Goodwill And Intangible Assets

3 Months Ended

Jan. 26, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

The following table summarizes goodwill activity by reportable segment for the three months ended January 26, 2013 (in thousands):



	SAN Products			IP Networking Products			Global Services		Total
Balance at October 27, 2012
Goodwill	$	176,956		$	1,337,549		$	155,416	$	1,669,921
Accumulated impairment losses	—			(45,832		)	—		(45,832		)
	176,956			1,291,717			155,416		1,624,089
Acquisitions	—			25,373			—		25,373
Tax and other adjustments during the three months ended January 26, 2013 ⁽¹⁾	(2		)	(738		)	—		(740		)
Balance at January 26, 2013
Goodwill	176,954			1,362,184			155,416		1,694,554
Accumulated impairment losses	—			(45,832		)	—		(45,832		)
	$	176,954		$	1,316,352		$	155,416	$	1,648,722


(1)	The goodwill adjustments during the three months ended January 26, 2013 were primarily a result of tax benefits from the exercise of stock awards of acquired companies.

The Company conducts its goodwill impairment test annually, as of the first day of the second fiscal quarter, and whenever events or changes in facts and circumstances indicate that the fair value of the reporting unit may be less than its carrying amount. For the annual goodwill impairment test, the Company uses the income approach, the market approach, or a combination thereof, to determine each reporting unit’s fair value. The income approach provides an estimate of fair value based on discounted expected future cash flows (“DCF”). The market approach provides an estimate of fair value using various prices or market multiples applied to the reporting unit’s operating results and then applying an appropriate control premium. For the fiscal year 2012 annual goodwill impairment test, the Company used a combination of approaches to estimate each reporting unit’s fair value. The Company believed that at the time of impairment testing performed in the second fiscal quarter of 2012, the income approach and the market approach were equally representative of a reporting unit’s fair value.

Determining the fair value of a reporting unit or an intangible asset requires judgment and involves the use of significant estimates and assumptions. The Company based its fair value estimates on assumptions it believes to be reasonable, but inherently uncertain. Estimates and assumptions with respect to the determination of the fair value of its reporting units using the income approach include, among other inputs:


•	The Company’s operating forecasts;


•	Revenue growth rates; and


•	Risk-commensurate discount rates and costs of capital.

The Company’s estimates of revenues and costs are based on historical data, various internal estimates and a variety of external sources, and are developed as part of our regular long-range planning process. The control premium used in market or combined approaches is determined by considering control premiums offered as part of the acquisitions that have occurred in the reporting units’ comparable market segments. Based on the results of the annual goodwill impairment analysis performed during the second fiscal quarter of 2012, the Company determined that no impairment needed to be recorded. During the three months ended January 26, 2013, there were no facts and circumstances that indicated that the fair value of the reporting units may be less than their current carrying amount. Consistent with prior years, the Company will perform its annual goodwill impairment test using measurement data as of the first day of the second fiscal quarter of 2013.

Intangible assets other than goodwill are amortized on a straight-line basis over the following estimated remaining useful lives, unless the Company has determined these lives to be indefinite. The following tables present details of the Company’s intangible assets (in thousands, except for weighted-average remaining useful life):



January 26, 2013	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life (in years)
Trade name	$	10,901	$	10,466	$	435	3.76
Core/developed technology	338,908		302,863		36,045		0.97
Customer relationships	353,860		303,877		49,983		1.03
Non-compete agreements	1,200		415		785		3.76
In-process research and development ⁽¹⁾	21,700		—		21,700		—
Total intangible assets	$	726,569	$	617,621	$	108,948	1.04

October 27, 2012	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life (in years)
Trade name	$	10,441	$	10,438	$	3	0.17
Core/developed technology	337,858		292,083		45,775		1.14
Customer relationships	352,581		289,094		63,487		1.16
Total intangible assets	$	700,880	$	591,615	$	109,265	1.16

(1)

Acquired in-process research and development (“IPRD”) is an intangible asset accounted for as an indefinite-lived asset until the completion or abandonment of the associated research and development effort. While accounted as an indefinite-lived asset, the IPRD intangible asset is subject to testing for impairment annually or when there are indicators of impairment. If the IPRD project is successfully completed, then the IPRD intangible asset will be amortized over its estimated useful life to be determined at the date the project is completed. During the three months ended January 26, 2013, the IPRD intangible asset was not amortized due to the current stage of the associated research and development effort.

The following table presents the amortization of intangible assets included in the Condensed Consolidated Statements of Income (in thousands):



	Three Months Ended
	January 26, 2013		January 28, 2012
Cost of revenues	$	10,780	$	14,090
Operating expenses	14,856		14,993
Total	$	25,636	$	29,083

The following table presents the estimated future amortization of intangible assets, including IPRD that is currently estimated to be amortized in 2014 and thereafter, as of January 26, 2013 (in thousands):



Fiscal Year	Estimated Future Amortization
2013 (remaining nine months)	$	68,371
2014	21,423
2015	5,269
2016	4,930
2017	4,607
Thereafter	4,348
Total	$	108,948

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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