Note 11. Goodwill and Other Intangibles

12 Months Ended

Feb. 02, 2013

Intangible Assets Disclosure [Text Block]

11.          Goodwill and other intangibles

The table below presents the balances of our intangible assets (in thousands):

	February 2, 2013			January 28, 2012
Acquired intangible assets	$	77,146		$	75,978
Purchased IP		23,450			22,204
Total		100,596			98,182
Accumulated amortization		(64,023	)		(52,526	)
Intangible assets, net	$	36,573		$	45,656

Impairment of intangible assets

We assess the carrying value of our 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 intangible assets due to continued reductions in our profitability and 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 our 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 impairment charge of $55.1 million in fiscal 2012.

As of February 2, 2013, due to continued reductions in our profitability, negative cash flows from operations and our restructuring measures adopted in fiscal 2013, we performed an impairment review of our intangible assets.  The results of this review indicated that certain purchased IP incorporated into discontinued products and products in development were impaired; as a result, we recorded an impairment charge for purchased IP of $8.2 million.  In addition, we recorded an impairment charge for certain software, equipment and leasehold improvements and prepaid licenses associated with such discontinued products of $2.6 million and $0.4 million, respectively.  The impairment related to developed products of $4.6 million was recorded in cost of revenue and the impairment related to products in development of $6.6 million was recorded in operating expenses in the accompanying consolidated statements of operations in fiscal 2013.

Impairment of goodwill and in-process research and development

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.  IP R&D is not subject to amortization and is tested for impairment annually or more frequently, if events or changes in circumstances indicate that the asset might be impaired.

As of October 29, 2011, we concluded that an interim review of the carrying value of our goodwill and IP R&D 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. As a result of this analysis, we determined that the carrying value of our goodwill and IP R&D was fully impaired, which resulted in an impairment charge of $45.1 million and $11.1 million, respectively, in fiscal 2012.  Subsequent to January 28, 2012, we have not capitalized any goodwill or IP R&D.

Intangible assets, subject to amortization, were as follows (in thousands, except for years): 

	February 2, 2013
	Gross Value		Impairment			Accumulated Amortization and Effect of Currency Translation			Net Value		Weighted Average Remaining Amortization Period (Years)
Acquired intangible assets:
Developed technology	$	76,995	$	(24,614	)	$	(34,923	)	$	17,458	3.6
Customer relationships		51,174		(30,486	)		(16,252	)		4,436	3.6
Trademarks		2,677		-			(1,982	)		695	5.9
Non-compete agreements		1,400		-			(1,400	)		-
Purchased IP - amortizing		22,866		(5,516	)		(9,466	)		7,884	2.4
Total amortizing		155,112		(60,616	)		(64,023	)		30,473	3.4
Purchased IP - not yet deployed		8,778		(2,678	)		-			6,100
In-process research and development		11,070		(11,070	)		-			-
Total intangibles	$	174,960	$	(74,364	)	$	(64,023	)	$	36,573

	January 28, 2012
	Gross Value		Impairment			Accumulated Amortization and Effect of Currency Translation			Net Value		Weighted Average Remaining Amortization Period (Years)
Acquired intangible assets:
Developed technology	$	75,827	$	(24,614	)	$	(28,455	)	$	22,758	4.7
Customer relationships		51,174		(30,486	)		(14,966	)		5,722	4.8
Trademarks		2,677		-			(1,805	)		872	6.6
Non-compete agreements		1,400		-			(1,400	)		-
Purchased IP - amortizing		8,395		-			(5,900	)		2,495	1.9
Total amortizing		139,473		(55,100	)		(52,526	)		31,847	4.8
Purchased IP - not yet deployed		13,809		-			-			13,809
In-process research and development		11,070		(11,070	)		-			-
Total intangibles	$	164,352	$	(66,170	)	$	(52,526	)	$	45,656

Amortization expense related to intangible assets was $11.6 million, $18.7 million and $19.6 million for fiscal 2013, 2012 and 2011, respectively.  As of February 2, 2013, we expect the amortization expense in future periods to be as follows (in thousands):

Fiscal years	Purchased IP-Amortizing		Developed Technology		Trademarks		Customer Relationships		Total
2014	$	3,438	$	5,767	$	119	$	1,265	$	10,589
2015		3,095		4,282		118		1,265		8,760
2016		1,351		3,957		118		1,109		6,535
2017		-		2,957		118		797		3,872
2018		-		495		118		-		613
Thereafter		-		-		104		-		104
Total	$	7,884	$	17,458	$	695	$	4,436	$	30,473