Note 3 — Restructuring and Other Costs

In January 2011, we entered into an employment severance agreement with our former President and Chief Executive Officer in connection with his resignation as an executive officer and employee effective January 4, 2011. In April 2011, we entered into a termination agreement with our former Executive Vice President, Global Sales, in connection with his resignation as an executive officer and employee effective April 29, 2011. In connection with these agreements, we incurred approximately $2.5 million and $1.6 million, respectively, in severance costs that will be paid during 2011 and 2012.

During 2010 and continuing through 2011, demand for our Eagle 5 and other established solutions has continued to decline as service providers shift their investments to data, video, and other broadband services. Further, while demand for our next-generation solutions has continued to grow, the growth has not been able to offset the decline in demand for our Eagle 5 and other established products. As a result, certain of our key operating metrics, such as total orders, total revenue, gross margin, operating margin and revenue per employee, declined from our historical levels.

In response to this decline, in the first quarter of 2011, we initiated a restructuring plan (the "Plan") as part of our efforts to better align our operating cost structure with our current and expected business opportunities. Under the Plan we have initiated the following actions:

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a reduction of our overall headcount in the U.S and the consolidation of positions from various global locations and, subject to employee information and consultation processes, further reductions in positions in foreign countries, which overall workforce reduction is expected to be approximately 10% to 15% of our workforce;

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a reduction of the discretionary portion of our operating costs through various cost control initiatives, including: (i) reducing advertising expenditures; (ii) delaying salary merit increases and modifying incentive compensation plans; (iii) reducing capital expenditures; and (iv) reducing other discretionary expenditures, such as costs related to outside consultants, travel and recruiting; and

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consolidation of certain facilities and the abandonment of certain assets in connection with the consolidation of facilities.

Included in our results from operations for the three and six months ended June 30, 2011 are pre-tax restructuring charges of $2.0 million and $23.3 million, respectively, related to severance costs under our severance policies, including the amounts related to our former officers discussed above. These charges are included in "Restructuring and other" in the accompanying unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2011. Based on the actions taken to date, we anticipate that during 2011 we will incur total restructuring costs of between $24.0 million and $28.0 million. The Plan and the associated costs are based on our current best estimates which could change materially, including without limitation as a result of (i) the ongoing review of our operations and the potential for further restructuring activities in 2011, and (ii) the employee information and consultation processes conducted in local jurisdictions associated with our restructuring activities.

Subject to complying with and undertaking any necessary individual and collective employee information and consultation obligations required by local law, we expect all of these activities to occur and associated expenses to be incurred by the end of 2011.

The following table provides a summary of our restructuring activities and the remaining obligations as of June 30, 2011 (in thousands):


	Severance Costs and Related Benefits

Restructuring obligations, March 31, 2011	$	19,930
2011 Restructuring and related expenses⁽¹⁾		1,733
Cash payments		(2,845	)
Effect of exchange rate changes		1

Restructuring obligations, June 30, 2011	$	18,819


	Severance Costs and Related Benefits

Restructuring obligations, December 31, 2010	$	441
2011 Restructuring and related expenses⁽¹⁾		23,097
Cash payments		(4,740	)
Effect of exchange rate changes		21

Restructuring obligations, June 30, 2011	$	18,819

(1)	Excludes a non-cash charge of $0.2 million associated with certain computer and research and development lab equipment.

Restructuring obligations are included in "Accrued expenses" in the accompanying unaudited consolidated balance sheets. We anticipate settling our remaining severance obligations during 2011 and 2012. This is based on our current estimate, which could change if actual activity differs from what is currently expected.