Certain Financial Statement Information

Accounts receivable:



	March 31,
	2014			2013
	(In thousands)
Accounts receivable	$	25,629		$	25,278
Less: allowance for bad debts	(451		)	(703		)
	$	25,178		$	24,575

Inventories:



	March 31,
	2014		2013
	(In thousands)
Finished goods	$	9,375	$	7,247
Work in process	6,510		4,098
Raw materials	3,061		1,555
	$	18,946	$	12,900

Other current assets:



	March 31,
	2014		2013
	(In thousands)
Prepaid expenses	$	10,978	$	13,762
Executive deferred compensation assets	1,035		693
Deposits	585		828
Proceeds receivable from sale of strategic investment	3,353		1,331
Other	848		1,384
	$	16,799	$	17,998

Property and equipment:



	Useful Life	March 31,
	Useful Life	2014			2013
	(In years)	(In thousands)
Machinery and equipment*	5-7	$	44,503		$	40,063
Leasehold improvements**	1-5	11,574			14,202
Computers, office furniture and equipment	3-7	43,365			43,485
Buildings**	—	—			2,756
Land**	—	—			9,800
		99,442			110,306
Less: accumulated depreciation and amortization		(78,696		)	(75,915		)
		$	20,746		$	34,391


*	Includes capitalized mask costs

** In March, 2014, The Company sold its headquarters building and related parcel of land in Sunnyvale, California for a purchase price of $40.8 million in cash. The building was being depreciated over the useful life of 31.5 years and the leasehold improvements associated with the building were being depreciated over the useful life of 5 to 15 years. The net book value of the properties sold was approximately $14.3 million on the closing date and the Company recorded a gain of $25.8 million in the fiscal year ended March 31, 2014. The Company leases a portion of the space on a lease which expires in August, 2015.

Goodwill and purchased intangibles:

Goodwill is as follows:



	March 31,
	2014		2013
	(In thousands)
Goodwill	$	11,425	$	13,183

The reduction in goodwill of $1.8 million relates to the sale of TPack. See Note 12, Sale of TPack A/S, to the Consolidated Financial Statements for details.

Purchase-related intangibles are as follows:



	March 31, 2014								March 31, 2013
	Gross		Accumulated Amortization and Impairments			Net		Weighted average remaining useful life	Gross		Accumulated Amortization and Impairments			Net		Weighted average remaining useful life
	(In thousands)							(In years)	(In thousands)							(In years)
Developed technology/in-process research and development	$	425,000	$	(425,000	)	$	—	0	$	441,300	$	(431,771	)	$	9,529	3.5
Customer relationships	6,330		(6,225		)	105		0.4	12,830		(10,507		)	2,323		2.1
Patents/core technology rights/trade name	62,306		(62,306		)	—		0	63,206		(63,067		)	139		0.3
	$	493,636	$	(493,531	)	$	105		$	517,336	$	(505,345	)	$	11,991

During the quarter ended June 30, 2013, $11.4 million of purchased intangibles were written off pursuant to the sale of TPack. See Note 12, Sale of TPack A/S, to the Consolidated Financial Statements for details.

The estimated future amortization expense of purchased intangible assets to be charged to operating expenses as of March 31, 2014, was as follows (in thousands):



	Operating Expenses
Fiscal Years Ending March 31, 2015	$	105

Other Assets:



	March 31,
	2014		2013
	(In thousands)
Non-current portion of prepaid expenses	$	4,235	$	7,866
Strategic investments*	3,000		3,000
Other	$	519	$	—
	$	7,754	$	10,866

*During the fiscal years ended March 31, 2014 and 2013, the Company recognized an impairment charge on its non-marketable strategic investment of $0.0 million and $2.3 million, respectively. Refer to Note 2, Investments, to the Consolidated Financial Statements for details.

Other accrued liabilities:



	March 31,
	2014		2013
	(In thousands)
Employee related liabilities	$	1,733	$	2,236
Executive deferred compensation	1,314		1,284
Income taxes	962		903
Professional fees	1,259		3,840
Other	5,609		2,467
	$	10,877	$	10,730

Warranty Reserves:

The Company’s products typically carry a one-year warranty. The Company establishes reserves for estimated product warranty costs at the time revenue is recognized. Although the Company engages in extensive product quality programs and processes, its warranty obligation is affected by product failure rates, use of materials and service delivery costs incurred in correcting any product failure. Should actual product failure rates, use of materials or service delivery costs differ from the Company’s estimates, additional warranty reserves could be required, which could reduce its gross margin.

The following table summarizes warranty reserve activity:



	March 31,
	2014			2013
	(In thousands)
Beginning balance	$	220		$	454
Charged (capitalized) to costs of revenues	58			(94		)
Costs incurred	(79		)	(140		)
Ending balance	$	199		$	220

Interest income (expense), net and other-than-temporary impairments:



	Fiscal Years Ended March 31,
	2014		2013			2012
	(In thousands)
Interest income	$	1,692	$	2,347		$	3,601
Net realized gain on short-term investments	3,360		1,391			646
Impairments of short-term investments and marketable securities	—		(1,143		)	—
	$	5,052	$	2,595		$	4,247

Other income (expense), net:



	Fiscal Years Ended March 31,
	2014		2013			2012
	(In thousands)
Net (impairment) gain on strategic investments*	$	—	$	(2,250	)	$	7,147
Impairment of notes receivable and other assets**	—		(1,800		)	—
Net (loss) gain on disposals of property	67		(21		)	(10		)
Other, net	287		1,677			300
	$	354	$	(2,394	)	$	7,437

*During the fiscal years ended March 31, 2014, 2013 and 2012, the Company recognized an impairment charge of its non-marketable strategic investment of $0.0 million, $2.3 million and $1.0 million, respectively. Refer to Note 1, Summary of Significant Accounting Policies, to the Consolidated Financial Statements for details.

**During the fiscal year ended March 31, 2013, the Company wrote-off $1.5 million of notes receivable due from an investee and $0.3 million related to a prepaid intellectual property license from this investee. The Company also impaired the related equity investment of $2.3 million in this investee - see * above.

Net loss per share:

Shares used in basic net loss per share are computed using the weighted average number of common shares outstanding during each period. Shares used in diluted net loss per share include the dilutive effect of common shares potentially issuable upon the exercise of stock options, vesting of RSUs and outstanding warrants. The reconciliation of shares used to calculate basic and diluted net loss per share consists of the following (in thousands, except per share data):



	Fiscal Years Ended March 31,
	2014			2013			2012
Net loss	$	(5,694	)	$	(134,115	)	$	(82,688	)
Shares used in net loss per share computation:
Weighted average common shares outstanding, basic	72,897			65,258			62,245
Net effect of dilutive common share equivalents	—			—			—
Weighted average common shares outstanding, diluted	72,897			65,258			62,245
Basic and diluted net loss per share	$	(0.08	)	$	(2.06	)	$	(1.33	)

The effect of anti-dilutive securities (comprised of options and restricted stock units) totaling 4.5 million, 7.2 million and 9.0 million equivalent shares for the fiscal years ended March 31, 2014, 2013 and 2012, respectively, have been excluded from the net loss per share computation, as the impact would be anti-dilutive.

The effect of dilutive securities (comprised of options and restricted stock units) totaling 1.5 million, 0.8 million and 0.5 million shares for the fiscal years ended March 31, 2014, 2013 and 2012, respectively, have been excluded from the net loss per share computation, as the impact would be anti-dilutive because the Company has incurred losses in the periods presented.

Total equivalent shares excluded from the net loss per share computation are 6.0 million, 8.0 million and 9.5 million for the fiscal years ended March 31, 2014, 2013 and 2012, respectively.