Segment Information and Major Customers

12 Months Ended

Dec. 31, 2012

Segment Information and Major Customers

Note 11 – Segment Information and Major Customers

We operate in two reportable segments: (1) the Carrier Networks Division and (2) the Enterprise Networks Division. The accounting policies of the segments are the same as those described in the “Nature of Business and Summary of Significant Accounting Policies” (see Note 1) to the extent that such policies affect the reported segment information. We evaluate the performance of our segments based on gross profit; therefore, selling, general and administrative expense, research and development expenses, interest income and dividend income, interest expense, net realized investment gain/loss, other income/expense and provision for taxes are reported on an entity-wide basis only. There are no inter-segment revenues.

The following table presents information about the reported sales and gross profit of our reportable segments for each of the years ended December 31, 2012, 2011 and 2010. Asset information by reportable segment is not reported, since we do not produce such information internally.

Sales and Gross Profit by Market Segment	2012				2011				2010
(In thousands)	Sales		Gross Profit		Sales		Gross Profit		Sales		Gross Profit
Carrier Networks	$	492,096	$	247,380	$	569,579	$	327,813	$	476,030	$	283,310
Enterprise Networks		128,518		69,263		147,650		86,505		129,644		75,553
	$	620,614	$	316,643	$	717,229	$	414,318	$	605,674	$	358,863

Sales by Product

Our three major product categories are Carrier Systems, Business Networking and Loop Access.

Carrier Systems products are used by communications service providers to provide data, voice and video services to consumers and enterprises. This category includes the following product areas and related services:

• Broadband Access

• Total Access^® 5000 Multi-Service Access and Aggregation Platform (MSAP)

• hiX family of MSAPs

• Total Access 1100/1200 Series of Fiber to the Node (FTTN) products

• Ultra Broadband Ethernet (UBE)

• Digital Subscriber Line Access Multiplexer (DSLAM) products

• Optical

• Optical Networking Edge (ONE)

• NetVanta 8000 Series

• OPTI and TA 3000 optical products

• Small Form-Factor Pluggable (SFP) products

• TDM systems

• Network Management Solutions

Business Networking products provide access to telecommunication services and facilitate the delivery of cloud connectivity, enterprise communications and virtual mobility to the small and mid-sized enterprise (SME) market. This category includes the following product areas and related services:

• Internetworking products

• Total Access IP Business Gateways

• Optical Network Terminals (ONTs)

• Bluesocket^® virtual Wireless LAN (vWLAN^®)

• NetVanta^®

• Multiservice Routers

• Managed Ethernet Switches

• Unified Communications (UC) solutions

• Carrier Ethernet Network Terminating Equipment (NTE)

• Network Management Solutions

• Integrated Access Devices (IADs)

Loop Access products are used by carrier and enterprise customers for access to copper-based telecommunications networks. The Loop Access category includes the following product areas:

• High bit-rate Digital Subscriber Line (HDSL) products

• Digital Data Service (DDS)

• Integrated Services Digital Network (ISDN) products

• T1/E1/T3 Channel Service Units/Data Service Units (CSUs/DSUs)

• TRACER fixed-wireless products

The table below presents sales information by product category for the years ended December 31, 2012, 2011 and 2010:

(In thousands)	2012		2011		2010
Carrier Systems	$	399,646	$	420,289	$	289,314
Business Networking		149,304		162,186		127,233
Loop Access		71,664		134,754		189,127
Total	$	620,614	$	717,229	$	605,674

In addition, we identify subcategories of product revenues, which we divide into core products and legacy products. Our core products consist of Broadband Access and Optical products (included in Carrier Systems) and Internetworking products (included in Business Networking). Our legacy products include HDSL products (included in Loop Access) and other products not included in the aforementioned core products.

The table below presents subcategory revenues for the years ended December 31, 2012, 2011 and 2010:

(In thousands)	2012		2011		2010
Core Products
Broadband Access (included in Carrier Systems)	$	320,076	$	289,776	$	176,116
Optical (included in Carrier Systems)		51,755		82,535		66,206
Internetworking (NetVanta® & Multi-service Access Gateways) (included in Business Networking)		142,958		151,536		111,123
Subtotal	$	514,789	$	523,847	$	353,445
Legacy Products
HDSL (does not include T1) (included in Loop Access)		66,974		126,976		177,249
Other products (excluding HDSL)		38,851		66,406		74,980
Subtotal	$	105,825	$	193,382	$	252,229
Total	$	620,614	$	717,229	$	605,674

The following table presents sales information by geographic area for the years ended December 31, 2012, 2011 and 2010. International sales correlate to shipments with a non-U.S. destination.

(In thousands)	2012		2011		2010
United States	$	470,369	$	632,795	$	573,845
International		150,245		84,434		31,829
Total	$	620,614	$	717,229	$	605,674

Only a single customer comprised more than 10% of our revenue in 2012 at 23%. Single customers comprising more than 10% of our revenue in 2011 included two customers at 25% and 10%, respectively. Single customers comprising more than 10% of our revenue in 2010 included three customers at 20%, 18%, and 11%, respectively. No other customer accounted for 10% or more of our sales in 2012, 2011 or 2010.

Sales to our three largest service provider customers for each year were 41%, 44% and 49% of total revenue in 2012, 2011 and 2010, respectively.

As of December 31, 2012, long-lived assets, net totaled $80.2 million, which includes $73.9 million held in the United States and $6.3 million held outside the United States. As of December 31, 2011, long-lived assets, net totaled $75.3 million, which includes $73.9 million held in the United States and $1.4 million held outside the United States.