Investments

Investments that have original maturities of three months or less are accounted for as cash equivalents. This includes money market funds, time deposits and United States (“U.S.”) government obligations. Temporary and long-term investments consist of government, bank and corporate obligations, with original maturity dates in excess of three months. Temporary investments have original maturities in excess of three months, but mature within twelve months of the balance sheet date. Long-term investments have original maturities in excess of twelve months. The Company determines the cost of securities sold based on the specific identification method. Realized gains or losses are reported in “Non-operating expense, net” within the unaudited condensed consolidated statements of income.

The Company classifies its investments as “available-for-sale” because it may sell some securities prior to maturity. The Company’s investments are subject to market risk, primarily interest rate and credit risks. The Company’s investments are managed by a limited number of outside professional managers that operate within investment guidelines set by the Company. These guidelines include specified permissible investments, minimum credit quality ratings and maximum average duration restrictions and are intended to limit market risk by restricting the Company’s investments to high quality debt instruments with relatively short-term maturities.

As of October 30, 2016, the Company did not have any long-term investments.

The following table summarizes the Company’s available-for-sale investments:



	October 30, 2016						January 31, 2016
(in thousands)	Market Value		Adjusted Cost		Gross Unrealized Gain		Market Value		Adjusted Cost		Gross Unrealized Gain
Cash equivalents	$	16,908	$	16,908	$	—	$	16,866	$	16,866	$	—
Total investments	$	16,908	$	16,908	$	—	$	16,866	$	16,866	$	—

The following table summarizes the maturities of the Company’s available-for-sale investments:



	October 30, 2016				January 31, 2016
(in thousands)	Market Value		Adjusted Cost		Market Value		Adjusted Cost
Within 1 year	$	16,908	$	16,908	$	16,866	$	16,866
After 1 year through 5 years	—		—		—		—
Total investments	$	16,908	$	16,908	$	16,866	$	16,866

Unrealized gains and losses are the result of fluctuations in the market value of the Company’s available-for-sale investments and are included in “Accumulated other comprehensive income” within the condensed consolidated balance sheets. The following table summarizes net unrealized losses arising in the periods presented in addition to the tax associated with these comprehensive income items:



	Three Months Ended				Nine Months Ended
(in thousands)	October 30, 2016		October 25, 2015		October 30, 2016			October 25, 2015
Unrealized gain (loss), net of tax	$	—	$	129	$	(85	)	$	266
Increase to deferred tax liability	—		74		—			172

The Company did not generate any significant interest income in the three or nine month periods ended October 30, 2016 and October 25, 2015.

Equity and Cost Method Investments

The Company accounts for its equity investments under the cost method of accounting when it does not have the ability to exercise significant influence over the investees. For investments where the Company has the ability to exercise significant influence, it uses the equity method of accounting. The Company’s total equity and cost method investments were $22.2 million and $20.2 million as of October 30, 2016 and January 31, 2016. All of these investments are in private companies and are included in “Other assets” within the condensed consolidated balance sheets.

The Company has the following investments which are accounted for as cost method investments:



Entity Name	Investment Value
(in thousands)	October 30, 2016		January 31, 2016
MultiPhy Ltd.	$	14,000	$	12,000
Skorpios Technologies Inc.	3,000		3,000
Guangdong Dapu Telecom Technology Co., Ltd.	3,300		3,300
Senet, Inc.	1,900		1,900
Jariet Technologies Inc.	—		—
Total	$	22,200	$	20,200

The Company evaluated its cost method investments for indicators of impairment at October 30, 2016. The Company did not identify any events or changes in circumstances that may have a significant adverse effect on the fair value of the investments and as a result did not estimate the fair value of its investments.

On January 11, 2016, the Company announced that it had entered into a strategic agreement to accelerate the introduction of a 100Gbps single wavelength optical module solution. As part of this agreement, the Company made an investment under which the Company acquired preferred stock and a call option that is exercisable through June 30, 2018, that would allow the Company to purchase all of the outstanding equity of MultiPhy Ltd. (“MultiPhy”) at a fixed price. The Company does not expect to exercise this option within the next twelve months.