Goodwill and Intangible Assets

12 Months Ended

Dec. 28, 2012

3. Goodwill and Intangible Assets

Goodwill

Prior to the second quarter of 2012, we reported results of operations for three reporting segments: Broadband, Transport, and Services. As a result of strategy changes and internal reorganizations at the beginning of the second quarter of 2012, we are focusing on the Packet Optical (primarily our optical portfolio) and Mobile Backhaul (primarily our data portfolio) markets in addition to the on-going Access and Services businesses. With these strategic adjustments, we changed our reporting segments accordingly. Therefore, beginning with the second quarter of 2012, we have reported in the following four segments: Optical, Data, Access and Services (the Services segment was unchanged).

As of December 28, 2012, only the Services segment had goodwill totaling $122.1 million.

During the fourth quarter of 2012, we tested the Services segment for possible goodwill impairment as part of our annual review. As the Services segment’s estimated fair value was greater than its carrying value and no impairment indicators existed, further impairment tests were not deemed necessary and no impairment loss was recorded.

In the third quarter of 2011, we performed an interim review for the Broadband segment since we continued to experience a significant decline in business volume from a major customer that had an adverse impact on the results of the Broadband segment, and our overall market capitalization continued to fall below carrying value. As a result of our interim review, we recorded a goodwill impairment charge of $82.7 million, the full amount of Broadband segment goodwill. The Services segment did not incur an impairment of its goodwill since the fair value of the segment was determined to be greater than the carrying value.


	12/30/11
	Broadband			Services			Total
Beginning balance	$	82.7		$	122.2		$	204.9
Reductions		(82.7	)		—			(82.7	)
Currency translation adjustments		—			(0.2	)		(0.2	)
Ending balance	$	—		$	122.0		$	122.0

Intangible Assets

We amortize intangible assets with finite lives on a straight-line basis over their estimated useful lives. Trade names/trademarks were amortized over 4 to 12 months; customer relationships/backlog over 6 months to 9 years; non-compete agreements from 1.5 to 3 years; and developed technology over 2 to 7.5 years.

We evaluate the carrying value of intangible assets and other long-lived assets for impairment whenever indicators of impairment exist.

In conjunction with the January 30, 2012, restructuring plan, we recorded $47.7 million of accelerated amortization to Restructuring and other charges for abandoned intangible assets in the first quarter of 2012 related to the mobile packet core technology. As a result of the abandonment, we wrote these assets down to zero in the first quarter of 2012. In addition, the decrease in gross assets and accumulated amortization for certain assets in 2012 from 2011 was attributable to the removal of fully amortized and utilized assets.

Intangible assets with indefinite lives, which included IPR&D, were reviewed for impairment annually unless potential interim indicators existed that could have resulted in impairment. In conjunction with the interim goodwill impairment review, we assessed the valuation of the IPR&D in the third quarter of 2011. Updated management projections, related to the IPR&D which reflected a significant decline in anticipated business volumes, resulted in an impairment charge in the third quarter of 2011 of $20.0 million.

The gross carrying amount and accumulated amortization of intangible assets subject to amortization are as follows:


	12/28/12
	Gross Assets		Accumulated Amortization			Net
Developed technology	$	126.1	$	(125.8	)	$	0.3
Customer relationships		30.9		(26.8	)		4.1
Total	$	157.0	$	(152.6	)	$	4.4


	12/30/11
	Gross Assets			Accumulated Amortization			Net
Developed technology	$	212.8		$	(169.1	)	$	43.7
Customer relationships/backlog		35.2			(23.7	)		11.5
Trade names/trademarks		0.2			(0.2	)		—
Leasehold improvements ¹		(2.7	)		2.3			(0.4	)
Non-compete arrangements		13.1			(10.8	)		2.3
Total	$	258.6		$	(201.5	)	$	57.1

¹	Leasehold improvements as of December 30, 2011, reflects a net reclass of $0.5 million to Restructuring and other charges due to the reduction of a facility.

Our intangible assets will be fully amortized by the end of 2015. The estimated amortization expense of intangible assets is $4.2 million for 2013, $0.1 million for 2014, and $0.1 million for 2015.

- 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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