NOTE 15: GUARANTEES

Warranties. The Company accrues for estimated warranty costs at the time of product shipment. Management periodically reviews the estimated fair value of its warranty liability and records adjustments based on the terms of warranties provided to customers, historical and anticipated warranty claims experience, and estimates of the timing and cost of specified warranty claims. Activity for the Company’s warranty accrual, which is included in accrued liabilities, is summarized below:


	Three months ended						Six months ended
	July 1, 2011			July 2, 2010			July 1, 2011			July 2, 2010
				(In thousands)
Balance at beginning of period	$	5,263		$	3,426		$	4,811		$	4,186
Accrual for current period warranties		2,171			1,020			4,433			1,470
Warranty costs incurred		(1,856	)		(1,252	)		(3,666	)		(2,462	)

Balance at end of period	$	5,578		$	3,194		$	5,578		$	3,194

Standby Letters of Credit. As of July 1, 2011, the Company’s financial guarantees consisted of standby letters of credit outstanding, which principally related to performance bonds and state requirements imposed on employers. The maximum amount of potential future payments under these arrangements was $0.9 million.

Indemnification. Harmonic is obligated to indemnify its officers and the members of its Board of Directors pursuant to its bylaws and contractual indemnity agreements. Harmonic also indemnifies some of its suppliers and customers for specified intellectual property matters pursuant to certain contractual arrangements, subject to certain limitations. The scope of these indemnities varies but, in some instances, includes indemnification for damages and expenses (including reasonable attorneys’ fees). There have been no amounts accrued in respect of the indemnification provisions through July 1, 2011.

Guarantees. As of July 1, 2011, Harmonic had no other guarantees outstanding.