Business Combination

3 Months Ended

Dec. 31, 2011

Business Combination [Abstract]

Business Combination

3. Business Combination

Proposed Acquisition

On January 31, 2012, the Company entered into a Definitive Agreement (“agreement”) with M5 Networks, Inc. (“M5”), a privately-held company headquartered in New York and a provider of hosted unified communications solutions.  Under the terms of the agreement, the Company will acquire M5 for an aggregate purchase price of approximately $159.7 million, which includes $84.1million in cash and 9.5 million shares of ShoreTel common stock, and up to $13.7 million in additional contingent and deferred consideration upon the achievement of certain performance milestones within the twelve months ended December 31, 2012. The contingent payments are payable over the two years after closing and are based upon the achievement of certain performance milestones for the twelve months ended December 31, 2012.  In connection with the agreement, the Company is in the process of establishing a financing arrangement with a bank. The acquisition of M5 enables ShoreTel to expand its product and service offerings by providing a cloud based solution and enter a growing market segment consisting of customers that are looking to deploy unified communications through a hosted model. The Company expects that the proposed acquisition will close in the third quarter of its fiscal 2012, subject to certain closing conditions.

Agito Networks, Inc. Acquisition

On October 19, 2010, the Company acquired Agito Networks, Inc. (“Agito”), a leader in platform-agnostic enterprise mobility, for total cash consideration of $11.4 million. The acquisition of Agito expands and enhances the Company's product offering by adding Agito's mobility solution to the Company's existing range of products, software and services. In accordance with ASC 805, Business Combinations, the total consideration paid for Agito was first allocated to the net tangible assets acquired based on the estimated fair values of the assets at the acquisition date.  The excess of the fair value of the consideration paid over the fair value of Agito's net tangible and identifiable intangible assets acquired resulted in the recognition of goodwill of approximately $7.4 million, primarily related to expected synergies to be achieved in connection with the acquisition. The goodwill recognized is deductible for income tax purposes.

The table below shows the allocation of the purchase price to tangible and intangible assets and liabilities assumed (in thousands):

Tangible assets	$	261
Goodwill		7,415
Intangible assets		4,220
Liabilities assumed		(521	)
	$	11,375

The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and Agito as though the companies were combined as of the beginning of fiscal year 2010. The pro forma financial information for the period presented also includes the business combination accounting effects resulting from the acquisition, including amortization charges from acquired intangible assets, adjustments to interest expenses for certain borrowings and exclusion of acquisition- related expenses and the related tax effects as though the companies were combined as of the beginning of fiscal year 2010. The pro forma financial information as presented below is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal year 2010.

	(Unaudited)
	Three Months Ended			Six Months Ended
(in thousands, except per share amounts)	December 31, 2010			December 31, 2010
Total revenue	$	47,832		$	92,451
Net loss		(4,106	)		(9,721	)
Basic and diluted earnings per share		(0.09	)		(0.21	)