Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation

Note 3. Stock-Based Compensation

Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is the vesting period. The Company uses the Black-Scholes option-pricing model to determine the fair-value of stock-based awards. The Company recognizes compensation cost related to options granted on a straight-line basis over the applicable vesting period.

The expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, including the contractual terms, vesting schedules, and expectations of future employee behavior. Expected stock price volatility is based on a combination of historical volatility of the Company’s stock for the related expected term and the implied volatility of its traded options. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with a term equivalent to the expected term of the stock options. Notwithstanding the special dividend described in Note 19, dividend yield is estimated at zero because the Company does not anticipate paying regular dividends in the foreseeable future.

The fair value of options granted was determined using the Black-Scholes model and the following weighted-average assumptions:

	Quarters Ended June  30,						Six Months Ended June 30,
	2011			2010			2011			2010
Expected dividend yield		0	%		0	%		0	%		0	%
Risk-free interest rate		1.57	%		1.65	%		1.73	%		1.91	%
Expected life (years)		4.0			4.0			4.0			4.0
Volatility		54	%		62	%		54	%		62	%

Recognized stock-based compensation expense is as follows (in thousands):

	Quarters Ended June 30,					Six Months Ended June 30,
	2011			2010		2011		2010
Cost of revenue	$	234		$	228	$	522	$	459
Research and development		306			693		803		2,290
Sales and marketing		994			811		1,928		1,807
General and administrative		1,152			1,039		2,040		2,136
Restructuring and other charges		(10	)		0		836		0
Total stock-based compensation expense	$	2,676		$	2,771	$	6,129	$	6,692

No stock-based compensation was capitalized as part of the cost of an asset during the quarters or six month periods ended June 30, 2011 or 2010. As of June 30, 2011, $14.6 million of total unrecognized compensation cost, net of estimated forfeitures, related to stock options, is expected to be recognized over a weighted-average period of 2.9 years.