Business Acquisition

12 Months Ended

Jan. 01, 2012

Business Combinations [Abstract]

Business Acquisition

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 were bridge loans from the Company to Pliant totaling $22.0 million. The total purchase price was comprised of the following (in thousands):

	Purchase Price
Cash consideration (1)	$	321,088
Estimated fair value of replacement stock options related to precombination service	553
Total purchase price	$	321,641

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⁽¹⁾  Cash consideration does not include cash acquired.

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 stock options was determined using the Black-Scholes-Merton valuation model. The Company records the fair value of unvested replacement stock options as operating expense over the remaining service periods as they relate to post-combination services.

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 (in thousands).

	Acquired Tangible Assets and Liabilities
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 (in thousands):

	Purchase Price Allocation
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 $1.5 million during the fiscal year ended January 1, 2012 were related to legal, regulatory and accounting fees, and expensed to General and administrative expense in the Consolidated Statement of Operations. Pliant’s prior period financial results are not considered material to the Company.