The following table summarizes the distribution of stock-based compensation expense related to employee stock options, restricted stock units, performance-based restricted stock units and employee stock purchases for the three and nine months ended September 30, 2011 and 2010:

	Three Months Ended					Nine Months Ended

	September 30, 2011			September 30, 2010		September 30, 2011			September 30, 2010
	*(in thousands)*
Cost of revenues	$	1,143		$	2,093	$	5,783		$	5,957
Research and development		5,557			4,260		16,325			13,845
Selling, general and administrative		9,758			6,896		27,496			25,069

Total stock-based compensation expense, before income taxes		16,458			13,249		49,604			44,871
Tax benefit		(2,776	)		-		(7,853	)		-

Total stock-based compensation expense, net of income taxes	$	13,682		$	13,249	$	41,751		$	44,871

The table above excludes stock-based compensation (credit) of $0 and $(3,065) for the three and nine months ended September 30, 2010, respectively, related to the Quantum Research Group Ltd. acquisition, which are classified within acquisition-related charges in the condensed consolidated statements of operations.

Non-employee stock-based compensation expense for the three and nine months ended September 30, 2011 and 2010 was not material.

In May 2005, Atmel's stockholders initially approved Atmel's 2005 Stock Plan (as amended, the "2005 Stock Plan"). As of September 30, 2011, 133,000 shares were authorized for issuance under the 2005 Stock Plan, and 18,448 shares of common stock remained available for grant. Under the 2005 Stock Plan, Atmel may issue common stock directly, grant options to purchase common stock or grant restricted stock units payable in common stock to employees, consultants and directors of Atmel. Options, which generally vest over four years, are granted at fair market value on the date of the grant and generally expire ten years from that date.

				Outstanding Options

				Outstanding Options					Weighted- Average Exercise Price per Share
	Available for Grant			Number of Options			Exercise Price per Share		Weighted- Average Exercise Price per Share
	*(in thousands, except per share data)*
Balances, December 31, 2010		11,463			12,660		$	1.68-$14.94	$	4.35
Restricted stock units issued		(642	)		-			-		-
Adjustment for restricted stock units issued		(501	)		-			-		-
Performance-based restricted stock units issued		(9	)		-			-		-
Adjustment for performance-based restricted stock units issued		(7	)		-			-		-
Restricted stock units cancelled		152			-			-		-
Adjustment for restricted stock units cancelled		119			-			-		-
Options cancelled/expired/forfeited		22			(22	)	$	3.59-$14.94		6.68
Options exercised		-			(2,467	)	$	1.80-$13.77		4.61

Balances, March 31, 2011		10,597			10,171		$	1.68-$13.77	$	4.28
Additional shares authorized		19,000			-			-		-
Restricted stock units issued		(461	)		-			-		-
Adjustment for restricted stock units issued		(332	)		-			-		-
Performance-based restricted stock units issued		(3,409	)		-			-		-
Adjustment for performance-based restricted stock units issued		(2,079	)		-			-		-
Restricted stock units cancelled		172			-			-		-
Adjustment for restricted stock units cancelled		134			-			-		-
Options cancelled/expired/forfeited		17			(17	)		$2.11-4.92		3.58
Options exercised		-			(1,008	)		$1.80-13.77		4.28

Balance, June 30, 2011		23,639			9,146		$	1.68-$10.01	$	4.28
Restricted stock units issued		(3,874	)		-			-		-
Adjustment for restricted stock units issued		(2,363	)		-			-		-
Restricted stock units cancelled		526			-			-		-
Adjustment for restricted stock units cancelled		410			-			-		-
Options cancelled/expired/forfeited		111			(111	)		$2.11-4.43		4.24
Options exercised		-			(313	)		$1.80-8.83		4.72

Balance, September 30, 2011		18,448			8,722		$	1.68-$10.01	$	4.27

Restricted stock units are granted from the pool of options available for grant. As the result of an amendment and restatement of the 2005 Stock Plan in May 2011, every share underlying restricted stock, restricted stock units (including performance-based restricted stock units), and stock purchase rights issued on or after May 18, 2011 (the date on which the amendment and restatement became effective) is counted against the numerical limit for options available for grant as 1.61 shares in the table above, except that restricted stock, restricted stock units (including performance-based restricted stock units), and stock purchase rights issued prior to May 18, 2011, continue to be governed by an earlier amendment to the 2005 Stock Plan that provided for a numerical limit of 1.78 shares. If shares issued pursuant to any restricted stock, restricted stock unit, and stock purchase right agreements granted on or after May 18, 2011 are cancelled, forfeited or repurchased by the Company and would otherwise return to the 2005 Stock Plan, 1.61 times the number of those shares will return to the 2005 Stock Plan and will again become available for issuance. The Company issued 6,921 shares of restricted stock units from May 18, 2011 to September 30, 2011 (net of cancellations) resulting in a reduction of 11,054 shares available for grant under the 2005 Stock Plan.

In the three and nine months ended September 30, 2011, 1,878 and 3,755 restricted stock units vested, respectively, including 838 and 1,542 units withheld for taxes, respectively. These vested restricted stock units had a weighted-average fair value of $12.84 and $14.07 per share, on the vesting dates, respectively. As of September 30, 2011, total unearned stock-based compensation related to nonvested restricted stock units previously granted (including performance-based restricted stock units) was approximately $179,186, excluding forfeitures, and is expected to be recognized over a weighted-average period of 2.95 years.

In the three and nine months ended September 30, 2010, 1,536 and 2,658 restricted stock units vested, respectively, including 688 and 1,064 units withheld for taxes, respectively. These vested restricted stock units had a weighted-average fair value of $5.77 and $5.49 per share on the vesting dates in the three and nine months ended September 30, 2010, respectively.

Until restricted stock units are vested, they do not have the voting rights of common stock and the shares underlying such restricted stock units are not considered issued and outstanding. Upon vesting of restricted stock units, shares withheld by the Company to pay taxes are retired.

In the three months ended June 30, 2011, 8,476 performance-based restricted stock units issued under the Company's 2008 Incentive Plan (the "2008 Plan") vested upon board of director approval on May 23, 2011 as a result of the Company achieving all of the performance criteria under the 2008 Plan as of March 31, 2011. A total of 5,127 shares were issued to participants, net of withholding taxes. These vested performance-based restricted stock units had a weighted average value of $14 per share on the vesting date. The Company recorded total stock-based compensation expense related to the performance-based restricted stock units granted under the 2008 Plan, of $6,511 in the nine months ended September 30, 2011, and $4,429 and $20,624 in the three and nine months ended September 30, 2010, respectively. There were no charges under the 2008 Plan for the three months ended September 30, 2011 as the plan concluded in May 2011.

In May 2011, the Company adopted the 2011 Long-Term Performance-Based Incentive Plan (the "2011 Plan"), which provides for the grant of restricted stock units to eligible employees; vesting of these restricted stock units is subject to the satisfaction of specified performance metrics over the designated performance periods. The performance periods for the 2011 Plan run from January 1, 2011 through December 31, 2013, consisting of three one-year performance periods (calendar years 2011, 2012 and 2013) and a three-year cumulative performance period. The Company issued 3,409 performance-based restricted stock units in May 2011 under the 2011 Plan and recorded stock-based compensation expense related to these performance-based restricted stock units of $3,652 and $4,276 in the three and nine months ended September 30, 2011, respectively.

The 2011 Plan performance metrics include ranking of revenue growth relative to a semiconductor peer group or a microcontroller peer group, as determined by the Compensation Committee. In addition, in order for a participant to receive credit for a performance period the Company must achieve a minimum operating margin during such performance period, measured on a pro forma basis, subject to adjustment by the Compensation Committee. The Company re-evaluates estimated achievement of performance metrics each quarter in determining stock-based compensation expense for performance share plans.

No stock options were granted during the three and nine months ended September 30, 2011. In the three and nine months ended September 30, 2010, 60 and 299 stock options were granted, respectively.

As of September 30, 2011, total unearned compensation expense related to unvested stock options was approximately $6,252, excluding forfeitures, and is expected to be recognized over a weighted-average period of 1.74 years.

Under the 1991 Employee Stock Purchase Plan ("1991 ESPP") and 2010 Employee Stock Purchase Plan ("2010 ESPP" and together with the 1991 ESPP, the "Company's ESPPs"), qualified employees are entitled to purchase shares of Atmel's common stock at the lower of 85% of the fair market value of the common stock at the date of commencement of the six-month offering period or at 85% of the fair market value on the last day of the offering period. Purchases are limited to 10% of an employee's eligible compensation. In 2010, the Company's stockholders approved the 2010 ESPP and authorized 25,000 shares for issuance under the 2010 ESPP; the 2010 ESPP became effective with the offering period commencing August 15, 2011. There were 679 shares purchased under the 2010 ESPP in the three months ended September 30, 2011 at an average price per share of $8.56. There were 980 shares purchased under the 1991 ESPP in the three months ended September 30, 2010 at an average price per share of $4.05. There were 835 and 2,028 shares purchased under the 1991 ESPP in the nine months ended September 30, 2011 and 2010, respectively, at an average price per share of $4.85 and $3.65, respectively. The 1,888 shares that remained available under the 1991 ESPP were not purchased and the 1991 ESPP was superseded by the 2010 ESPP in the three months ended March 31, 2011. As of September 30, 2011, 24,321 shares remained available for issuance under the 2010 ESPP.

The fair value of each purchase under the Company's ESPPs is estimated on the date of the beginning of the offering period using the Black-Scholes option pricing model. The following assumptions were utilized to determine the fair value of the Company ESPPs shares:

The weighted-average fair value of the rights to purchase shares under the Company ESPPs for offering periods started in the three months ended September 30, 2011 and 2010 was $2.23 and $1.02, respectively and in the nine months ended September 30, 2011 and 2010 was $2.70 and $0.89, respectively. Cash proceeds for the issuance of shares under the Company's ESPPs were $6,207 and $3,974 for the three months ended September 30, 2011 and 2010, respectively. Cash proceeds for the issuance of shares under the Company's ESPPs were $6,207 and $7,411 for the nine months ended September 30, 2011 and 2010, respectively.

Atmel's Board of Directors has authorized $500,000 of funding for its stock repurchase program. The repurchase program does not have an expiration date, and the number of shares repurchased and the timing of repurchases are based on the level of the Company's cash balances, general business and market conditions, regulatory requirements, and other factors, including alternative investment opportunities.

During the three and nine months ended September 30, 2011, Atmel repurchased 6,095 and 13,826 shares of its common stock on the open market at an average repurchase price of $9.23 and $12.23 per share, respectively, excluding commission, and subsequently retired those shares. Common stock and additional paid-in capital were reduced by $56,271 and $169,083, excluding commission, for the three and nine months ended September 30, 2011, respectively, as a result of the stock repurchases. As of September 30, 2011, $241,934 remained available for repurchase under this program.

- Definition

The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

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+ Details