Goodwill And Intangible Assets

3 Months Ended

Jan. 25, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

The following table presents a summary of the net carrying value of the Company’s intangible assets (in thousands):



	January 25, 2014		October 26, 2013
Indefinite-lived intangible assets
Goodwill	$	1,640,629	$	1,645,437
In-process research and development ⁽¹⁾	21,590		21,590
Finite-lived intangible assets
Total intangible assets subject to amortization	2,323		18,668
Total intangible assets	$	1,664,542	$	1,685,695

⁽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, as of the first day of the second fiscal quarter, and whenever events or changes in facts and circumstances indicate that it is more likely than not that IPRD is impaired. If the research and development effort associated with the IPRD is successfully completed, then the IPRD intangible asset will be amortized over its estimated useful life to be determined at the date the effort is completed. During the three months ended January 25, 2014, the IPRD intangible asset was not amortized due to the current stage of the associated research and development effort, which is expected to be completed in fiscal year 2014.

The Company performed its annual IPRD impairment test using measurement data as of the first day of the second fiscal quarter of 2013. During the test, the Company elected the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of its IPRD asset is less than its carrying amount. After assessing the totality of events and circumstances, the Company determined that it was not more likely than not that the fair value of its IPRD assets is less than its carrying amount and no further testing is required. During the three months ended January 25, 2014, there were no events or changes in facts and circumstances that indicated that it is more likely than not that IPRD is impaired.

The following table summarizes goodwill activity by reportable segment for the three months ended January 25, 2014 (in thousands):



	SAN Products			IP Networking Products			Global Services		Total
Balance at October 26, 2013
Goodwill	$	176,878		$	1,358,975		$	155,416	$	1,691,269
Accumulated impairment losses	—			(45,832		)	—		(45,832		)
	176,878			1,313,143			155,416		1,645,437
Divestitures⁽¹⁾	(474		)	(3,657		)	—		(4,131		)
Tax and other adjustments during the three months ended January 25, 2014 ⁽²⁾	(17		)	(660		)	—		(677		)
Balance at January 25, 2014
Goodwill	176,387			1,354,658			155,416		1,686,461
Accumulated impairment losses	—			(45,832		)	—		(45,832		)
	$	176,387		$	1,308,826		$	155,416	$	1,640,629


⁽¹⁾	The goodwill disposed relates to the sale of the Company’s network adapter business, see Note 3, “Acquisitions and Divestitures,” of the Notes to Condensed Consolidated Financial Statements.


⁽²⁾	The goodwill adjustments during the three months ended January 25, 2014, 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 occur or facts and circumstances change that would more likely than not reduce the fair value of a reporting unit below 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 applying various observable market-based multiples to the reporting unit’s operating results and then applying an appropriate control premium. For the fiscal year 2013 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 the impairment testing performed in the second fiscal quarter of 2013, 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 market segments that are comparable with the Company’s reporting units. Based on the results of the annual goodwill impairment analysis performed during the second fiscal quarter of 2013, the Company determined that no impairment needed to be recorded. During the three months ended January 25, 2014, there were no facts and circumstances that indicated that the fair value of the reporting units may be less than their current carrying amount.

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 finite-lived intangible assets (in thousands, except for weighted-average remaining useful life):



January 25, 2014	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life (in years)
Trade name	$	460	$	138	$	322	2.76
Core/developed technology	1,040		416		624		1.76
Customer relationships	1,080		268		812		3.76
Non-compete agreements	810		245		565		2.76
Total intangible assets ⁽¹⁾	$	3,390	$	1,067	$	2,323	2.84

October 26, 2013	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life (in years)
Trade name	$	460	$	110	$	350	3.01
Core/developed technology	192,340		185,254		7,086		0.35
Customer relationships	287,090		276,473		10,617		0.51
Non-compete agreements	810		195		615		3.01
Total intangible assets	$	480,700	$	462,032	$	18,668	0.58


⁽¹⁾	During the three months ended January 25, 2014, $477.3 million of intangible assets became fully amortized and, therefore, were removed from the balance sheet.

The following table presents the amortization of finite-lived intangible assets included in the Condensed Consolidated Statements of Operations (in thousands):



	Three Months Ended
	January 25, 2014		January 26, 2013
Cost of revenues	$	6,462	$	10,780
Operating expenses	9,883		14,856
Total	$	16,345	$	25,636

The following table presents the estimated future amortization of finite-lived intangible assets as of January 25, 2014 (in thousands):



Fiscal Year	Estimated Future Amortization
2014 (remaining nine months)	$	649
2015	865
2016	553
2017	238
2018	18
Total	$	2,323

- 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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