Fair Value

12 Months Ended

Dec. 31, 2011

Fair Value [Abstract]

FAIR VALUE

NOTE 5: FAIR VALUE

The applicable accounting guidance establishes a framework for measuring fair value and required disclosure about the fair value measurements of assets and liabilities. This guidance requires the Company to classify and disclose assets and liabilities measured at fair value on a recurring basis, as well as fair value measurements of assets and liabilities measured on a nonrecurring basis in periods subsequent to initial measurement, in a three-tier fair value hierarchy as described below.

The guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The guidance describes three levels of inputs that may be used to measure fair value:

• Level 1 — Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

• Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Company primarily uses broker quotes for valuation of its short-term investments. The forward exchange contracts are classified as Level 2 because they are valued using quoted market prices and other observable data for similar instruments in an active market.

• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company uses the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. During the years ended December 31, 2011 and 2010, there were no nonrecurring fair value measurements of assets and liabilities subsequent to initial recognition.

The following table sets forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis at December 31, 2011 and 2010, based on the three-tier fair value hierarchy:

	Level 1		Level 2		Level 3		Total
	(In thousands)
December 31, 2011
Assets
Money market funds	$	62,131			$	—	$	62,131
State, municipal and local government agencies bonds				38,825		—		38,825
Corporate bonds				18,604		—		18,604
U.S. federal government bonds		9,230		—		—		9,230
Commercial paper				4,195		—		4,195
Foreign exchange forward contracts				373				373
Total assets measured and recorded at fair value	$	71,361	$	61,997	$	—	$	133,358
Liabilities
Foreign exchange forward contracts	$	—	$	159	$	—	$	159
Total liabilities measured and recorded at fair value	$	—	$	159	$	—	$	159
December 31, 2010
Assets
Money market funds	$	68,081	$	—	$	—	$	68,081
State, municipal and local government agencies bonds		—		11,931		—		11,931
Corporate bonds		—		11,907		—		11,907
Total assets measured and recorded at fair value	$	68,081	$	23,838	$	—	$	91,919

At December 31, 2011 and 2010, maturities of short-term investments are as follows:

	December 31,
	2011		2010
	(In thousands)
Short-term investments:
Less than one year	$	43,470	$	21,174
Due in 1 - 2 years		27,384		2,664
Total short-term investments	$	70,854	$	23,838

The following is a summary of available-for-sale securities at December 31, 2011 and 2010:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(In thousands)
December 31, 2011
State, municipal and local government agencies bonds	$	38,785	$	46	$	(6	)	$	38,825
Corporate bonds		18,613		6		(15	)		18,604
U.S. federal government bonds		9,226		4		—			9,230
Commercial paper		4,195		—		—			4,195
Total	$	70,819	$	56	$	(21	)	$	70,854
December 31, 2010
State, municipal and local government agencies bonds	$	11,915	$	20	$	(4	)	$	11,931
Corporate bonds		11,894		20		(7	)		11,907
Total	$	23,809	$	40	$	(11	)	$	23,838

In the event the Company needs or desires to access funds from the short-term investments that it holds, it is possible that the Company may not be able to do so due to market conditions. If a buyer is found, but is unwilling to purchase the investments at par or the Company’s cost, it may incur a loss. Further, rating downgrades of the security issuer or the third parties insuring such investments may require the Company to adjust the carrying value of these investments through an impairment charge. The Company’s inability to sell all or some of the Company’s short-term investments at par or the Company’s cost, or rating downgrades of issuers or insurers of these securities, could adversely affect the Company’s results of operations or financial condition.

For the years ended December 31, 2011, 2010 and 2009, realized gains and realized losses from the sale of investments were not material.

Impairment of Investments

Harmonic monitors its investment portfolio for impairment on a periodic basis. In the event that the carrying value of an investment exceeds its fair value and the decline in value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis for the investment is established. A decline of fair value below amortized costs of debt securities is considered other-than temporary if the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of the entire amortized cost basis. At the present time, the Company does not intend to sell its investments that have unrealized losses in accumulated other comprehensive loss. In addition, the Company does not believe that it is more likely than not that it will be required to sell its investments that have unrealized losses in accumulated other comprehensive loss before the Company recovers the principal amounts invested. The Company believes that the unrealized losses are temporary and do not require an other-than-temporary impairment, based on its evaluation of available evidence as of December 31, 2011.

As of December 31, 2011, there were no individual available-for-sale securities in a material unrealized loss position and the amount of unrealized losses on the total investment balance was insignificant.