Goodwill and Intangible Assets

The following table summarizes goodwill activity by reportable segment during the fiscal years ended October 29, 2016, and October 31, 2015 (in thousands):



	SAN Products			IP Networking Products			Global Services		Total
Balance at November 1, 2014
Goodwill	$	176,346		$	1,365,175		$	155,416	$	1,696,937
Accumulated impairment losses	—			(129,214		)	—		(129,214		)
	176,346			1,235,961			155,416		1,567,723
Acquisitions ⁽¹⁾	—			49,458			—		49,458
Purchase accounting adjustments	—			(15		)	—		(15		)
Tax and other adjustments ⁽²⁾	(21		)	—			—		(21		)
Translation adjustments	—			16			—		16
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 ⁽³⁾	—			284,336			394,021		678,357
Purchase accounting adjustments	—			—			—		—
Tax adjustments ⁽²⁾	(5		)	—			—		(5		)
Translation adjustments	—			(329		)	—		(329		)
Balance at October 29, 2016
Goodwill	176,320			1,698,641			549,437		2,424,398
Accumulated impairment losses	—			(129,214		)	—		(129,214		)
	$	176,320		$	1,569,427		$	549,437	$	2,295,184


⁽¹⁾	The goodwill acquired relates to the acquisitions completed in fiscal year 2015, which is gross of the adjustments recorded during the purchase price allocation period. See Note 3, “Acquisitions and Divestitures,” of the Notes to Consolidated Financial Statements.


⁽²⁾	The goodwill adjustments were primarily a result of tax benefits from the exercise of stock awards of acquired companies.


⁽³⁾	The goodwill acquired relates to the acquisitions completed in fiscal year 2016. See Note 3, “Acquisitions and Divestitures,” of the Notes to Consolidated Financial Statements.

The Company conducts its goodwill impairment test annually 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. Effective on the first day of the fourth fiscal quarter of 2016, the Company changed the date of its annual impairment test for goodwill from the first day of the second fiscal quarter to the first day of the fourth fiscal quarter. This change in the annual impairment test date was made to better coincide with the timing of when the Company prepares its annual budget and financial plans as part of its regular long-range planning process. Upon the change in the annual impairment test date during the fourth fiscal quarter of 2016, the Company again performed an impairment test in addition to the one performed during the second fiscal quarter of 2016. There was no change in the valuation methodology between the annual impairment tests performed during the second and fourth fiscal quarters of 2016.

For the annual goodwill impairment tests, 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 annual goodwill impairment tests performed in fiscal year 2016, the Company used a combination of these approaches to estimate each reporting unit’s fair value. At the time the annual goodwill impairment tests were 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 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;


•	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 as part of 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 goodwill impairment analyses, performed during both the second and fourth fiscal quarter of 2016, the Company determined that no impairment charge 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 fiscal year ended October 29, 2016.

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



	October 29, 2016
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Weighted- Average Remaining Useful Life (in years)
Finite-lived intangible assets:
Trade names	$	45,090	$	2,359	$	42,731	10.51
Core/developed technology ^{(1) (2)}	286,290		37,352		248,938		5.51
Patent portfolio license ⁽³⁾	7,750		1,935		5,815		17.00
Customer relationships	143,110		15,813		127,297		6.32
Non-compete agreements	1,050		983		67		0.29
Patents with broader applications	1,040		110		930		13.38
Total finite-lived intangible assets	$	484,330	$	58,552	$	425,778	6.08
Indefinite-lived intangible assets, excluding goodwill:
IPR&D ⁽¹⁾	24,000		—		24,000
Total indefinite-lived intangible assets, excluding goodwill	24,000		—		24,000
Total intangible assets, excluding goodwill	$	508,330	$	58,552	$	449,778



	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	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:
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 is an intangible asset accounted for as an indefinite-lived asset until the completion or abandonment of the associated research and development effort. If the research and development effort associated with the IPR&D is successfully completed, then the IPR&D intangible asset will be amortized over its estimated useful life to be determined at the date the effort is completed. During the year ended October 29, 2016, the Company acquired $27.0 million in IPR&D intangible assets in connection with the acquisition of Ruckus. The research and development efforts associated with these IPR&D intangible assets are expected to be completed in fiscal year 2017. During the year ended October 29, 2016, research and development efforts were completed on $18.1 million of the IPR&D intangible assets, and the completed IPR&D intangible assets are being amortized as core/developed technology over their estimated useful lives of five to seven years.


⁽²⁾	During the fiscal year ended October 29, 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 and whenever events occur or facts and circumstances indicate that it is more likely than not that the IPR&D is impaired. Effective on the first day of the fourth fiscal quarter, the Company changed the date of its annual impairment test for IPR&D from the first day of the second fiscal quarter to the first day of the fourth fiscal quarter. This change in the annual impairment test date was made to better coincide with the timing of when the Company prepares its annual budget and financial plans as part of its regular long-range planning process. 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.

Based on the results of the annual IPR&D impairment analysis performed during the fourth fiscal quarter of 2016, the Company determined that no impairment needed to be recorded.

The following table presents the amortization of finite-lived intangible assets included on the Company’s Consolidated Statements of Income (in thousands):



	Fiscal Year Ended
	October 29, 2016		October 31, 2015		November 1, 2014
Cost of revenues	$	28,787	$	7,640	$	8,010
General and administrative ⁽¹⁾	1,087		849		—
Other operating expense	15,661		2,556		10,280
Total	$	45,535	$	11,045	$	18,290


⁽¹⁾	The amortization is related to the $7.8 million of perpetual, nonexclusive 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 October 29, 2016 (in thousands):



Fiscal Year	Estimated Future Amortization
2017	$	78,985
2018	69,915
2019	66,386
2020	65,454
2021	61,700
Thereafter	83,338
Total	$	425,778