STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2011

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

Note 9    STOCKHOLDERS' EQUITY

• Stock-Based Compensation

        The components of the Company's stock-based compensation expense, net of amount capitalized in inventory, for the years ended December 31, 2011, 2010 and 2009 are summarized below:

	Years Ended
	December 31, 2011			December 31, 2010			December 31, 2009
	(in thousands)
Employee stock options	$	5,685		$	9,230		$	11,419
Employee stock purchase plan		2,511			1,844			2,208
Restricted stock units		60,906			50,478			16,542
Amounts capitalized in inventory		(977	)		(1,042	)		(111	)
	$	68,125		$	60,510		$	30,058

        The table above excludes stock-based compensation of $(3.1) million and $7.6 million for the years ended December 31, 2010 and 2009, respectively, for former Quantum executives related to the Quantum acquisition in 2008, which are classified within acquisition-related charges in the consolidated statements of operations.

        The accounting standard on stock-based compensation requires the gross benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow. The future realizability of tax benefits related to stock compensation is dependent upon the timing of employee exercises and future taxable income, among other factors. The Company reported gross excess tax benefits of $2.7 million and $3.1 million in the years ended December 31, 2011 and 2010, but did not realize any tax benefit from the stock-based compensation expense incurred for the year ended December 2009 as the Company believed it was more likely than not that it would not realize the benefit from tax deductions related to equity compensation incurred in 2009.

        There was no significant non-employee stock-based compensation expense for the years ended December 31, 2011, 2010 and 2009.

        The following table summarizes the distribution of stock-based compensation expense by function for the years ended December 31, 2011, 2010 and 2009:

	Years Ended
	December 31, 2011			December 31, 2010			December 31, 2009
	(in thousands)
Cost of revenues	$	7,840		$	8,159		$	4,831
Research and development		22,916			19,324			12,088
Selling, general and administrative		37,369			33,027			13,139
Total stock-based compensation expense, before income taxes		68,125			60,510			30,058
Tax benefit		(10,453	)		(7,548	)		—
Total stock-based compensation expense, net of income taxes	$	57,672		$	52,962		$	30,058

• Stock Options, Restricted Stock Units and Employee Stock Purchase Plan

        In May 2005, Atmel's stockholders initially approved Atmel's 2005 Stock Plan (as amended, the "2005 Stock Plan"). As of December 31, 2011, 133.0 million shares were authorized for issuance under the 2005 Stock Plan, and 16.5 million 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.

        Activity under Atmel's 2005 Stock Plan is set forth below:

				Outstanding Options
									Weighted- Average Exercise Price per Share
	Available for Grant			Number of Options			Exercise Price per Share
	(in thousands, except per share data)
Balances, December 31, 2008		30,186			31,263		$	1.68-$24.44	$	5.54
Restricted stock units issued		(8,951	)		—			—		—
Performance-based restricted stock units issued		(83	)		—			—		—
Adjustment for restricted stock units issued		(7,046	)		—			—		—
Restricted stock units cancelled		1,766			—			—		—
Adjustment for restricted stock units cancelled		1,377			—			—		—
Options granted		(3,167	)		3,167		$	3.49-4.43		4.31
Options cancelled/expired/forfeited		14,396			(14,396	)	$	1.80-24.44		7.02
Options exercised		—			(1,206	)	$	1.80-4.35		2.71
Balances, December 31, 2009		28,478			18,828		$	1.68-$24.44	$	4.38
Restricted stock units issued		(11,701	)		—
Adjustment for restricted stock units issued		(9,127	)		—
Performance-based restricted stock units issued		(472	)		—
Adjustment for perfomance-based restricted stock units issued		(368	)		—
Restricted stock units cancelled		2,151			—
Adjustment for restricted stock units cancelled		1,678			—
Options granted		(315	)		315		$	4.77-10.01		5.39
Options cancelled/expired/forfeited		1,139			(1,139	)	$	2.11-24.44		5.79
Options exercised		—			(5,344	)	$	1.68-10.82		4.21
Balances, December 31, 2010		11,463			12,660		$	1.68-$14.94	$	4.35
Additional shares authorized		19,000			—
Restricted stock units issued		(6,343	)		—
Adjustment for restricted stock units issued		(4,017	)		—
Performance-based restricted stock units issued		(3,474	)		—
Adjustment for perfomance-based restricted stock units issued		(2,124	)		—
Restricted stock units cancelled		1,025			—
Adjustment for restricted stock units cancelled		793			—
Performance-based restricted stock units cancelled		25			—
Adjustment for perfomance-based restricted stock units cancelled		17			—
Options cancelled/expired/forfeited		158			(158	)	$	2.11-$14.94		5.01
Options exercised		—			(4,285	)	$	1.80-$13.77		4.51
Balances, December 31, 2011		16,523			8,217		$	1.68-$10.01	$	4.26

        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 8.1 million shares of restricted stock units from May 18, 2011 to December 31, 2011 (net of cancellations) resulting in a reduction of 13.0 million shares available for grant under the 2005 Stock Plan.

        The Company issued 36.1 million restricted stock units from May 14, 2008 to May 17, 2011 (net of cancellations), resulting in a reduction of 64.3 million shares available for grant under the 2005 Stock Plan, based on the 1.78 numerical limit in effect until May, 18, 2011.

• Restricted Stock Units

        Activity related to restricted stock units is set forth below:

	Number of Shares			Weighted-Average Fair Value Per Share
	(In thousands, except per share data)
Balance, December 31, 2008		20,422		$	4.33
Restricted stock units issued		8,951			4.18
Performance-based restricted stock units issued		83			3.63
Restricted stock units vested		(3,646	)		3.83
Restricted stock units cancelled		(750	)		3.90
Performance-based restricted stock units cancelled		(1,016	)		3.78
Balance, December 31, 2009		24,044		$	4.38
Restricted stock units issued		11,701			7.97
Performance-based restricted stock units issued		472			5.49
Restricted stock units vested		(4,816	)		6.23
Restricted stock units cancelled		(1,200	)		4.28
Performance-based restricted stock units cancelled		(951	)		4.10
Balance, December 31, 2010		29,250		$	5.56
Restricted stock units issued		6,343			10.88
Performance-based restricted stock units issued		3,474			13.94
Restricted stock units vested		(6,345	)		11.79
Performance-based restricted stock units vested		(8,485	)		14.00
Restricted stock units cancelled		(1,025	)		6.80
Performance-based restricted stock units cancelled		(25	)		9.77
Balance, December 31, 2011		23,187		$	3.18

        For the year ended December 31, 2011, 6.3 million restricted stock units vested, including 2.3 million units withheld for taxes. These vested restricted stock units had a weighted-average fair value of $11.79 per share on the vesting dates for the year ended December 31, 2011. As of December 31, 2011, total unearned stock-based compensation related to unvested restricted stock units previously granted (including performance-based restricted stock units) was approximately $177.9 million, excluding forfeitures, and is expected to be recognized over a weighted-average period of 2.8 years.

        For the year ended December 31, 2010, 4.8 million restricted stock units vested, including 1.4 million units withheld for taxes. These vested restricted stock units had a weighted-average fair value of $6.23 per share on the vesting dates for the year ended December 31, 2010. As of December 31, 2010, total unearned stock-based compensation related to unvested restricted stock units previously granted (including performance-based restricted stock units) was approximately $127.1 million, excluding forfeitures, and is expected to be recognized over a weighted-average period of 3.2 years.

        For the year ended December 31, 2009, 3.6 million restricted stock units vested, including 1.3 million units withheld for taxes. These vested restricted stock units had a weighted-average fair value of $3.83 on the vesting dates. As of December 31, 2009, total unearned stock-based compensation related to unvested restricted stock units previously granted (including performance-based restricted stock units) was approximately $73.3 million, excluding forfeitures, and is expected to be recognized over a weighted-average period of 3.0 years.

        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.

• Performance-Based Restricted Stock Units

        In the quarter ended June 30, 2011, 8.5 million 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 as of March 31, 2011. A total of 5.1 million shares were issued to participants, net of withholding taxes of 3.3 million shares, which represented all remaining shares available under the 2008 Plan. 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 performance based restricted stock units of $6.5 million, $24.8 million and $0.5 million under the 2008 Plan in the years ended December 31, 2011, 2010 and 2009.

        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, such as revenue growth and operating margin targets 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 a total of 3.4 million performance-based restricted stock units under the 2011 Plan. The Company recorded total stock-based compensation expense related to performance-based restricted stock units of $7.5 million under the 2011 Plan for the year ended December 31, 2011.

• Stock Option Awards

Options Outstanding									Options Exercisable
Range of Exercise Price	Number Outstanding		Weighted- Average Remaining Contractual Term (years)		Weighted- Average Exercise Price		Aggregate Intrinsic Value		Number Exercisable		Weighted- Average Remaining Contractual Term (years)		Weighted- Average Exercise Price		Aggregate Intrinsic Value
(In thousands, except per share prices and life data)
$1.68 - 3.24		981		3.95	$	2.73	$	5,270		905		3.76	$	2.69	$	4,901
3.26 - 3.29		512		3.62		3.28		2,465		505		3.58		3.28		2,432
3.32 - 3.32		1,090		6.21		3.32		5,210		1,005		6.19		3.32		4,803
3.41 - 4.20		926		6.66		4.13		3,676		592		6.58		4.12		2,358
4.23 - 4.40		820		4.95		4.25		3,157		332		5.12		4.27		1,224
4.43 - 4.43		1,000		7.71		4.43		3,670		413		7.71		4.43		1,516
4.56 - 4.89		1,528		5.19		4.82		5,013		1,443		5.01		4.82		4,729
4.92 - 5.75		826		4.79		5.39		2,234		826		5.01		5.39		2,111
5.96 - 8.89		520		4.97		6.38		870		396		4.57		6.42		638
10.01 - 10.01		14		8.88		10.01		—		3		8.88		10.01		—
		8,217		5.48	$	4.26	$	31,565		6,420		5.21	$	4.22	$	24,712

        The number of options exercisable under Atmel's stock option plans at December 31, 2011, 2010 and 2009 were 6.4 million, 8.5 million and 11.1 million, respectively. For the years ended December 31, 2011, 2010 and 2009, the number of stock options that were forfeited, but were not available for future stock option grants due to the expiration of these shares under the 1986 Stock Plan was not material.

        For the years ended December 31, 2011, 2010 and 2009, the number of stock options that were exercised were 4.3 million, 5.3 million and 1.2 million, respectively, which had a total intrinsic value at the date of exercise of $42.0 million, $24.8 million and $1.5 million, respectively, and had an aggregate exercise price of $19.3 million, $22.5 million and $3.3 million, respectively.

        On August 3, 2009, the Company commenced an exchange offer whereby eligible employees were given the opportunity to exchange some or all of their outstanding stock options with an exercise price greater than $4.69 per share (which was equal to the 52-week high of the Company's per share stock price as of the start of the offer) that were granted on or before August 3, 2008, whether vested or unvested, for restricted stock units or, for certain employees, a combination of restricted stock units and stock options. The exchange ratio was based on the per share exercise price of the eligible stock options. The Company completed the exchange offer on August 28, 2009, under which 9.5 million stock options were exchanged for 1.4 million stock options and 2.3 million restricted stock units. The modification of these stock options did not result in a material charge to the Company's financial results for the year ended December 31, 2009.

        The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

	Years Ended
	December 31, 2010			December 31, 2009
Risk-free interest rate		2.05	%		2.38	%
Expected life (years)		5.54			5.58
Expected volatility		54	%		55	%
Expected dividend yield		—			—

        No options were granted for the year ended December 31, 2011.

        The Company's weighted-average assumptions for the years ended December 31, 2010 and 2009 were determined in accordance with the accounting standard on stock-based compensation and are further discussed below.

        The expected life of employee stock options represents the weighted-average period the stock options are expected to remain outstanding and was derived based on an evaluation of the Company's historical settlement trends including an evaluation of historical exercise and expected post-vesting employment-termination behavior. The expected life of employee stock options impacts all underlying assumptions used in the Company's Black-Scholes option-pricing model, including the period applicable for risk-free interest and expected volatility.

        The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected life of the Company's employee stock options.

        The Company calculates the historic volatility over the expected life of the employee stock options and believes this to be representative of the Company's expectations about its future volatility over the expected life of the option.

        The dividend yield assumption is based on the Company's history and expectation of dividend payouts.

        The weighted-average estimated fair value of options granted for the years ended 2010 and 2009 was $2.70 and $2.25, respectively.

        As of December 31, 2011, total unearned compensation expense related to unvested stock options was approximately $5.1 million, excluding forfeitures, and is expected to be recognized over a weighted-average period of 1.6 years.

• Employee Stock Purchase Plan

        Under the 1991 Employee Stock Purchase Plan ("1991 ESPP"), 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. There were 0.8 million, 2.0 million and 2.1 million shares purchased under the 1991 ESPP for the years ended December 31, 2011, 2010 and 2009, at an average price per share of $4.85, $3.65 and $3.03, respectively. The remaining 1.9 million shares available under the 1991 ESPP expired in the three months ended March 31, 2011. In 2010, the Company's stockholders approved a new 2010 Employee Stock Purchase Plan ("2010 ESPP") and authorized an additional 25.0 million shares for issuance under the 2010 ESPP. There were 0.7 million shares purchased under the 2010 ESPP for the year ended December 31, 2011 at an average price per share of $8.56. Of the 25.0 million shares authorized for issuance under the 2010 ESPP, 24.3 million shares were available for issuance at December 31, 2011. The 1991 ESPP and the 2010 ESPP are collectively referred to as the "Company's ESPPs".

        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's ESPPs shares:

	Years Ended
	December 31, 2011			December 31, 2010			December 31, 2009
Risk-free interest rate		0.12	%		0.18	%		0.35	%
Expected life (years)		0.50			0.50			0.50
Expected volatility		46	%		45	%		73	%
Expected dividend yield		—			—			—

        The weighted-average fair value of the rights to purchase shares under the Company's ESPPs for offering periods started for the years ended December 31, 2011, 2010 and 2009 was $2.70, $0.89 and $0.86, respectively. Cash proceeds for the issuance of shares under the Company's ESPPs were $9.4 million, $7.4 million and $6.5 million for the years ended December 31, 2011, 2010 and 2009, respectively.

• Common Stock Repurchase Program

        Atmel's Board of Directors has authorized $500.0 million 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 years ended December 31, 2011 and 2010, Atmel repurchased 28.8 million and 11.7 million shares, respectively, of its common stock on the open market at an average repurchase price of $10.57 and $7.59 per share, excluding commission, and subsequently retired those shares. Common stock and additional paid-in capital were reduced by $304.2 million and $89.2 million, excluding commission, for the years ended December 31, 2011 and 2010, respectively, as a result of the stock repurchases. As of December 31, 2011, $106.8 million remained available for repurchase under this program.