Stock-Based Compensation

12 Months Ended

Jun. 25, 2011

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation [Text Block]

STOCK-BASED COMPENSATION

At June 25, 2011, the Company had five stock option plans and one employee stock purchase plan, including the Company's 1996 Stock Incentive Plan (the "1996 Plan"), 1993 Officer and Director Stock Option Plan, 1987 Stock Option Plan, 1987 Supplemental Stock Option Plan, Supplemental Non-employee Stock Option Plan and 2008 Employee Stock Purchase Plan ("2008 ESPP").

The following tables present stock-based compensation expense by type of award and resulting tax effect included in the Consolidated Statements of Income for fiscal year 2011, 2010, and 2009:

	For the Year Ended
	June 25, 2011		June 26, 2010		June 27, 2009
	(in thousands)
Cost of goods sold
Stock options	$	2,625	$	3,330	$	33,380
Restricted stock units	9,820		10,825		23,350
Employee stock purchase plan	1,556		1,065		370
	14,001		15,220		57,100
Research and development expense
Stock options	11,325		15,085		38,237
Restricted stock units	36,925		33,834		61,151
Employee stock purchase plan	5,436		5,146		1,442
	53,686		54,065		100,830
Selling, general and administrative expense
Stock options	6,120		8,130		21,390
Restricted stock units	18,944		15,056		16,665
Employee stock purchase plan	1,546		1,054		123
	26,610		24,240		38,178
Total stock-based compensation expense
Stock options	20,070		26,545		93,007
Restricted stock units	65,689		59,715		101,166
Employee stock purchase plan	8,538		7,265		1,935
Pre-tax stock-based compensation expense	94,297		93,525		196,108
Less: Income tax effect	25,457		25,041		67,430
Net stock-based compensation expense	$	68,840	$	68,484	$	128,678

Modifications and Settlements

Tender Offer

In November 2008, the Company offered to purchase from employees up to 52.8 million shares underlying certain outstanding stock options for cash payments for the total potential cash consideration of $22.4 million. The amount of the cash payment was determined based on the Black-Scholes value of the eligible options utilizing the average stock price over the 20 trading days period preceding the date of the offer.

In December 2008, upon the closing of the offer, a total of 31.9 million shares underlying the eligible options had been tendered requiring the Company to remit an aggregate payment totaling $13.6 million. The Company accounted for the offer as a settlement under ASC Topic-718 Stock Based Compensation ("ASC 718"), which resulted in the recognition of $75.9 million in stock-based compensation expenses consisting of $8.7 million inadditional expense from settlements above fair value and $67.2 million associated with the unamortized compensation expense on the previously unvested tendered options. Settlement of the tendered options reduced deferred tax assets by $129.4 million, generated a tax benefit of $4.7 million, and resulted in a $124.7 million charge to additional paid in capital for the difference between the deferred tax assets and tax benefits associated with the tendered options.

The $75.9 million expense recognized in connection with the tender offer in the second quarter of fiscal year 2009 included the final true-up for $31.9 million tendered options, therefore, the Company also recorded in the same period a reversal of stock based compensation of $52.2 million related to the true-up for previously forfeited options.

Officer Option Repurchase

In December 2008, the Company repurchased 6.2 million outstanding stock options from officers for $1.8 million payable in installments over the greater of two years or the remaining vesting period associated with the options prior to their repurchase. The Company accounted for the repurchase as a modification under ASC 718 resulting in incremental compensation of $1.1 million which will be recognized over the payment period.

2009 Goodwill Program

In January 2009, the Company approved a program ("Goodwill Program") wherein non-officer employees holding options that were outstanding as of November 1, 2008 and which reached or will reach their contractual 10-year expiration term between November 2008 and December 2009 would be eligible for a payment in the form of cash or restricted stock units ("RSUs"). Payments exceeding $5,000 would be settled in restricted stock units that vest over three quarters and are contingent upon continued employment, while amounts below $5,000 would be settled in cash in a lump sum payment. The program was extended to officers in May 2009 except that payments exceeding $5,000 to officers were settled in restricted stock units vesting over six quarters.

The Company recorded a liability for the options settling in cash under the Goodwill Program. Options associated with payments being made in the form of restricted stock units under the Goodwill Program, which contain market and service conditions, are accounted for under the provisions of ASC 718. The Company recognized $0.2 million, and $5.4 million in stock based compensation expense related to this program during fiscal year 2011 and fiscal year 2010, respectively.

Share-Based Compensation and Other Adjustments resulting from the Blackout Period

On September 8, 2006, the SEC was notified that the Company would delay filing its Annual Report on Form 10K for the fiscal year ended June 24, 2006 as a result of the ongoing investigation into the Company's historical stock option granting practices. As a result of such delay, the Company suspended the issuance of shares upon exercise of stock options, vesting of RSUs and purchases of stock under the 1987 Employee Stock Participation Plan, as amended ("1987 ESPP") until the Company became current with all of its required SEC filings and its registration statements on Form S-8 became effective ("Blackout Period"). The Company instituted multiple programs in an attempt to compensate employees during the Blackout Period, as described below. The Company became current in its SEC filings, and its registration statements on Form S-8 became effective on September 30, 2008.

RSU Loan Program

In October 2006, the Company offered certain domestic employees an opportunity to receive cash in the form of a non-recourse loan ("RSU Loan") for common stock that they would have otherwise been able to receive in settlement for RSUs that vested during the Blackout Period. The program was not offered to executive officers or members of the Company's Board of Directors. Employees accepting the offer were also entitled to additional shares of common stock if the Company's stock price appreciated between the vesting date and the settlement date at the end of the Blackout Period. Employees foregoing the loan received shares of common stock at the conclusion of the Blackout Period. The Company also offered to cash-settle RSUs vesting during the Blackout Period held by foreign employees. The aforementioned loan offers were considered modifications of the RSUs triggering a change in the classification from equity to liability for all eligible awards vesting during the Blackout Period. The Company recorded a reclassification from additional paid-in-capital to accrued salary and related expenses of $19.4 million on the modification date and incremental compensation expense of $2.2 million from the modifications. Vesting of eligible awards and changes in stock price resulted in additional reclassifications from additional paid-in-capital to accrued salary and related expenses and additional compensation expenses in periods in which they occurred. The Company recorded $6.8 million and $50.2 million in stock based compensation expense in fiscal year 2009, and 2008, respectively. During fiscal years 2009 and 2008, the Company made cash payments of $35.6 million and $25.3 million pursuant to the RSU Loan program and $1.9 million and $4.3 million to cash-settle restricted stock units held by employees located outside the United States.

Extension of Options that Would Have Expired after Reaching 10-Year Contractual Term and Cash-Settlements of Expired Options

In September 2006, the Company approved the extension of the terms of vested stock options that would have expired during the Blackout Period as a result of the expiration of the 10-year contractual term. The extension was considered a modification under ASC 718. The incremental compensation expense of the modification was equal to the fair value of the option at the modification date after the extension compared to the fair value of the option prior to modification. The Company recognized additional compensation expense totaling $118.9 million for 8.3 million options in the three months ended September 23, 2006. The stock-based compensation expense adjustment was based on modified vested options held by employees that expired during the period from September 22, 2006 through the end of the Blackout Period.

In September 2007, as a result of changes in NASDAQ regulations, the Company decided to cash-settle substantially all options expiring during the Blackout Period ("goodwill payment") based on the price at which 10% of the daily close prices of the Company's common stock fall above this price for trading days from August 7, 2006 (the date on which the Company initiated a trading suspension on officers and other individuals) through the expiration date of the option. The cash payment is subject to the option holder executing a release of all claims relating to the option. The goodwill payment modification changed the classification of the associated awards from equity to liability instruments. The modification resulted in a reclassification from additional paid-in capital to accrued salary and related expenses of $126.8 million and incremental compensation expenses of $27.5 million. At the end of each period, the Company recognized changes in fair value of the options in its Consolidated Statements of Operations in the period of change until the options were settled.

On September 26, 2008, the Company offered certain employees, including certain officers of the Company, holding vested stock options that expired due to reaching their maximum 10-year terms in October 2008, certain cash goodwill payments contingent upon employee acceptance and signing of a release of claims related to the option. The Company cash-settled options to purchase 1.1 million option shares that expired in October 2008, with employees that accepted the offer. The cash-settlement resulted in a reduction of additional paid-in-capital of $0.3 million for the fair value of the underlying options on the settlement dates and incremental compensation expense of $4.3 million during the year ended June 26, 2010.

Fair Value

The fair value of share-based awards granted to employees under the Company's 1996 Plan and 2008 ESPP is estimated on the date of grant using the Black-Scholes option valuation model. Expected volatilities are based on the implied volatilities from traded options of the Company's common stock before the Company's common stock was delisted from NASDAQ on October 2, 2007. Subsequent to the Company's delisting, the Company began analyzing its expected volatilities based on historical volatilities from its traded common stock over a period equal to the expected term. The Company analyzed historical exercise patterns of relatively homogeneous groups of employees to estimate the expected holding period for options granted through December 29, 2008. Subsequent to the end of the second quarter of 2009, the Company began utilizing the simplified method under ASC-718, to estimate expected holding periods. This change was attributable to the significant impact resulting from the completion of the tender offer and the Company reducing the contractual term associated with new option grants from ten years to seven years. The risk-free interest rate is based on the U.S. Treasury yield. The Company determines the dividend yield by dividing the annualized dividends per share by the prior quarter's average stock price. The result is analyzed by the Company to decide whether it represents expected future dividend yield. As required by ASC 718, the Company also estimates forfeitures at the time of grant and makes revisions if the estimates change or the actual forfeitures differ from those estimates.

The fair value of each award granted in fiscal years 2011, 2010 and 2009 has been estimated at the date of grant using the Black-Scholes option valuation model and the following weighted-average assumptions:

	Stock Option Plan For the Year Ended
	June 25, 2011		June 26, 2010		June 27, 2009
Expected holding period (in years)	5.2		5.2		6.3
Risk-free interest rate	1.7	%	2.3	%	3.0	%
Expected stock price volatility	37.1	%	38.0	%	39.0	%
Dividend yield	4.2	%	4.5	%	4.1	%
	ESP Plan For the Year Ended
	June 25, 2011		June 26, 2010		June 27, 2009
Expected holding period (in years)	0.5		0.7		1.0
Risk-free interest rate	0.1	%	0.3	%	4.0	%
Expected stock price volatility	24.7	%	35.0	%	57.0	%
Dividend yield	3.3	%	4.4	%	6.1	%

The weighted-average fair value of stock options granted was $4.02, $4.23 and $3.61 per share for fiscal years 2011, 2010 and 2009, respectively. The weighted-average fair value of RSUs granted was $16.61, $16.20 and $11.91 per share for fiscal years 2011, 2010 and 2009, respe

Stock Option Plans

1996 Stock Incentive Plan

The Company's 1996 Plan, which was previously approved by the Company's stockholders, permits the grant of up to 113.1 million shares. The 1996 Plan provides for the grant of stock options, restricted stock units and restricted stock. To date, the Company has only issued stock options and restricted stock units. Under the 1996 Plan, the exercise price for all stock options will not be less than the fair market value of the Company's common stock on the date of grant. Options granted under the 1996 Plan, as well as under the Company's other stock plans described above, generally vest over a period of up to five years and expire from five to ten years from the date of the grant or such shorter term as may be provided in the agreement.

At June 25, 2011, the Company had 15.5 million shares of its common stock available for issuance to employees and other option recipients under its 1996 Stock Incentive Plan, 1993 Officer and Director Stock Option Plan, 1987 Stock Option Plan, 1987 Supplemental Stock Option Plan, and Supplemental Non-employee Stock Option Plan.

The following table summarizes stock options outstanding, exercisable and vested and expected to vest as of June 25, 2011:

	Options			Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (1)
	Number of Shares		Weighted Average Exercise Price
Balance at June 28, 2008	76,906,882		35.59
Options Granted	8,309,163		13.06
Options Exercised	(2,377	)	11.39
Options Cancelled	(55,613,752	)	35.89
Balance at June 27, 2009	29,599,916		28.83
Options Granted	3,671,459		18.08
Options Exercised	(47,327	)	12.86
Options Cancelled	(4,061,541	)	32.38
Balance at June 26, 2010	29,162,507		27.05
Options Granted	3,559,132		17.61
Options Exercised	(1,460,652	)	17.22
Options Cancelled	(2,928,501	)	33.67
Balance at June 25, 2011	28,332,486		25.62	3.7	$	119,500,252
Exercisable at June 25, 2011	16,468,585		$32.33	2.7	$	25,036,590
Vested and expected to vest, June 25, 2011	27,345,574		$25.93	3.7	$	112,428,729

(1) Aggregate intrinsic value represents the difference between the exercise price and the closing price per share of the Company's common stock on June 24, 2011, the last business day preceding the fiscal year end, multiplied by the number of options outstanding, exercisable or vested and expected to vest as of June 25, 2011.

The following table summarizes information about stock options that were outstanding and exercisable at June 25, 2011:

	Outstanding Options			Options Exercisable
Range of Exercise Prices	Number Outstanding at June 25, 2011	Weighted Average Remaining Contractual Term (In years)	Weighted Average Exercise Price	Number Exercisable at June 25, 2011	Weighted Average Exercise Price
$12.00 - $18.04	9,496,988	5.03	$14.10	1,731,327	$12.95
$18.11 - $27.45	6,428,859	4.19	20.49	2,603,082	22.40
$28.52 - $43.00	10,614,912	2.52	35.57	10,357,209	35.69
$49.95 - $52.33	1,791,727	1.93	46.12	1,776,967	46.12
	28,332,486			16,468,585

During fiscal year 2011, the Company granted approximately 3.6 million stock options from its 1996 Plan with an estimated total grant date fair value of $14.3 million. The weighted average grant date fair values of stock options granted during fiscal years 2011, 2010 and 2009 were $4.02, $4.23 and $3.61, respectively. The total intrinsic value of options exercised during fiscal year 2011 was $11.8 million and insignificant in fiscal years 2010 and 2009, respectively. The total fair value of options vested during fiscal year 2011 was $23.0 million and insignificant in fiscal years 2010 and 2009, respectively. As of June 25, 2011, there was $33.2 million of total unrecognized compensation costs related to 11.9 million unvested stock options expected to be recognized over a weighted average period of approximately 2.5 years.

Restricted Stock Units

Restricted stock units ("RSUs") generally vest on a quarterly basis over a service period of up to five years from the grant date. The restricted stock units represent a promise by the Company to the employees to issue shares of its common stock in the future, provided the vesting criteria are satisfied. RSUs granted reduce the total number of shares available for issuance under the 1996 Plan by a factor of two. To the extent RSUs are returned back to the 1996 Plan, for example, due to cancellations, such RSUs would increase the number of shares available to grant by a factor of two.

The following table summarizes outstanding and expected to vest RSUs as of June 25, 2011 and their activity during fiscal year 2011, 2010 and 2009:

	Number of Shares		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (1)
Balance at June 28, 2008	10,266,201
Restricted stock units granted	10,738,846
Restricted stock units released	(8,160,302	)
Restricted stock units cancelled	(977,416	)
Balance at June 27, 2009	11,867,329
Restricted stock units granted	4,259,756
Restricted stock units released	(4,813,738	)
Restricted stock units cancelled	(737,930	)
Balance at June 26, 2010	10,575,417
Restricted stock units granted	4,171,372
Restricted stock units released	(3,922,768	)
Restricted stock units cancelled	(823,283	)
Balance at June 25, 2011	10,000,738		2.5	239,894,343
Expected to vest at June 25, 2011	8,897,935		2.4	213,906,362

(1) Aggregate intrinsic value for RSUs represents the closing price per share of the Company's common stock on June 24, 2011, the last business day preceding the fiscal year end, multiplied by the number of RSUs outstanding, or expected to vest as of June 25, 2011.

The Company withheld shares worth $8.9 million related to employee withholding taxes based on the value of the RSUs on their vesting date as determined by the Company's closing stock price during the year ended June 25, 2011. The total payments for the employees' tax obligations to the taxing authorities are reflected as financing activities within the Consolidated Statements of Cash Flows.

The weighted average grant-date fair value of RSUs granted during fiscal years 2011, 2010 and 2009 was $16.61, $16.20 and $11.91, respectively. As of June 25, 2011, there was $122.8 million of unrecognized compensation cost related to 10.0 million unvested RSUs, which is expected to be recognized over a weighted average period of approximately 2.5 years.

2008 Employee Stock Purchase Plan

In December 2008, stockholders of the Company approved the creation of the 2008 Employee Stock Purchase Plan ("2008 ESPP"). Under the 2008 ESPP, the Company has reserved to date 8.0 million shares of its common stock for future issuance. The 2008 ESPP permits two purchases over a twelve month offer period. Pursuant to the terms of the 2008 ESPP, eligible employees may elect withholdings of up to 25% of eligible compensation to purchase shares of common stock at the lower of (i) 85% of the fair market value of the shares on the offer date or (ii) 85% of the fair market value of the shares on the purchase date. The 2008 ESPP does not permit employees to buy more than $25,000 worth of stock annually or 1,600 shares during an offer period.

The Company issued 1.7 million shares of its common stock for total consideration of $29.0 million related to the ESPP plan during the fiscal year ended June 25, 2011. As of June 25, 2011, the Company has remaining 4.0 million shares of its common stock reserved and available for future issuance under the 2008 ESPP.