Stockholders' Equity

6 Months Ended

Sep. 30, 2012

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 September 30, 2012, the Company had 375.0 million shares authorized for issuance and approximately 65.3 million shares issued and outstanding. At March 31, 2012, there were approximately 61.9 million shares issued and outstanding.

Employee Stock Purchase Plan

The Company had in effect the 1998 Employee Stock Purchase Plan (1998 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. In August 2012, the Company’s stockholders approved the proposal to reserve an additional 1.8 million shares under the 2012 Employee Stock Purchase Plan (2012 Plan). Upon adoption of the 2012 Plan, the 1998 Plan was terminated. Under the terms of the 2012 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 six months ended September 30, 2012 and 2011, 0.4 million shares for each of these periods were issued under the 1998 Plan. At September 30, 2012, 6.6 million shares had been issued under all previous stock plans and none were available for future issuance, and 1.8 million shares were available for issuance under the 2012 Plan.

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 six months ended September 30, 2012, approximately 0.1 million shares were repurchased on the open market at a weighted average price of $5.18 per share. During the six months ended September 30, 2011, approximately 3.5 million shares were repurchased on the open market at a weighted average price of $5.98 per share. From the time the program was first implemented in August 2004, the Company has repurchased on the open market a total of 17.3 million shares at a weighted average price of $10.04 per share. All repurchased shares were retired upon delivery to the Company.

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 six months ended September 30, 2012, the Company did not enter into any structured stock repurchase agreements. During the six months ended September 30, 2011, the Company entered into structured stock repurchase agreements totaling $10.0 million for which it 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. At September 30, 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 September 30, 2012, 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 September 30, 2012 (in thousands, except per share data):

	Aggregate Price		Repurchased Shares		Average Price Per Share
Stock repurchase program
Authorized amount	$	300,000		—	$	—
Open market repurchases		173,611		17,284		10.04
Structured stock repurchase agreements*		110,517		9,989		11.06
Total repurchases	$	284,128		27,273	$	10.42
Available for repurchase	$	15,872

* 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 and 1997 Directors’ Stock Option Plan) and four plans not approved by stockholders (the 2000 Equity Incentive 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.

In February 2012, Dr. Gopi was awarded 500,000 restricted stock units. The Black-Scholes value of these stock options is $3.7 million. These options will vest only if the Company’s performance milestones relating to the Veloce merger are satisfied; otherwise they will expire unvested. The Company evaluates the probability of achieving the milestones and recognizes any stock option expense accordingly.

At September 30, 2012 and March 31, 2012, there were no 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 six months ended September 30, 2012 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		4,164		$	10.67
Granted		40			5.58
Exercised		(14	)		5.14
Forfeited		(252	)		18.68
Outstanding at the end of the period		3,938		$	10.13
Vested and expected to vest at the end of the period		3,910		$	10.14
Vested at the end of the period		3,133		$	10.42

At September 30, 2012, the weighted average remaining contractual term for options outstanding and vested is 3.8 years each.

The aggregate pretax intrinsic value of options exercised during the six months ended September 30, 2012 was approximately $11,000. 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 September 30, 2012 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
$ 1.68 - $ 7.12		939		3.28	$	6.40		553	$	6.03
7.13 - 8.07		854		4.06		7.71		816		7.70
8.08 - 11.86		938		5.10		10.34		654		10.15
11.87 - 14.40		829		3.34		12.94		732		13.03
14.41 - 24.16		378		2.44		18.15		378		18.15
$ 1.68 - $24.16		3,938		3.82	$	10.13		3,133	$	10.42

As of September 30, 2012, the aggregate pre-tax intrinsic value of options outstanding and exercisable was approximately $10,000 each. The aggregate pretax intrinsic values were calculated based on the closing price of the Company’s common stock of $5.06 on September 30, 2012.

Restricted Stock Units

The Company has granted restricted stock units (“RSUs”) pursuant to its 1992 Plan, 2000 Equity Incentive Plan and 2011 Equity Incentive Plan as part of its regular annual employee equity compensation review program as well as to new hires. RSUs are share awards that, upon vesting, will deliver to the holder, shares of the Company’s common stock. Generally, RSUs vest ratably on a quarterly basis over four years from the date of grant. For employees hired after May 15, 2006, 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 of employment, at the end of which the shares that would have vested during that year will vest and the remaining shares will vest over the remaining 12 quarters.

In May 2009, the Company issued three-year performance-based RSU grants, or “EBITDA” Grants which were completed in fiscal 2012 and no additional grants will be made under this grant.

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. The Company evaluates the probability of achieving the milestones and adjusts any RSU expense which is included in stock-based compensation expense. As of September 30, 2012, the Company believes that that it would be highly unlikely for any EBITDA2 shares to vest during the three-year life of the program. Fiscal 2012 was declared zero attainment and vesting target shares have rolled over to fiscal 2013. The Company expects that all shares issued under the EBITDA2 program will expire unvested when the program concludes in May 2014.

In November 2011 and February 2012, 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. In May 2012, the Committee authorized 12-month Performance Retention Grants. 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. The 18-month 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. The 12-month RSU shares will have the opportunity to vest after one year. Unvested RSU shares remaining at the end of the 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 six months ended September 30, 2012 is set forth below (in thousands):

	Restricted Stock Units Outstanding Number of Shares
Outstanding at the beginning of the year		9,244
Awarded		522
Vested		(327	)
Cancelled		(797	)
Outstanding at the end of the period		8,642

The weighted average remaining contractual term for the restricted stock units outstanding as of September 30, 2012 was 1.31 years.

As of September 30, 2012, the aggregate pre-tax intrinsic value of restricted stock units outstanding was $43.7 million which includes performance based awards which are subject to milestone attainments. The aggregate pretax intrinsic values were calculated based on the closing price of the Company’s common stock of $5.06 on September 30, 2012.

The aggregate pretax intrinsic value of RSUs released during the three months ended September 30, 2012 was $1.8 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 development agreement with Veloce pursuant to which Veloce 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”). The Warrant vesting schedule was amended in conjunction with the amended development agreement on November 8, 2010. In connection with the Merger Agreement amendment entered into on April 5, 2012, the Company and Veloce further modified the Warrant by fully accelerating the vesting schedule resulting in the recognition of approximately $1.3 million of stock compensation expense during the quarter ended June 30, 2012. All vested shares were subsequently sold and the proceeds distributed, prior to the acquisition of Veloce by the Company on June 20, 2012.