Note 8. Acquisitions

6 Months Ended

Jul. 28, 2012

Business Combination Disclosure [Text Block]

8. Acquisitions

On May 4, 2012, we completed our acquisition of certain assets from Trident Microsystems, Inc. and certain of its subsidiaries (collectively referred to as “Trident”) used in or related to Trident’s digital television and PC television businesses (the “DTV Business”) for a purchase price of $21.0 million plus additional cash consideration of $18.7 million as a result of adjustments based on the closing asset balance of the DTV Business, plus the assumption of certain employee related liabilities pursuant to an Asset Purchase Agreement dated March 23, 2012 (the “Purchase Agreement”).  The addition of Trident's industry-leading DTV media processor System-on-a-Chip, or SoC, products for next-generation Internet-enabled digital televisions is expected to significantly expand our served available market.  DTV products complement our existing IPTV set-top-box and connected media player SoC solutions and will augment our ability to develop innovative solutions for the anticipated convergence of IP-video delivery across any device within the home.

Pursuant to the Purchase Agreement, we acquired all of Trident’s DTV business products, certain licensed intellectual property rights, specified tangible assets and other assets specified in the Purchase Agreement.  We also acquired the right to use certain facilities of Trident under short-term facilities use agreements for facilities located in Shanghai and Beijing, China, The Netherlands, Taiwan and California.  We hired approximately 320 employees whose services are used in the DTV Business.  We also entered into a transition services agreement with Trident under which Trident agreed to provide certain services to us following the closing.  The purchaser of Trident's set-top box business also agreed to provide transition support services to us.

In connection with this acquisition, we obtained a valuation of the assets acquired in order to allocate the purchase price.  The total purchase price was allocated to the net tangible and identified intangible assets based upon fair values as of May 4, 2012.  The fair value of the tangible assets and identifiable intangible assets acquired, net of liabilities assumed, exceeded the purchase price by $1.4 million, which was recognized in the condensed statements of operations as a gain on acquisition.  The purchase price in the transaction was allocated as follows (in thousands, except years):

	Amount
Purchase consideration:
Cash	$	39,740
Tangible assets acquired and liabilities assumed	$	40,019
Estimated Useful Life (in years)
Identifiable intangible assets:
Developed technology		1,138		3
Gain on acquisition		(1,417	)
Total consideration	$	39,740

Beginning in the second quarter of fiscal 2013, the results of operations of the DTV business are included in the condensed consolidated results of operations.  For the three and six months ended July 28, 2012, net sales of approximately $26.6 million and operating loss of approximately $2.1 million attributable to the DTV business were included in the condensed consolidated results of operations.

The following unaudited pro forma consolidated results of operations give effect to the acquisition of the DTV business as if it had occurred at January 30, 2011.  The unaudited pro forma consolidated results of operations are provided for informational purposes only and do not purport to represent actual consolidated results of operations had the acquisition occurred on the date assumed, nor are these financial statements necessarily indicative of future consolidated results of operations.  We expect to incur costs and realize benefits associated with integrating the operations of the DTV business.  The unaudited pro forma consolidated results of operations do not reflect the cost of any integration activities or any benefits that may result from operating efficiencies or revenue synergies.  The pro forma consolidated results of operations for the three and six months ended July 28, 2012 and July 30, 2011 include non-recurring adjustments of $3.5 million and $4.0 million of direct acquisition costs for the three and six months ended July 28, 2012, respectively (in thousands, except per share data).

	Three Months Ended				Six Months Ended
	July 28, 2012		July 30, 2011		July 28, 2012		July 30, 2011
Net revenue	$	68,251	$	85,877	$	131,453	$	202,778
Net loss		(13,418)		(32,442)		(45,665)		(45,709)
Basic and diluted net loss per share		(0.41)		(1.02)		(1.39)		(1.44)

On March 21, 2011, we executed a definitive agreement to acquire certain assets, including intangible assets and products, from a business division of a large computer manufacturer for $5.0 million in cash, which we paid on May 3, 2011.

The assets we acquired include a low-power High Definition, or HD, video encoder processor aimed at capturing HD video for visual telephony between set-top boxes, connected media players, Voice over Internet Protocol, or VoIP, devices, video phones, video conferencing TV’s and video surveillance devices.

In connection with this acquisition, we obtained a valuation of the assets acquired in order to allocate the purchase price.  The total purchase price was allocated to the net tangible and identified intangible assets based upon fair values as of March 21, 2011.  The excess purchase price over the value of the net tangible and identifiable intangible assets was recorded as goodwill.  The purchase price in the transaction was allocated as follows (in thousands, except years):

	Amount
Purchase consideration:
Cash	$	5,000
Net tangible assets	$	752
Estimated Useful Life
Identifiable intangible assets:
Developed technology:
Technology		1,250	5 years
Technology leveraged		1,680	8 years
Customer relationships		750	5 years
In-process research and development		370	—
Goodwill		198	—
Total consideration	$	5,000