FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2012

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

4. FAIR VALUE MEASUREMENTS

The following table provides the assets carried at fair value measured on a recurring basis as of September 30, 2012 (in thousands):

		Fair Value Measurements, Using
	Total carrying value as of September  30, 2012	Quoted prices  in active markets (Level 1)	Significant other observable  inputs (Level 2)	Significant unobservable inputs (Level 3)
Cash equivalents	$64,228	$64,228	$             -	$             -
Short-term investments	164,585	160,585	-	4,000
Long-term investments	1,169	869	-	300

The following table provides the assets carried at fair value measured on a recurring basis as of December 31, 2011 (in thousands):

		Fair Value Measurements, Using
	Total carrying  value as of December 31, 2011	Quoted prices in active markets  (Level 1)	Significant other observable  inputs (Level 2)	Significant unobservable inputs (Level 3)
Cash equivalents	$96,538	$96,538	$             -	$             -
Short-term investments	234,294	234,294	-	-

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on management's own assumptions used to measure assets and liabilities at fair value. A financial asset or liability's classification is determined based on the lowest level input that is significant to the fair value measurement.

Our convertible promissory note investments were initially recorded at cost and are classified within both short-term and long-term investments on the consolidated balance sheet.

These convertible promissory note investments are inherently risky as they lack a ready market for resale, and the note issuer's success is dependent on product development, market acceptance, operational efficiency, the ability of the investee companies to raise additional funds in financial markets that can be volatile, and other key business factors. The companies we have invested in could fail or not be able to raise additional funds when needed. These events could cause our investments to become impaired. In addition, financial market volatility could negatively affect our ability to realize value in our investments through liquidity events such as mergers, and private sales.

We determine the fair value of our convertible promissory note investments portfolio quarterly.  The fair value of our convertible promissory note investments is determined through the consideration of whether an investee is experiencing financial difficulty.  Management performs an evaluation of the probability that the borrower will be in payment default on any of its debt in the foreseeable future.  The evaluation requires significant judgment and includes quantitative and qualitative analysis of identified events or circumstances affecting the investee, which may impact the fair value of the investment, such as:

�   the investee's revenue and earnings trends relative to pre-defined milestones and overall business prospects;

�   the technological feasibility of the investee's products and technologies;

�   the general market conditions in the investee's industry or geographic area, including adverse regulatory or economic changes;

�   factors related to the investee's ability to remain in business, such as the investee's liquidity, debt ratios, and the rate at which the investee is using its cash; and

�   the investee's receipt of additional funding at a lower valuation.

If the fair value of a convertible promissory note investment is below our carrying value, the asset will be written down to its fair value with a resulting charge to net income. Temporary impairments result in a write down of the investment to its fair value with the charge reported in shareholders' equity.  There were no impairments of convertible promissory note investments as of September 30, 2012.

The following table is a reconciliation of the changes in fair value of the Company's investments in convertible notes for the three and nine months ended September 30, 2012, which had been classified in Level 3 in the fair value hierarchy (in thousands):

	2012
Fair value of notes, beginning of period	$        -
Investments	4,300
Fair value of notes, end of period	$   4,300

The following table is a reconciliation of the changes in fair value of the Company's stock warrant liability for the three months ended September 30, 2011, which had been classified in Level 3 in the fair value hierarchy (in thousands):

	2011
Fair value of stock warrant liability, beginning of period	$   4,589
Gain for period	(240)
Warrants exercised	(4,349)
Fair value of stock warrant liability, end of period	$        -

The following table is a reconciliation of the changes in fair value of the Company's stock warrant liability for the nine months ended September 30, 2011, which had been classified in Level 3 in the fair value hierarchy (in thousands):

	2011
Fair value of stock warrant liability, beginning of period	$   10,660
Loss for period	4,190
Warrants exercised	(14,850)
Fair value of stock warrant liability, end of period	$          -

There was no stock warrant liability as of September 30, 2012, as all remaining stock warrants were exercised in 2011.