Business Combination

12 Months Ended

Jul. 01, 2012

Business Combination [Abstract]

Business Combination

13. Business Combination

On March 20, 2012, the Company acquired a product line (existing technology, customer relationships, fixed assets and employees) to enhance the Company’s product offerings in embedded timing and synchronization solutions for residential small cell solutions. This transaction was recorded as an acquisition of a business. The transaction price was approximately $2.4 million of which $1.4 million was paid in cash and approximately $1.0 million is contingent consideration payable as a royalty upon future sales of such products.

The fair value of the contingent consideration arrangement at the acquisition date was $0.5 million. We estimated the fair value of the contingent consideration using a probability-weighted discounted cash flow model (See Note 3). The purchase price was determined as follows (amounts in thousands):

Initial cash payment	$	1,400
Fair value of contingent consideration		540
Total	$	1,940

This purchase price was allocated to fixed assets and intangible assets based on their estimated fair values as follows (amounts in thousands):

Fixed assets	$	50
Intangible assets		1,890
Total	$	1,940

The estimated fair value of Intangible assets acquired under the transaction consists of the following (in thousands):

Existing technology (estimated useful life 4 years)	$	1,612
Customer relationships (estimated useful life 2 years)		278
Total	$	1,890

The fair value of the acquired non-monetary assets, summarized above, were derived from significant unobservable inputs (“Level 3 inputs”) determined by the Company based on market analysis, income analysis (discounted cash flow model), or cost approach. The fair value of fixed assets acquired was determined using market data for similar assets. The fair value of existing technology was determined using a discounted cash flow model from cash flow projections prepared by management, including an estimated undiscounted cash flows of approximately $3 million during the five to six year period after the acquisition, and a weighted average cost of capital. The fair value of customer relationships was determined using a cost approach which includes an estimate of time and expenses required to recreate the intangible asset.

Pro forma results of operations have not been presented because the effect of the business combination described in this Note was not material to our consolidated results of operations. Revenue and earnings per share for the acquired business, since the date of acquisition through July 1, 2012, were not material.