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Business Combinations
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12 Months Ended | |||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2013
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| Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||
| BUSINESS COMBINATIONS | Coyote Point Systems On March 21, 2013, we acquired all of the outstanding equity securities of Coyote Point Systems, Inc. (“Coyote”), a provider of application delivery, load balancing and acceleration solutions, for $6.0 million in cash. The acquisition also includes a contingent obligation for up to $5.5 million in future earn-out payments to former stockholders of Coyote, if specified future operational objectives, service conditions and financial results are met within two years of the acquisition date. Of the maximum $5.5 million in contingent earn-out payments, up to $3.5 million will be payable after eighteen months from the acquisition date, and up to $2.0 million will be payable after two years from the acquisition date. As the future earn-out payments are also contingent upon one of Coyote's former stockholder's employment during the earn-out period, the estimated fair value of these contingent obligations is being recorded as compensation expense ratably over the earn-out periods. This acquisition complements our network security strategy and allows us and our channel partners to accelerate and further deliver on our vision of providing broad security and networking functionality to customers. Furthermore, the acquisition is expected to generate synergy among certain of our existing products. We accounted for this acquisition as a purchase of a business and, accordingly, the total purchase price was allocated to Coyote’s identifiable tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair value assigned to the intangible assets acquired was determined using the income approach which discounts expected cash flows to present value using our estimates and assumptions. The following table summarizes the fair value of assets acquired and liabilities assumed ($ amounts in 000’s):
Of the total acquired identified intangible assets, we allocated $2.3 million to developed technology, $0.5 million to customer relationships, and $2.6 million to in-process research and development (“IPR&D”) as of the acquisition date. Identified finite-lived intangible assets consist of developed technology and customer relationships that are being amortized as cost of revenue and sales and marketing expense, respectively, ratably on a straight-line basis, each over an estimated useful life of six years. Identified indefinite-lived intangible assets consisted of acquired IPR&D relating to existing research and development projects at the time of acquisition. The goodwill of $2.9 million represents the premium we paid over the fair value of the net tangible liabilities assumed and identified intangible assets acquired, due primarily to acquire developed and in-process technology. None of the goodwill recognized as a result of the acquisition is deductible for income tax purposes. The financial results of this acquisition were considered immaterial for purposes of pro-forma financial disclosures. During the three months ended September 30, 2013, we completed the development of technology associated with the IPR&D projects, and started amortizing this developed technology as cost of revenue ratably on a straight-line basis over an estimated useful life of 6 years. Other Fiscal 2013 Acquisition In September 2013, we acquired certain assets of Xtera Communications, Inc. (“Xtera”), including certain load balancing solutions and certain patents, for a total consideration of $1.8 million, of which $1.7 million was paid in cash on the acquisition date and $0.1 million payment in cash is contingent upon attainment of revenue milestones. In connection with this acquisition, we acquired net tangible assets of $0.2 million, intangible assets of $1.5 million, and recognized an estimated contingent obligation of $0.1 million payable upon attainment of revenue milestones. The results of operations of our fiscal 2013 acquisitions have been included in our consolidated statements of operations from their respective acquisition dates. Fiscal 2012 Acquisitions During fiscal 2012, we completed the acquisitions of two privately-held companies, XDN, Inc. (“XDN”) and IntruGuard Devices, Inc. (“IntruGuard”), together referred to as our fiscal 2012 acquisitions. Our fiscal 2012 acquisitions were completed for total cash consideration of $1.5 million which was allocated to developed technology. In fiscal 2013, we determined the net carrying value of certain developed technology was impaired and recorded an impairment charge of $0.5 million within Cost of product revenue in our consolidated statements of operations. The results of operations of our fiscal 2012 acquisitions have been included in our consolidated statements of operations from their respective acquisition dates. |
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