Stock-Based Compensation

6 Months Ended

Sep. 30, 2012

Stock-Based Compensation [Abstract]

STOCK-BASED COMPENSATION

6. STOCK-BASED COMPENSATION

The Company accounts for stock based compensation activity using the modified prospective method. This method requires companies to estimate the fair value of stock-based compensation on the date of grant using an option-pricing model. The Company uses the Black-Scholes model to value stock-based compensation, excluding RSUs, which we use the fair market value of our common stock. The Black-Scholes model determines the fair value of share-based payment awards based on the stock price on the date of grant and is affected by assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s stock price, volatility over the term of the awards and actual and projected employee stock option exercise behaviors. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Although the fair value of stock options granted by the Company is estimated by the Black-Scholes model, the estimated fair value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

The fair value of the options granted is estimated as of the grant date using the Black-Scholes option-pricing model assuming the weighted-average assumptions listed in the following tables:

	Three Months Ended September 30,
	Employee Stock Purchase  Plans
	2012			2011
Expected life (years)		0.5			0.5
Risk-free interest rate		0.2	%		0.2	%
Volatility		50	%		55	%
Dividend yield		—	%		—	%
Weighted average fair value	$	1.50		$	1.92

The Company did not grant options during the three months ended September 30, 2012 and 2011.

	Six Months Ended September 30,
	Employee Stock Options						Employee Stock Purchase Plans
	2012			2011			2012			2011
Expected life (years)		4.5			3.8			0.5			0.5
Risk-free interest rate		0.7	%		1.4	%		0.2	%		0.2	%
Volatility		54	%		48	%		50	%		55	%
Dividend yield		—	%		—	%		—	%		—	%
Weighted average fair value	$	2.47		$	3.83		$	1.50		$	1.92

The weighted average grant-date fair value per share of the restricted stock units awarded was $5.75 and $5.52 during the three and six months ended September 30, 2012, respectively, compared to $5.86 and $9.87 during the three and six months ended September 30, 2011, respectively. The weighted average fair value per share was calculated based on the fair market value of the Company’s common stock on the respective grant dates.

Effective April 1, 2012, the Company revised its estimated forfeiture rate used in determining the amount of stock-based compensation from 6.8% to 6.6% as a result of an decreasing rate of forfeitures in recent periods, which the Company believes is indicative of the rate it will experience during the remaining vesting period of currently outstanding unvested grants.

The following table summarizes stock-based compensation expense related to stock options and restricted stock units (in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,
	2012		2011		2012		2011
Stock-based compensation expense by type of award
Stock options and warrants	$	601	$	992	$	2,089	$	2,561
Restricted stock units		7,031		2,103		13,151		4,709
Total stock-based compensation		7,632		3,095		15,240		7,270
Stock-based compensation expensed from inventory		2		29		83		32
Total stock-based compensation expense	$	7,634	$	3,124	$	15,323	$	7,302

The following table summarizes stock-based compensation expense as it relates to the Company’s statement of operations (in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,
	2012		2011		2012		2011
Stock-based compensation expense by cost centers
Cost of revenues	$	175	$	69	$	355	$	177
Research and development		3,714		1,726		7,919		4,114
Selling, general and administrative		3,743		1,300		6,966		2,979
Total stock-based compensation	$	7,632	$	3,095	$	15,240	$	7,270
Stock-based compensation expensed from inventory		2		29		83		32
Total stock-based compensation expense	$	7,634	$	3,124	$	15,323	$	7,302

Stock-based compensation expense will continue to have a significant adverse impact on the Company’s reported results of operations, although it will have no impact on its overall financial position. The amount of unearned stock-based compensation currently estimated to be expensed from now through fiscal 2016 related to unvested share-based payment awards at September 30, 2012 is $15.8 million. The weighted-average period over which the unearned stock-based compensation is expected to be recognized is approximately 1.3 years. If there are any modifications or cancellations of the underlying unvested securities, the Company may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that the Company grants additional equity awards or assumes unvested equity awards in connection with acquisitions.

The above stock based compensation expense of approximately $15.3 million for the six months ended September 30, 2012 does not include approximately $1.3 million of expense related to the acceleration of Veloce warrants. See note 5 of Notes to Condensed Consolidated Financial Statements for further details relating to the Veloce warrants.