Fair Value Measurements

The following is a summary of available-for-sale marketable securities held as of June 30, 2014 and December 31, 2013 (in thousands):



			Gross Unrealized							Classification on Balance Sheet
	Amortized Cost		Gains		Losses			Aggregate Fair Value		Short-Term Marketable Securities		Long-Term Marketable Securities
As of June 30, 2014
Certificates of deposit	$	53	$	—	$	—		$	53	$	—	$	53
Commercial paper	39,974		—		(9		)	39,965		39,965		—
Corporate bonds	923,490		1,404		(475		)	924,419		384,619		539,800
U.S. government agency obligations	273,792		94		(86		)	273,800		78,024		195,776
	$	1,237,309	$	1,498	$	(570	)	$	1,238,237	$	502,608	$	735,629

As of December 31, 2013
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

Unrealized gains and unrealized temporary losses on investments classified as available-for-sale are included within accumulated other comprehensive income (loss) in the consolidated balance sheets. Upon realization, those amounts are reclassified from accumulated other comprehensive income (loss) to interest income in the statements of operations. The Company holds for investment one corporate bond, which is classified as an available-for-sale marketable security, in a continuous unrealized loss position for more than 12 months, with an insignificant unrealized loss and a fair value of $1.9 million as of June 30, 2014. The unrealized loss is attributable to changes in interest rates. The Company does not believe any unrealized losses represent other than temporary impairments based on the evaluation of available evidence. As of December 31, 2013, there were no securities in a continuous unrealized 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 at June 30, 2014 and December 31, 2013 (in thousands):



	Total Fair Value			Fair Value Measurements at Reporting Date Using
	Total Fair Value			Level 1		Level 2		Level 3
As of June 30, 2014
Cash Equivalents and Marketable Securities:
Money market funds	$	1,257		$	1,257	$	—	$	—
Certificates of deposit	53			53		—		—
Commercial paper	39,965			—		39,965		—
Corporate bonds	924,419			—		924,419		—
U.S. government agency obligations	273,800			—		273,800		—
	$	1,239,494		$	1,310	$	1,238,184	$	—
Other Liabilities:
Contingent consideration obligation related to Velocius acquisition	$	(2,900	)	$	—	$	—	$	(2,900	)

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		—
Corporate bonds	737,861			—		737,861		—
U.S. government agency obligations	174,948			—		174,948		—
	$	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 June 30, 2014 and December 31, 2013, 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 June 30, 2014 and December 31, 2013, 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.

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 of the Company's Level 3 liability, which consists of contingent consideration related to the acquisition of Velocius Networks, Inc. ("Velocius") (Note 5), 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 valuation technique used to measure fair value for the Company's Level 3 asset, which consisted of a $25.0 million face value convertible note receivable, 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. In the second quarter of 2014, the note was amended. Under the terms of the amendment, the note became convertible into shares of preferred stock of the issuer valued at $12.5 million at the time of conversion; $6.3 million became due and payable (and was paid) during the second quarter of 2014 and the balance of $6.3 million is due and payable in the third quarter of 2014.

Increases or decreases in the underlying assumptions used to value the Company's Level 3 assets and liabilities held at June 30, 2014 and December 31, 2013, could 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 at June 30, 2014 and December 31, 2013 were as follows (in thousands):



	June 30, 2014		December 31, 2013
Due in 1 year or less	$	502,608	$	340,005
Due after 1 year through 5 years	735,629		573,026
	$	1,238,237	$	913,031

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 six months ended June 30, 2014 (in thousands):



	Other Assets: Note Receivable			Other Liabilities: Contingent Consideration Obligation
Balance as of January 1, 2014	$	22,879		$	(2,600	)
Unrealized gain on convertible note receivable included in other comprehensive income	2,121			—
Amendment of the convertible note receivable for preferred stock of the issuer and cash	(25,000		)	$	—
Fair value adjustment to contingent consideration included in general and administrative expense	—			(300		)
Balance as of June 30, 2014	$	—		$	(2,900	)