Share-based Compensation

6 Months Ended

Dec. 31, 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				Six Months Ended
	December 31, 2012		January 1, 2012		December 31, 2012		January 1, 2012
Cost of product revenue	$	121	$	135	$	295	$	291
Cost of service revenue	85		30		244		144
Research and development	288		280		720		752
Sales and marketing	567		323		1,295		819
General and administrative	555		513		1,230		1,170
Total share-based compensation expense	$	1,616	$	1,281	$	3,784	$	3,176

During the three and six months ended December 31, 2012 and January 1, 2012, 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 the three and six months ended December 31, 2012 and January 1, 2012.  

The weighted-average grant-date per share fair value of options granted during the three months ended December 31, 2012 and January 1, 2012 were $1.73 and $1.54, 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 December 31, 2012 and January 1, 2012 were $0.91 and $1.03, respectively.

The weighted-average grant-date per share fair value of options granted during the six months ended December 31, 2012 and January 1, 2012 were $1.81 and $1.66, respectively. The weighted-average estimated per share fair value of shares purchased under the ESPP during the six months ended December 31, 2012 and January 1, 2012 were $0.89 and $0.99, respectively.

The following table summarizes stock option activity under all plans for the six months ended December 31, 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	1,830		$	3.49
Exercised	(454	)	$	2.86		$	314
Canceled	(633	)	$	3.69
Options outstanding at December 31, 2012	9,749		$	3.68	4.79	$	3,104
Exercisable at December 31, 2012	5,742		$	3.89	4.03	$	2,036
Vested and expected to vest at December 31, 2012	9,257		$	3.70	4.73	$	2,984

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 six months ended December 31, 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	2,589		$	3.47
Vested	(647	)	$	3.37	$	2,181
Cancelled	(83	)	$	3.32
Non-vested stock outstanding at December 31, 2012	2,937		$	3.09

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				Stock Option Plan				Employee Stock Purchase Plan
	Three Months Ended				Three Months Ended				Six Months Ended				Six Months Ended
	December 31, 2012		January 1, 2012		December 31, 2012		January 1, 2012		December 31, 2012		January 1, 2012		December 31, 2012		January 1, 2012
Expected life	4 years		5 years		0.25 years		0.25 years		5 years		5 years		0.25 years		0.25 years
Risk-free interest rate	0.57	%	1.00	%	0.04	%	0.04	%	0.71	%	1.09	%	0.05	%	0.04	%
Volatility	63	%	61	%	50	%	79	%	64	%	59	%	59	%	70	%
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.