Share-Based Compensation

6 Months Ended

Jan. 01, 2012

Share-based Compensation [Abstract]

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					Six Months Ended
	January 1, 2012		December 26, 2010			January 1, 2012		December 26, 2010
Cost of product revenue	$	135	$	41		$	291	$	233
Cost of service revenue	30		6			144		150
Sales and marketing	323		388			819		960
Research and development	280		(119		)	752		492
General and administrative	513		60			1,170		650
Total share-based compensation expense	$	1,281	$	376		$	3,176	$	2,485

During the three and six months ended January 1, 2012 and December 26, 2010, the Company did not capitalize any stock-based compensation expense in inventory, as the amounts were immaterial.

The weighted-average grant-date per share fair value of options granted during the three months ended January 1, 2012 and December 26, 2010 were $1.54 and $1.39, 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 January 1, 2012 and December 26, 2010 were $1.03 and $0.96, respectively.

The weighted-average grant-date per share fair value of options granted during the six months ended January 1, 2012 and December 26, 2010 were $1.66 and $1.39, respectively. The weighted-average estimated per share fair value of shares purchased under the Company’s 1999 Employee Stock Purchase Plan (“ESPP”) during the six months ended January 1, 2012 and December 26, 2010 were $0.99 and $0.94, respectively.

The following table summarizes the activity for stock options for the six months ended January 1, 2012:

	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 3, 2011	9,132		$	4.01
Granted	2,233		$	3.28
Exercised	(229	)	$	2.08			$	253
Canceled	(1,342	)	$	5.48
Options outstanding at January 1, 2012	9,794		$	3.69
Exercisable at January 1, 2012	5,666		$	4.01	$	4.81	$	852
Vested and expected to vest at January 1, 2012	9,330		$	3.71	$	5.40	$	1,019

The following table summarizes the activity for restricted stock units ("RSUs") for the six months ended January 1, 2012:

	Number of Shares (000’s)		Weighted- Average Grant- Date Fair Value		Aggregate Fair Market Value ($ 000's)
Unvested at July 3, 2011	1,870		$	2.79
Granted	494		$	3.00
Vested	(558	)	$	2.89	$	1,616
Canceled	(196	)	$	3.11
Unvested at January 1, 2012	1,610		$	2.78

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				Stock Option Plan				Employee Stock Purchase Plan
	Three Months Ended				Three Months Ended				Six Months Ended				Six Months Ended
	January 1, 2012		December 26, 2010		January 1, 2012		December 26, 2010		January 1, 2012		December 26, 2010		January 1, 2012		December 26, 2010
Expected life	5 yrs		4 yrs		0.25 yrs		0.24 yrs		5 yrs		4 yrs		0.25 yrs		0.24 yrs
Risk-free interest rate	1.00	%	1.27	%	0.04	%	0.18	%	1.09	%	1.27	%	0.04	%	0.17	%
Volatility	61	%	59	%	79	%	54	%	59	%	59	%	70	%	57	%
Dividend yield	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%

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.