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Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Taxes  
Income Taxes

Note 7: Income Taxes

        The income tax provision (benefit) consisted of the following (in thousands):

 
   Year Ended
December 31, 		 
 
   2011   2010   2009  

Current portion:

                    

Federal

   $ 247   $ (19 ) $ (109 )

State

     3     2     (23 )

Foreign

     38     68     (23 )
               

 

   $ 288   $ 51   $ (155 )
               

        Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

        Significant components of the Company's deferred tax assets and liabilities were as follows (in thousands):

 
   December 31,  
 
   2011   2010  

Deferred tax assets:

              

Federal and state loss carryforwards

   $ 20,196   $ 24,468  

Reserves, accruals and other

     685     512  

Depreciation and amortization

     2,117     2,193  

Deferred stock-based compensation

     3,061     2,320  

Research and development credit carryforwards

     6,856     6,434  

Foreign tax and other credits

     1,347     1,084  
           

Total deferred tax assets

     34,262     37,011  

Deferred tax liabilities:

              

Acquired intangible assets and other

     1,898     1,970  

Less: Valuation allowance

     (32,364 )   (35,041 )
           

Net deferred tax assets

   $ —   $ —  
           

        The valuation allowance decreased by $2.7 million during the year ended December 31, 2011 and increased $9.4 million during the year ended December 31, 2010. The valuation allowance at December 31, 2011 includes $1.8 million related to stock option deductions incurred prior to January 1, 2006, the benefit of which will be credited to additional paid-in capital if they become realized.

        As of December 31, 2011, the Company had net operating loss carryforwards of approximately $52.7 million for federal income tax purposes and approximately $62.0 million for state income tax purposes. These losses are available to reduce future taxable income and expire at various times from 2017 through 2030. Approximately $4.6 million of federal net operating loss carryforwards and $3.9 million of state net operating loss carryforwards are related to excess tax benefits from stock-based compensation and will be charged to additional paid-in capital when realized.

        The Company also had federal research and development tax credit carryforwards of approximately $4.7 million, which will expire beginning in 2012, and California research and development credits of approximately $3.3 million, which do not have an expiration date. The Company had foreign tax credits available for federal income tax purposes of approximately $1.1 million which will begin to expire in 2014.

        Utilization of the Company's net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration or elimination of the net operating loss and tax credit carryforwards before utilization. Management does not believe it is likely that utilization will in fact be significantly limited due to ownership change limitation provisions.

        A reconciliation of income taxes provided at the federal statutory rate (35%) to actual income tax provision (benefit) follows (in thousands):

 
   Year Ended December 31,  
 
   2011   2010   2009  

Income tax benefit computed at U.S. statutory rate

   $ 4,040   $ (8,054 ) $ (6,741 )

Federal alternative minimum tax

     247     —     —  

State income tax (net of federal benefit)

     2     2     (22 )

Foreign income tax at rate different from U.S. statutory rate

     (9 )   (90 )   167  

Research and development credits

     (1,254 )   (1,239 )   (1,028 )

Foreign tax credit

     (17 )   (21 )   (196 )

Stock-based compensation

     292     607     545  

Amortization of intangible assets

     (657 )   —     —  

Valuation allowance changes affecting tax provision

     (2,363 )   8,979     7,006  

Other

     7     (133 )   114  
               

Income tax provision (benefit)

   $ 288   $ 51   $ (155 )
               

        The domestic and foreign components of income (loss) before income tax provision (benefit) were as follows (in thousands):

 
   Year Ended December 31,  
 
   2011   2010   2009  

U.S. 

   $ 11,363   $ (23,499 ) $ (18,692 )

Non-U.S. 

     181     488     (567 )
               

 

   $ 11,544   $ (23,011 ) $ (19,259 )