Goodwill and Other Purchased Intangible Assets

3 Months Ended

Mar. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Purchased Intangible Assets

Goodwill

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



	Reportable Segments
	Broadband Communications		Mobile and Wireless			Infrastructure and Networking			Foreign Currency		Consolidated
	(In millions)
Goodwill	$	770	$	1,053		$	3,778		$	21	$	5,622
Accumulated impairment losses	—		(543		)	(1,286		)	—		(1,829		)
Goodwill at December 31, 2013	$	770	$	510		$	2,492		$	21	$	3,793
Adjustment due to sale of certain assets (Note 2)	—		—			(37		)	—		(37		)
Goodwill at March 31, 2014	$	770	$	510		$	2,455		$	21	$	3,756

Purchased Intangible Assets

The following table presents details of our purchased intangible assets:



	March 31, 2014							December 31, 2013
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(In millions)
Developed technology	$	1,543	$	(586	)	$	957	$	1,492	$	(539	)	$	953
In-process research and development	51		—			51		130		—			130
Customer relationships	232		(184		)	48		232		(176		)	56
Other	34		(29		)	5		34		(29		)	5
	$	1,860	$	(799	)	$	1,061	$	1,888	$	(744	)	$	1,144

In the three months ended March 31, 2014 we reclassified $78 million of in-process research and development, or

IPR&D costs, to developed technology primarily related to knowledge-based processors from our acquisition of NetLogic Microsystems, Inc., or NetLogic.

Impairment of Long-Lived Assets

In the three months ended March 31, 2014 we recorded impairment charges primarily for completed technology of $25 million, of which $19 million was related to our acquisition of SC Square Ltd., or SC Square, and $5 million related to the purchase of LTE-related assets from affiliates of Renesas Electronics Corporation, or the Renesas Transaction, each included in our Mobile and Wireless reportable segment. In the three months ended March 31, 2013 we recorded impairment charges primarily for IPR&D costs of $10 million, related to our acquisition of Provigent, Inc. included in our Infrastructure and Networking reportable segment. The primary factors contributing to the 2014 impairment charges were (i) for SC Square, the discontinuation of certain security solutions and (ii) for the Renesas Transaction, a reduction in revenue expectations related to an acquired legacy LTE modem product and an associated decrease to the respective estimated cash flows.

In determining the amount of the impairment charges we calculated fair values as of the impairment dates for acquired intangible assets. We used several variations of the income approach to compute the fair values, including the multiple period excess earnings, relief from royalty, and incremental cash flow methods. These methods employ significant unobservable inputs categorized as Level 3 inputs. The key unobservable inputs utilized include a discount rate of approximately 22%, a market participant tax rate of 17%, and estimated level of future cash flows based on current product and market data.

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
	March 31,
	2014		2013
	(In millions)
Cost of product revenue	$	50	$	43
Other operating expenses	9		15
	$	59	$	58

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 2014 and thereafter:



	Purchased Intangible Asset Amortization by Year
	2014		2015		2016		2017		2018		Thereafter		Total
	(In millions)
Cost of product revenue	$	142	$	175	$	154	$	133	$	113	$	291	$	1,008
Other operating expenses	26		14		5		3		2		3		53
	$	168	$	189	$	159	$	136	$	115	$	294	$	1,061

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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