Note 9. Goodwill and Intangible assets

9 Months Ended

Oct. 29, 2011

Goodwill and Intangible Assets Disclosure [Text Block]

9.	Goodwill and Intangible assets

Goodwill

The following table summarizes the activity related to the carrying value of our goodwill during the nine months ended October 29, 2011 (in thousands):

	October 29, 2011
Balance at January 29, 2011	$	44,910
Acquisition		198
Goodwill impairment		(45,108)
Balance at October 29, 2011	$	--

We review goodwill for impairment annually, as of the last day of our fiscal year, and whenever events or changes in circumstances indicate the carrying value may not be recoverable. As of October 29, 2011, we concluded that an interim review of the carrying value of our goodwill and indefinite-lived intangible assets should be performed due to continued reductions in our profitability, sales forecasts and market capitalization. In performing this review, we used both the income and the market valuation methodologies. In applying the income approach, we developed a forecast of the discounted cash flows expected to be generated by our operating unit and in applying the market approach, we utilized the current value of our publically traded common stock adjusted for a control premium. The result of this review showed that the fair value of our reporting unit was less than its net book value and therefore indicated a possible impairment. Therefore, we performed the second step of the analysis by allocating the fair value of our reporting unit to all of its assets and liabilities on a fair value basis to determine the amount of the impairment. This analysis resulted in a goodwill impairment charge of $45.1 million and an impairment charge for our indefinite-lived in-process research and development intangible assets of $11.1 million for the three and nine months ended October 29, 2011.

Intangible assets

Acquired intangible assets, subject to amortization, were as follows as of October 29, 2011 and January 29, 2011 (in thousands, except for years):

	As of October 29, 2011

	Gross Value		Impairment			Accumulated Amortization and Effect of Currency Translation			Net Value		Weighted average remaining amortization period (years)
Developed technology	$	75,827	$	(24,614	)	$	(26,950	)	$	24,263		4.9
Customer relationships		51,173		(30,486	)		(14,648	)		6,039		5.1
Trademarks		2,678		—			(1,750	)		928		6.7
Non-compete agreements		1,400		—			(1,400	)		—
		131,078		(55,100	)		(44,748	)		31,230		5
In-process research and development		11,070		(11,070	)		—			—		—
	$	142,148	$	(66,170	)	$	(44,748	)	$	31,230

	As of January 29, 2011
		Gross Value		Accumulated Amortization and Effect of Currency Translation		Net Value		Weighted average remaining amortization period (years)
Developed technology		$	72,910	$	(18,770)	$	54,140	5.7
Customer relationships			50,423		(9,146)		41,277	6.0
Trademarks			2,677		(1,166)		1,511	5.4
Non-compete agreements			1,400		(1,400)		—	—
			127,410		(30,482)		96,928	5.8
In-process research and development			10,700		—		10,700	—
		$	138,110	$	(30,482)	$	107,628

We assess the carrying value of long-lived assets whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. As of October 29, 2011, we performed a review of the carrying value of our acquired intangible assets due to continued reductions in our profitability, sales forecasts and negative cash flows from operations. In performing this review, we developed a forecast of the total undiscounted cash flow expected to be generated by each acquired intangible asset group and compared the result to the carrying value. The results of this review indicated that two of these intangible asset groups, consisting primarily of certain developed technology and customer relationship intangibles related to our CopperGate acquisition, were not fully recoverable. Therefore, we performed the second step of the analysis by developing a discounted cash flow analysis for each of the individual identifiable assets in these two groups to determine the amount of impairment. Our analysis resulted in an intangible asset impairment charge of $55.1 million for the three and nine months ended October 29, 2011. In addition, as a result of our review of indefinite-lived intangible assets, we recorded an impairment charge for our in-process research and development intangible assets of $11.1 million for the three months ended October 29, 2011.

Amortization expense related to acquired intangible assets was $4.8 million and $14.3 million for the three and nine months ended October 29, 2011, respectively, and $4.6 million and $13.8 million for the three and nine months ended October 30, 2010, respectively. As of October 29, 2011, we expect amortization expense in future periods to be as follows (in thousands):

	Developed		Customer
Fiscal year	Technology		Relationships		Trademarks		Total
Remainder of 2012	$	1,523	$	317	$	56	$	1,896
2013		6,115		1,265		178		7,558
2014		5,359		1,265		119		6,743
2015		3,892		1,265		118		5,275
2016		3,860		1,109		118		5,087
Thereafter		3,514		818		339		4,671
	$	24,263	$	6,039	$	928	$	31,230

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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