Magma Design Automation Inc. provides design and implementation software that enables chip designers to reduce the time it takes to design and produce complex integrated circuits used in the communications computing consumer electronics networking and semiconductor industries. Magma Design Automation Inc. has a market cap of $76.2 million; its shares were traded at around $1.58 with a P/E ratio of 17.6 and P/S ratio of 0.5.
Highlight of Business Operations:Based on the Level 3 valuation and the transfer of the ARS from the available-for-sale category to the trading category, we recorded an other-than-temporary gain of $0.8 million in valuation gain (loss), net in the consolidated statements of operations for the first quarter of fiscal 2010. This gain was offset by losses related to the purchased put option of $0.6 million.
We review all of our investments periodically for impairment; however, for non-marketable equity securities, the fair value analysis requires significant judgment. This analysis includes assessment of each investees financial condition, the business outlook for its products and technology, its projected results and cash flows, the likelihood of obtaining subsequent rounds of financing and the impact of any relevant contractual equity preferences held by us or others. If an investee obtains additional funding at a valuation lower than our carrying amount, we presume that the investment is other than temporarily impaired, unless specific facts and circumstances indicate otherwise, such as when we hold contractual rights that give us a preference over the rights of other investors. As the equity markets have experienced volatility over the past few years, we have experienced substantial impairments in our portfolio of non-marketable equity securities. If certain equity market conditions do not improve, as companies within our portfolio attempt to raise additional funds, the funds may not be available to them, or they may receive lower valuations, with more onerous investment terms than in previous financings, and the investments will likely become impaired. However, we are not able to determine at the present time which specific investments are likely to be impaired in the future, or the extent or timing of individual impairments. We recorded impairment charges related to these non-marketable equity investments of $0.1 million and $0.2 million, respectively, for the three months ended August 2, 2009 and August 3, 2008.
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