Stock-Based Compensation

(10) Stock-Based Compensation

Share-based compensation expense is as follows:


	Three Months Ended				Nine Months Ended
	June 25, 2011		June 26, 2010		June 25, 2011		June 26, 2010
Cost of revenues	$	992	$	1,083	$	3,533	$	3,115
Research and development		1,081		1,024		3,633		2,946
Selling and marketing		1,342		1,083		4,486		3,577
General and administrative		4,364		4,759		15,593		14,886

	$	7,779	$	7,949	$	27,245	$	24,524

The Company granted approximately 2.2 million and 2.8 million stock options during the nine months ended June 25, 2011 and June 26, 2010, respectively, with weighted average exercise prices of $17.14 and $15.65, respectively. There were 15.6 million options outstanding at June 25, 2011 with a weighted average exercise price of $16.98.

The Company uses a binomial model to determine the fair value of its stock options. The weighted-average assumptions utilized to value these stock options are indicated in the following table:


	Three Months Ended						Nine Months Ended
	June 25, 2011			June 26, 2010			June 25, 2011			June 26, 2010
Risk-free interest rate		1.0	%		1.8	%		1.0	%		1.8	%
Expected volatility		45	%		47	%		45	%		47	%
Expected life (in years)		4.2			3.9			4.2			3.9
Dividend yield		—			—			—			—
Weighted average fair value of options granted	$	7.96		$	5.68		$	6.23		$	5.87

The Company granted approximately 1.2 million and 1.3 million restricted stock units (RSU) during the nine months ended June 25, 2011 and June 26, 2010, respectively, with weighted average grant date fair values of $16.87 and $15.62, respectively. As of June 25, 2011, there were 3.1 million unvested RSUs outstanding with a weighted average grant date fair value of $15.67.

The Company uses the straight-line attribution method to recognize stock-based compensation expense for stock options and RSUs. The vesting term of stock options granted to employees is generally five years with annual vesting of 20% per year on the anniversary of the grant date, and RSUs granted to employees either cliff vest at the end of three years or vest over four years with annual vesting at 25% per year on the anniversary of the grant date. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. Based on an analysis of historical forfeitures, the Company has determined a specific forfeiture rate for certain employee groups and has applied forfeiture rates ranging from 0% to 5% as of June 25, 2011. This analysis is periodically re-evaluated and forfeiture rates will be adjusted as necessary. Ultimately, the actual stock-based compensation expense recognized will only be for those stock options and RSUs that vest.

At June 25, 2011, there was $34.1 million and $35.7 million of unrecognized compensation expense related to stock options and RSUs, respectively, to be recognized over a weighted average period of 3.2 years and 2.4 years, respectively.

- Definition

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

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