Balance Sheet Components

Available-for-sale short-term investments



	As of
	December 31, 2017									December 31, 2016
	Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value		Cost		Unrealized Gain		Unrealized Loss			Estimated Fair Value
	(In thousands)
U.S. treasuries	$	124,816	$	—	$	(146	)	$	124,670	$	123,869	$	9	$	(40	)	$	123,838
Certificates of deposits	162		—		—			162		148		—		—			148
Total	$	124,978	$	—	$	(146	)	$	124,832	$	124,017	$	9	$	(40	)	$	123,986

The Company’s short-term investments are primarily comprised of marketable securities that are classified as available-for-sale and consist of government securities with an original maturity or remaining maturity at the time of purchase of greater than three months and no more than twelve months. Accordingly, none of the available-for-sale securities have unrealized losses greater than 12 months.

Cost method investments

The carrying value of the Company's cost method investments was $4.5 million and $0.1 million as of December 31, 2017 and 2016, respectively. These investments are accounted under the cost method because the Company does not have a controlling interest or the ability to exercise significant influence over these companies and these investments do not have readily determinable fair values. These investments are included in other non-current assets in the consolidated balance sheets and are carried at cost, adjusted for any impairment. The Company monitors these investments for impairment on a quarterly basis, and adjusts carrying value for any impairment charges recognized. There were no impairments recognized during the years ended December 31, 2017, 2016 and 2015, respectively. Realized gains and losses on these investments are reported in other income (expense), net in the consolidated statements of operations. The Company did not recognize any material realized gains or losses during the years ended December 31, 2017, 2016 and 2015, respectively.

Accounts receivable, net



	As of
	December 31, 2017			December 31, 2016
	(In thousands)
Gross accounts receivable	$	437,891		$	333,080
Allowance for doubtful accounts	(1,257		)	(1,255		)
Allowance for sales returns	(20,189		)	(13,506		)
Allowance for price protection	(3,647		)	(4,480		)
Total allowances	(25,093		)	(19,241		)
Total accounts receivable, net	$	412,798		$	313,839

Inventories



	As of
	December 31, 2017		December 31, 2016
	(In thousands)
Raw materials	$	4,465	$	4,596
Finished goods	241,429		243,266
Total inventories	$	245,894	$	247,862

The Company records provisions for excess and obsolete inventory based on forecasts of future demand. While management believes the estimates and assumptions underlying its current forecasts are reasonable, there is risk that additional charges may be necessary if current forecasts are greater than actual demand.

Property and equipment, net



	As of
	December 31, 2017			December 31, 2016
	(In thousands)
Computer equipment	$	10,114		$	10,557
Furniture, fixtures and leasehold improvements	21,640			20,827
Software	28,997			28,663
Machinery and equipment	62,490			63,446
Total property and equipment, gross	123,241			123,493
Accumulated depreciation and amortization	(102,581		)	(104,020		)
Total property and equipment, net	$	20,660		$	19,473

Depreciation and amortization expense pertaining to property and equipment was $13.2 million, $14.6 million and $18.1 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Intangibles, net



	As of December 31, 2017							As of December 31, 2016
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
	(In thousands)
Technology	$	66,599	$	(62,172	)	$	4,427	$	66,599	$	(57,381	)	$	9,218
Customer contracts and relationships	56,500		(37,430		)	19,070		56,500		(30,375		)	26,125
Other	11,045		(9,554		)	1,491		11,045		(8,489		)	2,556
Total intangibles, net	134,144		(109,156		)	24,988		$	134,144	$	(96,245	)	$	37,899

Amortization of purchased intangibles in the years ended December 31, 2017, 2016 and 2015 was $12.9 million, $17.0 million and $17.3 million, respectively. No impairment charges were recorded in the years ended December 31, 2017, 2016 and 2015.

As of December 31, 2017, estimated amortization expense related to finite-lived intangibles for each of the next five years and thereafter is as follows (in thousands):



2018	$	9,396
2019	7,544
2020	6,622
2021	1,413
2022	13
Total estimated amortization expense	$	24,988

Goodwill

As discussed in Note 11, Segment Information, during the first fiscal quarter of 2017, the Company's Chief Operating Decision Maker requested changes in the information that he regularly reviews for purposes of allocating resources and assessing performance. With these changes, the Company revised its reportable segments. Beginning with fiscal year 2017, the Company operates and reports in three segments: Arlo, Connected Home, and SMB. Goodwill was reallocated to the reportable segments using a relative fair value approach. As a result, the Company completed assessments of any potential goodwill impairment for all reportable segments immediately prior to and after the reallocation and determined that no impairment existed.

The changes in the carrying amount of goodwill during the years ended December 31, 2017 and 2016 are as follows:



	Old Segments											New Segments
	Retail			Commercial			Service Provider		Total			Arlo		Connected Home		SMB		Total
	(In thousands)
As of December 31, 2015	$	45,442		$	36,279		$	—	$	81,721		$	—	$	—	$	—	$	—
Goodwill from acquisition of Placemeter	3,742			—			—		3,742			—		—		—		—
As of December 31, 2016	49,184			36,279			—		85,463			—		—		—		—
Relative fair value approach	(49,184		)	(36,279		)	—		(85,463		)	21,149		28,035		36,279		85,463
As of January 1, 2017	—			—			—		—			21,149		28,035		36,279		85,463
As of December 31, 2017	$	—		$	—		$	—	$	—		$	21,149	$	28,035	$	36,279	$	85,463

In the fourth fiscal quarter of 2017, the Company early adopted ASU 2017-04 "Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment" and completed the annual impairment test of goodwill. The test was performed as of the first day of the fourth quarter, or October 2, 2017.

The Company performed a qualitative test for goodwill impairment of the Arlo, Connected Home, and SMB reporting units as of October 2, 2017. Based upon the results of the qualitative testing, the respective fair values of these reporting units were substantially in excess of their carrying values. The Company believes it is more-likely-than-not that the fair value of these reporting units are greater than their respective carrying values and therefore performing the next step of the impairment test for these reporting units was unnecessary. No goodwill impairment was recognized in the years ended December 31, 2017, 2016 or 2015. Accumulated goodwill impairment charges for the years ended December 31, 2017 and 2016, was $74.2 million and $74.2 million, respectively.

Other non-current assets



	As of
	December 31, 2017		December 31, 2016
	(In thousands)
Non-current deferred income taxes	$	49,468	$	70,859
Other	12,321		7,977
Total other non-current assets	$	61,789	$	78,836

Other accrued liabilities



	As of
	December 31, 2017		December 31, 2016
	(In thousands)
Sales and marketing programs	$	96,153	$	74,330
Warranty obligation	75,824		58,520
Freight	10,567		8,980
Other	39,926		28,844
Total other accrued liabilities	$	222,470	$	170,674