Goodwill and Identified Intangible Assets

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Identified Intangible Assets

GOODWILL AND IDENTIFIED INTANGIBLE ASSETS

Goodwill

Goodwill represents the difference between the purchase price and the estimated fair value of the identifiable assets acquired and liabilities assumed. The Company tests for goodwill impairment at the reporting unit level on an annual basis, or more frequently if events or changes in circumstances indicate that the asset is more likely than not impaired. The Company’s annual goodwill impairment test is performed in the fiscal fourth quarter, with a testing date at the end of fiscal October.

Prior to the fourth quarter of 2014, the Company operated its business in one reportable segment. Effective in fourth quarter of 2014, the Company changed its operating segments to align with how the Company’s Chief Operating Decision Maker evaluates the financial information used to allocate resources and assess performance of the Company. The new reporting structure consists of two operating segments: Video and Cable Edge. The following table presents goodwill by reportable segments (in thousands):



	Video			Cable Edge			Total
Balance as of December 31, 2014	$	136,975		$	60,909		$	197,884
Foreign currency translation adjustment	(71		)	(32		)	(103		)
Balance as of December 31, 2015	$	136,904		$	60,877		$	197,781

The Company performs its annual goodwill impairment review of its two reporting units, which are the same as its operating segments, during the fourth fiscal quarter of 2015. It is concluded that goodwill was not impaired as the Video and Cable Edge reporting units had estimated fair values in excess of their carrying value by approximately 87% and 42%, respectively. In addition, the Company has not recorded any impairment charges related to goodwill for any prior periods. Because the Cable Edge reporting unit has an estimated fair value that is not substantially in excess of its carrying value, the Company will continue to monitor this reporting unit for risk of impairment in future periods.

The Company’s market capitalization has declined so far in 2016. A significant decline in a company’s stock price may suggest that an adverse change in the business climate may have caused the fair value of one or more reporting units to fall below their carrying value. Significant judgment has been applied to determine whether stock price declines are a short-term swing or a long-term trend. The Company believes that the decline in its stock price will not be sustained as it only fluctuated below the 2015 level for a short period. Additionally, the Company believes that the fluctuation in market capitalization is driven by general market movement and not company specific factors. The Company believes that the fair value established during the 2015 annual goodwill impairment testing for its Video and Cable Edge reporting units were reasonable and no triggering event subsequent to the 2015 annual assessment exists. However, a sustained decline in the Company stock price may lead to a triggering event for goodwill impairment in 2016.

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value of each reporting unit. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows and determining appropriate discount rates, growth rates, an appropriate control premium and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit which could trigger impairment. If the Company’s assumptions and related estimates change in the future, or if the Company’s reporting structure changes or other events and circumstances change (e.g. such as a sustained decrease in the Company’s stock price), the Company may be required to record impairment charges in future periods. Any impairment charges that the Company may take in the future could be material to its results of operations and financial condition.

Identified Intangible Assets

The following is a summary of identified intangible assets (in thousands):



		December 31, 2015							December 31, 2014
	Range of Useful Lives	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Identifiable intangibles:
Developed core technology	4-6 years	$	10,987	$	(10,987	)	$	—	$	136,145	$	(135,426	)	$	719
Customer relationships/contracts	5-6 years	29,200		(25,752		)	3,448		67,098		(58,784		)	8,314
Trademarks and tradenames	4-5 years	—		—			—		11,361		(11,361		)	—
Maintenance agreements and related relationships	6-7 years	5,500		(4,851		)	649		7,100		(5,534		)	1,566
Total identifiable intangibles		$	45,687	$	(41,590	)	$	4,097	$	221,704	$	(211,105	)	$	10,599

As of December 31, 2015, certain fully amortized intangible assets have been removed from both the gross and accumulated amortization amounts. The balance of intangibles, net of $4.1 million at December 31, 2015 will be fully amortized in 2016 and recorded in operating expenses.

Amortization expense for the identifiable purchased intangible assets for the years ended December 31, 2015, 2014 and 2013 was allocated as follows (in thousands):



	December 31,
	2015		2014		2013
Included in cost of revenue	$	719	$	13,745	$	19,233
Included in operating expenses	5,783		6,775		8,096
Total amortization expense	$	6,502	$	20,520	$	27,329

- 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.

+ References + Details