Supplemental Financial Information

9 Months Ended

Sep. 30, 2011

Supplemental Financial Information [Abstract]

2. Supplemental Financial Information

Net Revenue

The following table presents details of our product revenue:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Product sales made through direct sales force ⁽¹⁾		76.6	%		77.6	%		76.9	%		78.2	%
Product sales made through distributors⁽²⁾		23.4			22.4			23.1			21.8

		100.0	%		100.0	%		100.0	%		100.0	%


(1)		Includes 8.6% and 8.3% of product sales maintained under hubbing arrangements with certain of our customers in the three months ended September 30, 2011 and 2010, respectively, and 9.0% and 6.6% in the nine months ended September 30, 2011 and 2010, respectively.


(2)		Includes 8.1% and 8.6% of product sales maintained under fulfillment distributor arrangements in the three months ended September 30, 2011 and 2010, respectively, and 7.3% and 7.4% in the nine months ended September 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	$	52	$	186	$	86	$	—	$	324

Inventory

The following table presents details of our inventory:


	September 30,		December 31,
	2011		2010
	(In millions)
Work in process	$	194	$	279
Finished goods		297		319

	$	491	$	598

Property and Equipment

The following table presents details of our property and equipment:


		September 30,			December 31,
	Useful Life	2011			2010
	(In years)	(In millions)
Leasehold improvements	1 to 10	$	200		$	173
Office furniture and equipment	3 to 7		35			29
Machinery and equipment	3 to 5		388			313
Computer software and equipment	2 to 4		128			142
Construction in progress	N/A		17			14

			768			671
Less accumulated depreciation and amortization			(429	)		(405	)

		$	339		$	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		—		23		111		134
Other		2		—		—		2

Goodwill at September 30, 2011	$	597	$	470	$	734	$	1,801

Effects of foreign currency translation								(5	)

Goodwill at September 30, 2011							$	1,796


(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:


	September 30, 2011								December 31, 2010
			Accumulated								Accumulated
	Gross		Amortization			Net			Gross		Amortization			Net
	(In millions)
Developed technology	$	587	$	(270	)	$	317		$	481	$	(236	)	$	245
In-process research and development		59		—			59			56		—			56
Customer relationships		173		(110	)		63			154		(102	)		52
Customer backlog		10		(10	)		—			10		(8	)		2
Other		13		(9	)		4			11		(9	)		2

	$	842	$	(399	)	$	443		$	712	$	(355	)	$	357

Effects of foreign currency translation							(16	)							9

						$	427							$	366

In September 2011 we recorded a purchased intangible impairment charge of $9 million primarily related to our acquisition of Teknovus, Inc. in 2010. The primary factor contributing to this impairment charge was a reduction in the forecasted cash flows related to this networking business. 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 related to WiMAX products, as wireless service providers have accelerated their adoption of competing 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. In the three and nine months ended September 30, 2010 we recorded an impairment charge to developed technology of $2 million.

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				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
			(In millions)
Cost of product revenue	$	13	$	7	$	42	$	23
Other operating expenses		8		5		23		13

	$	21	$	12	$	65	$	36

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	$	12	$	78	$	73	$	61	$	47	$	92	$	363
Other operating expenses		7		28		10		4		4		11		64

	$	19	$	106	$	83	$	65	$	51	$	103	$	427

Accrued Liabilities

The following table presents details of our accrued liabilities:


	September 30,		December 31,
	2011		2010
	(In millions)
Accrued rebates	$	340	$	270
Accrued royalities		30		19
Accrued settlement charges		50		17
Accrued legal costs		19		28
Accrued taxes		9		14
Warranty reserve		14		13
Restructuring liabilities		15		—
Other		47		43

	$	524	$	404

Other Long-Term Liabilities

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


	September 30,		December 31,
	2011		2010
	(In millions)
Deferred rent	$	46	$	39
Accrued taxes		30		29
Deferred tax liabilities		71		35
Accrued settlement charges		36		38
Other long-term liabilities		19		9

	$	202	$	150

Accrued Rebate Activity

The following table summarizes the activity related to accrued rebates:


	Nine Months Ended
	September 30,
	2011			2010
	(In millions)
Beginning balance	$	270		$	162
Charged as a reduction of revenue		498			381
Reversal of unclaimed rebates		(11	)		(3	)
Payments		(417	)		(227	)

Ending balance	$	340		$	313

We recorded rebates to certain customers of $184 million and $145 million in the three months ended September 30, 2011 and 2010, respectively.

Warranty Reserve Activity

The following table summarizes activity related to the warranty reserve:


	Nine Months Ended
	September 30,
	2011			2010
	(In millions)
Beginning balance	$	13		$	10
Charged to costs and expenses		8			1
Payments		(7	)		(3	)

Ending balance	$	14		$	8

We recorded a net charge and a net reversal to costs and expenses of $2 million and $4 million in the three months ended September 30, 2011 and 2010, respectively.

Restructuring Activity

As part of our regular portfolio management review process and in light of our decision to significantly reduce our investment in our digital television and Blu-ray Disc^® lines of business within our Broadband Communications operating segment, in September 2011 we began implementing a restructuring plan to reduce our worldwide headcount by approximately 300 employees. We recorded $17 million in restructuring costs in the three months ended September 30, 2011, of which $15 million was related to severance and other charges associated with our reduction in workforce across multiple locations and functions, and $2 million was related to the closure of one of our facilities. Most of these expenses will be paid in the three months ended December 31, 2011. We currently expect to complete this plan by the end of 2011 and will record additional costs of approximately $6 million in the three months ended December 31, 2011, primarily for additional facilities closures.

The following table summarizes activity related to our current and long-term restructuring liabilities during the nine months ended September 30, 2011:


	Nine Months Ended
	September 30, 2011
	(In millions)
Beginning balance	$	—
Charged to expense		17
Reversal of restructuring costs		—
Payments and other		(2	)

Ending balance	$	15

Settlement Costs (Gains)

In the three and nine months ended September 30, 2011 we recorded net settlement costs of $27 million and net settlement gains of $23 million, primarily related to patent infringement claims and the Derivative Settlement. We recorded settlement charges of $4 million in the nine months ended September 30, 2010. See Note 9.

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 nine months ended September 30, 2011. Approximately $2 million of the $25 million contribution came from Dr. Henry Samueli, our Chief Technical Officer and member of the Board of Directors, who made such payment to Broadcom Corporation in connection with the settlement of the shareholder derivative litigation as further described in Note 9.

Computation of Net Income Per Share

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
	(In millions, except per share data)
Numerator: Net income	$	270	$	328	$	673	$	816

Denominator for net income per share (basic)		537		509		537		502
Effect of dilutive securities:
Stock awards		21		35		27		35

Denominator for net income per share (diluted)		558		544		564		537

Net income per share (basic)	$	0.50	$	0.64	$	1.25	$	1.63

Net income per share (diluted)	$	0.48	$	0.60	$	1.19	$	1.52

Net income per share (diluted) does not include the effect of anti-dilutive common share equivalents resulting from outstanding equity awards. There were 23 million and 30 million anti-dilutive common share equivalents in the three months ended September 30, 2011 and 2010, respectively, and 21 million and 34 million anti-dilutive common share equivalents in the nine months ended September 30, 2011 and 2010, respectively.

Supplemental Cash Flow Information

In the nine months ended September 30, 2011 we paid $1 million related to share repurchases that had not settled by December 31, 2010. In the nine months ended September 30, 2011 we received $4 million related to stock option exercises that had not settled by December 31, 2010. In the nine months ended September 30, 2011 we accrued $2 million related to stock option exercises that had not settled by September 30, 2011. In the nine months ended September 30, 2011, we paid $12 million for capital equipment that was accrued as of December 31, 2010 and had billings of $10 million for capital equipment that were accrued but not yet paid as of September 30, 2011.