(14) STOCK-BASED COMPENSATION

Valuation Assumptions

We are required to estimate the fair value of share-based payment awards on the date of grant. We recognize compensation costs for stock-based payment awards to employees based on the grant-date fair value using a straight-line approach over the service period for which such awards are expected to vest.

We determine the fair value of our share-based payment awards as follows:

Restricted Stock Units, Restricted Stock, and Performance-Based Restricted Stock Units. The fair value of restricted stock units, restricted stock, and performance-based restricted stock units (other than market-based restricted stock units) is determined based on the quoted market price of our common stock on the date of grant. Performance-based restricted stock units include grants made (1) to certain members of executive management primarily granted in fiscal year 2008 and (2) in connection with certain acquisitions.
Market-Based Restricted Stock Units. Market-based restricted stock units consist of grants of performance-based restricted stock units to certain members of executive management (referred to herein as "market-based restricted stock units"). The fair value of our market-based restricted stock units is determined using a Monte-Carlo simulation model. Key assumptions for the Monte-Carlo simulation model are the risk-free interest rate, expected volatility, expected dividends and correlation coefficient.
Stock Options and Employee Stock Purchase Plan. The fair value of stock options and stock purchase rights granted pursuant to our equity incentive plans and our 2000 Employee Stock Purchase Plan ("ESPP"), respectively, is determined using the Black-Scholes valuation model based on the multiple-award valuation method. Key assumptions of the Black-Scholes valuation model are the risk-free interest rate, expected volatility, expected term and expected dividends.

The determination of the fair value of market-based restricted stock units, stock options and ESPP is affected by assumptions regarding subjective and complex variables. Generally, our assumptions are based on historical information and judgment is required to determine if historical trends may be indicators of future outcomes.

The estimated assumptions used in the Black-Scholes valuation model to value our stock option grants and ESPP were as follows:


	Stock Option Grants								ESPP
	Three Months Ended December 31,				Nine Months Ended December 31,				Nine Months Ended December 31,
	Three Months Ended December 31,				Nine Months Ended December 31,				Nine Months Ended December 31,
	2011		2010		2011		2010		2011		2010
Risk-free interest rate	0.4- 1.2	%	1.2- 2.6	%	0.4- 1.8	%	0.8- 2.6	%	0.1	%	0.2- 0.3	%
Expected volatility	42- 46	%	41- 43	%	40- 46	%	41- 45	%	39- 40	%	38	%
Weighted-average volatility	45	%	42	%	43	%	43	%	39	%	38	%
Expected term	4.1 years		4.2 years		4.4 years		4.4 years		6-12 months		6-12 months
Expected dividends	None		None		None		None		None		None

There were no ESPP shares valued during the three months ended December 31, 2011 and 2010.

The estimated assumptions used in the Monte-Carlo simulation model to value our market-based restricted stock units were as follows:


	Nine Months Ended December 31, 2011


Risk-free interest rate	0.2- 0.6	%
Expected volatility	14- 83	%
Weighted-average volatility	35	%
Expected dividends	None

There were no market-based restricted stock units granted during the three months ended December 31, 2011 and the three and nine months ended December 30, 2010.

Stock-Based Compensation Expense

Employee stock-based compensation expense recognized during the three and nine months ended December 31, 2011 and 2010 was calculated based on awards ultimately expected to vest and has been reduced for estimated forfeitures. In subsequent periods, if actual forfeitures differ from those estimates, an adjustment to stock-based compensation expense will be recognized at that time.

The following table summarizes stock-based compensation expense resulting from stock options, restricted stock, restricted stock units and the ESPP included in our Condensed Consolidated Statements of Operations (in millions):


	Three Months Ended December 31,				Nine Months Ended December 31,
	Three Months Ended December 31,				Nine Months Ended December 31,
	2011		2010		2011		2010
Cost of goods sold	$	-	$	1	$	1	$	2
Marketing and sales		7		6		18		16
General and administrative		11		9		29		32
Research and development		30		30		81		86
Restructuring and other charges		-		2		-		2
Stock-based compensation expense	$	48	$	48	$	129	$	138

During the three and nine months ended December 31, 2011 and 2010, we did not recognize any provision for or benefit from income taxes related to our stock-based compensation expense.

As of December 31, 2011, our total unrecognized compensation cost related to stock options was $17 million and is expected to be recognized over a weighted-average service period of 1.7 years. As of December 31, 2011, our total unrecognized compensation cost related to restricted stock, restricted stock units and notes payable in shares of common stock (collectively referred to as "restricted stock rights") was $310 million and is expected to be recognized over a weighted-average service period of 2.0 years. During the nine months ended December 31, 2011, we determined that the performance criteria for certain performance-based restricted stock units was improbable of achievement and accordingly reversed stock-based compensation expense of $7 million previously recognized within our Condensed Consolidated Statement of Operations. As the criteria for these certain performance-based restricted stock was improbable of achievement, the related unrecognized compensation cost is excluded from the total unrecognized compensation cost related to restricted stock rights as of December 31, 2011.

Stock Options

The following table summarizes our stock option activity for the nine months ended December 31, 2011:


	Options (in thousands)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)




Outstanding as of March 31, 2011	12,899		$	31.39
Granted	431			20.79
Exercised	(1,145	)		19.61
Forfeited, cancelled or expired	(2,151	)		23.90
Outstanding as of December 31, 2011	10,034			33.90	5.15	$	10
Exercisable as of December 31, 2011	8,440			35.43	4.69	$	9

The aggregate intrinsic value represents the total pre-tax intrinsic value based on our closing stock price as of December 31, 2011, which would have been received by the option holders had all the option holders exercised their options as of that date. The weighted-average grant date fair values of stock options granted during the three and nine months ended December 31, 2011 were $7.85 and $7.35, respectively. The weighted-average grant date fair values of stock options granted during the three and nine months ended December 31, 2010 were $5.58 and $6.20, respectively. We issue new common stock from our authorized shares upon the exercise of stock options.

Restricted Stock Rights

The following table summarizes our restricted stock rights activity, excluding performance-based and market-based restricted stock unit activity discussed below, for the nine months ended December 31, 2011:


	Restricted Stock Rights (in thousands)		Weighted- Average Grant Date Fair Value


Balance as of March 31, 2011	13,971		$	22.01
Granted	9,433			22.17
Vested	(5,123	)		20.33
Forfeited or cancelled	(1,564	)		20.22
Balance as of December 31, 2011	16,717			22.78

The weighted-average grant date fair values of restricted stock rights granted during the three and nine months ended December 31, 2011 were $22.10 and $22.17, respectively. The weighted-average grant date fair values of restricted stock rights granted during the three and nine months ended December 31, 2010 were $15.59 and $17.25, respectively.

Performance-Based Restricted Stock Units

The following table summarizes our performance-based restricted stock unit activity for the nine months ended December 31, 2011:


	Performance- Based Restricted Stock Units (in thousands)		Weighted- Average Grant Date Fair Value



Balance as of March 31, 2011	1,993		$	47.00
Forfeited or cancelled	(423	)		34.80
Balance as of December 31, 2011	1,570			50.29

Market-Based Restricted Stock Units

Our market-based restricted stock units vest contingent upon the achievement of pre-determined market and service conditions. If these market conditions are not met but service conditions are met, the restricted stock units will not vest; however, any compensation expense we have recognized to date will not be reversed. During the three months ended June 30, 2011, 670,000 market-based restricted stock units, representing the target number, were granted. The number of shares of common stock to be received at vesting will range from zero percent to 200 percent of the target number of stock units based on our total stockholder return ("TSR") relative to the performance of companies in the NASDAQ-100 Index for each measurement period over a three year period. The maximum number of common shares that could vest is 1,340,000 for market-based restricted stock units granted in fiscal year 2012. The following table summarizes our market-based restricted stock unit activity for the nine months ended December 31, 2011:


	Market-Based Restricted Stock Units (in thousands)		Weighted- Average Grant Date Fair Value



Balance as of March 31, 2011	-		$	-
Granted	670			34.77
Forfeited or cancelled	(35	)		34.77
Balance as of December 31, 2011	635			34.77

Stock Repurchase Program

On February 1, 2011, our Board of Directors authorized a program to repurchase up to $600 million of our common stock over the next 18 months. The timing and actual amount of the stock repurchases will depend on several factors including price, capital availability, regulatory requirements, alternative investment opportunities and other market conditions. We are not obligated to repurchase any specific number of shares under the program and the repurchase program may be modified, suspended or discontinued at any time. During nine months ended December 31, 2011, we repurchased and retired approximately 11 million shares of our common stock for approximately $230 million, net of commissions.

Annual Meeting of Stockholders

At our Annual Meeting of Stockholders, held on July 28, 2011, our stockholders approved (1) an amendment to our 2000 Equity Incentive Plan (the "Equity Plan") to increase the number of shares authorized for issuance under the Equity Plan by 10 million shares and (2) an amendment to the ESPP to increase the number of shares authorized under the ESPP by 3.5 million shares.