Business Acquisition

6 Months Ended

Jul. 03, 2011

Business Acquisition [Abstract]

Business Acquisition

14. Business Acquisition

     Pliant Technology, Inc. On May 24, 2011, the Company completed its acquisition of Pliant, a developer of enterprise flash storage solutions. This acquisition represents a significant opportunity for the Company to participate in the enterprise storage solutions market. The Company acquired 100% of the outstanding shares of Pliant through an all-cash transaction. Included in the cash consideration is $22.0 million comprised of a $15.0 million bridge loan from the Company to Pliant in March 2011 and a $7.0 million bridge loan from the Company to Pliant in May 2011. The total purchase price is comprised of the following:

	Purchase Price
	(in thousands)
Cash consideration	$	321,088
Estimated fair value of replacement stock options related to precombination service		553
Total purchase price	$	321,641

     The Company assumed all unvested outstanding Pliant stock options, which were converted into options to purchase an aggregate of 0.2 million shares of the Company’s common stock. The fair value of these unvested options was determined using the Black-Scholes-Merton valuation model. The fair value of unvested replacement stock options as they relate to post-combination services will be recorded as operating expense over the remaining service periods.

     Net Tangible Liabilities. The allocation of the Pliant purchase price to the tangible assets acquired and liabilities assumed as of May 24, 2011, is summarized below.

	Acquired Tangible
	Assets and Liabilities
	(in thousands)
Cash	$	3,439
Other assets		16,810
Total assets		20,249
Accounts payable		11,614
Other current liabilities		21,138
Total current liabilities		32,752
Non-current liabilities		9,949
Total liabilities assumed		42,701
Net tangible liabilities acquired	$	(22,452	)

     Purchase Price Allocation. The total purchase price was allocated to Pliant’s net tangible and intangible assets based upon their estimated fair values as of May 24, 2011. The excess purchase price over the value of the net tangible liabilities and identifiable intangible assets was recorded as goodwill. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on estimates and assumptions of management. These estimates include those related to the forecast used to value the intangible assets assumed, including the allocation of developed technology and in-process research and development, and the fair value of inventory and obligations related to excess committed purchases.

     The following table presents the allocation of the Pliant purchase price:

	Purchase Price
	Allocation
	(in thousands)
Net tangible liabilities acquired	$	(22,452	)
Intangible assets:
Developed technology		161,400
Trademarks		5,300
Customer relationships		12,200
In-process research and development		36,200
Covenants not to compete		700
Total intangible assets		215,800
Goodwill		154,899
Net deferred tax asset		(26,606	)
Total purchase price	$	321,641

     The total weighted-average amortization period for finite-lived intangible assets is 4.8 years. The intangible assets are amortized based on the period when the economic benefits of the intangible assets are expected to be utilized, which is straight-line. The goodwill resulted from expected synergies from the transaction, including the Company’s supply of NAND flash and complementary products, which will enhance the Company’s overall product portfolio, and is not deductible for tax purposes.

     Acquisition-related costs of $1.3 million related to legal, regulatory and accounting fees were expensed to the general and administrative expense line item on the Condensed Consolidated Statement of Operations during the three and six months ended July 3, 2011. Pliant’s prior period financial results are not considered material to the Company.