Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

3. Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy, based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, is as follows:

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

• Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company measures the following financial assets at fair value on a recurring basis. The fair values of these financial assets at June 30, 2011 and December 31, 2010 (in thousands) were as follows:

	Fair Value Measurements at Reporting Date Using
			Quoted prices in		Significant
			active markets		other		Significant
			for identical		observable		unobservable
	Balance at		assets		inputs		inputs
	June 30, 2011		(Level 1)*		(Level 2)*		(Level 3)
Money market funds	$	17,998	$	17,998	$	—	$	—
U.S. government and agency obligations		33,228		9,625		23,603		—
U.S. corporate debt securities		29,225		—		29,225		—
U.S. commercial paper		42,628		—		42,628		—
Foreign commercial paper		14,084		—		14,084		—
Foreign corporate debt		4,009		—		4,009		—
Total	$	141,172	$	27,623	$	113,549	$	—

	Fair Value Measurements at Reporting Date Using
			Quoted prices in		Significant
			active markets		other		Significant
	Balance at		for identical		observable		unobservable
	December 31,		assets		inputs		inputs
	2010		(Level 1)*		(Level 2)*		(Level 3)
Money market funds	$	9,909	$	9,909	$	—	$	—
U.S. government and agency obligations		51,431		4,998		46,433		—
U.S. corporate debt securities		8,257		—		8,257		—
U.S. commercial paper		5,497		—		5,497		—
Foreign commercial paper		5,299		—		5,299		—
Total	$	80,393	$	14,907	$	65,486	$	—

* There were no significant transfers between level 1 and level 2 investments for the periods ended June 30, 2011 and December 31, 2010.

As of June 30, 2011, the Company’s short-term investments consisted of approximately $94,014,000 of available-for-sale securities with contractual maturities of one year or less and approximately $24,661,000 with contractual maturities not to exceed 15 months.

A company may elect to use fair value to measure accounts and loans receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees and issued debt. Other eligible items include firm commitments for financial instruments that otherwise would not be recognized at inception and non-cash warranty obligations where a warrantor is permitted to pay a third party to provide the warranty goods or services. If the use of fair value is elected, any upfront costs and fees related to the item such as debt issuance costs must be recognized in earnings and cannot be deferred. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value. Unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings and any changes in fair value are recognized in earnings. The Company has elected not to apply the fair value option to its financial assets and liabilities.

The Company considers the carrying amounts of cash and cash equivalents, prepaid expenses and other current assets, receivables, accounts payable and accrued liabilities to be representative of their respective fair values because of the short-term nature of those instruments. Based on the borrowing rates currently available to the Company for loans with similar terms, management believes the fair values of these long-term obligations approximate their carrying value. The Company applies fair value accounting to its securities available-for-sale.

Unrealized gains and losses associated with the Company’s investments, if any, are reported in stockholders’ equity. For the three and six months ended June 30, 2011, the Company recognized approximately $10,000 and $31,000, respectively, in net unrealized losses on its short-term investments. For the three and six months ended June 30, 2010, the Company recognized approximately $20,000 in net unrealized gains and $2,000 in net unrealized losses, respectively, on its short-term investments.

Realized gains and losses associated with the Company’s investments, if any, are reported in the statement of operations. For the three and six months ended June 30, 2011, the Company recognized approximately $2,000 in net realized gains associated with its short-term investments. For the three and six months ended June 30, 2010, the Company recognized approximately $12,000 and $23,000, respectively, in net realized gains on its short-term investments.