Fair Value Measurements (Notes)

12 Months Ended

Dec. 31, 2013

The following is a summary of available-for-sale marketable securities held as of December 31, 2013 and 2012 (in thousands):



			Gross Unrealized					Aggregate Fair Value		Classification on Balance Sheet
	Amortized Cost									Short-Term Marketable Securities		Long-Term Marketable Securities
As of December 31, 2013	Amortized Cost		Gains		Losses					Short-Term Marketable Securities		Long-Term Marketable Securities
Certificates of deposit	$	222	$	—	$	—		$	222	$	173	$	49
Corporate bonds	736,945		1,197		(281		)	737,861		278,318		459,543
U.S. government agency obligations	174,982		51		(85		)	174,948		61,514		113,434
	$	912,149	$	1,248	$	(366	)	$	913,031	$	340,005	$	573,026

As of December 31, 2012
Certificates of deposit	$	3,100	$	—	$	—		$	3,100	$	3,057	$	43
Commercial paper	7,481		2		(1		)	7,482		7,482		—
Corporate bonds	691,931		1,269		(205		)	692,995		217,548		475,447
U.S. government agency obligations	189,607		95		(28		)	189,674		7,505		182,169
	$	892,119	$	1,366	$	(234	)	$	893,251	$	235,592	$	657,659

Unrealized gains and unrealized temporary losses on investments classified as available-for-sale are included within accumulated other comprehensive loss. Upon realization, those amounts are reclassified from accumulated other comprehensive loss to interest income, net in the consolidated statements of operations. As of December 31, 2013, the Company did not hold any investment-related assets that had been in a continuous loss position for more than 12 months.

The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets and liabilities as of December 31, 2013 and 2012 (in thousands):



	Total Fair Value			Fair Value Measurements at Reporting Date Using
	Total Fair Value			Level 1		Level 2		Level 3
As of December 31, 2013
Cash Equivalents and Marketable Securities:
Money market funds	$	40,482		$	40,482	$	—	$	—
Certificates of deposit	3,418			3,418		—		—
Commercial paper	29,999			—		29,999		—
U.S. government agency obligations	174,948			—		174,948		—
Corporate bonds	737,861			—		737,861		—
	$	986,708		$	43,900	$	942,808	$	—
Other Assets:
Note receivable	$	22,879		$	—	$	—	$	22,879

Other Liabilities:
Contingent consideration obligation related to Velocius acquisition	$	(2,600	)	$	—	$	—	$	(2,600	)

As of December 31, 2012
Cash Equivalents and Marketable Securities:
Money market funds	$	22,255		$	22,255	$	—	$	—
Certificates of deposit	7,473			7,473		—		—
Commercial paper	9,482			—		9,482		—
U.S. government agency obligations	189,674			—		189,674		—
Corporate bonds	692,995			—		692,995		—
	$	921,879		$	29,728	$	892,151	$	—
Other Liabilities:
Contingent consideration obligation related to Verivue acquisition	$	(1,200	)	$	—	$	—	$	(1,200	)

As of December 31, 2013 and 2012, the Company grouped money market funds and certificates of deposit using a Level 1 valuation because market prices for such investments are readily available in active markets. As of December 31, 2013 and 2012, the Company grouped commercial paper, U.S. government agency obligations and corporate bonds using a Level 2 valuation because quoted prices for identical or similar assets are available in markets that are inactive. The Company did not have any transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy during the years ended December 31, 2013 and 2012.

When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. The valuation technique used to measure fair value for the Company's Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument.

The valuation technique used to measure fair value for the Company's Level 3 asset, which consists of a $25.0 million face value convertible note receivable that is due and payable on July 24, 2014, is primarily an income approach, where the expected weighted average future cash flows are discounted back to present value. The significant unobservable inputs used in the fair value measurement of the convertible note receivable are the probability of conversion to equity and the fair value of equity into which the note is convertible. The valuation assumed a 90% probability of being converted to equity. If a 70% probability of conversion was used, the fair value of the note would have been $23.4 million.

The valuation technique used to measure fair value of the Company's Level 3 liabilities, which consist of contingent consideration related to the acquisition of Velocius Networks, Inc. ("Velocius") and Verivue, Inc. ("Verivue") (Note 7), is primarily an income approach. The significant unobservable input used in the fair value measurement of the Velocius contingent consideration is the likelihood of achieving development milestones to integrate the acquired technology into the Company's technology. The significant unobservable input used in the fair value measurement of the Verivue contingent consideration is the likelihood of achieving defined levels of customer revenue.

Significant increases or decreases in the underlying assumptions used to value the Company's Level 3 asset and liabilities held at December 31, 2013 and 2012, respectively, could significantly increase or decrease the fair value estimates recorded in the consolidated balance sheets.

Contractual maturities of the Company’s available-for-sale marketable securities held as of December 31, 2013 and 2012 were as follows (in thousands):



	December 31, 2013		December 31, 2012
Due in 1 year or less	$	340,005	$	235,592
Due after 1 year through 5 years	573,026		657,659
	$	913,031	$	893,251

The following table reflects the activity for the Company’s major classes of assets and liabilities measured at fair value using Level 3 inputs for the years ended December 31, 2013 and 2012 (in thousands):



	Other Assets: Note Receivable		Other Liabilities: Contingent Consideration Obligation
Balance, January 1, 2012	$	—	$	—
Contingent consideration obligation related to Verivue acquisition	—		(1,200		)
Balance, December 31, 2012	—		(1,200		)
Fair value adjustment to contingent consideration for acquisition of Verivue included in general and administrative expense	—		1,200
Contingent consideration obligation related to Velocius acquisition	—		(2,600		)
Convertible note receivable from divestiture of a business	18,882		—
Unrealized gain on convertible note receivable included in other comprehensive income	3,997		—
Balance, December 31, 2013	$	22,879	$	(2,600	)

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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