Stock-Based Employee Compensation

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)

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 December 28, 2014, there were 11.0 million shares available for future grant under the 2004 Plan.

Compensation Expense

The following table summarizes stock-based compensation expense by category appearing in the Company’s Condensed Consolidated Statement of Operations:



	Three Months Ended				Nine Months Ended
(in thousands)	December 28, 2014		December 29, 2013		December 28, 2014			December 29, 2013
Cost of revenue	$	592	$	403	$	1,347		$	1,129
Research and development	2,562		1,514		7,547			4,211
Selling, general and administrative	2,724		1,252		7,875			4,969
Discontinued operations	20		199		(207		)	537
Total stock-based compensation expense	$	5,898	$	3,368	$	16,562		$	10,846

The amount of stock-based compensation expense that was capitalized during the periods presented above was not material.

Stock Options

The following is a summary of the Company's stock option activity and related weighted average exercise prices for each category:



	Nine Months Ended December 28, 2014
(shares in thousands)	Shares		Price
Beginning stock options outstanding	5,602		$	7.21
Granted	407		12.03
Exercised (1)	(1,281	)	7.01
Canceled	(451	)	8.54
Ending stock options outstanding	4,277		$	7.59
Ending stock options exercisable	2,632		$	6.69


(1)	Upon exercise, the Company issues new shares of common stock.

As of December 28, 2014, the unrecognized compensation cost related to nonvested stock options, net of estimated forfeitures, was $1.6 million and will be recognized over a weighted-average period of 1.04 years.

As of December 28, 2014, stock options vested and expected to vest totaled approximately 4.0 million with a weighted-average exercise price of $7.44 and a weighted-average remaining contractual life of 3.83 years. The aggregate intrinsic value was approximately $49.7 million.

As of December 28, 2014, fully vested stock options totaled approximately 2.6 million with a weighted-average exercise price of $6.69 and a weighted-average remaining contractual life of 3.13 years. The aggregate intrinsic value was approximately $34.8 million.

Restricted Stock Units

Restricted stock units granted by the Company under the 2004 Plan generally vest over at least a three-year period from the grant date with one-third of restricted stock units vesting on each one-year anniversary. As of December 28, 2014, 3.5 million restricted stock unit awards were outstanding under the 2004 Plan.

The following table summarizes the Company's restricted stock unit activity for each category for the nine months ended December 28, 2014:



	Nine Months Ended December 28, 2014
(shares in thousands)	Shares		Weighted-average grant date fair value per share
Beginning RSUs outstanding	2,924		$	7.44
Granted	1,911		12.91
Released	(940	)	7.29
Forfeited	(385	)	8.71
Ending RSUs outstanding	3,510		$	10.32

As of December 28, 2014, restricted stock units vested and expected to vest totaled approximately 2.8 million with a weighted-average remaining contract life of 1.42 years. The aggregate intrinsic value was approximately $55.8 million.

As of December 28, 2014, the unrecognized compensation cost related to restricted stock units granted under the Company’s equity incentive plan was approximately $16.1 million, net of estimated forfeitures, and is expected to be recognized over a weighted-average period of 1.58 years.

Performance-Based Stock Units

Under the 2004 Plan, the Company has granted performance-based stock units which vest and convert into shares of the Company's common stock based on the level of achievement of pre-established performance goals relating to Company's performance relative to a group of peer companies and to cumulative revenue targets for a specific product group, during a specified performance period. The performance period for the Company's performance-based stock units is generally 1 to 3 years. Management evaluates, on a quarterly basis, the likelihood of the Company meeting its performance metrics in determining stock-based compensation expense.

The following table summarizes the Company's performance stock unit activity for each category for the nine months ended December 28, 2014:



	Nine Months Ended December 28, 2014
(shares in thousands)	Shares		Weighted-average grant date fair value per share
Beginning PSUs outstanding	804		$	7.79
Granted	101		9.91
Released	(220	)	8.11
Forfeited	(122	)	7.85
Ending PSUs outstanding	563		$	8.04

As of December 28, 2014, performance stock units vested and expected to vest totaled approximately 0.4 million with a weighted-average remaining contract life of 0.93 years. The aggregate intrinsic value was approximately $8.9 million.

As of December 28, 2014, the unrecognized compensation cost related to performance stock units granted under the Company’s equity incentive plan was approximately $1.0 million, net of estimated forfeitures, and is expected to be recognized over a weighted-average period of 0.96 years.

Market-Based Stock Units

In June 2014, under the 2004 Plan, the Company granted approximately 0.5 million shares of restricted stock units with a market-based condition to a group of executive-level employees. These equity awards vest and convert into shares of the Company’s common stock based on the achievement of the Company’s relative total shareholder return over the performance period of 2 years. The earned market-based stock units will vest in two equal installments, with the first installment of vesting to occur on June 15, 2016, and the second on June 15, 2017.

The fair value of each market-based stock unit award was estimated on the date of grant using a Monte Carlo simulation model that uses the assumptions noted in the table below. The Company uses historical data to estimate employee termination within the valuation model. The expected term of 1.80 years was derived from the output of the valuation model and represents the period of time that restricted stock units granted are expected to be outstanding.

The following weighted average assumptions were used to calculate the fair value of the market-based equity award using a Monte Carlo simulation model:



	June 15, 2014
Estimated fair value	$	21.00
Expected volatility	34.6		%
Expected term (in years)	1.80
Risk-free interest rate	0.38		%
Dividend yield	—		%

As of December 28, 2014, the total market-based stock units outstanding was approximately 0.5 million.

As of December 28, 2014, market-based stock units vested and expected to vest totaled approximately 0.4 million with a weighted-average remaining contract life of 1.92 years. The aggregate intrinsic value was approximately $8.0 million.

As of December 28, 2014, the unrecognized compensation cost related to market-based stock units granted under the Company’s equity incentive plans was approximately $6.6 million, net of estimated forfeitures, and is expected to be recognized over a weighted-average period of 1.96 years.

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 9.0 million 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. At the 2012 annual meeting of stockholders on September 13, 2012, the Company's stockholders approved an additional 5.0 million shares. On July 12, 2013, the Company filed a registration statement on Form S-8 with the SEC to add the shares to the 2009 ESPP. The number of shares of common stock reserved for issuance thereunder increased from 9.0 million shares to 14.0 million shares.

Activity under the Company's ESPP for the nine months ended December 28, 2014 is summarized in the following table:



(in thousands, except per share amounts)
Number of shares issued	498
Average issuance price	$	11.76
Number of shares available at December 28, 2014	4,522