Note 8. Business Combinations

9 Months Ended

Nov. 02, 2013

Business Combinations [Abstract]

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):

	Purchase price (in thousands)			Estimated useful Life (in years)
Purchased tangible assets and liabilities
Accounts receivable	$	13,410
Inventory		13,643
Prepaid inventory		2,895
Prepaid third party support		2,466
Deposit with contract manufacturer		3,543
Property and equipment		2,553			1.5
Mask sets		1,438			3
Net liabilities		(1,489	)
Purchased identifiable intangible assets:
Developed technology		1,168			3
Gain on acquisition		(1,417	)
Cash consideration	$	38,210
Other consideration		-
Total consideration issued in the acquisition	$	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 and nine months ended November 2, 2013, net sales of approximately $9.8 million and $36.7 million, respectively, and an operating loss of approximately $2.9 million and $4.4 million, respectively, attributable to the DTV business, were included in the condensed consolidated results of operations. For the three and nine months ended October 27, 2012, net sales of approximately $27.8 million and $54.4 million, respectively, and an operating profit of approximately $1.2 million and operating loss of $0.9 million, respectively, 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 as of the beginning of the fiscal years of the periods presented. 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 nine months ended October 27, 2012 include non-recurring adjustments of $4.0 million of direct acquisition costs (in thousands, except per share data):

	Three Months Ended						Nine Months Ended
	November 2, 2013			October 27, 2012			November 2, 2013			October 27, 2012
Net revenue	$	54,394		$	63,905		$	106,696		$	195,358
Net loss		(2,978	)		(39,451	)		(12,302	)		(85,116	)
Basic and diluted net loss per share		(0.09	)		(1.18	)		(0.36	)		(2.58	)