Note 8. Business Combinations

3 Months Ended

May 04, 2013

Business Combination Disclosure [Text Block]

8.             Business Combinations

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 $38.2 million, subject to 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”). Trident filed for voluntarily petition under Chapter 11 bankruptcy on January 4, 2012. In April 2012, we were selected as the successful bidder to acquire Trident’s DTV business. The purchase price of the Trident acquisition was paid in cash.

In connection with the Trident acquisition, 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, Germany, 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.

The addition of Trident's industry-leading DTV media processor System-on-a-Chip, or SoC, products for next-generation Internet-enabled digital televisions has significantly expanded our served available market. DTV products complement our existing IPTV set-top-box and connected media player SoC solutions and augment our ability to develop innovative solutions for the anticipated convergence of IP-video delivery across any device within the home.

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 consolidated statements of operations as a gain on acquisition in fiscal 2013.

The purchase price in the transaction was allocated as follows (in thousands, except years):

	Amount
Purchase consideration:
Cash	$	38,210
Tangible assets acquired and liabilities assumed	$	38,431
Identifiable intangible assets:				Estimated Useful Lives (years)
Developed technology		1,168			3
Gain on acquisition		(1,389	)
Total consideration	$	38,210

The results of operations of the DTV business have been included in the consolidated results of operations from May 4, 2012.

For the three months ended May 4, 2013, net sales of approximately $13.5 million and an operating loss of approximately $0.7 million, attributable to the DTV business, were included in the consolidated results of operations. We believe that Trident and/or a vendor of Trident owed us $1.8 million and $4.5 million as of May 4, 2013 and February 2, 2013, respectively, which are included in “Prepaid expenses and other current assets” in the condensed consolidated balance sheets. Trident paid us $2.7 million during the three months ended May 4, 2013. As further described in Note 13, in April 2013, we initiated a lawsuit against Trident and a vendor to fully recover the outstanding balance of $1.8 million that we believe is due to us as of May 4, 2013.

The following unaudited pro forma consolidated results of operations give effect to the acquisition of the DTV business as if it had occurred on January 30, 2011 (in thousands, except per share data):

	Three Months Ended
	May 4, 2013			April 28, 2012
Net revenue	$	52,540		$	63,202
Net loss		(4,533	)		(32,247	)
Basic and diluted net loss per share	$	(0.13	)	$	(0.99	)

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.