BUSINESS COMBINATIONS

6 Months Ended

Jun. 30, 2013

Business Combinations [Abstract]

BUSINESS COMBINATIONS

BUSINESS COMBINATIONS

Integrated Device Technology's Smart Metering Business

On March 7, 2013, the Company completed the acquisition from Integrated Device Technology (“IDT”) of its smart metering business for a cash purchase price of $10.3 million. This business is included in the Company's Microcontroller segment. The acquisition was intended to enable the Company to offer complementary products and to enhance the Company's existing smart energy product portfolio. Prior to the acquisition, the assets of IDT's smart metering business consisted primarily of approximately 20 employees, inventory, intellectual property assets, customers and distributors and related revenue streams. The acquisition, therefore, qualified as a business for accounting purposes and was accounted for under the acquisition method of accounting.

The total purchase price paid by the Company exceeded the estimated fair value of the intangible assets of the acquired business, which were $3.5 million, and net tangible assets which were $1.4 million. Based on the foregoing, as part of the purchase price allocation, the Company allocated $5.4 million of the purchase price to goodwill.

Acquisition costs for this transaction totaled $0.1 million and were expensed as incurred and included in the selling, general and administrative expense in the condensed consolidated statement of operations for the three months ended March 31, 2013.

Ozmo, Inc.

On December 20, 2012, the Company completed the acquisition of Ozmo, Inc. (“Ozmo”), a provider of ultra-low Wi-Fi Direct solutions for approximately $64.4 million in cash. Ozmo's business is included in the Company's Microcontroller segment. The acquisition of Ozmo was intended to enable the Company to offer complementary products, to enhance the Company's existing wireless product portfolio, and potentially to accelerate time-to-market for future wireless microcontroller products that may integrate Ozmo technologies. Prior to the acquisition, Ozmo's assets consisted primarily of approximately 50 employees, patents and other intellectual property assets related to the development of Wi-Fi technologies. The acquisition, therefore, qualified as a business for accounting purposes and was accounted for under the acquisition method of accounting.

The total purchase price exceeded the estimated fair value of Ozmo's intangible assets, which were $15.4 million, and net tangible assets which were $2.8 million. The Company's determination of estimated fair value was corroborated by a third-party valuation. As part of the purchase price allocation, the Company allocated $46.2 million of the purchase price to goodwill. The goodwill balance of $46.2 million was reduced by $11.2 million related to deferred tax assets created as a result of net operating losses generated by Ozmo prior to the acquisition.

Former Ozmo shareholders are eligible to receive a potential earnout in 2013 and 2014 of up to $22.0 million, subject to the achievement of specified revenue targets and, with respect to a portion of the earnout allocable to certain former Ozmo shareholders now employed by the Company, to their continuing employment. The Company recorded a liability in December 2012 of $1.9 million in respect of this potential earnout contingency, representing the fair value of the earnout potential, as adjusted to reflect a probability-weighted forecast for 2013 and 2014 Ozmo revenue and as further discounted by a 17% expected rate of return.

Acquisition costs for this transaction totaled $0.2 million and were expensed as incurred and included in selling, general and administrative expense in the consolidated statement of operations for the year ended December 31, 2012.

Pro forma results of operations for the acquisitions completed during the six months ended June 30, 2013 have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to the Company's financial results.