Business Divestiture

9 Months Ended

Oct. 01, 2016

Discontinued Operations and Disposal Groups [Abstract]

Business Divestiture

Business Divestiture

On September 13, 2016, the Company entered into an Asset Purchase Agreement with Extreme Networks, Inc. to dispose of its wireless LAN (“WLAN”) business (“disposal group”) for $55 million in cash, subject to working capital and other adjustments.

Management has determined that the disposal group does not qualify to be reported as discontinued operations and will therefore continue to be reported as part of continuing operations in its consolidated statements of operations. The assets and liabilities of the disposal group do qualify for assets held for sale accounting treatment and have been reclassified as assets and liabilities held for sale within the consolidated balance sheet at fair value less cost to sell.

As reported on Form 8-K filed on September 20, 2016, the Company incurred a non-cash pre-tax charge related to the disposal group during the third quarter of 2016. This charge, which totaled $62 million, consists of impairments of goodwill for $32 million and other intangibles for $30 million and is shown separately on the consolidated statements of operations for the three and nine months ended October 1, 2016. The sale price of the disposal group was used as fair value in determining the impairment of the assets held for sale. Since the sales price of the disposal group was less than its carrying value, the resulting loss was recorded as an impairment.

WLAN operating results are reported in the Enterprise segment. For the nine months ended October 1, 2016, the Company generated revenue and gross profit from these assets of $76 million and $37 million, respectively.

The assets and liabilities classified as held for sale reflected in the consolidated balance sheets related to the WLAN business are as follows (in millions):

	October 1, 2016
Accounts receivable, net	$	27
Inventories, net	14
Prepaid expenses and other current assets	2
Current assets held for sale	43
Property and equipment, net	3
Goodwill	—
Other intangibles, net	18
Other long-term assets	4
Total assets held for sale	$	68
Accrued liabilities	$	5
Current liabilities held for sale	5
Deferred revenue	15
Other long-term liabilities	1
Total liabilities held for sale	$	21

On October 28, 2016, the Company completed the disposition of the disposal group. The finalization of the closing balance sheet is expected to be completed no later than the first quarter of 2017.