Supplemental Financial Information

6 Months Ended

Jun. 30, 2011

Supplemental Financial Information [Abstract]

2. Supplemental Financial Information

Net Revenue

The following table presents details of our product revenue:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Product sales made through direct sales force ⁽¹⁾		77.1	%		76.6	%		77.0	%		78.5	%
Product sales made through distributors⁽²⁾		22.9			23.4			23.0			21.5

		100.0	%		100.0	%		100.0	%		100.0	%


(1)		Includes 9.5% and 5.7% of product sales maintained under hubbing arrangements with certain of our customers in the three months ended June 30, 2011 and 2010, respectively, and 9.2% and 5.6% in the six months ended June 30, 2011 and 2010, respectively.

(2)		Includes 5.8% and 8.1% of product sales maintained under fulfillment distributor arrangements in the three months ended June 30, 2011 and 2010, respectively, and 6.9% and 6.7% in the six months ended June 30, 2011 and 2010, respectively.

Income from the Qualcomm Agreement is expected to be recognized in the remainder of 2011 through 2013 as follows:


	2011		2012		2013		Thereafter		Total
	(In millions)
Income from Qualcomm Agreement	$	103	$	186	$	87	$	—	$	376

Inventory

The following table presents details of our inventory:


	June 30,		December 31,
	2011		2010
	(In millions)
Work in process	$	220	$	279
Finished goods		326		319

	$	546	$	598

Property and Equipment

The following table presents details of our property and equipment:


			June 30,			December 31,
	Useful Life		2011			2010
	(In years)		(In millions)
Leasehold improvements		1 to 10	$	192		$	173
Office furniture and equipment		3 to 7		31			29
Machinery and equipment		3 to 5		369			313
Computer software and equipment		2 to 4		131			142
Construction in progress		N/A		14			14

				737			671
Less accumulated depreciation and amortization				(418	)		(405	)

			$	319		$	266

Goodwill

The following tables summarize the activity related to the carrying value of our goodwill:


	Reportable Segments
	Broadband		Mobile &		Infrastructure &
	Communications		Wireless		Networking		Consolidated
	(In millions)
Goodwill at December 31, 2010⁽¹⁾	$	595	$	447	$	623	$	1,665
Goodwill recorded in connection with acquisitions		111		20		—		131
Other		2		—		—		2

Goodwill at June 30, 2011	$	708	$	467	$	623	$	1,798

Effects of foreign currency translation								22

Goodwill at June 30, 2011							$	1,820


(1)		Does not include the effects of $12 million in foreign currency translation.

Purchased Intangible Assets

The following table presents details of our purchased intangible assets:


	June 30, 2011							December 31, 2010
			Accumulated							Accumulated
	Gross		Amortization			Net		Gross		Amortization			Net
	(In millions)
Developed technology	$	584	$	(258	)	$	326	$	481	$	(236	)	$	245
In-process research and development		71		—			71		56		—			56
Customer relationships		173		(103	)		70		154		(102	)		52
Customer backlog		10		(9	)		1		10		(8	)		2
Other		14		(10	)		4		11		(9	)		2

	$	852	$	(380	)	$	472	$	712	$	(355	)	$	357

Effects of foreign currency translation							16							9

						$	488						$	366

In June 2011 we recorded a purchased intangible impairment charge of $74 million related to our acquisition of Beceem Communications, Inc. in 2010. The primary factor contributing to this impairment charge was a reduction in the forecasted cash flows experienced this quarter derived from the acquired WiMAX products as wireless service providers have accelerated their adoption of Long Term Evolution, or LTE, products. In March 2011 we recorded an impairment charge of $9 million primarily related to a technology license that was acquired in 2008. The primary factor contributing to this impairment charge was the continued reduction in the forecasted cash flows for our Blu-ray Disc business. We did not record any impairment charges in the three and six months ended June 30, 2010.

In determining the amount of these impairment charges we calculated fair values as of the impairment date for acquired developed technology, in-process research and development and customer relationships. The fair value for the first two assets was determined using the multiple period excess earnings method, which method is described below in Note 3. The fair value of acquired customer relationships was based on the benefit derived from the incremental revenue and related cash flow as a direct result of the customer relationship. The fair values were determined using significant unobservable inputs categorized as Level 3 inputs.

The following table presents details of the amortization of purchased intangible assets included in the cost of product revenue and other operating expense categories:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In millions)
Cost of product revenue	$	14	$	9	$	29	$	16
Other operating expenses		8		5		15		8

	$	22	$	14	$	44	$	24

The following table presents details of the amortization of existing purchased intangible assets, including IPR&D, that is currently estimated to be expensed in the remainder of 2011 and thereafter:


	Purchased Intangible Asset Amortization by Year
	2011		2012		2013		2014		2015		Thereafter		Total
	(In millions)
Cost of product revenue	$	25	$	84	$	81	$	68	$	52	$	101	$	411
Other operating expenses		15		30		11		5		5		11		77

	$	40	$	114	$	92	$	73	$	57	$	112	$	488

Accrued Liabilities

The following table presents details of our accrued liabilities:


	June 30,		December 31,
	2011		2010
	(In millions)
Accrued rebates	$	295	$	270
Accrued settlement charges		21		17
Accrued legal costs		15		28
Accrued taxes		12		14
Warranty reserve		14		13
Other		60		62

	$	417	$	404

Other Long-Term Liabilities

The following table presents details of our other long-term liabilities:


	June 30,		December 31,
	2011		2010
	(In millions)
Deferred rent	$	45	$	39
Accrued taxes		26		29
Deferred tax liabilities		78		35
Accrued settlement charges		37		38
Other long-term liabilities		21		9

	$	207	$	150

Accrued Rebate Activity

The following table summarizes the activity related to accrued rebates:


	Six Months Ended
	June 30,
	2011			2010
	(In millions)
Beginning balance	$	270		$	162
Charged as a reduction of revenue		314			236
Reversal of unclaimed rebates		(7	)		(3	)
Payments		(282	)		(164	)

Ending balance	$	295		$	231

We recorded rebates to certain customers of $163 million and $132 million in the three months ended June 30, 2011 and 2010, respectively.

Warranty Reserve Activity

The following table summarizes activity related to the warranty reserve:


	Six Months Ended
	June 30,
	2011			2010
	(In millions)
Beginning balance	$	13		$	10
Charged to costs and expenses		6			5
Payments		(5	)		(2	)

Ending balance	$	14		$	13

We recorded net charges to costs and expenses of $4 million and less than $1 million in the three months ended June 30, 2011 and 2010, respectively.

Computation of Net Income Per Share

The following table presents the computation of net income per share:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
	(In millions, except per share data)
Numerator: Net income	$	175	$	278	$	403	$	488

Denominator for net income per share (basic)		535		501		537		498
Effect of dilutive securities:
Stock awards		23		37		30		35

Denominator for net income per share (diluted)		558		538		567		533

Net income per share (basic)	$	0.33	$	0.56	$	0.75	$	0.98

Net income per share (diluted)	$	0.31	$	0.52	$	0.71	$	0.92

Net income per share (diluted) does not include the effect of anti-dilutive common share equivalents resulting from outstanding equity awards. There were 24 million and 32 million anti-dilutive common share equivalents in the three months ended June 30, 2011 and 2010, respectively, and 20 million and 47 million anti-dilutive common share equivalents in the six months ended June 30, 2011 and 2010, respectively.

Charitable Contribution

In June 2011 we contributed $25 million to the Broadcom Foundation to support science, technology, engineering and mathematics programs, as well as a broad range of community services. This payment was recorded as an operating expense in our unaudited condensed consolidated statements of income in the three and six months ended June 30, 2011. Approximately $2 million of the $25 million contribution came from Dr. Henry Samueli, who made such payment to Broadcom Corporation in connection with the settlement of the shareholder derivative litigation as further described in Note 9.

Supplemental Cash Flow Information

In the six months ended June 30, 2011 we paid $1 million related to share repurchases that had not settled by December 31, 2010. In the six months ended June 30, 2011 we received $4 million related to stock option exercises that had not settled by December 31, 2010. In the six months ended June 30, 2011, we paid $12 million for capital equipment that was accrued as of December 31, 2010 and had billings of $13 million for capital equipment that were accrued but not yet paid as of June 30, 2011.