Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill. Goodwill balances are presented below (in thousands):



	Carrying Amount
Balance as of January 1, 2012	$	154,899
Acquisitions	42,979
Acquisition earn-out provision	3,857
Balance as of September 30, 2012	$	201,735

Goodwill increased by $43.0 million due to the Company’s acquisition of 100% of the outstanding shares of FlashSoft Corporation (“FlashSoft”) on February 13, 2012 and Schooner Information Technology, Inc. (“Schooner”) on June 21, 2012. In addition, during the three months ended September 30, 2012, the Company recognized $3.9 million of goodwill under an achieved earn-out provision related to an acquisition consummated in fiscal year 2004.

FlashSoft is a provider of software caching solutions that enable flash-based products to be configured as high-performance cache. The acquisition of FlashSoft adds software caching solutions to the Company’s growing portfolio of enterprise storage solutions. The goodwill resulted from expected synergies from the transaction, including the Company’s resources and complementary products, and is not deductible for tax purposes. The preliminary estimates of fair value for the liabilities assumed from the acquisition are subject to change as the Company obtains additional information related to certain legal contingency matters during the measurement period (up to one year from the acquisition date).

Schooner is an enterprise software company that develops flash-optimized database and data store solutions. Schooner’s products complement the Company’s growing portfolio of enterprise storage solutions and flash-optimized software offerings that enable customers to accelerate the performance of data-intensive applications and reduce overall cost of ownership. The goodwill resulted from expected synergies from the transaction, including the Company’s resources and complementary products, and is not deductible for tax purposes. The preliminary estimates of fair value for the liabilities assumed from the acquisition are subject to change as the Company obtains additional information related to certain legal contingency matters during the measurement period (up to one year from the acquisition date).

Intangible Assets. Intangible asset balances are presented below (in thousands):



	September 30, 2012
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed product technology	$	200,010	$	(58,245	)	$	141,765
Core technology	80,500		(79,829		)	671
Customer relationships	13,050		(8,377		)	4,673
Trademarks	5,700		(1,554		)	4,146
Covenants not to compete	3,100		(1,230		)	1,870
Acquisition-related intangible assets	302,360		(149,235		)	153,125
Technology licenses and patents	133,340		(59,224		)	74,116
Total intangible assets subject to amortization	435,700		(208,459		)	227,241
Acquired in-process research and development	38,635		—			38,635
Total intangible assets	$	474,335	$	(208,459	)	$	265,876



	January 1, 2012
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed product technology	$	172,800	$	(30,014	)	$	142,786
Core technology	79,800		(75,349		)	4,451
Customer relationships	12,200		(3,643		)	8,557
Trademarks	5,300		(633		)	4,667
Covenants not to compete	700		(209		)	491
Acquisition-related intangible assets	270,800		(109,848		)	160,952
Technology licenses and patents	131,340		(40,801		)	90,539
Total intangible assets subject to amortization	402,140		(150,649		)	251,491
Acquired in-process research and development	36,200		—			36,200
Total intangible assets	$	438,340	$	(150,649	)	$	287,691

Acquisition-related intangible assets increased in the nine months ended September 30, 2012 due to the acquisitions of FlashSoft and Schooner. During the three months ended September 30, 2012, the Company reclassified $0.7 million of acquired in-process research and development to core technology and commenced amortization.

The annual expected amortization expense of intangible assets as of September 30, 2012, excluding acquired in-process research and development, is presented below (in thousands):



	Estimated Amortization Expense
	Acquisition-related Intangible Assets		Technology Licenses and Patents
Fiscal year:
2012 (remaining three months)	$	12,184	$	6,159
2013	44,865		23,337
2014	40,482		21,231
2015	40,318		20,056
2016	15,276		3,333
Total intangible assets subject to amortization	$	153,125	$	74,116

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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