Share-Based Compensation

3 Months Ended

Sep. 30, 2012

Share-based Compensation [Abstract]

Share-based Compensation

Share-based Compensation

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

	Three Months Ended
	September 30, 2012		October 2, 2011
Cost of product revenue	$	174	$	156
Cost of service revenue	159		114
Research and development	432		472
Sales and marketing	727		496
General and administrative	676		657
Total share-based compensation expense	$	2,168	$	1,895

During the three months ended September 30, 2012 and October 2, 2011, the Company did not capitalize any stock-based compensation expense in inventory, as the amounts were immaterial. The income tax benefit for share-based compensation expense was immaterial in each of the three months ended September 30, 2012 and October 2, 2011.  

The weighted-average grant-date per share fair value of options granted during the three months ended September 30, 2012 and October 2, 2011 were $1.85 and $1.66, 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 September 30, 2012 and October 2, 2011 were $0.87 and $0.96, respectively.

The following table summarizes stock option activity under all plans for the three months ended September 30, 2012:

	Number of Shares (000’s)		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (000’s)
Options outstanding at June 30, 2012	9,006		$	3.68
Granted	779		$	3.41
Exercised	(202	)	$	2.94		$	120
Canceled	(461	)	$	3.78
Options outstanding at September 30, 2012	9,122		$	3.67	4.95	$	1,752
Exercisable at September 30, 2012	5,672		$	3.88	4.34	$	1,412
Vested and expected to vest at September 30, 2012	8,803		$	3.68	4.90	$	1,733

Stock Awards

Stock awards may be granted under the 2005 Plan on terms approved by the Board of Directors. Stock awards generally provide for the issuance of restricted stock which vests over a fixed period.

The following table summarizes stock award activity for the three months ended September 30, 2012:

	Number of Shares (000’s)		Weighted- Average Grant- Date Fair Value		Aggregate Fair Market Value ($000's)
Non-vested stock outstanding at June 30, 2012	1,078		$	2.35
Granted	832		$	3.32
Vested	(450	)	$	3.31	$	1,488
Cancelled	(40	)	$	3.19
Non-vested stock outstanding at September 30, 2012	1,420		$	2.59

The fair value of each option award and share purchase option under the Company's 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
	September 30, 2012		October 2, 2011		September 30, 2012		October 2, 2011
Expected life	5 yrs		5 yrs		0.25 yrs		0.25 yrs
Risk-free interest rate	0.90	%	1.09	%	0.06	%	0.04	%
Volatility	66	%	59	%	69	%	62	%
Dividend yield	0.0	%	0.0	%	0.0	%	0.0	%

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.