Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The fair value measurement statement defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which the Company would transact, and the Company considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance.

The Company’s financial instruments are measured and recorded at fair value, except for cost method investments and convertible notes. The Company’s non-financial assets, such as goodwill, intangible assets, and property, plant and equipment, are measured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized.

Fair Value Hierarchy

The fair value measurement statement requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurement be classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

The Company uses unadjusted quotes to determine fair value. The financial assets in Level 1 include money market funds.

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

The Company uses observable pricing inputs including benchmark yields, reported trades, and broker/dealer quotes. The financial assets in Level 2 include U.S. government bonds and notes, corporate notes, commercial paper and municipal bonds and notes.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The financial assets in Level 3 include a cost investment whose value is determined using inputs that are both unobservable and significant to the fair value measurements.

The Company reviews the pricing inputs by obtaining prices from a different source for the same security on a sample of its portfolio. The Company has not adjusted the pricing inputs it has obtained. The following table presents the financial instruments that are carried at fair value and summarizes the valuation of its cash equivalents and marketable securities by the above pricing levels as of December 31, 2013 and 2012:

	As of December 31, 2013
	Total		Quoted Market Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Money market funds	$	300,605	$	300,605	$	—	$	—
Corporate notes, bonds and commercial paper	58,492		—		58,492		—
Total available-for-sale securities	$	359,097	$	300,605	$	58,492	$	—

	As of December 31, 2012
	Total		Quoted Market Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Money market funds	$	126,570	$	126,570	$	—	$	—
Corporate notes, bonds and commercial paper	57,345		—		57,345		—
Total available-for-sale securities	$	183,915	$	126,570	$	57,345	$	—

The Company monitors its investments for other-than-temporary impairment and records appropriate reductions in carrying value when necessary. The Company monitors its investments for other-than-temporary losses by considering current factors, including the economic environment, market conditions, operational performance and other specific factors relating to the business underlying the investment, reductions in carrying values when necessary and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in the market. Any other-than-temporary loss is reported under “Interest and other income (expense), net” in the consolidated statement of operations. For the year ended December 31, 2013, the Company recorded an impairment charge related to its non-marketable equity security of a private company as described below. For the year ended December 31, 2012, the Company did not incur any impairment loss on its investments.

The Company made an investment of $2.0 million in a non-marketable equity security of a private company during 2009. Prior to the second quarter of 2013, the Company had not recorded any impairment charges related to this investment as there had been no events that caused a decrease in its fair value below the carrying cost. During the second quarter of 2013, as part of its periodic evaluation of the fair value of the investment in the non-marketable equity security, and based on the information provided by the private company at that time, the Company determined that there was a decrease in the security's fair value. The fair value of the non-marketable equity security was determined based on an income approach, using level 3 fair value inputs, as it was deemed to be the most indicative of the security's fair value. Accordingly, the Company recorded an impairment charge of $1.4 million within interest income and other income (expense), net, in the consolidated statements of operations for the second quarter of 2013. The Company evaluated the fair value of the investment in the non-marketable security as of December 31, 2013 and determined that there were no additional circumstances that caused a further decrease in its fair value below the carrying cost. Additionally, the Company cannot provide any assurance that its non-marketable equity security will not be further impacted by adverse changes in the general market conditions or deterioration in business prospects of the investee, which may require the Company in the future to record additional impairment charges which could adversely impact its financial results.

The following table presents the financial instruments that are measured and carried at cost on a nonrecurring basis as of December 31, 2013 and 2012:

	As of December 31, 2013
(in thousands)	Carrying Value		Quoted market prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Impairment charges for the year ended December 31, 2013
Investment in non-marketable security	$	600	$	—	$	—	$	600	$	1,400

	As of December 31, 2012
(in thousands)	Carrying Value		Quoted market prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Impairment charges for the year ended December 31, 2012
Investment in non-marketable security	$	2,000	$	—	$	—	$	2,000	$	—

In 2013 and 2012, there were no transfers of financial instruments between different categories of fair value.

The following table presents the financial instruments that are not carried at fair value but which require fair value disclosure as of December 31, 2013 and 2012:

	As of December 31, 2013						As of December 31, 2012
(in thousands)	Face Value		Carrying Value		Fair Value		Face Value		Carrying Value		Fair Value
5% Convertible Senior Notes due 2014	$	172,500	$	164,047	$	175,821	$	172,500	$	147,556	$	172,716
1.125% Convertible Senior Notes due 2018	138,000		109,629		142,427		—		—		—

The fair value of the convertible notes at each balance sheet date is determined based on recent quoted market prices for these notes which is a level two measurement. As discussed in Note 11, “Convertible Notes,” as of December 31, 2013, the convertible notes are carried at their face value of $172.5 million and $138.0 million, respectively, less any unamortized debt discount. The carrying value of other financial instruments, including accounts receivable, accounts payable and other payables, approximates fair value due to their short maturities.

Information regarding the Company's goodwill and long-lived assets balances are disclosed in Note 6, "Intangible Assets and Goodwill".