Stock-Based Compensation

3 Months Ended

Mar. 29, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

NOTE 11: STOCK-BASED COMPENSATION

Stock-based compensation expense consists primarily of expenses for stock options and restricted stock units granted to employees and shares issued under the Employee Stock Purchase Plan. The following table summarizes stock-based compensation expense (in thousands):

	Three months ended
	March 29, 2013		March 30, 2012
Stock-based compensation in:
Cost of revenue	$	611	$	753
Research and development expense		1,203		1,655
Selling, general and administrative expense		2,085		2,259
Total stock-based compensation in operating expense		3,288		3,914
Total stock-based compensation	$	3,899	$	4,667

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 29, 2013			March 30, 2012
Expected term (years)		4.70			4.70
Volatility		52	%		58	%
Risk-free interest rate		0.8	%		1.0	%
Expected dividends		0.0	%		0.0	%

The expected term represents the weighted-average period that the stock options are expected to remain outstanding. The 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. The Company uses its historical volatility for a period equivalent to the expected term of the options to estimate the expected volatility. 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. 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 weighted-average fair value per share of options granted for the three months ended March 29, 2013 and March 30, 2012 was $2.50 and $2.94 per share, respectively. The fair value of all stock options vested during the three months ended March 29, 2013 and March 30, 2012 was $1.3 million and $2.1 million, respectively.

The total realized tax benefit attributable to stock options exercised during the three months ended March 30, 2012, in jurisdictions where this expense is deductible for tax purposes, was $0.1 million. The Company did not recognize any tax benefit attributable to stock options exercised during the three months ended March 29, 2013.

Restricted Stock Units

The estimated fair value of restricted stock units is based on the market price of the Company’s common stock on the grant date. The fair value of all restricted stock units issued during the three months ended March 29, 2013 and March 30, 2012 was $5.6 million and $5.4 million, respectively.

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 29, 2013			March 30, 2012
Expected term (years)		0.49			0.50
Volatility		32	%		53	%
Risk-free interest rate		0.2	%		0.2	%
Expected dividends		0.0	%		0.0	%

The expected term represents the period of time from the beginning of the offering period to the purchase date. The Company uses its historical volatility for a period equivalent to the expected term of the options to estimate the expected volatility. 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. 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 per share of stock purchase rights under the ESPP granted for the three months ended March 29, 2013 and March 30, 2012 was $1.20 and $1.50, respectively.

Unrecognized Stock-Based Compensation

As of March 29, 2013, total unamortized stock-based compensation cost related to unvested stock options and restricted stock units was $28.2 million. This amount will be recognized as expense using the straight-line attribution method over the remaining weighted-average amortization period of 2.3 years.