Segments and Major Customers

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Business Segments and Major Customers

Segments and Major Customers

Operating segments are based upon Rambus' internal organization structure, the manner in which its operations are managed, the criteria used by its Chief Operating Decision Maker ("CODM") to evaluate segment performance and availability of separate financial information regularly reviewed for resource allocation and performance assessment. Since the fourth quarter of 2012, the Company has four operating segments: (1) MID, which focuses on the design, development and licensing of technology that is related to memory and interfaces; (2) CRI, which focuses on the design, development and licensing of technologies for chip and system security and anti-counterfeiting; (3) LDT, which focuses on the design, development and licensing of technologies for lighting; and (4) CTO, which focuses on the design, development and productization of emerging technologies. For the year ended December 31, 2013, MID, CRI and CTO were considered reportable segments as they met the quantitative thresholds for disclosure as reportable segments. The results of the remaining operating segment are shown under “All Other”. The presentation of the 2012 and 2011 segment data has been updated accordingly to conform with the 2013 segment presentation.

The Company evaluates the performance of its segments based on segment operating income (loss), which is defined as customer licensing income ("CLI") minus segment operating expenses. Segment operating expenses are comprised of direct operating expenses and the allocation of certain engineering expenses.

CLI includes the Company's measure of the total cash royalties received from its customers under its licensing agreements with them and any product sales. In 2011, the Company bifurcated royalty payments that it received from Samsung between revenue and gain from settlement, which was reflected as reducing operating expenses. In 2013, the Company bifurcated royalty payments that it received from SK hynix and Micron between revenue and gain from settlement, which was reflected as reducing operating expenses. The Company has combined revenue from its customers, including Samsung, SK hynix and Micron, and the gain from the Samsung, SK hynix and Micron settlement as customer licensing income to reflect the total amounts received from all of its customers for the periods presented. In addition, customer licensing income includes other patent royalties received but not recognized as revenue and proceeds from sale of intellectual property. In certain periods presented, certain patent royalties received from a customer was not recognized as revenue as not all revenue recognition criteria were met. Additionally, since the third quarter of 2011, the Company has received patent royalty payments from certain patent license agreements assumed in the acquisition of CRI which were treated as favorable contracts. Cash received from these acquired favorable contracts reduced the favorable contract intangible asset on the Company's balance sheet. The Company has combined these cash royalty payments as CLI to reflect the total amounts received from its customers.

Segment operating expenses do not include gain from settlement discussed above, marketing, general and administrative expenses and the allocation of certain expenses managed at the corporate level, such as stock-based compensation, amortization, and certain bonus and acquisition costs. The “Reconciling Items” category includes these unallocated marketing, general and administrative expenses as well as corporate level expenses. The presentation of the 2012 and 2011 segment data has been updated accordingly to conform with the 2013 segment operating income (loss) definition.

The tables below present reported segment operating income (loss) for the years ended December 31, 2013, 2012 and 2011:

	For the Year Ended December 31, 2013
	MID		CRI		CTO			All Other			Total
	(In thousands)
Revenue	$	232,040	$	32,625	$	—		$	6,836		$	271,501
Gain from settlement	535		—		—			—			535
Other adjustment from revenue to CLI	5,000		2,304		—			2,250			9,554
Customer licensing income	$	237,575	$	34,929	$	—		$	9,086		$	281,590
Segment operating expenses	33,764		24,149		25,703			22,502			106,118
Segment operating income (loss)	$	203,811	$	10,780	$	(25,703	)	$	(13,416	)	$	175,472
Reconciling items											(153,008		)
Operating income											$	22,464
Interest and other income (expense), net											(34,481		)
Loss before income taxes											$	(12,017	)

	For the Year Ended December 31, 2012
	MID		CRI		CTO			All Other			Total
	(In thousands)
Revenue	$	215,047	$	17,808	$	—		$	1,196		$	234,051
Gain from settlement	—		—		—			—			—
Other adjustment from revenue to CLI	7,500		5,165		—			—			12,665
Customer licensing income	$	222,547	$	22,973	$	—		$	1,196		$	246,716
Segment operating expenses	37,353		13,611		28,106			19,330			98,400
Segment operating income (loss)	$	185,194	$	9,362	$	(28,106	)	$	(18,134	)	$	148,316
Reconciling items											(238,750		)
Operating loss											$	(90,434	)
Interest and other income (expense), net											(27,451		)
Loss before income taxes											$	(117,885	)

	For the Year Ended December 31, 2011
	MID			CRI		CTO			All Other			Total
	(In thousands)
Revenue	$	292,074		$	17,353	$	—		$	2,936		$	312,363
Gain from settlement	6,200			—		—			—			6,200
Other adjustment from revenue to CLI	(3,000		)	2,250		—			—			(750		)
Customer licensing income	$	295,274		$	19,603	$	—		$	2,936		$	317,813
Segment operating expenses	45,670			5,606		17,771			15,025			84,072
Segment operating income (loss)	$	249,604		$	13,997	$	(17,771	)	$	(12,089	)	$	233,741
Reconciling items												(235,277		)
Operating loss												$	(1,536	)
Interest and other income (expense), net												(24,265		)
Loss before income taxes												$	(25,801	)

The Company’s CODM does not review information regarding assets on an operating segment basis. Additionally, the Company does not record intersegment revenue or expense.

Revenue from the Company’s major customers representing 10% or more of total revenue for the years ended December 31, 2013, 2012 and 2011 were as follows:

	Years Ended December 31,
	2013		2012		2011
Customer A (MID and CRI reportable segments)	33	%	38	%	30	%
Customer B (MID reportable segment)	*		*		11	%
Customer C (MID reportable segment)	*		*		10	%

_________________________________________

* Customer accounted for less than 10% of total revenue in the period

Revenue from customers in the geographic regions based on the location of customers' headquarters is as follows:

	Years Ended December 31,
	2013		2012		2011
	(In thousands)
South Korea	$	112,806	$	88,971	$	94,197
USA	80,652		63,398		103,367
Japan	51,156		63,686		97,726
Europe	15,985		5,236		1,992
Canada	7,896		7,759		14,750
Asia-Other	3,006		5,001		331
Total	$	271,501	$	234,051	$	312,363

At December 31, 2013, of the $72.6 million of total property, plant and equipment, approximately $71.8 million were located in the United States, $0.7 million were located in India and $0.1 million were located in other foreign locations. At December 31, 2012, of the $86.9 million of total property, plant and equipment, approximately $85.8 million were located in the United States, $1.0 million were located in India and $0.1 million were located in other foreign locations.