Stock-Based Compensation

3 Months Ended

Mar. 30, 2012

Stock-Based Compensation [Abstract]

STOCK-BASED COMPENSATION

NOTE 10: STOCK-BASED COMPENSATION

The following table summarizes stock-based compensation costs in our Statements of Operations for the three months ended March 30, 2012 and April 1, 2011 (in thousands):

	Three months ended
	March 30, 2012		April 1, 2011
	(In thousands)
Cost of revenue	$	794	$	747
Research and development expense		1,724		1,836
Selling, general and administrative expense		2,282		3,419
Total employee stock-based compensation recognized in statement of operations		4,800		6,002
Amount capitalized in inventory		—		14
Total stock-based compensation	$	4,800	$	6,016

Stock Options

The Company estimated the fair value of all employee stock options using a Black-Scholes valuation model with the following weighted average assumptions:

	Three months ended
	March 30, 2012			April 1, 2011
Expected term		4.70			4.75
Volatility		58	%		54	%
Risk-free interest rate		1.0	%		2.1	%
Expected dividends		0.0	%		0.0	%

Expected term. The expected term represents the weighted-average period that the stock options are expected to remain outstanding. Our computation of expected term was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior.

Volatility. The Company uses its historical volatility for a period equivalent to the expected term of the options to estimate the expected volatility.

Risk-free interest rate. The risk-free interest rate that the Company uses in the Black-Scholes option valuation model is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term.

Expected dividends. The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future, and, therefore, used an expected dividend yield of zero in the valuation model.

The Company is required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate pre-vesting option forfeitures and records stock-based compensation expense only for those awards that are expected to vest. All stock-based payment awards are amortized on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods. The Company’s estimated forfeiture rate was 6% and 5% for the three months ended March 30, 2012 and April 1, 2011, respectively.

The weighted-average fair value of options granted for the three months ended March 30, 2012 and April 1, 2011 was $2.94 and $4.55 per share, respectively.

The fair value of all stock options vested during the three months ended March 30, 2012 was $ 2.1 million.

Restricted Stock Units

The fair value of RSUs is equal to the fair value of the Company’s common stock on the date of grant.

The fair value of all restricted stock units issued during the three months ended March 30, 2012 was $ 5.4 million.

Employee Stock Purchase Plan

The value of the stock purchase rights under the Company’s Employee Stock Purchase Plan (“ESPP”) consists of: (1) the 15% discount on the purchase of the stock; (2) 85% of the fair value of the call option; and (3) 15% of the fair value of the put option. The call option and put option were valued using the Black-Scholes option pricing model with the following assumptions:

	Three months ended
	March 30, 2012			April 1, 2011
Expected term		0.5			0.5
Volatility		53	%		54	%
Risk-free interest rate		0.2	%		0.3	%
Expected dividends		0.0	%		0.0	%

Expected term. The expected term represents the period of time from the beginning of the offering period to the purchase date.

Volatility. The Company uses its historical volatility for a period equivalent to the expected term of the options to estimate the expected volatility.

Risk-free interest rate. The risk-free interest rate that the Company uses in the Black-Scholes option valuation model is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term.

Expected dividends. The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future, and, therefore, used an expected dividend yield of zero in the valuation model.

The weighted-average fair value of stock purchase rights granted under the ESPP for the three months ended March 30, 2012 and April 1, 2011 was $ 1.50 and $2.58 per share, respectively.

Unrecognized Stock-Based Compensation

As of March 30, 2012, total unamortized stock-based compensation cost related to unvested stock options and restricted stock units was $39.1 million. This amount will be recognized as expense using the straight-line attribution method over the remaining weighted-average amortization period of 2.8 years.