Note 9

Stock-Based Compensation

Compensation Expense

The following table summarizes stock-based compensation expense by line items appearing in the Company's Condensed Consolidated Statements of Operations:

	Three Months Ended				Nine Months Ended
(in thousands)	Jan. 1, 2012		Jan. 2, 2011		Jan. 1, 2012		Jan. 2, 2011
Cost of revenue	$	535	$	370	$	1,415	$	1,260
Research and development		2,174		2,400		6,493		6,746
Selling, general and administrative		1,603		1,237		4,458		3,765
Discontinued operations		113		506		208		1,436
Total stock-based compensation expense	$	4,425	$	4,513	$	12,574	$	13,207

Stock-based compensation expense recognized in the Condensed Consolidated Statements of Operations is based on awards ultimately expected to vest. The authoritative guidance for stock-based compensation requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company attributes the value of stock-based compensation to expense on an accelerated method.

Valuation Assumptions

Assumptions used in the Black-Scholes valuation model and resulting weighted average grant-date fair values were as follows:

	Three Months Ended						Nine Months Ended
	Jan. 1, 2012			Jan. 2, 2011			Jan. 1, 2012			Jan. 2, 2011
Stock option plans:
Expected Term (in years)		4.3			4.6			4.3			4.6
Risk-free interest rate		0.8	%		1.5	%		1.4	%		2.0	%
Volatility		48.3	%		39.2	%		43.4	%		41.5	%
Dividend Yield		0.0	%		0.0	%		0.0	%		0.0	%
Weighted average grant-date fair value	$	2.18		$	2.17		$	2.88		$	2.16
ESPP:
Expected Term (in years)		0.24			0.25			0.25			0.25
Risk-free interest rate		0.2	%		0.2	%		0.3	%		0.2	%
Volatility		59.1	%		32.1	%		52.6	%		40.9	%
Dividend Yield		0.0	%		0.0	%		0.0	%		0.0	%
Weighted average fair value	$	1.37		$	1.23		$	1.66		$	1.33

Equity Incentive Programs

The Company currently issues awards under two equity based plans in order to provide additional incentive and retention to directors and employees who are considered to be essential to the long-range success of the Company. These plans are further described below.

2004 Equity Plan (“2004 Plan”)

In September 2004, the Company's stockholders approved the 2004 Plan. On July 21, 2010, the Board of Directors of the Company approved an amendment to the Company's 2004 Plan to increase the number of shares of common stock reserved for issuance thereunder from 28,500,000 shares to 36,800,000 shares (an increase of 8,300,000 shares), provided, however, that the aggregate number of common shares available for issuance under the 2004 Plan is reduced by 1.74 shares for each common share delivered in settlement of any full value award, which are awards other than stock options and stock appreciation rights, that are granted under the 2004 Plan on or after September 23, 2010. On September 23, 2010, the stockholders of the Company approved the proposed amendment described above, which also includes certain other changes to the 2004 Plan, including an extension of the term of the 2004 Plan. Options granted by the Company under the 2004 Plan generally expire seven years from the date of grant and generally vest over a four-year period from the date of grant, with one-quarter of the shares of common stock vesting on the one-year anniversary of the grant date and the remaining shares vesting monthly for the 36 months thereafter. The exercise price of the options granted by the Company under the 2004 Plan shall not be less than 100% of the fair market value for a common share subject to such option on the date the option is granted. Full value awards made under the 2004 Plan shall become vested over a period of not less than three years (or, if vesting is performance-based, over a period of not less than one year) following the date such award is made; provided, however, that full value awards that result in the issuance of an aggregate of up to 5% of common stock available under the 2004 Plan may be granted to any one or more participants without respect to such minimum vesting provisions. As of January 1, 2012, there were 11.9 million shares available for future grant under the 2004 Plan.

The following table summarizes the Company's stock option activities for the nine months ended January 1, 2012:

(in thousands, except per share data)	Shares			Weighted Average Exercise Price
Options outstanding as of April 3, 2011		17,814		$	8.49
Granted		3,909			7.93
Exercised		(466	)		5.55
Canceled, forfeited or expired		(2,339	)		9.75
Options outstanding as of January 1, 2012		18,918		$	8.29
Options exercisable at January 1, 2012		11,508		$	9.16

Restricted stock units available for grant by the Company under the 2004 Plan generally vest over at least a three-year period from the grant date with a proportionate share of the restricted stock units vesting annually over the total vesting period (e.g., for an award with a total three-year vesting period, one-third of the restricted stock units will vest on each one-year anniversary). Prior to vesting, participants holding restricted stock units do not have shareholder rights. Shares are issued on or as soon as administratively practicable following the vesting date of the restricted stock units and upon issuance, recordation and delivery, the participant will have all the rights of a shareholder of the Company with respect to voting such stock and receipt of dividends and distributions on such stock. As of January 1, 2012, 2.4 million restricted stock unit awards were outstanding under the 2004 Plan.

The following table summarizes the Company's restricted stock unit activities for the nine months ended January 1, 2012:

(in thousands, except per share data)	Shares			Weighted Grant Date Fair Value
RSU's outstanding as of April 3, 2011		2,342		$	6.70
Granted		1,125			7.96
Released		(732	)		7.72
Forfeited		(319	)		6.82
RSU's outstanding as of Janaury 1, 2012		2,416		$	6.97

2009 Employee Stock Purchase Plan (“2009 ESPP")

On June 18, 2009, the Board approved implementation of the 2009 Employee Stock Purchase Plan (“2009 ESPP”) and authorized the reservation and issuance of up to 9,000,000 shares of the Company's common stock, subject to stockholder approval. On September 17, 2009, the Company's stockholders approved the plan at the 2009 Annual Meeting of Stockholders. The 2009 ESPP is intended to be implemented in successive quarterly purchase periods commencing on the first day of each fiscal quarter of the Company. In order to maintain its qualified status under Section 423 of the Internal Revenue Code, the 2009 ESPP imposes certain restrictions, including the limitation that no employee is permitted to participate in the 2009 ESPP if the rights of such employee to purchase common stock of the Company under the 2009 ESPP and all similar purchase plans of the Company or its subsidiaries would accrue at a rate which exceeds $25,000 of the fair market value of such stock (determined at the time the right is granted) for each calendar year. During the nine months ended January 1, 2012, the Company issued 1.7 million shares of common stock with a weighted-average purchase price of $4.90 per share.