Business Acquisitions and License Agreement

12 Months Ended

Mar. 30, 2014

Business Combinations [Abstract]

Business Acquisitions and License Agreement

Note 2. Business Acquisitions and License Agreement

Broadcom Corporation

On March 13, 2014, the Company acquired certain 10/40/100Gb Ethernet controller-related assets from Broadcom Corporation (Broadcom) primarily relating to the NetXtreme^® II Ethernet controller family and licensed certain related intellectual property under non-exclusive licenses for total cash consideration of $147.8 million and the assumption of certain liabilities. The transfer of certain property and equipment in a foreign jurisdiction is subject to local compliance requirements and is expected to be completed in fiscal 2015. This business acquisition expands the Company’s product portfolio and is expected to accelerate its time to market for next generation products in the server Ethernet connectivity market. In connection with this acquisition, the Company entered into a development and supply agreement under which the Company will purchase services and ASICs from Broadcom related to this business.

The Company preliminarily estimated the fair value of the assets acquired and liabilities assumed and allocated a portion of the total purchase consideration to tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values at the acquisition date. The excess of the total purchase consideration over the aggregate estimated fair values was recorded as goodwill. The goodwill associated with this acquisition is expected to be tax deductible. The following table summarizes the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed:

	(In thousands)
Inventories	$	2,880
Other current assets		307
Property and equipment		2,455
Goodwill		83,131
Purchased intangible asset		60,100
Accrued compensation		(987	)
Other current liabilities		(129	)
	$	147,757

Included in the preliminary purchase price allocation is a provisional amount related to a purchased intangible asset consisting of developed technology, which has an estimated useful life of five years. The preliminary fair value of this purchased intangible asset was based on estimates and assumptions made by management at the time of the acquisition. The Company is in the process of completing the identification and valuation of the intangible assets and certain property and equipment acquired, which may result in adjustments to goodwill and the provisional amounts recorded for the purchased intangible asset and property and equipment, as well as recording the fair value of additional identifiable intangible assets. These adjustments may also result in changes to related amortization expense. The Company expects to finalize the purchase price allocation during fiscal 2015.

Supplemental Pro Forma Data (Unaudited)

The unaudited supplemental pro forma financial data presented below gives effect to this acquisition as if it had occurred at the beginning of fiscal 2013. The supplemental data includes amortization expense related to the acquired intangible assets of $12.0 million in each of the periods presented. In addition, the supplemental data reflects adjustments related to stock-based compensation, the amortization of acquired inventory valuation step-up and transaction costs, such as legal fees, directly associated with the acquisition. These additional adjustments are not material to the periods presented.

This unaudited supplemental pro forma financial data is presented for informational purposes only and does not purport to be indicative of the results of future operations or the results that would have occurred had the Company completed the acquisition at the beginning of fiscal 2013.

	2014			2013
	(Unaudited, in thousands, except per share amounts)
Pro forma net revenues:
Advanced Connectivity Platforms	$	423,446		$	433,357
Legacy Connectivity Products		85,888			124,424
	$	509,334		$	557,781
Pro forma income (loss) from continuing operations	$	(38,676	)	$	59,198
Pro forma income (loss) from continuing operations per share (basic)	$	(0.44	)	$	0.63
Pro forma income (loss) from continuing operations per share (diluted)	$	(0.44	)	$	0.63

The results of operations for this acquisition have been included in the consolidated financial statements from the date of acquisition and are immaterial to the consolidated financial results of the Company.

Patent License Agreement

On March 13, 2014, the Company entered into a non-exclusive patent license agreement with Broadcom and paid a one-time fee of $62.0 million as specified in the agreement. The license covers all of the Company’s Fibre Channel products. The Company determined that the $62.0 million fee represented the estimated fair value of the license utilizing a market approach, as well as a relief-from-royalty income approach based on the applicable historical revenues and projected future revenues over the ten-year term of the license. Based on the relief-from-royalty income approach, the Company attributed $41.0 million of the license fee to the use of the related technology in periods prior to the date of the license agreement and recorded this amount in special charges in fiscal 2014. The portion of the fee attributed to the future use of the technology was $21.0 million and was recorded as a prepaid license in other assets. The prepaid license is being amortized using a method that reflects the pattern in which the economic benefits of the prepaid license are consumed or otherwise used over the ten-year license term. During fiscal 2014, the Company recognized $0.1 million of amortization expense related to the prepaid license.

Multiple Element Arrangement

The Company accounted for the acquisition of the Ethernet controller-related assets (which included a development and supply agreement and a transition services agreement) and the patent license agreement as a multiple element arrangement, since these agreements were entered into between the parties within a short period of time. In a multiple element arrangement, the fair value of the individual components is determined and the total consideration is allocated to the components on a relative fair value basis. The Company determined that the fair value of each of the acquisition and the patent license were consistent with the consideration specified in the respective agreements.

Brocade Communications Systems, Inc.

On January 17, 2014, the Company acquired the assets of the Fibre Channel and converged network adapter business from Brocade Communications Systems, Inc. (Brocade) for cash consideration of $9.6 million and the assumption of certain liabilities. The Company completed this acquisition to expand its product portfolio and market position in the Fibre Channel and converged network adapter market. The Company estimated the fair value of the assets acquired and liabilities assumed and allocated the total purchase consideration to tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values at the acquisition date. The primary components of the purchase price allocation are an intangible asset of $8.0 million, consisting of developed technology, and inventory of $1.7 million. The intangible asset is being amortized over an estimated useful life of three years using a method that reflects the pattern in which the economic benefits of the intangible asset are utilized.

The results of operations for this acquisition have been included in the consolidated financial statements from the date of acquisition and are immaterial to the consolidated financial results of the Company. Pro forma results of operations have not been presented for this acquisition as the results of operations of the acquired business are not material to the consolidated financial statements of the Company.