Goodwill and Intangible Assets

12 Months Ended

Jan. 03, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill. Goodwill balances were as follows:



	Years ended
	January 3, 2016		December 28, 2014
	(In thousands)
Balance, beginning of year	$	831,328	$	318,111
Acquisition	—		513,398
Adjustment	—		(181		)
Balance, end of year	$	831,328	$	831,328

During the fiscal year ended December 28, 2014, goodwill increased by $513.2 million, due primarily to the Company’s acquisition of Fusion‑io, Inc. (“Fusion‑io”).

Goodwill is not amortized, but is reviewed and tested for impairment at least annually, on the first day of the Company’s fourth quarter and whenever events or circumstances occur that indicate that goodwill might be impaired. Impairment of goodwill is tested at the Company’s reporting unit level. The Company has the option to first assess qualitative factors to determine whether events and circumstances indicate that it is more likely than not that the goodwill is impaired and determine whether further action is needed (“Step 0”). For the year ended January 3, 2016, the Company performed a Step 1 quantitative assessment of its goodwill and did not identify an impairment of goodwill. As such, the Company did not perform any further goodwill impairment testing.

Intangible Assets. Intangible asset balances were as follows:



	January 3, 2016
	Gross Carrying Amount		Accumulated Amortization			Impairment			Net Carrying Amount
	(In thousands)
Developed product technology	$	451,560	$	(203,514	)	$	—		$	248,046
Customer relationships	64,600		(61,434		)	—			3,166
Trademarks and trade names	62,500		(20,319		)	—			42,181
Acquisition-related intangible assets	578,660		(285,267		)	—			293,393
Technology licenses and patents	102,000		(98,667		)	—			3,333
Total intangible assets subject to amortization	680,660		(383,934		)	—			296,726
Acquired in-process research and development	61,000		—			(61,000		)	—
Total intangible assets	$	741,660	$	(383,934	)	$	(61,000	)	$	296,726



	December 28, 2014
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In thousands)
Developed product technology	$	568,744	$	(209,478	)	$	359,266
Customer relationships	64,600		(21,009		)	43,591
Trademarks and trade names	62,500		(7,395		)	55,105
Acquisition-related intangible assets	695,844		(237,882		)	457,962
Technology licenses and patents	102,000		(78,611		)	23,389
Total intangible assets subject to amortization	797,844		(316,493		)	481,351
Acquired in-process research and development	61,000		—			61,000
Total intangible assets	$	858,844	$	(316,493	)	$	542,351

During 2015, $61.0 million of in-process research and development (“IPR&D”) was impaired. The Company performs tests for impairment of long-lived assets whenever events or circumstances suggest that long-lived assets may be impaired. In the first quarter of 2015, due to a decline in revenue from previous forecasts and changes to the product development schedule related to an IPR&D project from the Fusion‑io acquisition, the Company performed impairment tests on the acquisition-related amortizable intangible and IPR&D assets for this acquisition. In the first quarter of 2015, the Company reviewed the forecasts for the Fusion‑io IPR&D project and determined to cancel this project in order to reduce the number of platforms under development, resulting in no future attributable cash flows and a full impairment of the IPR&D asset of $61.0 million was recorded. The project was cancelled and resources were redirected towards the next-generation PCIe and converged enterprise platform. In testing the recoverability of the Fusion‑io acquisition-related amortizable intangible assets, the Company determined that there was no impairment. The impairment test is based upon the lowest level for which identifiable cash flows are available related to the intangible assets. In connection with the impairment analysis in the first quarter of 2015, the Company reduced the expected life of the acquisition-related amortizable developed technology intangible assets from the Fusion‑io acquisition from five years to four years, and will amortize the remaining net carrying amount of this developed technology intangible asset over the next 31 months. As of January 3, 2016, the net book value of the Fusion‑io acquisition-related amortizable intangible assets was $223.9 million.

In 2013, the Company performed impairment tests on the amortizable intangible and IPR&D assets from the Pliant Technology, Inc. (“Pliant”) acquisition due to the SMART Storage Systems (“SMART Storage”) acquisition. Based upon its impairment analysis, the Company recorded an impairment of certain amortizable intangible assets and IPR&D assets totaling $83.2 million in 2013, which was included in Impairment of acquisition-related intangible assets in the Consolidated Statements of Operations.

Acquired IPR&D is accounted for as an indefinite-lived intangible asset. Indefinite-lived intangible assets are reviewed for impairment at least annually until technological feasibility is achieved or development is complete. Upon completion of development, the acquired IPR&D is considered an amortizable finite-lived intangible asset. Amortization expense of technology licenses and patents is recorded to cost of revenue or R&D based upon the use of the technology.

Amortization expense of intangible assets totaled $184.6 million, $148.6 million and $84.3 million in 2015, 2014 and 2013, respectively.

The annual expected amortization expense of intangible assets subject to amortization as of January 3, 2016 was as follows:



	Acquisition-related Intangible Assets		Technology Licenses and Patents
	(In thousands)
Year:
2016	$	126,231	$	3,333
2017	107,176		—
2018	53,160		—
2019	6,826		—
Total intangible assets subject to amortization	$	293,393	$	3,333

- 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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