Fair Value

6 Months Ended

Jun. 30, 2011

Fair Value [Abstract]

FAIR VALUE

7. FAIR VALUE

The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability. The fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There are three levels of inputs that may be used to measure fair value as follows:

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

     Level 2—Other inputs that are directly or indirectly observable in the marketplace

     Level 3—Unobservable inputs that are supported by little or no market activity

The carrying value of the Company’s financial instruments, including cash, accounts receivable and accounts payable, approximate their fair value because of their short-term nature. The Company measures cash equivalents, comprised of money market fund deposits, and a contingent liability at fair value. At June 30, 2011 and December 31, 2010, the money market funds were valued based on quoted prices for the specific securities in an active market and therefore classified as Level 1. The Level 3 liability consists of contingent consideration related to the SmartReply acquisition in the form of an earn-out for a maximum of $8.9 million paid out annually over the next three years based upon year-over-year revenue growth relative to the Company’s mobile services business. The fair value of the contingent consideration was estimated by applying the income approach. The measure is based on significant inputs that are unobservable in the market. Key assumptions include a discount rate of 18.5% and probability weighted estimates of future revenues of the acquired business.

Assets and liabilities measured at fair value on a recurring basis consisted of the following types of instruments as of June 30, 2011 and December 31, 2010 (in thousands):

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in		Significant
	Active Markets for		Other		Significant
	Identical		Observable		Unobservable
	Instruments		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total Balance
Assets
Cash equivalents:
Money market fund deposits at June 30, 2011	$	27,238		—		—	$	27,238
Money market fund deposits at December 31, 2010	$	33,134		—		—	$	33,134
Liabilities
Accrued Expenses:
Liability for contingent consideration at June 30, 2011		—		—	$	1,158	$	1,158
Liability for contingent consideration at December 31, 2010		—		—		—		—

There was no change in the liability for contingent consideration in the period due to the short passage of time since the recording of the liability in purchase accounting.