Goodwill and Intangible Assets

The following table summarizes goodwill activity by reportable segment during the six months ended April 30, 2016 (in thousands):



	Storage Area Networking (“SAN”) Products			IP Networking Products			Global Services		Total
Balance at October 31, 2015
Goodwill	$	176,325		$	1,414,634		$	155,416	$	1,746,375
Accumulated impairment losses	—			(129,214		)	—		(129,214		)
	176,325			1,285,420			155,416		1,617,161
Acquisitions ⁽¹⁾	—			4,625			—		4,625
Tax adjustments ⁽²⁾	(5		)	—			—		(5		)
Translation adjustments	—			(90		)	—		(90		)
Balance at April 30, 2016
Goodwill	176,320			1,419,169			155,416		1,750,905
Accumulated impairment losses	—			(129,214		)	—		(129,214		)
	$	176,320		$	1,289,955		$	155,416	$	1,621,691


⁽¹⁾	The goodwill acquired relates to the acquisition completed in March 2016. See Note 3, “Acquisitions,” of the Notes to Condensed Consolidated Financial Statements.


⁽²⁾	The goodwill adjustments 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 by applying various observable market-based multiples to the reporting unit’s operating results and then applying an appropriate control premium. For the fiscal year 2016 annual goodwill impairment test, the Company used a combination of these approaches to estimate each reporting unit’s fair value. At the time that the fiscal year 2016 annual goodwill impairment test was performed, the Company believed that 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 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 are 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;


•	The Company’s forecasted 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 the Company’s regular long-range planning process. The control premium used in market or combined approaches was determined by considering control premiums offered as part of the acquisitions where acquired companies were comparable with the Company’s reporting units.

Based on the results of the annual goodwill impairment analysis performed during the second fiscal quarter of 2016, the Company determined that no impairment needed to be recorded.

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 Company did not incur costs to renew or extend the term of any acquired finite-lived intangible assets during the six months ended April 30, 2016.

The following tables present details of the Company’s intangible assets, excluding goodwill (in thousands, except for weighted-average remaining useful life):



	April 30, 2016
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life (In years)
Finite-lived intangible assets:
Trade names	$	1,090	$	527	$	563	4.13
Core/developed technology ^{(1) (2)}	57,290		14,912		42,378		4.00
Patent portfolio license ⁽³⁾	7,750		1,399		6,351		17.49
Customer relationships	23,110		3,982		19,128		6.71
Non-compete agreements	1,050		824		226		0.69
Patents with broader applications	1,040		75		965		13.88
Total finite-lived intangible assets	91,330		21,719		69,611		6.10
Total intangible assets, excluding goodwill	$	91,330	$	21,719	$	69,611

	October 31, 2015
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life (In years)
Finite-lived intangible assets:
Trade names	$	1,090	$	415	$	675	4.36
Core/developed technology ⁽²⁾	40,530		9,605		30,925		3.49
Patent portfolio license ⁽³⁾	7,750		849		6,901		17.74
Customer relationships	23,110		2,484		20,626		7.18
Non-compete agreements	1,050		664		386		1.17
Patents with broader applications	1,040		40		1,000		14.38
Total finite-lived intangible assets	74,570		14,057		60,513		6.55
Indefinite-lived intangible assets, excluding goodwill:
In-process research and development (“IPR&D”) ⁽¹⁾	15,110		—		15,110
Total indefinite-lived intangible assets, excluding goodwill	15,110		—		15,110
Total intangible assets, excluding goodwill	$	89,680	$	14,057	$	75,623

⁽¹⁾

Acquired IPR&D are intangible assets accounted for as indefinite-lived assets until the completion or abandonment of the associated research and development efforts. If the research and development efforts associated with the IPR&D are successfully completed, then the IPR&D intangible assets will be amortized over the estimated useful lives to be determined as of the date the efforts are completed. During the six months ended April 30, 2016, research and development efforts were completed on $15.1 million of the IPR&D intangible assets, and the completed IPR&D intangible assets are being amortized as Core/developed technology over the respective estimated useful lives of five and six years.


⁽²⁾	During the six months ended April 30, 2016, $1.0 million of finite-lived intangible assets became fully amortized and, therefore, were removed from the balance sheet.

⁽³⁾

The patent portfolio license was assigned an estimated useful life that reflects the Company’s consumption of the expected defensive benefits related to this license to certain patents. The method of amortization for the patent portfolio license reflects the Company’s estimate of the pattern in which these expected defensive benefits will be used by the Company and is primarily based on the mix of expiration patterns of the individual patents included in the license.

The Company conducts the IPR&D impairment test annually, as of the first day of the second fiscal quarter, or when events occur or facts and circumstances indicate that it is more likely than not that the IPR&D is impaired. For the annual IPR&D impairment test, the Company elects 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 the IPR&D assets is less than the carrying amount. If, after assessing the totality of events and circumstances, the Company determines that it is more likely than not that the fair value of the IPR&D assets is less than the carrying amount, then the Company conducts a quantitative analysis to determine the fair value of the IPR&D assets. If the carrying amount of the IPR&D assets exceeds the fair value, then the Company recognizes an impairment loss equal to the difference.

As of April 30, 2016, the Company had no remaining IPR&D intangible assets.

The amortization of finite-lived intangible assets is included in the following line items of the Company’s Condensed Consolidated Statements of Income as follows (in thousands):



	Three Months Ended				Six Months Ended
	April 30, 2016		May 2, 2015		April 30, 2016		May 2, 2015
Cost of revenues	$	3,193	$	1,857	$	6,348	$	2,494
General and administrative ⁽¹⁾	274		291		550		291
Amortization of intangible assets	902		627		1,804		765
Total	$	4,369	$	2,775	$	8,702	$	3,550


⁽¹⁾	The amortization is related to the $7.8 million of perpetual, non-exclusive license to certain patents purchased during the fiscal year ended October 31, 2015.

The following table presents the estimated future amortization of finite-lived intangible assets as of April 30, 2016 (in thousands):



Fiscal Year	Estimated Future Amortization
2016 (remaining six months)	$	8,979
2017	17,531
2018	13,012
2019	9,483
2020	8,394
Thereafter	12,212
Total	$	69,611