Fair Value Measurements

12 Months Ended

Dec. 31, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

3. Fair Value Measurements

We measure our cash equivalents, marketable securities, restricted cash and the earn-out liability associated with our acquisition of MPC Data Limited (“MPC”) (see note 4) at fair value. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Directly or indirectly observable market-based inputs or unobservable inputs used in models or other valuation methodologies.

Level 3: Unobservable inputs that are not corroborated by market data. The inputs require significant management judgment or estimation.

We classify our cash equivalents, marketable securities and restricted cash within Level 1 or Level 2. This is because we value these items using quoted market prices or alternative pricing sources and models utilizing market observable inputs that are actively quoted and can be validated through external sources, including third-party pricing services, brokers and market transactions. We review the pricing techniques and methodologies of the independent pricing service for Level 2 investments and believe that the policies adequately consider market activity, either based on specific transactions for the security valued or based on modeling of securities with similar credit quality, duration, yield and structure that were recently traded.

In 2011, we classified our acquisition consideration liability associated with MPC within Level 3 as it is valued using valuation techniques using inputs such as management’s estimation of future sales. Some of the inputs to these models are unobservable in the market and are significant. The acquisition earn-out consideration payout of $631,000 occurred during the fourth quarter of 2012. The reduction in the estimated fair value of the acquisition consideration of $135,000 in 2012 is recorded in other income in statement of operations.

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

	December 31, 2012
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Direct or Indirect Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Cash equivalents:
Money market funds	$	7,313	$	—	$	—	$	7,313
Corporate debt		—		—		—		—
Total cash equivalents		7,313		—		—		7,313
Short-term investments:
U.S. agency securities		—		—		—		—
Municipal securities		—		356		—		356
Corporate commercial paper		—		4,374		—		4,374
Foreign government bonds		—		999		—		999
Corporate debt securities		—		4,097		—		4,097
Total short-term investments		—		9,826	$	—		9,826
Restricted cash—money market fund		875		—		—		875
Total assets	$	8,188	$	9,826	$	—	$	18,014

	December 31, 2011
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Direct or Indirect Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets
Cash equivalents:
Money market funds	$	6,576	$	—	$	—	$	6,576
Corporate debt		—		501		—		501
Total cash equivalents		6,576		501		—		7,077
Short-term investments:
U.S. agency securities		—		1,751		—		1,751
Municipal securities		—		355		—		355
Corporate commercial paper		—		1,250		—		1,250
Foreign government bonds		—		500		—		500
Corporate debt securities		—		5,763		—		5,763
Total short-term investments		—		9,619	$	—		9,619
Restricted cash—money market fund		875		—		—		875
Total assets	$	7,451	$	10,120	$	—	$	17,571
MPC earn-out liability	$	—	$	—	$	766	$	766

An impairment charge of $518,000 was recognized in the fourth quarter of 2011 for intangible assets measured using level 3 inputs and recorded at fair value. These intangible assets were associated with acquired technology (see Note 6).