Goodwill And Intangible Assets

9 Months Ended

Jan. 01, 2012

Goodwill And Intangible Assets [Abstract]

NOTE 4. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. We evaluate goodwill for impairment on an annual basis or whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. We conduct our annual impairment analysis in the fourth quarter of each fiscal year. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit's carrying amount, including goodwill, to the fair value of the reporting unit. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss. Because we have one reporting unit, we utilize an entity-wide approach to assess goodwill for impairment. As of January 1, 2012, no events or changes in circumstances suggest that the carrying amount for goodwill may not be recoverable and therefore we did not perform an interim goodwill impairment analysis.

Intangible Assets

Our purchased intangible assets at January 1, 2012 and March 27, 2011, respectively, are as follows (in thousands):


	January 1, 2012							March 27, 2011
	Carrying Amount		Accumulated Amortization			Net Carrying Amount		Carrying Amount		Accumulated Amortization			Net Carrying Amount
Existing technology	$	34,735	$	(24,989	)	$	9,746	$	33,613	$	(22,095	)	$	11,518
Patents/Core technology		3,736		(2,726	)		1,010		3,906		(2,340	)		1,566
In-process research and development ("IPR&D")		300		—			300		300		—			300
Research and development reimbursement contract		4,500		(4,500	)		—		4,500		(4,500	)		—
Customer backlog		1,400		(1,400	)		—		1,400		(1,400	)		—
Distributor relationships		1,264		(1,094	)		170		1,264		(1,019	)		245
Customer relationships		2,905		(1,669	)		1,236		2,905		(1,424	)		1,481
Non-compete agreement		77		(77	)		—		77		(77	)		—
Tradenames/Trademarks		1,025		(946	)		79		1,025		(745	)		280

Total	$	49,942	$	(37,401	)	$	12,541	$	48,990	$	(33,600	)	$	15,390

Long-lived assets are amortized on a straight-line basis over their respective estimated useful lives. We evaluate the remaining useful life of our long-lived assets that are being amortized each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset's remaining useful life is changed, the remaining carrying amount of the long-lived asset is amortized prospectively over the remaining useful life. Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an indicator of impairment exists, we compare the carrying value of long-lived assets to our projection of future undiscounted cash flows attributable to such assets and, in the event that the carrying value exceeds the future undiscounted cash flows, we record an impairment charge equal to the excess of the carrying value over the asset's fair value. IPR&D assets are considered an indefinite-lived intangible asset and are not subject to amortization until its useful life is determined to be no longer indefinite. IPR&D assets are evaluated for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired.

During the fourth quarter of fiscal year 2011, we decided to exit the data center virtualization market, and, in connection therewith, to stop development of our 10GbE network interface cards. We determined that the current economic and market environment did not provide the potential to deliver acceptable returns on the required investments in these products. As a result, in the fourth quarter of fiscal year 2011, we abandoned all related in-process research and development. In addition, we began to actively market for sale the related assets of our 10GbE technology, consisting primarily of underlying existing and core technology intangible assets. Charges related to this decision in the fourth quarter of fiscal year 2011 included $7.5 million for the impairment of intangible assets.

The intangible asset impairment charge of $7.5 million consisted of $0.8 million to the write-off abandoned IPR&D and $6.7 million to write-down the carrying value of intangible assets that were held for sale to $0.2 million at March 27, 2011, which represented their estimated fair value less costs to sell based on third-party bids received to date. In June 2011, we completed the asset sale process and received $0.2 million, net of selling costs.

As of January 1, 2012, there were no indicators that required us to perform an intangible assets impairment review.

The aggregate amortization expenses for our purchased intangible assets for periods presented below are as follows:


			Three Months Ended				Nine Months Ended
	Weighted Average Lives		January 1, 2012		December 26, 2010		January 1, 2012		December 26, 2010
	(in months)		(in thousands)
Existing technology		65	$	969	$	1,603	$	2,894	$	4,796
Patents/Core technology		61		128		166		386		498
Research and development reimbursement contract		24		—		—		—		2,004
Customer backlog		6		—		—		—		75
Distributor relationships		72		25		25		75		75
Customer relationships		80		82		169		245		507
Non-compete agreement		15		—		20		—		60
Tradenames/Trademarks		35		67		79		201		245

Total			$	1,271	$	2,062	$	3,801	$	8,260

The estimated future amortization expenses for our purchased intangible assets are summarized below (in thousands):


Amortization Expense (by fiscal year)
2012 (3 months remaining)	$	1,287
2013		4,685
2014		4,115
2015		1,592
2016		655
2017 and thereafter		207

Total estimated amortization	$	12,541

In-Process Research and Development ("IPR&D")

On June 17, 2009, we completed the acquisition of Galazar Networks, Inc. ("Galazar"), a fabless semiconductor company focused on carrier grade transport over telecom networks based in Ottawa, Ontario, Canada. As of January 1, 2012, the total research and development expense incurred and expected to be incurred to complete the project is estimated at $14.2 million. In the second quarter of fiscal year 2012, the estimated costs expected to be incurred increased by $2.2 million due to additional testing, improvement and refinement of the underlying product. The product is expected to be released into production by June 2012.

- 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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