Share-Based Compensation

6 Months Ended

Jul. 28, 2012

Share-Based Compensation

Note 11. Share-Based Compensation

The following table presents details of share-based compensation expenses by functional line item (in thousands):

	Three Months Ended				Six Months Ended
	July 28, 2012		July 30, 2011		July 28, 2012		July 30, 2011
Cost of goods sold	$	1,775	$	1,916	$	3,898	$	3,611
Research and development		22,413		22,128		39,587		41,721
Selling and marketing		3,458		3,207		6,494		5,861
General and administrative		5,582		3,104		10,441		6,642
	$	33,228	$	30,355	$	60,420	$	57,835

Share-based compensation capitalized in inventory was $1.7 million at July 28, 2012 and $2.1 million at January 28, 2012.

Valuation Assumptions

The following weighted average assumptions were used for each respective period to calculate the fair value of each time-based stock option award on the date of grant using the Black-Scholes valuation model and of each market-based equity award using a Monte Carlo simulation model:

	Three Months Ended						Six Months Ended
	July 28, 2012			July 30, 2011			July 28, 2012			July 30, 2011
Time-based Stock Options:
Weighted average fair value	$	3.73		$	6.24		$	5.59		$	6.09
Expected volatility		46	%		46	%		44	%		43	%
Expected term (in years)		4.8			4.8			4.8			4.8
Risk-free interest rate		0.7	%		1.7	%		0.9	%		2.1	%
Expected dividend yield		2.0	%		—			0-2.0	%		—

	Three and Six Months Ended
	July 28, 2012			July 30, 2011
Market-based Stock Options:
Weighted average fair value	$	—		$	5.08
Expected volatility		—	%		42	%
Risk-free interest rate		—	%		0.9-3.6	%

There were no market-based stock options granted during the three and six months ended July 28, 2012. The fair value of each market-based stock option award is estimated on the date of grant using a Monte Carlo simulation model that uses the assumptions noted in the above table, including the same volatility applied to the Company’s time-based options. Because a Monte Carlo simulation model incorporates ranges of assumptions for inputs, those ranges are disclosed where applicable. The Company uses historical data to estimate employee termination within the valuation model. The expected term of 2.66 years for market-based stock options granted during the three months ended April 30, 2011 was derived from the output of the valuation model and represents the period of time that options granted are expected to be outstanding.

The fair value of each restricted stock unit is estimated based on the market price of the Company’s common shares on the date of grant less the expected dividend yield.

	Three and Six Months Ended
	July 28, 2012			July 30, 2011
Employee Stock Purchase Plan:
Estimated fair value	$	3.77		$	4.09
Volatility		39	%		46	%
Expected term (in years)		1.3			0.5
Risk-free interest rate		0.2	%		0.2	%
Dividend yield		2.0	%		—