EX-99.1 2 f52287exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
(PHOENIX LOGO)
PHOENIX TECHNOLOGIES LTD. REPORTS

SECOND QUARTER FISCAL 2009 FINANCIAL RESULTS
MILPITAS, Calif.: April 30, 2009 — Phoenix Technologies Ltd. (NASDAQ: PTEC), the global leader in core systems software and embedded technologies, today reported financial results for the second quarter of fiscal year 2009 ended March 31, 2009, including:
— Total revenues of $15.8 million, compared to $17.1 million in the second quarter of fiscal 2008;

— GAAP net loss of ($55.1 million), or ($1.93) per share, compared to a net loss of ($1.4 million), or ($0.05) per share in the second quarter of fiscal 2008; and

— Non-GAAP net loss, adjusted to exclude charges for amortization of intangible assets, restructuring charges, stock-based compensation, and impairment of goodwill and intangible assets, of ($5.6 million), or ($0.20) per share, compared to non-GAAP net income of $2.3 million, or $0.08 per diluted share in the second quarter of fiscal 2008.
“Our second quarter performance reflects the substantial impact of the weakened global economy on the PC industry,” said President and CEO Woody Hobbs. “Inventory reductions across the global supply chain and reduced end-user PC demand drove weaker core systems revenues, and since we continued to fund important market adoption initiatives for our new products, our result was negative cash flow from operations for the quarter. In advance of these expected results, we took decisive actions to reduce our cost structure and improve operational efficiency.”
Richard Arnold, COO and CFO, said, “Our second quarter results include restructuring costs associated with our previously announced workforce and infrastructure rationalization as we moved to realign costs to revenue expectations in light of the current weak demand environment. Additionally, we incurred non-cash charges associated with the impairment of goodwill and other intangible assets which arose principally as a result of the widespread decline in corporate valuations that has occurred since the crisis in global equity markets commenced in the third quarter of calendar year 2008.”
In the course of preparing its financial statements for the quarter ended March 31, 2009, the Company concluded that, based on a combination of factors including: the recent and rapid deterioration of global economic conditions; the substantial decline in the Company’s market capitalization; the Company’s operating results; and management’s decisions to prioritize allocation of resources and to discontinue investments in certain products and services, there were sufficient indicators to require an interim

 


 

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impairment analysis of goodwill and other long-lived assets. As will be discussed in more detail in its Form 10-Q for the quarter ended March 31, 2009, the company recorded second quarter impairment charges of $33.2 million for goodwill and $11.9 million for other long-lived intangible assets in accordance with Statement of Financial Accounting Standards (SFAS) 142 “Goodwill and Other Intangible Assets” and SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” respectively.
Mr. Hobbs concluded, “Despite the current weakness in the PC industry, we remain committed to investing in our new products and services as we pursue a market opportunity that is several times greater than that of our core systems software products. Meanwhile, cost reduction initiatives we have undertaken both during and subsequent to the close of the quarter provide us with a right-sized operating platform from which to execute on our growth strategy. We are confident that there is broad industry and consumer interest in our new products and expect to gain further momentum as we achieve key milestones in the current quarter, including the first OEM deployments of both our FailSafe™ and HyperSpace™ products. We are also seeing some encouraging early signs of a return to more normal production levels across the PC supply chain.”
Second Quarter Fiscal 2009 Financial Summary
Total revenues for the second quarter of fiscal 2009 ended March 31, 2009 were $15.8 million, as compared with $17.1 million in the second fiscal quarter of 2008 ended March 31, 2008. Gross margin for the second fiscal quarter of 2009 was $0.3 million, compared to gross margin of $15.3 million for the second fiscal quarter of 2008. Gross margin declined principally as a result of the amortization and impairment charges recorded on purchased intangible assets, which generally relates to assets acquired during fiscal year 2008. Operating expenses for the second fiscal quarter of 2009 were $55.6 million, including an impairment of goodwill totaling $33.2 million. This compares to operating expenses of $15.0 million for the second fiscal quarter of 2008. Net loss for the second fiscal quarter of 2009 was $55.1 million, or ($1.93) per share, as compared to a net loss of $1.4 million, or ($0.05) per share, in the year-ago period. The Company ended the second fiscal quarter of 2009 with cash and equivalents of $22.6 million, down from $31.2 million at the end of the first fiscal quarter ended December 31, 2008.
Conference Call
The Company will conduct its regularly scheduled financial announcement conference call on Thursday, April 30, 2009, at 5:30 a.m. PT (8:30 a.m. ET). Investors are invited to listen to a live audio

 


 

(PHOENIX LOGO)
web cast of the quarterly conference call on the investor relations section of the Company’s website at http://investor.phoenix.com/webcasts.cfm, which will also contain supplemental financial information related to the conference call. A replay of the web cast will be available two hours after the conclusion of the call and will be available for 30 calendar days. Alternatively, investors can listen to the conference call via telephone at: 877-941-6009 (U.S./Canada) or 480-629-9771 (international). An audio replay of the conference call will also be available approximately two hours after the conclusion of the call and will be available until 8:30 a.m. PT on Friday, May 29, 2009. The audio replay can be accessed by dialing 800-406-7325 (U.S./Canada) or 303-590-3030 (international) and entering conference call ID 4041377.
About Phoenix Technologies
Phoenix Technologies Ltd. (NASDAQ: PTEC), the leader in PC 3.0™ products, services and embedded technologies, pioneers open standards and delivers innovative solutions that enable the PC industry’s top system builders and specifiers to differentiate their systems, reduce time-to-market and increase their revenues. The Company’s flagship products and services — SecureCore, Embedded BIOS, Phoenix FailSafe, HyperSpace and eSupport — are revolutionizing the PC user experience by delivering unprecedented performance, security, reliability, continuity, and ease-of-use. The Company established industry leadership and created the PC clone industry with its original BIOS product in 1983. Phoenix has 159 technology patents and 136 pending applications, and has shipped in over one billion systems. Phoenix is headquartered in Milpitas, California with offices worldwide. For more information, visit http://www.phoenix.com.
Phoenix, Phoenix Technologies, Phoenix SecureCore, Embedded BIOS, Phoenix FailSafe, HyperSpace, eSupport, PC 3.0 and the Phoenix Technologies logo are trademarks and/or registered trademarks of Phoenix Technologies Ltd. All other marks referenced herein are the property of their respective owners.
Use of Non-GAAP Financial Information
To supplement Phoenix’s consolidated condensed financial statements presented on a GAAP basis, Phoenix also presents non-GAAP net income (loss) information in this press release. The adjustments in the current quarter consist principally of impairment charges associated with goodwill and other long-lived intangible assets in accordance with SFAS 142 and 144, respectively, non-cash stock compensation expense as required according to SFAS 123(R), restructuring charges primarily associated with the reduction in force and closure of the Company’s facility in Tel Aviv, Israel and the amortization of intangible assets. These non-GAAP adjustments, as well as management’s reasons for providing non-GAAP information, are more fully described in the reconciliation between net income (loss) on a GAAP basis and non-GAAP net income (loss) provided in the financial statements that accompany this press release.
Safe Harbor
The statements set forth above include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding our ability to improve our financial performance, the deployments of our FailSafe and HyperSpace products, the level of industry and consumer interest in our new products and market trends. These statements involve risk and uncertainties, including: demand for our products and services in adverse economic conditions; our dependence on key customers; our ability to successfully enhance existing products and develop and market new products and technologies; our

 


 

(PHOENIX LOGO)
ability to achieve and maintain profitability and positive cash flow from operations; our ability to meet our capital requirements in the future; our ability to attract and retain key personnel; product and price competition in our industry and the markets in which we operate; our ability to successfully compete in new markets where we do not have significant prior experience; our ability to maintain the average selling price of our Core System Software for Netbooks; end-user demand for products incorporating our products and services; the ability of our customers to introduce and market new products that incorporate our products and services; our ability to generate additional capital on terms acceptable to us; risks associated with any acquisition strategy that we might employ; results of litigation; failure to protect our intellectual property rights; changes in our relationship with leading software and semiconductor companies; the rate of adoption of new operating system and microprocessor design technology; the volatility of our stock price; risks associated with our international sales and operating internationally, including currency fluctuations, acts of war or terrorism, and changes in laws and regulations relating to our employees in international locations; whether future restructurings become necessary; our ability to increase the number of volume purchase agreements and pay-as-you-go arrangements with customers; fluctuations in our operating results; the effects of any software viruses or other breaches of our network security; our ability to convert free users to paid customers and retain customers for our subscription services; storage of confidential customer information; our ability to effectively manage our rapid growth; defects or errors in our products and services; consolidation in the industry we operate in; internet infrastructure; risk associated with usage of open source software; our dependence on third party service providers; any material weakness in our internal controls over financial reporting; changes in financial accounting standards and our cost of compliance; business disruptions due to acts of war, power shortages and unexpected natural disasters; trends regarding the use of the x86 microprocessor architecture for personal computers and other digital devices; and changes in our effective tax rates. For a further list and description of risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements in this release, we refer you to the Company’s filings with the Securities and Exchange Commission, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q. All forward-looking statements included in this document are based upon assumptions, forecasts and information available to the Company as of the date hereof, and the Company assumes no obligation to update any such forward-looking statements.
Investor Relations Contacts:
Phoenix Technologies Ltd.
Richard Arnold
Chief Operating Officer and Chief Financial Officer
Tel. +1 408 570 1256
investor_relations@phoenix.com
The Piacente Group, Investor Relations
Sanjay M. Hurry
Tel. +1 212 481 2050
phoenix@thepiacentegroup.com
SOURCE: Phoenix Technologies Ltd.

 


 

PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)
(unaudited)
                 
    March 31,     September 30,  
    2009     2008  
Assets
               
Current assets:
               
Cash and cash equivalents
  $ 22,619     $ 37,721  
Accounts receivable, net of allowances
    7,594       6,246  
Other assets — current
    8,399       8,190  
 
           
Total current assets
    38,612       52,157  
 
               
Property and equipment, net
    5,069       4,125  
Purchased technology and other intangible assets, net
    8,427       22,323  
Goodwill
    21,926       54,943  
Other assets — noncurrent
    2,948       2,994  
 
           
Total assets
  $ 76,982     $ 136,542  
 
           
 
               
Liabilities and stockholders’ equity
               
Current liabilities:
               
Accounts payable
  $ 2,049     $ 2,855  
Accrued compensation and related liabilities
    3,938       6,050  
Deferred revenue
    16,192       15,010  
Income taxes payable — current
    3,741       4,099  
Accrued restructuring charges — current
    440       658  
Other liabilities — current
    9,802       10,318  
 
           
Total current liabilities
    36,162       38,990  
 
               
Accrued restructuring charges — noncurrent
    46       8  
Income taxes payable — noncurrent
    14,391       13,629  
Other liabilities — noncurrent
    2,557       2,508  
 
           
Total liabilities
    53,156       55,135  
 
               
Stockholders’ equity:
               
Preferred stock
           
Common stock
    30       29  
Additional paid-in capital
    241,918       235,562  
Accumulated deficit
    (126,278 )     (61,786 )
Accumulated other comprehensive loss
    175       (466 )
Less: Cost of treasury stock
    (92,019 )     (91,932 )
 
           
Total stockholders’ equity
    23,826       81,407  
 
           
Total liabilities and stockholders’ equity
  $ 76,982     $ 136,542  
 
           
See notes to unaudited condensed consolidated financial statements


 

PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)
(unaudited)
                                 
    Three months ended March 31,     Six months ended March 31,  
    2009     2008     2009     2008  
Revenues:
                               
License fees
  $ 12,628     $ 14,818     $ 27,112     $ 30,227  
Subscription fees
    743             1,191        
Service fees
    2,447       2,242       4,881       4,197  
 
                       
Total revenues
    15,818       17,060       33,184       34,424  
 
                               
Cost of revenues:
                               
License fees
    198       83       286       242  
Subscription fees
    446             752        
Service fees
    1,992       1,719       4,030       3,517  
Amortization of purchased intangible assets
    910             2,053       71  
Impairment of purchased intangible assets
    11,943             11,943        
 
                       
Total cost of revenues
    15,489       1,802       19,064       3,830  
 
                               
Gross margin
    329       15,258       14,120       30,594  
 
                               
Operating expenses:
                               
Research and development
    10,591       6,569       21,458       11,672  
Sales and marketing
    5,740       2,769       11,149       5,640  
General and administrative
    4,998       5,586       10,634       9,513  
Restructuring
    1,049       44       1,142       113  
Impairment of goodwill
    33,213             33,213        
 
                       
Total operating expenses
    55,591       14,968       77,596       26,938  
 
                       
 
                               
Income (loss) from operations
    (55,262 )     290       (63,476 )     3,656  
 
                               
Interest and other income (expenses), net
    335       (403 )     605       274  
 
                       
Income (loss) before income taxes
    (54,927 )     (113 )     (62,871 )     3,930  
 
                               
Income tax expense
    221       1,252       1,620       2,803  
 
                       
Net income (loss)
  $ (55,148 )   $ (1,365 )   $ (64,491 )   $ 1,127  
 
                       
 
                               
 
                            .  
Earnings (loss) per share:
                               
Basic
  $ (1.93 )   $ (0.05 )   $ (2.27 )   $ 0.04  
Diluted
  $ (1.93 )   $ (0.05 )   $ (2.27 )   $ 0.04  
 
                               
Shares used in earnings (loss) per share calculation:
                               
Basic
    28,560       27,431       28,465       27,291  
Diluted
    28,560       27,431       28,465       29,114  
See notes to unaudited condensed consolidated financial statements
Phoenix Confidential

 


 

PHOENIX TECHNOLOGIES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)
(unaudited)
                                         
    Three months ended        
    March 31,     December 31,     March 31,     Six months ended March 31,  
    2009     2008     2008     2009     2008  
Cash flows from operating activities:
                                       
Net income (loss)
  $ (55,148 )   $ (9,343 )   $ (1,365 )   $ (64,491 )   $ 1,127  
Reconciliation to net cash provided by (used in) operating activities:
                                       
Depreciation and amortization
    1,417       1,618       501       3,035       1,051  
Stock-based compensation
    2,423       3,131       3,665       5,554       4,687  
Loss from disposal of fixed assets
    (4 )                 (4 )     33  
Impairment of purchased intangible assets
    11,943                   11,943        
Impairment of goodwill
    33,213                   33,213        
Change in operating assets and liabilities:
                                       
Accounts receivable
    (2,588 )     1,350       942       (1,238 )     2,261  
Prepaid royalties and maintenance
    17       (142 )     3       (125 )     32  
Other assets
    621       (642 )     (882 )     (21 )     (550 )
Accounts payable
    (1,290 )     568       (177 )     (722 )     (3 )
Accrued compensation and related liabilities
    637       (2,527 )     645       (1,890 )     (288 )
Deferred revenue
    1,261       45       2,267       1,306       2,464  
Income taxes
    (152 )     599       1,755       447       3,207  
Accrued restructuring charges
    95       (256 )     (246 )     (161 )     (1,476 )
Other accrued liabilities
    (447 )     (441 )     348       (888 )     878  
 
                             
Net cash provided by (used in) operating activities
    (8,002 )     (6,040 )     7,456       (14,042 )     13,423  
 
                             
 
                                       
Cash flows from investing activities:
                                       
Purchases of property and equipment and other intangible assets
    (155 )     (1,304 )     (316 )     (1,459 )     (931 )
Acquisition of businesses, net of cash acquired
          (204 )           (204 )      
 
                             
Net cash used in investing activities
    (155 )     (1,508 )     (316 )     (1,663 )     (931 )
 
                             
 
                                       
Cash flows from financing activities:
                                       
Proceeds from stock purchases under stock option and stock purchase plans
          804       1,355       804       3,550  
Repurchase of common stock
    (52 )     (35 )           (87 )      
 
                             
Net cash provided by (used in) financing activities
    (52 )     769       1,355       717       3,550  
 
                             
 
                                       
Effect of changes in exchange rates
    (391 )     277       191       (114 )     238  
 
                             
Net increase (decrease) in cash and cash equivalents
    (8,600 )     (6,502 )     8,686       (15,102 )     16,280  
Cash and cash equivalents at beginning of period
    31,219       37,721       70,299       37,721       62,705  
 
                             
Cash and cash equivalents at end of period
  $ 22,619     $ 31,219     $ 78,985     $ 22,619     $ 78,985  
 
                             
See notes to unaudited condensed consolidated financial statements

 


 

PHOENIX TECHNOLOGIES LTD.
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (LOSS) AND
NET EARNINGS (LOSS) PER SHARE

(in thousands, except per share data)
(unaudited)
                                         
    Three months ended        
    March 31,     December 31,     March 31,     Six months ended March 31,  
    2009     2008     2008     2009     2008  
GAAP net income (loss)
  $ (55,148 )   $ (9,343 )   $ (1,365 )   $ (64,491 )   $ 1,127  
Equity-based compensation expense under SFAS No. 123(R) (1)
    2,423       3,131       3,665       5,554       4,687  
Restructuring (2)
    1,049       93       44       1,142       113  
Amortization of purchased intangible assets (3)
    910       1,143             2,053       71  
Impairment of purchased intangible assets (4)
    11,943                   11,943        
Impairment of goodwill (4)
    33,213                   33,213        
 
                             
Non-GAAP net income (loss)
  $ (5,610 )   $ (4,976 )   $ 2,344     $ (10,586 )   $ 5,998  
 
                             
 
                                       
Non-GAAP earnings (loss) per share:
                                       
Basic
  $ (0.20 )   $ (0.18 )   $ 0.09     $ (0.37 )   $ 0.22  
Diluted
  $ (0.20 )   $ (0.18 )   $ 0.08     $ (0.37 )   $ 0.21  
 
                                       
Shares used in earnings (loss) per share calculation:
                                       
Basic
    28,560       28,371       27,431       28,465       27,291  
Diluted
    28,560       28,371       29,514       28,465       29,114  
 
    These adjustments reconcile the Company’s GAAP net income (loss) to the reported non-GAAP net income (loss). The Company believes that presentation of net income (loss) and net income (loss) per share excluding equity-based compensation, restructuring costs, amortization of purchased intangible assets and impairment of purchased intangible assets and of goodwill provides meaningful supplemental information to investors, as well as management, that is indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods as well as comparison with other companies. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and budgeting purposes. Equity-based compensation is excluded from non-GAAP results because management believes it is useful to investors to understand how the expenses associated with SFAS No. 123(R) are reflected in net income (loss). Restructuring costs are excluded from non-GAAP financial results since they may not be considered directly related to our ongoing business operations. Amortization of purchased intangible assets, principally purchased technology, are excluded from non-GAAP financial results since it generally cannot be changed by management after an acquisition has occurred. Impairment of purchased intangible assets and goodwill are excluded from non-GAAP financial results since management believes that these charges are not directly related to the underlying performance of the Company’s core business operations and eliminating these will assist investors to compare current versus past operational performance. These non-GAAP measures should not be viewed as a substitute for the Company’s GAAP results, and may be different than non-GAAP measures used by other companies.
 
(1)   This represents equity-based compensation expense related to the Company’s adoption of SFAS No. 123(R) beginning October 1, 2005. For the three months ended March 31, 2009, equity-based compensation was $2.4 million, allocated as follows: $0.1 million to cost of revenues, $0.7 million to research and development, $0.3 million to sales and marketing and $1.3 million to general and administrative. For the three months ended December 31, 2008, equity-based compensation was $3.1 million, allocated as follows: $0.2 million to cost of revenues, $0.9 million to research and development, $0.4 million to sales and marketing and $1.6 million to general and administrative. For the three months ended March 31, 2008, equity-based compensation was $3.7 million, allocated as follows: $0.1 million to cost of goods sold, $1.0 million to research and development, $0.4 million to sales and marketing and $2.2 million to general and administrative. For the six months ended March 31, 2009, equity-based compensation was $5.6 million, allocated as follows: $0.3 million to cost of goods sold, $1.6 million to research and development, $0.8 million to sales and marketing and $2.9 million to general and administrative. For the six months ended March 31, 2008, equity-based compensation was $4.7 million, allocated as follows: $0.2 million to cost of goods sold, $1.1 million to research and development, $0.6 million to sales and marketing and $2.8 million to general and administrative. Management believes that it is useful to investors to understand how the expenses associated with the adoption of SFAS No. 123(R) are reflected in net income.
 
    The quarter ended March 31, 2008 is the first quarter during in which the Company reported equity-based compensation expense under SFAS No. 123(R) in respect of stock options granted to the Company’s four most senior executives as approved by the Company’s stockholders on January 2, 2008 (the “Performance Options”). Of the $2.4 million of equity-based compensation for the three months ended March 31, 2009, $1.0 million was due to equity-based compensation expense which resulted from the grant of the Performance Options. Of the $3.1 million of equity-based compensation for the three months ended December 31, 2008, $1.6 million was due to equity-based compensation expense which resulted from the grant of the Performance Options. Of the $3.7 million of equity-based compensation for the three months ended March 31, 2008, $2.0 million was due to equity-based compensation expense which resulted from the grant of the Performance Options. Of the $5.6 million of equity-based compensation for the six months ended March 31, 2009, $2.5 million was due to equity-based compensation expense which resulted from the grant of the Performance Options. Of the $4.7 million of equity-based compensation for the three months ended March 31, 2008, $2.0 million was due to equity-based compensation expense which resulted from the grant of the Performance Options.
 
(2)   The Company has incurred restructuring expenses, included in its GAAP presentation of operating expenses, primarily due to workforce related charges such as payments for severance and benefits and estimated costs of exiting and terminating facility lease commitments related to formal restructuring plans approved by the Board of Directors/management in June 2006, September 2006, November 2006, September 2007, February 2009 and March 2009. For the three months ended March 31, 2009, restructuring costs totaled $1.0 million, which relates mainly to the severance and other employee related costs incurred in relation to the two restructuring plans announced during the quarter ended March 31, 2009. As part of these restructuring activities, the Company reduced its global workforce by 96 employees and closed its facility in Tel Aviv, Israel. For the three months ended December 31, 2008, costs related to exiting and terminating facilities leases totaled approximately $0.1 million due mainly to changes in the projected operating expenses over the remaining term of the leases. For the three months ended March 31, 2008, cost related to exiting and terminating 2 facility leases totaled approximately $47,000 and severance and benefits decreased for over accrued employer taxes of approximately $3,000. For the six months ended March 31, 2009, restructuring costs totaled $1.1 million, out of which $1.0 million relates to the severance and other employee related cost incurred in relation to the two restructuring plans announced during the quarter ended March 31, 2009 and $0.1 million relates to facilites and lease costs in respect of the earilier restructuring plans. For the six months ended March 31, 2008, restructuring costs were $0.1 million. The severance and benefits costs totaled approximately $80,000. The facilities lease costs totaled approximately $30,000. The Company believes that these items do not reflect expected future operating expenses nor does the Company believe that they provide a meaningful evaluation of current versus past operational performance.
 
(3)   This represents amortization of purchased intangible assets, principally purchased technology, in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”) and SFAS No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed” (“SFAS No. 86”). For the three months ended March 31, 2009, amortization of purchased intangible assets was $0.9 million allocated to cost of goods sold, which primarily include the amortization of the acquired assets from recent acquisitions. For the three months ended December 31, 2008, amortization of purchased intangible assets was $1.1 million allocated to cost of goods sold, which primarily includes the amortization of the acquired assets from recent acquisitions. For the three months ended March 31, 2008, there was no amortization of purchased intangible assets. For the six months ended March 31, 2009, amortization of purchased intangible assets was $2.1 million, allocated to cost of goods sold, which prmarily include the amortization of the acquired assets from recent acquisitions. For the six months ended March 31, 2008, amortization of purchased intangible assets was $0.1 million allocated to cost of goods sold. Future acquisitions may cause amortization expenses to be higher than these amounts.
 
(4)   This represents impairment of goodwill and purchased intangible assets in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”) and SFAS No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed” (“SFAS No. 86”). For the three months and six months ended March 31, 2009, impairment of purchased intangible assets was $11.9 million and impairment of goodwill was $33.2 million, which include the impairments of the acquired assets from recent acquisitions. There were no impairment charges recorded on purchased intangible assets or goodwill in the other periods presented. SFAS 142 and SFAS 144 adjustments typically occur when the financial performance of the business utilizing the affected assets falls below certain thresholds or certain assets are designated as held for sale. Accordingly, SFAS 142 and SFAS 144 related asset impairment are generally unpredictable and several factors could result in further impairment of the remaining goodwill and other intangible assets in the future periods.