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Notes to Consolidated Financial Statements
fiscal year 2007 was primarily the result of purchase price adjustments related to the msystems Ltd.
(“msystems”) acquisition and to a lesser extent from the Matrix Semiconductor, Inc. (“Matrix”) acquisition. See
Note 15, “Business Acquisitions,” regarding these acquisitions in fiscal year 2006.
In accordance with Statement of Financial Accounting Standards No. 142, (“SFAS 142”), Goodwill and
Other Intangible Assets, goodwill is not amortized, but instead is reviewed and tested for impairment at least
annually and whenever events or circumstances occur which indicate that goodwill might be impaired.
Impairment of goodwill is tested at the Company’s reporting unit level by comparing the carrying amount,
including goodwill, to the fair value. In performing the analysis, the Company uses the best information
available, including reasonable and supportable assumptions and projections. If the carrying amount of the
Company exceeds its implied fair value, goodwill is considered impaired and a second step is performed to
measure the amount of impairment loss, if any. The Company performed its annual impairment test on the first
day of the fourth quarter of fiscal year 2008 and determined that the goodwill was not impaired. However, based
on a combination of factors, including the economic environment, current and forecasted operating results,
NAND-industry pricing conditions and a sustained decline in the Company’s market capitalization, the Company
concluded that there were sufficient indicators to require an interim goodwill impairment analysis during the
fourth quarter of fiscal year 2008 and the Company recognized an impairment charge of $845.5 million.
Intangible Assets.Intangible asset balances are presented below (in thousands):
December 28, 2008 December 30, 2007
Gross
Carrying
Amount Impairment
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Core technology ................... $315,301 $(136,001) $(132,407) $ 46,893 $ 311,801 $ (78,863) $ 232,938
Developed product technology ........ 12,900 — (6,318) 6,582 12,900 (4,689) 8,211
Trademarks ....................... 4,000 — (4,000) — 4,000 (4,000) —
Backlog .......................... 5,000 — (5,000) — 5,000 (5,000) —
Supply agreement .................. 2,000 — (2,000) — 2,000 (2,000) —
Customer relationships .............. 80,100 (39,784) (40,316) — 80,100 (23,907) 56,193
Acquisition-related intangible assets . . . 419,301 (175,785) (190,041) 53,475 415,801 (118,459) 297,342
Technology licenses and patents ....... 23,814 — (14,107) 9,707 39,243 (14,562) 24,681
Total ........................ $443,115 $(175,785) $(204,148) $ 63,182 $ 455,044 $(133,021) $ 322,023
Intangible assets increased by $3.5 million in the fiscal year ended December 28, 2008 due to the Company’s
acquisition of MusicGremlin during the second quarter of fiscal year 2008 and by $3.0 million due to technology
licenses and patents purchased from third parties. Amortization expense of intangible assets totaled $78.8 million,
$98.9 million and $29.8 million in fiscal years 2008, 2007 and 2006, respectively. In accordance with SFAS 144,
circumstances indicated that the carrying values of certain acquisition-related intangible assets were not recoverable
and the Company recorded a $175.8 million impairment on acquisition-related intangible assets in the fourth quarter
of fiscal year 2008. This impairment was based upon forecasted discounted cash flows which considered factors
including a reduced business outlook primarily due to NAND-industry pricing conditions.
The annual expected amortization expense of intangible assets as of December 28, 2008 is presented below:
Estimated Amortization Expenses
Fiscal periods
Acquisition-related
Intangible Assets
Technology Licenses
and Patents
(In thousands)
2009 .............................................................. $13,695 $ 4,533
2010 .............................................................. 13,695 3,100
2011 .............................................................. 13,034 1,248
2012 .............................................................. 12,528 600
2013 .............................................................. 523 226
Total .......................................................... $53,475 $ 9,707
F-20