Stockholders' Equity

9 Months Ended

Dec. 31, 2011

Stockholders' Equity [Abstract]

Stockholders' Equity

5. STOCKHOLDERS' EQUITY

Preferred Stock

The Certificate of Incorporation allows for the issuance of up to two million shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences, and the number of shares constituting any series of the designation of such series, without further vote or action by the stockholders.

Common Stock

At December 31, 2011, the Company had 375.0 million shares authorized for issuance and approximately 61.2 million shares issued and outstanding. At March 31, 2011, there were approximately 63.7 million shares issued and outstanding.

Employee Stock Purchase Plan

The Company has in effect an employee stock purchase plan under which 4.8 million shares of common stock was reserved for issuance. In August 2010, the Company's stockholders approved the proposal to increase the number of shares reserved for issuance to 6.3 million shares. Under the terms of this plan, purchases are made semiannually and the purchase price of the common stock is equal to 85% of the fair market value of the common stock on the first or last day of the offering period, whichever is lower. During the nine months ended December 31, 2011 and 2010, 0.4 million and 0.2 million shares, respectively, were issued under this plan. At December 31, 2011, 4.9 million shares had been issued under this plan and 1.4 million shares were available for future issuance.

Stock Repurchase Program

In August 2004, the Board authorized a stock repurchase program for the repurchase of up to $200.0 million of the Company's common stock. Under the program, the Company is authorized to make purchases in the open market or enter into structured stock repurchase agreements. In October 2008, the Board increased the stock repurchase program by $100.0 million. During the nine months ended December 31, 2011, approximately 3.5 million shares were repurchased on the open market at a weighted average price of $5.98 per share. During the nine months ended December 31, 2010, 2.1 million shares were repurchased on the open market at a weighted average price of $11.25 per share. From the time the program was first implemented in August 2004, the Company has repurchased on the open market a total of 17.2 million shares at a weighted average price of $10.08 per share. All repurchased shares were retired upon delivery to the Company.

In February 2011, the Company entered into a Rule 10b5-1 plan to repurchase up to 3.0 million shares of its common stock at various price parameters. The Company cancelled this Rule 10b5-1 plan in May 2011. Included in the open market repurchases during the three months ended December 31, 2011 are 0.3 million shares that were repurchased under this Rule 10b5-1 plan at a weighted average price of $9.98 per share. At the time this Rule 10b5-1 plan was cancelled, the Company repurchased 1.0 million shares at a weighted average price of $10.00 per share under this Rule 10b5-1 plan.

The Company also utilizes structured stock repurchase agreements to buy back shares which are prepaid written put options on its common stock. The Company pays a fixed sum of cash upon execution of each agreement in exchange for the right to receive either a pre-determined amount of cash or stock depending on the closing market price of its common stock on the expiration date of the agreement. Upon expiration of each agreement, if the closing market price of its common stock is above the pre-determined price, the Company will have its cash investment returned with a premium. If the closing market price is at or below the pre-determined price, the Company will receive the number of shares specified at the agreement inception. The Company considered the guidance in ASC Topic 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity and ASC Topic 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock. Any cash received, including the premium, is treated as additional paid-in capital on the balance sheet.

During the nine months ended December 31, 2011 and 2010, the Company entered into structured stock repurchase agreements totaling $10.0 million during each period. For those agreements that had been settled during the nine months ended December 31, 2011, the Company received 1.0 million in shares of its common stock at an effective purchase price of $9.74 per share from the settled structured stock repurchase agreements. For those agreements that had been settled during the nine months ended December 31, 2010, the Company received $15.5 million in cash (including contracts entered into the previous fiscal year) and 0.5 million in shares of its common stock at an effective purchase price of $10.01 per share. At December 31, 2011, the Company had no outstanding structured stock repurchase agreements. From the inception of the Company's most recent stock repurchase program in August 2004, it entered into structured stock repurchase agreements totaling $277.5 million. Upon settlement of these agreements, as of December 31, 2011, the Company received $179.8 million in cash and 10.0 million shares of its common stock at an effective purchase price of $9.78 per share.

The table below is a plan-to-date summary of the Company's repurchase program activity as of December 31, 2011 (in thousands, except per share data):

	Aggregate Price		Repurchased Shares		Average Price Per Share
Stock repurchase program
Authorized amount	$	300,000		—	$	—
Open market repurchases		172,958		17,158		10.08
Structured stock repurchase agreements*		110,517		9,989		11.06
Total repurchases	$	283,475		27,147	$	10.44
Available for repurchase	$	16,525

* The amounts above do not include gains recorded to additional paid-in-capital of $12.8 million from structured stock repurchase agreements which settled in cash. The average price per share for structured stock repurchase agreements adjusted for gains from settlements in cash would have been $9.78 per share and for total repurchases would have been $9.97 per share.

Stock Options

The Company has granted stock options to employees and non-employee directors under several plans. These option plans include two stockholder-approved plans (the 1992 Stock Option Plan (the "1992 Plan") and 1997 Directors' Stock Option Plan) and four plans not approved by stockholders (the 2000 Equity Incentive Plan (the "2000 Plan"), Cimaron Communications Corporation's 1998 Stock Incentive Plan assumed in the fiscal 1999 merger, and JNI Corporation's 1997 and 1999 Stock Option Plans assumed in the fiscal 2004 merger). Certain other outstanding options were assumed through the Company's various acquisitions.

In April 2011, the Compensation Committee and the Board of Directors approved the Company's 2011 Equity Incentive Plan ("2011 Plan"). The Company's stockholders approved the 2011 Plan during its August 2011 annual meeting. The 2011 Plan serves as a successor to the 1992 Plan and no additional equity awards will be granted under the 1992 Plan. The total number of shares of common stock reserved for issuance under the 2011 Plan consists of 4.2 million shares plus up to 10.9 million shares subject to any stock awards under the 1992 Plan or the 2000 Plan that terminate or are forfeited or repurchased and would otherwise be returned to the share reserve under the 1992 Plan or the 2000 Plan, respectively.

The Board has delegated administration of the Company's equity plans to the Compensation Committee, which generally determines eligibility, vesting schedules and other terms for awards granted under the plans. Options under the plans expire not more than ten years from the date of grant and are generally exercisable upon vesting. Vesting generally occurs over four years. New hire grants generally vest and become exercisable at the rate of 25% on the first anniversary of the date of grant and ratably on a monthly basis over a period of 36 months thereafter; subsequent option grants to existing employees generally vest and become exercisable ratably on a monthly basis over a period of 48 months measured from the date of grant.

In May 2009, Dr. Gopi, our CEO, was awarded 300,000 stock options for "Extraordinary Accomplishment." The Black-Scholes value of these stock options is $1.1 million. These options will vest only if Company performance milestones are satisfied; otherwise they will expire unvested. The first milestone for 75,000 shares will vest only if we achieve an annual revenue target of $270 million or more for any fiscal year from fiscal 2010 through fiscal 2013. The next milestone for another 75,000 shares will vest only if we achieve an annual revenue target of $310 million or more for any fiscal year from fiscal 2010 through fiscal 2013 or an annual revenue target of $350 million or more for fiscal 2014. The last milestone for 150,000 shares will vest only if we achieve an annual operating margin of 13.5% of annual revenue or higher in fiscal 2013 or 15% or higher for any fiscal year from fiscal 2010 through fiscal 2012. The Company evaluates the probability of achieving the milestones and adjusts any stock option expense accordingly.

At December 31, 2011 and March 31, 2011, there were no outstanding shares of common stock subject to repurchase. Options are granted at prices at least equal to fair value of the Company's common stock on the date of grant.

Option activity under the Company's stock incentive plans during the nine months ended December 31, 2011 is set forth below (in thousands, except per share data):

	Number of Shares			Weighted Average Exercise Price Per Share
Outstanding at the beginning of the year		5,390		$	11.90
Granted		250			10.10
Exercised		(110	)		5.07
Forfeited		(1,271	)		16.35
Outstanding at the end of the period		4,259		$	10.63
Vested and expected to vest during the remaining recognition period		4,189		$	10.66
Vested at the end of the period		2,999		$	11.41

At December 31, 2011, the weighted average remaining contractual term for options outstanding is 4.3 years and for options vested is 4.0 years.

The aggregate pretax intrinsic value of options exercised during the nine months ended December 31, 2011 was $0.4 million. This intrinsic value represents the excess of the fair market value of the Company's common stock on the date of exercise over the exercise price of such options.

The weighted average remaining contractual life and weighted average per share exercise price of options outstanding and of options exercisable as of December 31, 2011 were as follows (in thousands, except exercise prices and years):

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number of Shares		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
$ 0.52 –   $ 7.12		979		3.79	$	6.31		454	$	5.94
7.13 –      8.07		854		4.82		7.71		696		7.69
8.07 –    11.86		983		5.61		10.34		526		10.07
11.87 –    14.40		871		4.00		12.97		751		13.08
14.41 –    26.60		572		2.31		19.33		572		19.33
$ 0.52 – $ 26.60		4,259		4.26	$	10.63		2,999	$	11.41

As of December 31, 2011, the aggregate pre-tax intrinsic value of options outstanding and exercisable was $0.4 million and options outstanding were $0.6 million. The aggregate pretax intrinsic values were calculated based on the closing price of the Company's common stock of $6.72 on December 31, 2011.

Restricted Stock Units

The Company has granted restricted stock units ("RSUs") pursuant to the 1992 Plan and the 2000 Plan as part of its regular annual employee equity compensation review program as well as to new hires. Each RSU is an equity award that, upon vesting, will deliver to the holder one share of the Company's common stock. Generally, RSUs will vest on a quarterly basis over four years from the date of hire, provided that no shares will vest during the first year, at the end of which the shares that would have vested during that year will vest and the remaining shares will vest over the following 12 quarters.

In May 2009, the Company issued three-year performance-based RSU grants, or "EBITDA" Grants. Vesting for the EBITDA Grants is subject to (i) the Company's performance as measured by earnings before interest, taxes, depreciation and amortization ("EBITDA"), and (ii) individual performance as measured by the accomplishment of goals and objectives. For the fiscal years ended March 31, 2011 and 2010, approximately 36% and 34%, respectively, of the three-year performance pool has vested because the Company's performance exceeded its "stretch" EBITDA target. For the fiscal year ending March 31, 2012, up to the remaining 30% of the three-year performance pool can vest, after adjusting for individual performance factors. The Company evaluates the probability of achieving the milestones and adjusts any RSU expense which is included in stock-based compensation expense.

In April 2011, the Committee authorized additional three-year performance-based RSU grants, or "EBITDA2" Grants. EBITDA2 Grants are similar to the EBITDA Grant program introduced in 2009 with one major exception. For Vice Presidents, the Company EBITDA attainment scale must be 50% or more for RSU share vesting to occur in that year. As with the previous EBITDA program, unearned amounts based on Company performance will roll over to the subsequent year, offering a "make-up" opportunity based on future company performance and unvested RSU shares remaining at the end of the three-year program period will expire unvested. The Company evaluates the probability of achieving the milestones and adjusts any RSU expense which is included in stock-based compensation expense.

In November 2011, the Committee authorized additional 18-month performance-based RSU grants, or "Performance Retention Grants", which are intended to incentivize superior performance and retain key employees. Vesting for the Performance Retention Grants is subject to (i) the accomplishment of goals and objectives of the individual's business unit and (ii) individual performance as measured by the accomplishment of individual goals and objectives. These RSU shares vest 2/3 after one year, with certain unearned amounts able to roll over to the subsequent vesting period, and 1/3 after 18 months. Unvested RSU shares remaining at the end of the 18-month program period will expire unvested. The Company evaluates the probability of achieving the goals and objectives and adjusts any RSU expense which is included in stock-based compensation expense.

Restricted stock unit activity during the nine months ended December 31, 2011 is set forth below (in thousands):

	Restricted Stock Units Outstanding Number of Shares
Outstanding at the beginning of the year		3,074
Awarded		7,820
Vested		(1,570	)
Cancelled		(713	)
Outstanding at the end of the period		8,611

The weighted average remaining contractual term for the restricted stock units outstanding as of December 31, 2011 was 1.3 years.

As of December 31, 2011, the aggregate pre-tax intrinsic value of restricted stock units outstanding was $57.9 million. The aggregate pretax intrinsic values were calculated based on the closing price of the Company's common stock of $6.72 on December 31, 2011.

The aggregate pretax intrinsic value of RSUs released during the nine months ended December 31, 2011 was $14.5 million. This intrinsic value represents the fair market value of the Company's common stock on the date of release.

Warrants

On May 17, 2009, the Company entered into a merger and other agreements with Veloce Technologies, Inc. ("Veloce") pursuant to which Veloce has agreed, among other things, to perform development work for the Company on an exclusive basis for up to five years for cash and other consideration, including a warrant to purchase shares of the Company's common stock. The warrant vesting schedule was amended in conjunction with the amended merger agreement on November 8, 2010.

The warrant expires on July 15, 2014 and has an exercise price of $0.01 per share. The warrant was 59% vested as of December 31, 2011. The remaining shares will vest quarterly through December 2012. A portion of the vested shares have been committed to be distributed to the employees of Veloce and will be settled in cash instead of common stock. Veloce will sell the committed shares and distribute the proceeds to its employees. Therefore, the Company has recognized stock-based compensation expense which is included in R&D expense and recorded a corresponding liability for the amount to be distributed as of December 31, 2011. Any committed shares not sold are adjusted to fair market value at the end of the period and the adjustment is recognized in stock-based compensation expense. No stock-based compensation expense has been recognized for the portion of the warrants that have been retained by Veloce.