Share-Based Compensation

3 Months Ended

Oct. 02, 2011

Share-based Compensation [Abstract]

Share-based Compensation

Share-Based Compensation

Share Based Compensation

Share-based compensation recognized in the condensed consolidated financial statements by line item caption is as follows (dollars in thousands):

	Three Months Ended
	October 2, 2011		September 26, 2010
Cost of product revenue	$	156	$	192
Cost of service revenue	114		144
Sales and marketing	496		572
Research and development	472		611
General and administrative	657		590
Total share-based compensation expense	$	1,895	$	2,109

During the three months ended October 2, 2011 and September 26, 2010, the Company did not capitalize any stock-based compensation expense in inventory, as such an amount would have been immaterial.

The weighted-average grant-date per share fair value of options granted during the three months ended October 2, 2011 and September 26, 2010 were $1.66 and $1.36, respectively. The weighted-average estimated per share fair value of shares purchased under the Company’s 1999 Employee Stock Purchase Plan (“ESPP”) during the three months ended October 2, 2011 and September 26, 2010 were $0.96 and $0.93, respectively.

The following table summarizes the activity for stock options for the three months ended October 2, 2011 (unaudited):

	Number of Shares (000’s)		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value ($ 000’s)
Options outstanding at July 4, 2011	9,132		$	4.01
Granted	2,131		$	3.29
Exercised	(138	)	$	2.08			$	173
Canceled	(397	)	$	3.70
Options outstanding at October 2, 2011	10,728		$	3.91
Exercisable at October 2, 2011	6,094		$	4.41	$	4.30	$	611
Vested and expected to vest at October 2, 2011	10,167		$	3.94	$	5.19	$	777

The following table summarizes the activity for restricted stock units ("RSUs") for the three months ended October 2, 2011 (unaudited):

	Number of Shares (000’s)		Weighted- Average Grant- Date Fair Value		Aggregate Fair Market Value
Unvested at July 4, 2011	1,870		$	2.79
Granted	429		$	3.01
Vested	(104	)	$	3.03	$	316
Canceled	(160	)	$	3.10
Unvested at October 2, 2011	2,035		$	2.80

The fair value of each option award and ESPP is estimated on the date of grant using the Black-Scholes-Merton option valuation model with the weighted average assumptions noted in the following table. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The expected term of ESPP represents the contractual life of the ESPP purchase period. The risk-free rate based upon the estimated life of the option and ESPP is based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on both the implied volatilities from traded options on the Company’s stock and historical volatility on the Company’s stock.

	Stock Option Plan				Employee Stock Purchase Plan
	Three Months Ended				Three Months Ended
	October 2, 2011		September 26, 2010		October 2, 2011		September 26, 2010
Expected life	5 yrs		4 yrs		0.25 yrs		0.25 yrs
Risk-free interest rate	1.09	%	1.11	%	0.04	%	0.17	%
Volatility	59	%	58	%	62	%	59	%
Dividend yield	—	%	—	%	—	%	—	%

The Black-Scholes-Merton option valuation model requires the input of highly subjective assumptions, including the expected life of the share-based award and stock price volatility. The assumptions listed above represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if other assumptions had been used, the Company’s share-based compensation cost could have been materially different from that recorded. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense on a straight-line method for those shares expected to vest.