BUSINESS ACQUISITION

On February 29, 2016, the Company completed its acquisition of TVN, a global leader in advanced video compression solutions headquartered in Rennes, France, for $82.5 million in cash. The acquisition strengthened the Company’s competitive position in the video infrastructure market and enhanced the depth and scale of the Company’s research and development and service and support capabilities in the video arena.

During the fourth quarter of 2016, the Company completed the accounting for this business combination. The purchase price was allocated to tangible and intangible assets acquired and liabilities assumed on the basis of their respective estimated fair values on the acquisition date. The Company’s allocation of TVN purchase consideration is as follows (in thousands):



Assets:
Cash and cash equivalents	$	6,843
Accounts receivable, net	14,933
Inventories	3,462
Prepaid expenses and other current assets	2,412
Property and equipment, net	9,942
French R&D tax credit receivables ⁽¹⁾	26,421
Other long-term assets	2,134
Total assets	$	66,147
Liabilities:
Other debts and capital lease obligations, current	8,362
Accounts payable	12,494
Deferred revenue	2,504
Accrued and other current liabilities	18,365
Other debts and capital lease obligations, long-term	16,087
Other non-current liabilities	6,467
Deferred tax liabilities	2,126
Total liabilities	$	66,405

Goodwill	41,670
Intangibles	41,100
Total purchase consideration	$	82,512

(1) See Note 9, “Certain Balance Sheet Components-Prepaid expenses and other current assets,” for more information on French R&D tax credit receivables.

The following table presents details of the intangible assets acquired through this business combination (in thousands, except years):



	Estimated Useful Life	Fair Value
Backlog	6 months	$	3,600
Developed technology	4 years	21,700
Customer relationships	5 years	15,200
Trade name	4 years	600
		$	41,100

Acquired identifiable intangible assets were valued using the income method and are amortized on a straight line basis over their respective estimated useful lives. Goodwill of $41.7 million arising from the acquisition was derived from expected benefits from the business synergies to be derived from the combined entities and the experienced workforce who joined the Company in connection with the acquisition. The goodwill is not expected to be deductible for income tax purposes but the intangibles assets acquired are expected to be deductible for income tax purposes in certain jurisdictions. Both goodwill and intangibles assets acquired were assigned to the Company’s video reporting unit.

Acquisition-and integration-related expenses

As a result of the TVN acquisition, the Company incurred acquisition-and integration-related expenses and these costs are expensed as incurred. Acquisition-related costs include outside legal, accounting and other professional services.

The following table summarizes the acquisition-and integration-related expenses for the TVN acquisition (in thousands):



	Acquisition-related		Integration-related⁽¹⁾
	Year ended December 31, 2016		Year ended December 31, 2017 (unaudited)		Year ended December 31, 2016 (unaudited)
Cost of revenue	$	—	$	342	$	1,049
Research and development	—		7		974
Selling, general and administrative	3,855		2,469		11,058
Total acquisition- and integration-related expenses	$	3,855	$	2,818	$	13,081

(1) Integration-related costs include incremental costs resulting from the TVN acquisition that are not expected to generate future benefits once the integration is fully consummated. All integration efforts were completed by 2017 and the Company does not expect any more such expenses to continue after 2017.