Supplemental Financial Information

Net Revenue

The following table presents details of our product revenue:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Product sales through direct sales force	75.7	%	78.1	%	77.7	%	79.0	%
Product sales maintained under fulfillment distributor arrangements	5.8		6.7		5.8		5.9
Product sales through distributors	18.5		15.2		16.5		15.1
	100.0	%	100.0	%	100.0	%	100.0	%

Income from the Qualcomm Agreement is expected to be recognized as follows:



	Three Months Ending
	December 31, 2012		March 31, 2013		June 30, 2013		Total
	(In millions)
Income from Qualcomm Agreement	$	43	$	44	$	43	$	130

Inventory

The following table presents details of our inventory:



	September 30, 2012		December 31, 2011
	(In millions)
Work in process	$	229	$	135
Finished goods	328		286
	$	557	$	421

Property and Equipment

The following table presents details of our property and equipment:



	Useful Life	September 30, 2012			December 31, 2011
	(In years)	(In millions)
Leasehold improvements	1 to 10	$	225		$	212
Office furniture and equipment	3 to 7	40			38
Machinery and equipment	5	511			396
Computer software and equipment	2 to 10	173			128
Construction in progress	N/A	33			26
		982			800
Less accumulated depreciation and amortization		(519		)	(432		)
		$	463		$	368

Goodwill

The following table summarizes the activity related to the carrying value of our goodwill:



	Reportable Segments
	Broadband Communications		Mobile & Wireless		Infrastructure & Networking		Foreign Currency			Consolidated
	(In millions)
Goodwill at December 31, 2011	$	597	$	470	$	735	$	(15	)	$	1,787
Goodwill recorded in connection with acquisitions	125		—		1,805		—			1,930
Effects of foreign currency translation	—		—		—		(8		)	(8		)
Goodwill at September 30, 2012	$	722	$	470	$	2,540	$	(23	)	$	3,709

Purchased Intangible Assets

The following table presents details of our purchased intangible assets:



	September 30, 2012								December 31, 2011
	Gross		Accumulated Amortization			Net			Gross		Accumulated Amortization			Net
						(In millions)
Developed technology	$	1,763	$	(391	)	$	1,372		$	587	$	(282	)	$	305
In-process research and development	317		—			317			59		—			59
Customer relationships	385		(194		)	191			173		(117		)	56
Other	39		(27		)	12			23		(20		)	3
	$	2,504	$	(612	)	$	1,892		$	842	$	(419	)	$	423
Effects of foreign currency translation						(31		)						(23		)
						$	1,861							$	400

In the nine months ended September 30, 2012 we reclassified $1 million of IPR&D costs related to previous acquisitions to developed technology and such costs will now be amortized to cost of product revenue.

For a detailed discussion of our various impairments of purchased intangible assets, see Note 10.

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,
	2012		2011		2012		2011
	(In millions)
Cost of product revenue	$	55	$	13	$	148	$	42
Other operating expenses	32		7		82		23
	$	87	$	20	$	230	$	65

The following table presents details of the amortization of existing purchased intangible assets (including IPR&D), which is currently estimated to be expensed in the remainder of 2012 and thereafter:



	Purchased Intangible Asset Amortization by Year
	2012		2013		2014		2015		2016		Thereafter		Total
							(In millions)
Cost of product revenue	$	50	$	173	$	222	$	218	$	200	$	800	$	1,663
Other operating expenses	31		57		63		31		9		7		198
	$	81	$	230	$	285	$	249	$	209	$	807	$	1,861

Accrued Liabilities

The following table presents details of our accrued liabilities included in current liabilities:



	September 30, 2012		December 31, 2011
	(In millions)
Accrued rebates	$	380	$	317
Accrued royalties	27		18
Accrued settlement charges	72		28
Accrued legal costs	16		16
Accrued taxes	21		16
Warranty reserve	14		14
Restructuring liabilities	3		6
Other	60		46
	$	593	$	461

Other Long-Term Liabilities

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



	September 30, 2012		December 31, 2011
	(In millions)
Deferred rent	$	54	$	48
Accrued taxes	62		24
Deferred tax liabilities	56		80
Accrued settlement charges	55		48
Restructuring liabilities	1		2
Deferred revenue	47		3
Other long-term liabilities	22		19
	$	297	$	224

Accrued Rebate Activity

The following table summarizes the activity related to accrued rebates:



	Nine Months Ended
	September 30,
	2012			2011
	(In millions)
Beginning balance	$	317		$	270
Charged as a reduction of revenue	512			498
Reversal of unclaimed rebates	(8		)	(11		)
Payments	(441		)	(417		)
Ending balance	$	380		$	340

We recorded rebates to certain customers of $216 million and $184 million in the three months ended September 30, 2012 and 2011, respectively.

Warranty Reserve Activity

The following table summarizes activity related to the warranty reserve:



	Nine Months Ended
	September 30,
	2012			2011
	(In millions)
Beginning balance	$	14		$	13
Charged to costs and expenses	4			8
Payments	(4		)	(7		)
Ending balance	$	14		$	14

We recorded charges to costs and expenses of $2 million in each of the three months ended September 30, 2012 and 2011.

Restructuring Activity

The following table summarizes activity related to our current and long-term restructuring liabilities during the nine months ended September 30, 2012:



	Nine Months Ended
	September 30, 2012
	(In millions)
Beginning balance	$	8
Charged to expense	6
Cash payments	(10		)
Ending balance	$	4

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.

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,
	2012		2011		2012		2011
	(In millions, except per share data)
Numerator: Net income	$	220	$	270	$	468	$	673
Denominator for net income per share (basic)	561		537		555		537
Effect of dilutive securities:
Stock awards	18		21		19		27
Denominator for net income per share (diluted)	579		558		574		564
Net income per share (basic)	$	0.39	$	0.50	$	0.84	$	1.25
Net income per share (diluted)	$	0.38	$	0.48	$	0.82	$	1.19

Net income per share (diluted) does not include the effect of anti-dilutive common share equivalents resulting from outstanding equity awards. There were 26 million and 23 million anti-dilutive common share equivalents in the three months ended September 30, 2012 and 2011, respectively, and 23 million and 21 million anti-dilutive common share equivalents in the nine months ended September 30, 2012 and 2011, respectively.

Supplemental Cash Flow Information

In the nine months ended September 30, 2012 we accrued $1 million related to stock option exercises that had not settled by September 30, 2012. In the nine months ended September 30, 2012, we paid $41 million for capital equipment that was accrued as of December 31, 2011 and had billings of $25 million for capital equipment that were accrued but not yet paid as of September 30, 2012.