Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

3.  Stock-Based Compensation

The following table summarizes the stock-based compensation expense, net of amounts capitalized, recorded by the Company in its Condensed Consolidated Statements of Operations for the three and six-month periods ended June 30, 2011 and 2010, respectively, by classification:

	Three Months Ended June 30,				Six Months Ended June 30,
Statement of Operations Classification	2011		2010		2011		2010
Costs of revenue	$	1,000	$	1,200	$	2,000	$	2,600
Selling and marketing expense		4,200		7,000		8,900		15,900
General and administrative expense		14,700		7,300		17,600		17,400
Research and development expense		3,900		500		6,100		10,400
	$	23,800	$	16,000	$	34,600	$	46,300

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The Company estimated the fair value of each stock-based award granted during the three and six-month periods ended June 30, 2011 and 2010 as of the respective dates of grant, using a binomial model with the assumptions set forth in the following table:

	Estimated Volatility	Annualized Forfeiture Rate	Expected Option Term (Years)	Estimated Exercise Factor	Risk-Free Interest Rate	Dividends
2011	180% - 185%	2%	7.5 – 10.0	20%-150%	2.82%-3.24%	—
2010	175%	2%	10.0	20%	3.72%	—

Stock-based compensation expense has historically included costs associated with shares of common stock purchased under the Company’s Employee Stock Purchase Plan (“ESPP”). The last shares purchased through the ESPP were purchased effective January 31, 2010, the date the ESPP expired. For shares purchased on such date, the Company applied the same variables as noted in the table above for 2010 to the calculation of such costs, except that the expected term was 0.5 years and the risk-free interest rate was 0.19%. The time span from the date of grant of ESPP shares to the date of purchase was six months.

Expected volatility is based on the historical volatility of the Company’s common stock over the expected option term period ended on the last business day of each respective quarterly reporting period. The estimated annualized forfeiture rate was based on an analysis of historical data and considered the impact of events such as work force reductions the Company carried out in previous years. The expected term of the Company’s stock-based option awards was based on historical award holder exercise patterns and considered the market performance of the Company’s common stock and other items. The estimated exercise factor was based on an analysis of historical data; historical exercise patterns; and a comparison of historical and current share prices. The approximate risk free interest rate was based on the implied yield available on U.S. Treasury issues with remaining terms equivalent to the Company’s expected term on its stock-based awards. The Company does not anticipate paying dividends on its common stock for the foreseeable future.

The following tables present summaries of the status and activity of the Company’s stock option awards for the three and six-month periods ended June 30, 2011.

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
	For the Three Months Ended June 30, 2011
Outstanding - March 31, 2011		7,982,281		$	0.24
Granted		525,000			0.18
Exercised		—			—
Forfeited or expired		(119,948	)		0.70
Outstanding - June 30, 2011		8,387,333		$	0.23	5.82	$ 346,400

	For the Six Months Ended June 30, 2011
Outstanding - December 31, 2010		7,322,933		$	0.27
Granted		1,246,000			0.10
Exercised		—			—
Forfeited or expired		(181,600	)		0.75
Outstanding - June 30, 2011		8,387,333		$	0.23	5.82	$ 346,400

The weighted average fair value of options granted during the three and six-month periods ended June 30, 2011 was $0.17 and $0.10, respectively.  Of the options outstanding as of June 30, 2011, 6,433,746 were vested, 1,910,774 were estimated to vest in future periods and 42,813 were estimated to be forfeited prior to their vesting.

All options are exercisable immediately upon grant. Options vest, generally, ratably over a 33-month period commencing in the fourth month after the grant date. The Company has the right to repurchase common stock issued upon the exercise of an option upon an optionee’s termination of service to the Company prior to full vesting at the option’s exercise price.

As of June 30, 2011, there was approximately $108,000 of total unrecognized compensation cost, net of estimated forfeitures, related to stock-based compensation. That cost is expected to be recognized over a weighted-average period of approximately fourteen months.