired properties. This approach can deliver experimental results hundreds to thousands of times faster than traditional research methods, at a fraction of the cost per experiment.

      We are applying our technology to discover materials for industrial customers in the chemicals, life sciences and electronics industries. Our discovery efforts encompass a broad range of materials, including catalysts for the manufacturing of chemicals, polymers for life science applications and phosphors and other materials for electronics uses.

      Our strategy is to apply our proprietary technologies to discover materials under our Industry Collaboration and Symyx® Proprietary Materials businesses, and to commercialize select instruments and software through our Discovery Tools® business.

      The power and breadth of our discovery technologies are evident in our Proprietary Materials business. Proprietary materials are discovered through our Industry Collaborations programs and through internal research programs, and are licensed to commercialization partners for a range of royalties and other payments. We currently have one commercialized material and a product pipeline at the end of 2001 consisting of 12 development candidates — materials that have completed the discovery phase and are in various stages of development by either Symyx or a Symyx licensee.

      We have a strong base of corporate partners in our Industry Collaborations business. In this area, we perform research for clients in exclusive fields, for which we receive profitable research funding and downstream royalties or other payments on the commercialization of materials we discover.

      To meet the increasing demand for combinatorial discovery tools and methodologies, we sell some of our proprietary synthesis and screening instruments and license the associated software and intellectual property. To date, we have completed agreements with seven companies for the purchase of Discovery Tools systems with shipments completed to five of these companies.

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Industry Background

      Materials and their diverse properties contribute in a vital way to many of the products we use every day. Examples include the catalysts used in the manufacture of major chemicals, pharmaceuticals, plastics and rubbers, the plastics in many of our household and office goods, and luminescent materials in lighting and computer and television screens. Traditional materials discovery relies on an expensive and time-consuming process of trial and error: making one material; testing it; then making a different material; testing it and so on. Traditional discovery methods are not fast enough to keep pace with product life cycles and growth expectations.

      We believe that we can assist chemical, life science and electronics companies by discovering new materials in a more productive and cost-effective manner than by using traditional methods.

      The development of combinatorial synthesis and rapid screening methods has the potential to cost-effectively accelerate materials discovery and fundamentally change the way materials are discovered. We believe combinatorial technologies leverage the full potential of personnel by increasing their experimental productivity by a factor of 100 or more. This promise of a far more efficient discovery method combined with a greater opportunity for product innovation is attracting increased attention from the chemical and electronics industries. We believe that few chemical and electronics companies employ combinatorial synthesis techniques or have the necessary specialized equipment available for such activities.

Symyx Solution

      Our technology provides complete platforms for materials discovery. Using our miniaturized, automated technology to execute hundreds to thousands of experiments at a time, our scientists can dramatically increase the probability of success and reduce the time and costs per experiment to discover new materials. For example, using traditional trial and error methods, a team consisting of a chemist plus a technician could perform 500 to 1,000 experiments per year. In our labs, that same team could perform up to 50,000 experiments per year. As a result, our scientists would generate significantly more data, increase the possibility of discoveries within that timeframe, and reduce the associated costs per experiment dramatically.

      To achieve these efficiencies, we require extensive capabilities in materials synthesis, screening and data analysis. A particular challenge is the ability to screen materials for a wide range of properties. For example, to discover a new catalyst we need to screen how well it performs a specific chemical reaction, to discover a new polymer we need to screen for physical and mechanical properties such as molecular weight and toughness.

      As a pioneer in combinatorial materials science, we found no existing technology capable of meeting our synthesis, screening and data analysis requirements. To address this challenge, we assembled a team of people who have expertise in the fields of inorganic, physical, polymer and organic chemistries, physics, engineering and software programming. This team has successfully designed, built and validated a powerful array of highly specialized proprietary instruments and software. Our scientists can synthesize a wide range of materials and screen for properties including catalytic, chemical, physical, mechanical, electronic and optical properties. In addition, we continue to expand our capabilities through the development of new instruments and software and enhanced versions of existing systems.

Symyx Strategy

      Our objective is to be the leading company using high-speed technologies for the discovery of new materials with commercially valuable properties. We have developed a strategy of three business approaches that we intend to follow in pursuit of our objective:

	•	Industry Collaborations, in which partners fund research and technology development programs in exchange for exclusive rights to commercialize materials discovered in these programs. Work under these research programs is profitable, and the materials we discover are Proprietary Materials;
	•	Proprietary Materials, where we discover and commercialize materials discovered in our Industry Collaborations and internally funded research programs. These materials are commercialized under

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		licensing arrangements, and we expect to receive higher royalties or payments on materials discovered through internally funded programs; and
	•	Discovery Tools, in which we sell and license selected equipment and software to chemical, pharmaceutical and other companies for their own use.

Industry Collaborations

      In our Industry Collaborations, we perform research for customers in exclusive fields, for which we receive profitable research funding and downstream royalties or other payments on materials we discover. In collaboration with major chemical, life science and other industrial companies, we seek to discover new polymers, catalysts, phosphors and other materials for industrial applications.

      We provide the platform technologies and effort, and our partners have rights to develop and commercialize resulting materials within their predefined field of exclusivity. Typically, we enter into collaborative arrangements to discover materials that require considerable investment in product development and manufacturing, as well as extensive marketing efforts. Our collaborative partners have already developed the infrastructure to support these requirements, and may therefore be in a strong position to commercialize our discoveries.

      We receive funding from our collaborative partners through quarterly research payments. These payments are made over the term of the research contract, which is generally one to three years. If a new material is discovered and commercialized, this is a Proprietary Material on which we will typically receive either royalties or milestone payments.

      In 2001, we broadened our research programs with industry partners, adding new customers, renewing existing agreements with Celanese and ICI, and expanding into the pharmaceutical area for the first time. Selection of the correct form of the drug for clinical trials is an important part of drug development. Molecules often crystallize in more than one polymorphic form depending on the specific crystallization and purification conditions used. Each polymorph has a unique set of physiochemical properties such as melting point, solubility, stability, and bioavailability. It is critically important for pharmaceutical companies to be able to identify as many polymorphic forms of a drug candidate as early as possible to better enable them to select the crystalline polymorph with the best overall properties. This process helps ensure that the pre-clinical, clinical and manufacturing processes are developed using the same polymorph of a drug candidate. During 2001, we announced a relationship with Merck & Co. to develop a polymorph Discovery Tools system for use in rapidly determining the optimal crystalline forms of drug candidates. In December 2001, Eli Lilly and Company also signed an agreement in the field of drug polymorphs including Discovery Tools systems to be delivered during 2002. In 2001, we also added collaborations with ExxonMobil Chemical Company and Rhodia Specialty Chemicals, and extended agreements with Celanese, ICI, Unilever, and two undisclosed partners. These partnerships represent a diverse mix of programs and customers, indicating the power of our technology to address a wide range of market opportunities.

      In order to maintain and grow our research and product pipelines, we intend to continue to enter into new collaborative arrangements. As a result of these new arrangements, and the conclusion of existing collaborations upon completion of research or transfer of development candidates to our collaborative partners for commercialization, our portfolio of collaborations will change over time. We expect that new collaborations will come from existing collaborative partners extending current programs and undertaking new research initiatives as well as new collaborative partners.

Symyx Proprietary Materials

      In October 2001, Prolinx Inc. introduced the first commercial product to incorporate a Symyx material — a novel polymer technology for proteomics applications discovered through internal research efforts. This achievement demonstrates our ability to quickly identify high-value materials with near-term commercialization potential. Our pipeline at the end of 2001 included 12 development candidates, materials that Symyx has discovered that have met the criteria specified by Symyx or its partner to complete the

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      In 2002, we expect to earn royalties resulting from the commercialization of the Prolinx polymer.

      In 2001, approximately 22% of our research effort was on Symyx funded research. The focus of our Symyx funded programs is largely on life sciences, such as materials for genomics and pharmaceutical development, and on industrial polymer applications as well as the next generation of our Discovery Tools. We expect to receive higher royalties or payments on materials discovered through internally funded programs.

Discovery Tools

      Our scientific and technical team has spent considerable time and resources developing a broad array of instruments, software and know-how in support of our research. In addition to our alliances, we are seeking to meet the growing demand for combinatorial technologies by offering access to some of our equipment and technology. We believe that these programs enhance our collaborative arrangement efforts by reinforcing our position as the leading source for combinatorial technology in materials science.

      Revenues from our Discovery Tools business increased significantly in 2001, as we increased our installed base of systems among customers interested in using our proprietary instrumentation, software and methods to speed their research efforts. We signed purchase agreements with GIRSA, Sumitomo Chemical, Merck & Co. and Eli Lilly and Company, and shipped a total of five systems to ExxonMobil Chemical Company, GIRSA and Sumitomo Chemical. Merck & ExxonMobil are also companies that we performed research and development activities for under our Industry Collaborations business.

      In addition to the sale of Discovery Tools, we also believe that there is significant commercial value in the sale, through licensees, of both our software and the non-automated laboratory instruments that we developed to perform small scale parallel synthesis and screening of materials. We have entered into licenses with Argonaut Technologies, Inc., Zeton Inc., Zinsser Analytic GmbH, and Polymer Laboratories, Ltd to capture this opportunity. We earn royalties on the sale of instruments by these licensees.

Technology

      Our scientists begin the discovery process by working with our collaborative partners or our own business development staff to define the research objective in terms of the specific properties a new material should have to meet the needs of a given application. We then apply the components of our combinatorial process, synthesis, screening and informatics, to discover materials that match these criteria.

Synthesis

      The materials research process begins with chemists’ theories about what elements from the periodic table of elements might be combined to create new materials with desired properties. However, while chemists working in traditional labs have to choose the few experiments they will perform on a given day, our chemists have the ability to perform hundreds or thousands of experiments during the same time frame. Our chemists are therefore able to pursue their theories both broadly — across a wide range of elements — and comprehensively — creating materials with the same components in different ratios.

      A Symyx chemist initiates the synthesis process by using Library Studio®, a computer software package created by our programmers to design the group, or “library,” of materials to be synthesized. These instructions, or “recipes,” are then relayed to automated synthesis instruments. These instruments create the library on a single substrate such as a three-inch diameter silicon wafer or a 96-well plate. The quantity of each compound synthesized is very small, generally ranging from micrograms to hundreds of milligrams. This

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      Each material synthesized represents a unique experiment and potential discovery. The desired end result of these experiments is defined at the outset of the experiment as a target material having specific performance properties. Our scientists, in conjunction with our collaborative partners, or independently for our proprietary discovery programs, set the specific performance properties and define the desired performance attributes of the target material for a given application or applications. Generally, these criteria are well beyond the performance attributes of currently used materials.

Screening

      Once created, the library is analyzed for desired properties. As with synthesis, our technical staff has designed and built a broad array of instruments and software to evaluate different properties under a wide variety of process conditions. These properties include catalytic, physical, mechanical, thermal, chemical, electronic and optical properties. In general, a Symyx chemist can design, synthesize and screen a library in a single day.

      To reach the point of commercialization, a candidate material must progress through an increasingly stringent set of requirements, progressing from a hit to a lead to a development candidate. First, we screen materials to identify those materials that have properties defined for the target discovery, called “hits.” Hits are subjected to additional testing and optimization, to find a larger number of needed properties. Hits also identify areas that merit further exploration, and new libraries are created using this information. Candidate materials that continue to meet or exceed the defined criteria are then classified as “leads.” Leads are then transferred to a partner or processed internally for additional testing and scale up. Leads are then tested on a larger scale, as bulk samples of 1 to 100 grams, to confirm that the materials still perform at this “bench scale” level. Once a lead has passed this bench scale testing by either a collaborative partner or Symyx, it may become a development candidate. Finally, if all is successful, the decision may be made to commercialize the material. Once a material has been identified as a development candidate, the time to the first sale or commercial usage may be as short as 1 to 2 years. Industrial catalysts to produce high volume commodity chemicals, on the other hand, may require 5 to 7 or more years to reach the market because of the extensive process development and capital investment involved.

Informatics

      A critical factor in our discovery process is the ability to retain and access the huge amounts of data generated by our synthesis and screening activities. Given the broad acceptance of high-speed combinatorial discovery in pharmaceuticals, a number of software applications exist to support organic chemistry. However, those software applications were not sufficient to address the storage and retrieval needs of our diverse array of inorganic, organometallic and polymer chemistries. To that end, we have devoted considerable resources to build a proprietary database capable of addressing our unique needs. Our chemists can query this database to identify materials screened in the past that possess the property or properties specified. We believe that this database will emerge as a powerful tool in accelerating materials discovery by enabling our scientists to benefit from the cumulative effect of all of our research.

Intellectual Property and Other Proprietary Rights

      Our success depends upon our proprietary technology. There are five general areas that may be patented using our combinatorial approach:

	•	library synthesis methods;
	•	the libraries themselves;
	•	screening or characterization methods;

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	•	equipment and software; and
	•	new materials.

      During 2001, we were issued 24 patents including our first in Europe. Our patent portfolio as of year end 2001 consisted of 40 issued patents, including 36 U.S. patents and four European patents, and more than 330 patent applications pending worldwide. These patents and applications cover composition of matter, instruments, and methodology, and include issued patents with broad claims in combinatorial methodologies. We co-own 4 of the issued United States patents and a few of the pending patent applications with Lawrence Berkeley National Laboratory, on behalf of The Regents of the University of California. We have an exclusive license to these patents and patent applications from Lawrence Berkeley National Laboratory, which was agreed to upon formation of the Company. In addition to patents, we rely on copyright, trademark and trade secret rights, confidentiality procedures and licensing arrangements to establish and protect our proprietary rights.

      As part of our confidentiality and trade secret protection procedures, we enter into non-disclosure agreements with our employees, consultants and potential collaborative partners. Despite these precautions, third parties could obtain and use our products or technology without authorization, or develop similar technology independently. It is difficult for us to police unauthorized use of our methods. Effective protection of intellectual property rights is unavailable or limited in some foreign countries. The protection of our proprietary rights may be inadequate and our competitors could independently develop similar technology, duplicate our products or design around any patents or other intellectual property rights we hold.

Competition

      We are aware of some chemical companies with internal combinatorial programs. In addition, two European based companies, Avantium and HTE may also use combinatorial approaches to materials discovery. In addition, academic and research institutions may seek to develop technologies that would be competitive with our systems for materials discovery. Because combinatorial materials science is an emerging field, competition from additional entrants may increase.

      Some of our competitors may be addressing the same materials targets as Symyx or our collaborative partners. Many of our current and potential competitors, either alone or together with their collaborative partners, have greater financial, manufacturing, marketing and sales resources than we do. Accordingly, our competitors may succeed in obtaining patent protection or commercializing products before us. If we commence commercial product sales, we will be competing against companies with greater marketing, sales and manufacturing capabilities, areas in which we have limited or no experience.

Employees

      As of December 31, 2001, we had a total of 204 employees, including 146 scientific and technical employees and 58 people in business development, legal and general and administrative services. None of our employees are represented by a labor union, and we consider our employee relations to be good.

Risk Factors

      All statements in this annual report that do not discuss past results are forward-looking statements. Forward-looking statements are based on management’s current expectations and are therefore subject to certain risks and uncertainties. Any of the following risks could seriously harm our business, financial condition or results of operations. As a result, these risks could cause the decline of the trading price of our Common Stock. The risks described below, however, are not the only ones that we face. You should also refer to the other information set forth in this annual report, including our financial statements and the related notes.

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      Our combinatorial materials discovery technologies and processes are new. To date, our partners have only successfully commercialized as a product one material that we have discovered using these technologies and processes. Discovery and development of new materials is a highly uncertain process. Accordingly, because of these uncertainties, our discovery process may not result in the identification of development candidates we or our partners will commercialize. If we are not able to use our technologies to discover new materials with significant commercial potential, we will be unable to achieve our objectives or maintain a profitable business.

      The market for our discovery services and instrumentation within the chemical, life sciences and electronics industries depends on our customers’ ability and willingness to invest in research and development. A majority of our revenues are attributable to our research collaborations. Our future revenues are dependent on funding of our research collaborations, licensing of proprietary materials and sales of Discovery Tools.

      In particular, many companies in the chemical and pharmaceutical industries have, in the past several years, experienced declining profitability or even losses. In addition, many chemical products have become commodity products which compete primarily on the basis of price. As a result, some chemical companies have reduced their research and development activities. If commoditization of chemical products and other pressures affecting the industry continue in the future, more companies could adopt strategies that involve significant reductions in their research and development programs. Although we believe that our approach can help life science, chemical and electronics companies increase the efficiency of their research and development activities, our efforts to convince them of this value may be unsuccessful. To the extent that life science, chemical and electronics companies reduce their research and development activities, they would be less likely to do business with us. As a result of current negative economic conditions, a number of these companies have recently both reduced the size of their research and development budgets as well as the size of their workforces. Decisions by these companies to reduce their research and development activities could result in fewer or smaller scale collaborations with us as well as fewer sales of our Discovery Tools systems and related licenses and products, any of which could reduce our revenues and harm our business and operating results.

      Our ability to succeed is also dependent upon the acceptance by potential customers of our high throughput screening technology as an effective tool in the discovery of new materials. Historically, life science and chemical companies have conducted materials research and discovery activities internally using traditional manual discovery methods. In order for us to achieve our business objectives, we must convince these companies that our technology and capabilities justify outsourcing part of their basic research and discovery programs. If we cannot convince other companies of the effectiveness of our automated discovery methods, we may be unable to keep our existing customers or attract additional customers on acceptable terms or develop a sustainable, profitable business.

      Our future revenues and profitability are dependent upon our ability to achieve discoveries. Because of the inherently uncertain nature of research activities, we cannot predict with a high level of precision the pace with which we may generate discoveries or the quality of any discoveries that we may generate. Due to the uncertain nature of materials discovery, in which several hundred thousand compounds must often be

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      Our strategy involves conducting proprietary research programs. These programs are focused on discovery of products for specialty markets that have fewer barriers to entry for an emerging company. A significant number of our collaborative research programs are focused on commodity chemical markets, which are larger than fine chemical and specialty chemical markets that are the focus of our proprietary programs. We believe that this differentiation of focus will enable us to minimize conflicts with our collaborators relating to rights to potentially overlapping leads developed through our proprietary programs and through programs funded by a collaborator. However, conflicts between us and a collaborator could potentially arise, particularly if we were to discover a material in one of our proprietary programs that was a potential target of one of our collaborative programs. In this event, we may become involved in a dispute with our collaborator regarding the material. Disputes of this nature could harm the relationship between us and our collaborator, and concerns regarding our proprietary research programs could also affect our ability to enter into new collaborative relationships. If circumstances surrounding our proprietary research programs were to affect our existing collaborative relationships or our ability to enter into new relationships, our revenues and operating results would decline.

      In addition, we will either commercialize development candidates resulting from our proprietary programs directly or through licensing to other companies. In order for us to commercialize these development candidates directly, we would need to develop, or obtain through outsourcing arrangements, the capability to manufacture, market and sell products. We do not have this capability, and we may not be able to develop or otherwise obtain the requisite manufacturing, marketing and sales capabilities. If we are unable to successfully commercialize products resulting from our proprietary research efforts, our revenues and operating results would decline.

      To date, the majority of our revenues have come from collaborative arrangements with chemical, electronics and life science companies. These contracts generally expire after a fixed period of time. If they are not renewed or if we do not enter into new collaborative arrangements, our business and operating results may be harmed.

      For us to achieve and sustain a significant level of profitability, we must make discoveries with significant commercial potential, and our collaborators must successfully commercialize products based on our discoveries. Typically, we do not receive royalties on sales of products by our collaborators until the collaborator has commenced commercial sales of a product resulting from the collaboration. The failure of our partners to commercialize development candidates resulting from our research efforts would reduce our revenues and would harm our business and operating results.

      To date, we have a limited number of contracts for our Discovery Tools systems. Because of the high cost and complexity of these systems, the sales cycle for them has been and is likely to continue to be long. Sales of these systems will require us to educate our potential customers about the full benefits of these systems, which

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	•	customers’ budgetary constraints and internal acceptance review procedures;
	•	complexity of our systems and difficulties we may encounter in meeting individual customer specifications and commitments on a timely basis;
	•	the fact that there may be only a limited number of customers that are willing to pay several million dollars for our systems;
	•	a long sales cycle that involves substantial human and capital resources; and
	•	potential downturns in general or in industry specific economic conditions.

      Because we expect future revenue growth from the sale of Discovery Tools, our revenues may decline or not grow as anticipated if we are unable to build the infrastructure to support this business or if the sales or build cycles for Discovery Tools systems lengthens unexpectedly.

      Key parts of our Discovery Tools systems are currently available only from a single source or a limited number of sources. In addition, components of our capital equipment are available from one of only a few suppliers. In the event that supplies from these vendors were delayed or interrupted for any reason, we may not be able to get equipment or components for Discovery Tools systems or our own research efforts in a timely fashion or in sufficient quantities or under acceptable terms.

      Even if alternative sources of supply are available, it could be time consuming and expensive for us to qualify new vendors. In addition, we are dependent on our vendors to provide components of appropriate quality and reliability. Consequently, in the event that supplies from these vendors were delayed or interrupted for any reason, we could be delayed in our ability to develop and deliver products to our customers.

      We commercialize certain manual laboratory instruments through our relationships with Argonaut Technologies, Polymer Laboratories, Zeton Inc. and Zinsser Analytic GmbH. The commercial success of these instruments and software licenses will depend in large part on their features and price as compared to competing products and on their ability to achieve market acceptance. In addition, our ability to realize significant commercial sales of these instruments and software licenses will also depend on the efforts of these third parties in promoting, marketing and selling these instruments. These third parties’ efforts in this regard will be outside of our control. Accordingly, to the extent that they fail to effectively promote, market and sell our manual instruments and software licenses, our revenues from the sales of these instruments and software licenses, and therefore our operating results, would be harmed.

      Our ability to commercialize future manual laboratory instruments or software is dependant upon securing new partners with the appropriate expertise or extending existing relationships. To the extent that we fail to secure new partners or extend existing relationships, or these partners fail to effectively promote, market and sell our manual instruments or software licenses, our revenues from the sales of these instruments and software licenses, and therefore our operating results, would be harmed.

      Our quarterly operating results have fluctuated in the past and are likely to do so in the future. These fluctuations could cause our stock price to fluctuate significantly or decline. Revenues in future fiscal periods

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	•	expiration of research contracts with major collaborative partners, which may not be renewed or replaced with contracts with other companies;
	•	the success rate of our discovery efforts associated with milestones and royalties;
	•	the timing and willingness of partners to commercialize our discoveries which would result in royalties;
	•	the size and timing of customer orders for shipments of, and payments related to Discovery Tools instrumentation;
	•	the size and timing of royalties we receive from third parties who license our manual instruments and software for resale;
	•	the size and timing of late stage licensing agreements we may enter into; and
	•	general and industry specific economic conditions, which may affect our customers’ capital investment levels.

      A large portion of our expenses, including expenses for facilities, equipment and personnel, are relatively fixed in nature. Accordingly, in the event revenues decline or do not grow as anticipated due to expiration of research contracts, failure to obtain new contracts or other factors, we may not be able to correspondingly reduce our operating expenses. In addition, we plan to significantly increase operating expenses in 2002. Failure to achieve anticipated levels of revenues could therefore significantly harm our operating results for a particular period.

      Due to the possibility of fluctuations in our revenues and expenses, we believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. Our operating results in some quarters may not meet the expectations of stock market analysts and investors. In that case, our stock price would probably decline, and investors would experience a decline in the value of their investment.

      We believe our future success will depend upon our ability to attract and retain highly skilled personnel, including W. Henry Weinberg, our Senior Vice President and Chief Technical Officer, and other key scientific and managerial personnel. We do not have any key-person life insurance relating to our key personnel. These employees are at-will and not subject to employment contracts. We may not be successful in attracting and retaining key personnel in the future.

      As we seek to expand our operations, the hiring of qualified scientific and technical personnel will be difficult due to the limited availability of qualified professionals. The number of people with experience in the fields of combinatorial materials science and combinatorial chemistry is limited, and we face intense competition for these types of employees. We have in the past experienced difficulty in recruiting qualified personnel. Failure to attract and retain personnel, particularly scientific and technical personnel, would impair our ability to grow our business and pursue new discovery initiatives and collaborative arrangements.

      The field of combinatorial materials science is increasingly competitive. We are aware of companies that may apply their expertise in combinatorial chemistry to materials research and development. We are also aware of some companies that have internal combinatorial programs. In addition, there are companies focusing on aspects of combinatorial chemistry for the discovery of materials, including Avantium in The Netherlands and HTE in Germany. In addition, academic and research institutions may seek to develop technologies that would be competitive with our systems for materials discovery. Because combinatorial materials science is an emerging field, competition from additional entrants may increase.

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      Many of our current and potential competitors have greater financial, manufacturing, marketing and sales resources than we do. In addition, some of our existing competitors may, individually or together with companies affiliated with them, have greater human and scientific resources than we do. Our competitors could develop technologies and methods for materials research and discovery that render our technologies and systems obsolete or less competitive. Any competitive developments of this nature would make our technologies and methodologies less competitive. Accordingly, if competitors introduce new materials discovery technologies that are faster or more cost-effective than our technologies, customers may switch to these new technologies. We would then experience a decline in our revenues and operating results.

      The market for our products is characterized by continuing technological development, evolving industry standards and changing customer requirements. Due to increasing competition in our field, it is likely that the pace of innovation and technological change will increase. The introduction of products by our direct competitors or others embodying new technologies, the emergence of new industry standards or changes in customer requirements could render our existing products obsolete, unmarketable or less competitive. Our success depends upon our ability to enhance existing products and services and to respond to changing customer requirements. Failure to develop and introduce new products and services, or enhancements to existing products, in a timely manner in response to changing market conditions or customer requirements will harm our future revenues and our business and operating results.

      The success of our business depends on our ability to protect our intellectual property portfolio and obtain patents without infringing the proprietary rights of others. If we do not effectively protect our intellectual property, our business and operating results could be harmed.

      Patents may not issue from our applications. Even if we are able to obtain patents covering our technology, the patents may be challenged, circumvented, invalidated or unenforceable. Competitors may develop similar technology or design around any patents issued to us or our other intellectual property rights. Our competitors would then be able to offer research services and develop, manufacture and sell products which compete directly with our research services and products. In that case, our revenues and operating results would decline.

      We also seek to protect our technology and processes in part by confidentiality agreements with our collaborators, employees and consultants. We also do not provide broad access to our proprietary technologies and processes to collaborators. However, confidentiality agreements might be breached by collaborators, former employees or others, and in that event, we might not have adequate remedies for the breach. Further, our trade secrets might otherwise become known or be independently discovered by competitors. Unauthorized disclosure of our trade secrets could enable competitors to use some of our proprietary technologies. This would harm our competitive position and could cause our revenues and operating results to decline.

      We may receive communications from others asserting that our business or technologies infringe their intellectual property rights. If we became involved in infringement litigation or interference proceedings declared by the United States Patent and Trademark Office, or oppositions or other intellectual property proceedings outside of the United States, to defend our intellectual property rights or as the result of alleged infringement of the rights of others, we might have to spend significant amounts of money to defend our position. The litigation or proceedings could divert our management’s time and efforts. An adverse ruling, including an adverse decision as to the priority of our inventions, would undercut or invalidate our intellectual property position. An adverse ruling could also subject us to significant liability for damages or prevent us from

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      We believe we have taken reasonable measures to assess the validity of our intellectual property rights. We are not currently involved in any litigation with third parties regarding intellectual property rights. However, we may become involved in intellectual property disputes or receive communications from others in the future asserting that our business or technologies infringe their intellectual property rights. To settle these disputes, we may need to obtain licenses to patents or other proprietary rights held by others. However, these licenses might not be available on acceptable terms, or at all. In that event, we could encounter delays in system, process or product introductions while we attempt to design around the patents. Our redesigned systems, processes or products may be inferior to our original designs or we may be unable to continue system, process or product development in the particular field. In either case, our competitive position, business, revenues and operating results would likely suffer.

      Our business involves the use of a broad range of hazardous chemicals and materials. Environmental laws impose stringent civil and criminal penalties for improper handling, disposal and storage of these materials. In addition, in the event of an improper or unauthorized release of, or exposure of individuals to, hazardous materials, we could be subject to civil damages due to personal injury or property damage caused by the release or exposure. A failure to comply with environmental laws could result in fines and the revocation of environmental permits, which could prevent us from conducting our business. Accordingly, any violation of environmental laws or failure to properly handle, store or dispose of hazardous materials could result in restrictions on our ability to operate our business and could require us to incur potentially significant costs for personal injuries, property damage and environmental cleanup and remediation.

      Our facilities are located in the Silicon Valley near known earthquake fault zones and are vulnerable to damage from earthquakes. In October 1989, a major earthquake that caused significant property damage and a number of fatalities struck this area. We are also vulnerable to damage from other types of disasters, including fire, floods, power loss, communications failures and similar events. Recently, California has been experiencing a shortage of electrical supply that has resulted in intermittent loss of power in the form of rolling blackouts. In the event these blackouts continue or increase in severity, they could disrupt the operations of our facilities. If any disaster were to occur, our ability to operate our business at our facilities would be seriously, or potentially completely, impaired. In addition, the unique nature of our research activities and of much of our equipment could make it difficult for us to recover from a disaster. The insurance we maintain may not be adequate to cover our losses resulting from disasters or other business interruptions. Accordingly, an earthquake or other disaster could harm our business and operating results.

      Our officers, directors and principal stockholders (greater than 5% stockholders) together control a significant percentage of our outstanding common stock. As a result, these stockholders, if they act together, will be able to exert a significant degree of influence over our management and affairs and over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of Symyx and might affect the market price of our common stock, even when such a change may be in the best interests of all stockholders.

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      The market price of our common stock since our initial public offering has been highly volatile. Volatility in the market price for our common stock will be affected by a number of factors, including the following:

	•	the announcement of new products or services by us or our competitors;
	•	quarterly variations in our or our competitors’ results of operations;
	•	failure to achieve operating results projected by securities analysts;
	•	changes in earnings estimates or recommendations by securities analysts;
	•	developments in our industry; and
	•	general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.

      These factors and fluctuations, as well as general economic, political and market conditions, may materially adversely affect the market price of our common stock.

      In 2001, purported securities class action lawsuits were filed against certain leading investment banks and over 300 companies that completed public offerings in 1999 and 2000, including a lawsuit filed against certain of Symyx’ officers in December, 2001, which was subsequently dismissed, without prejudice, in March 2002. See “Part I — Item 3. — Legal Proceedings” for a description of this lawsuit. Securities litigation can result in potential liability, cause us to incur litigation costs and divert management’s attention and resources, any of which could harm our business. In addition, announcements of future lawsuits of this or some other nature, whether with or without merit, and announcements of events occurring during the course of the current and any future lawsuits, could cause our stock price to fall.

      Provisions of our amended and restated certificate of incorporation, bylaws and Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. These provisions include:

	•	a classified board of directors, in which our board is divided into three classes with three year terms with only one class elected at each annual meeting of stockholders, which means that a holder of a majority of our common stock will need two annual meetings of stockholders to gain control of the board;
	•	a provision which prohibits our stockholders from acting by written consent without a meeting;
	•	a provision which permits only the board of directors, the president or the chairman to call special meetings of stockholders; and
	•	a provision which requires advance notice of items of business to be brought before stockholders meetings.

      These provisions can be amended only with the vote of the holders of 66 2/3% of our outstanding capital stock.

Item 2.     Properties

      Our facilities currently consist of an aggregate of approximately 104,300 square feet of office, research and laboratory space in several locations in Santa Clara and Sunnyvale, California, pursuant to leases that expire from 2002 to 2010.

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Item 3.     Legal Proceedings

      On or about December 5, 2001, a securities lawsuit, Meyers v. Credit Suisse First Boston Corporation, et al., Case No. 01-CV-10981, was filed in the United States District Court for the Southern District of New York purportedly on behalf of all persons who acquired Symyx Technologies, Inc. securities between November 18, 1999 and December 6, 2000. The complaint named as defendants Symyx’ Chief Executive Officer and Chairman, Steven D. Goldby, Symyx’ Senior Vice President and Chief Financial Officer, Jeryl L. Hilleman, and Credit Suisse First Boston Corporation, the lead underwriter of the Company’s initial public offering in November 1999. Symyx Technologies, Inc. was not named as a defendant in the complaint.

      On or about March 12, 2002, the plaintiffs in this case filed a notice of voluntary dismissal, without prejudice, in the United States District Court for the Southern District of New York.

      The complaint had asserted a claim for violation of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934, as amended, against all defendants. The complaint alleged that the registration statement filed by Symyx with the SEC for its November 1999 initial public offering of common stock was materially false and misleading because it failed to disclose that: (i) Credit Suisse First Boston obtained excessive commissions from certain investors in exchange for which Credit Suisse First Boston allocated to those investors portions of the shares issued in the Symyx initial public offering; and (ii) Credit Suisse First Boston had entered into agreements whereby Credit Suisse First Boston agreed to allocate shares in the Symyx initial public offering to certain investors in exchange for which the investors agreed to purchase additional Symyx shares in the aftermarket at pre-arranged higher prices.

      The complaint sought damages in an unspecified amount. We continue to believe that the claims alleged against our officers were without merit.

      Symyx is not a party to any material pending legal proceedings.

Item 4.     Submission of Matters to a Vote of Security Holders

      Not Applicable

PART II

      The Company’s Common Stock is traded on the Nasdaq National Market System under the symbol of SMMX. The following table sets forth, for the period indicated, the low and high bid prices per share for the Company’s Common Stock as reported by the Nasdaq National Market.

      As of February 28, 2002, there were approximately 236 holders of record of the Company’s Common Stock.

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      No dividends have been paid on the Common Stock since the Company’s inception and the Company currently intends to retain all future earnings, if any, for use in its business and does not anticipate paying any cash dividends in the foreseeable future.

Use of Proceeds

      On November 18, 1999, a Registration Statement on Form S-1 (No. 333-87453) was declared effective by the Securities and Exchange Commission, pursuant to which 6,368,700 shares of the Company’s Common Stock, no par value, were offered and sold for the account of the Company at a price of $14.00 per share, generating gross offering proceeds of $89.2 million for the account of the Company. The managing underwriters for the offering were Credit Suisse First Boston, Donaldson, Lufkin & Jenrette, Invemed Associates and Schroder & Co. Inc.

      From the effective date of the Registration Statement to December 31, 1999, the Company incurred $6.3 million in underwriting discounts and commissions and $1.5 million in other related expenses. Total expenses incurred in connection with the offering were $7.8 million. The net proceeds of the offering, after deducting the foregoing expenses, were $81.4 million. No direct or indirect payments were made to directors, officers, or general partners of the Company or their associates, or to persons owning 10% or more of any class of equity securities of the Company and its affiliates.

      From the effective date of the Registration Statement to December 31, 2001, the Company estimates that it has used a portion of the net proceeds of the offering as follows:

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Item 6.     Selected Financial Data

      The following selected historical information has been derived from the audited financial statements of the Company. The financial information as of December 31, 2001 and 2000 and for each of the three years in the period ended December 31, 2001 are derived from audited financial statements and are included elsewhere in this Form 10-K. The table should be read in conjunction with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8. “Financial Statements and Supplementary Data”.