Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Note 6. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the three years ended December 31, 2018 are as follows (in thousands):

	CPE			N & C			Enterprise			Total
Goodwill		1,391,171			1,003,654			—			2,394,825
Accumulated impairment losses		—			(378,656	)		—			(378,656	)
Balance as of December 31, 2016	$	1,391,171		$	624,998		$	—		$	2,016,169
Changes in year 2017:
Goodwill acquired, net		—			—			318,034			318,034
Impairment		—			(51,200	)		—			(51,200	)
Other		(4,491	)		—			—			(4,491	)
Balance as of December 31, 2017	$	1,386,680		$	573,798		$	318,034		$	2,278,512
Goodwill		1,386,680			1,003,654			318,034			2,708,368
Accumulated impairment losses		—			(429,856	)		—			(429,856	)
Balance as of December 31, 2017	$	1,386,680		$	573,798		$	318,034		$	2,278,512
Changes in year 2018:
Acquisition accounting adjustments		—			—			(29,061	)		(29,061	)
Impairment		—			(3,400	)		—			(3,400	)
Other		(5,863	)		454			—			(5,409	)
Balance as of December 31, 2018	$	1,380,817		$	570,852		$	288,973		$	2,240,642
Goodwill		1,380,817			1,004,108			288,973			2,673,898
Accumulated impairment losses		—			(433,256	)		—			(433,256	)
Balance as of December 31, 2018	$	1,380,817		$	570,852		$	288,973		$	2,240,642

During 2018, the Company recorded an adjustment of $29.1 million to goodwill related to the Ruckus Network acquisition. The Company also recorded a partial impairment of goodwill of $3.4 million related to its Cloud TV reporting unit, respectively, of which $1.2 million is attributable to the noncontrolling interest. This impairment was a result of the indirect effect of a change in accounting principle related to the adoption of new accounting standard Revenue from Contracts with Customers, resulting in changes in the composition and carrying amount of the net assets of our Cloud TV reporting unit. The partial impairment was included in impairment of goodwill on the Consolidated Statements of Income. Fair value was determined using a discounted cash flow model.

As of December 31, 2018, Cloud and Services reporting unit, which is included in the N&C segment, had a negative carrying amount of net assets of $(15.5) million. As of December 31, 2018, remaining goodwill allocated to this reporting unit was $49.9 million.

During 2017, as a result of a change in strategy for our Cloud TV reporting unit associated with the ActiveVideo acquisition, the Company expected lower future projected cash flows for the business, and as such, the Company recorded a partial impairment of $51.2 million for the amount by which the Cloud TV reporting unit carrying amount exceeded its fair value of which $17.9 million is attributable to noncontrolling interest. The partial impairment was included in impairment of goodwill and intangible assets on the Consolidated Statements of Income.

Intangible Assets

The gross carrying amount and accumulated amortization of the Company’s intangible assets as of December 31, 2018 and December 31, 2017 are as follows (in thousands):

	December 31, 2018						December 31, 2017
	Gross Amount		Accumulated Amortization		Net Book Value		Gross Amount		Accumulated Amortization		Net Book Value
Definite-lived intangible assets:
Customer relationships	$	1,762,750	$	952,308	$	810,442	$	1,672,470	$	780,655	$	891,815
Developed technology, patents & licenses		1,482,200		956,012		526,188		1,521,893		771,200		750,693
Trademarks, trade and domain names		75,772		64,257		11,515		87,472		41,885		45,587
Backlog		16,500		16,386		114		35,000		5,833		29,167
Sub-total	$	3,337,222	$	1,988,963	$	1,348,259	$	3,316,835	$	1,599,573	$	1,717,262
Indefinite-lived intangible assets:
Trademarks and trade names		55,400		—		55,400		—		—		—
In-process research and development		—		—		—		54,100		—		54,100
Sub-total		55,400		—		55,400		54,100		—		54,100
Total	$	3,392,622	$	1,988,963	$	1,403,659	$	3,370,935	$	1,599,573	$	1,771,362

During 2018, the Company recorded additional intangible assets (other than goodwill) of $28.2 million during the measurement period related to Ruckus Networks, for a total of $500.7 million, see Note 5 Business Acquisitions of Notes to the Consolidated Financial Statements for further discussion. In addition, an in-process research and development project of $4.1 million was reclassified to become a definite-lived asset upon completion of the associated research and development efforts during 2018.

During 2017, due to lower projected cashflows of its Cloud TV reporting unit, the Company recorded a $3.8 million partial impairment of indefinite-lived trademarks and tradenames, determined using a “relief from royalty income” approach. The partial impairment was included in impairment of goodwill and intangible assets on the Consolidated Statements of Income. The remaining carrying amount was reclassified as a definite-lived intangible asset.

Amortization expense is reported in the Consolidated Statements of Income within cost of sales and operating expenses. The following table presents the amortization of intangible assets (in thousands):

	Years Ended December 31,
	2018		2017		2016
Cost of sales	$	3,558	$	3,174	$	2,963
Selling, general & administrative expense		3,955		3,835		4,048
Amortization of acquired intangible assets		383,561		375,407		397,464
Total	$	391,074	$	382,416	$	404,475

The estimated total amortization expense for finite-lived intangibles for each of the next five fiscal years is as follows (in thousands):

2019	$	333,882
2020		322,037
2021		187,250
2022		149,949
2023		106,749
Thereafter		248,392