Share-Based Compensation (Tables)

12 Months Ended

Jul. 31, 2012

Share-Based Compensation Expense

The following table presents share-based compensation expense included in the Company’s consolidated statements of operations for the years ended July 31, 2012, 2011 and 2010 (in thousands):

	July 31,
	2012		2011		2010
Cost of product revenue	$	164	$	185	$	237
Cost of service revenue		454		281		272
Research and development		1,519		848		1,092
Sales and marketing		749		719		924
General and administrative		903		718		765
Net compensation expense	$	3,789	$	2,751	$	3,290

The Fair Value of Each Option Grant

The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	July 31,
	2012			2011			2010
Expected option term(1)		5.8 years			6.1 years			5.2 years
Expected volatility factor (2)		46.9	%		44.5	%		39.2	%
Risk-free interest rate (3)		1.3	%		2.4	%		2.2	%
Expected annual dividend yield (4)		0.0	%		0.0	%		0.0	%

Stock Option Activity

Stock option activity under all of the Company’s stock plans during the year ended July 31, 2012 is summarized as follows:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Term (Years)
Outstanding at July 31, 2011 .		2,993,840		$	20.33		5.59
Options granted .		17,875			18.37
Options exercised .		(140,485	)		17.40
Options canceled .		(729,940	)		21.91
Outstanding at July 31, 2012 .		2,141,290		$	19.96		6.03
Options vested and expected to vest		2,098,875		$	19.95		5.97
Options exercisable at end of period		1,524,776		$	19.80		5.06