STOCK-BASED COMPENSATION PLANS

3 Months Ended

Mar. 30, 2012

STOCK-BASED COMPENSATION PLANS

STOCK-BASED COMPENSATION PLANS

(8) STOCK-BASED COMPENSATION PLANS

        The Company's 2007 Stock Incentive Plan, as amended (the "2007 Plan"), provides for the award of options to purchase the Company's common stock ("stock options"), stock appreciation rights, restricted common stock ("restricted stock"), performance-based share awards ("performance-based awards"), restricted stock units and other stock-based awards to employees, officers, directors (including those directors who are not employees or officers of the Company), consultants and advisors of the Company and its subsidiaries.

Stock Options

        The activity related to the Company's outstanding stock options during the three months ended March 30, 2012 was as follows:

	Number of shares			Weighted average exercise price		Weighted average remaining contractual life (years)		Aggregate intrinsic value (in thousands)
Outstanding at January 1, 2012		22,627,885		$	3.82
Granted		4,369,505		$	2.86
Exercised		(18,459	)	$	2.11
Forfeited		(199,436	)	$	2.78
Expired		(207,121	)	$	4.88
Outstanding at March 30, 2012		26,572,374		$	3.66		6.95	$	4,304
Vested or expected to vest at March 30, 2012		24,466,693		$	3.75		6.73	$	3,689
Exercisable at March 30, 2012		12,592,228		$	4.71		4.27	$	667

        The grant date fair value of stock options granted in the three months ended March 30, 2012 was estimated using the Black-Scholes valuation model with the following assumptions:

	Three months ended March 30, 2012
Risk-free interest rate		0.89	%
Expected dividend yield		—
Weighted average volatility		67.8	%
Expected life (years)		4.5

        Additional information regarding the Company's stock options is as follows:

	Three months ended March 30, 2012
Weighted average grant date fair value of stock options granted	$	1.54
Total intrinsic value of stock options exercised (in thousands)	$	15
Cash received from the exercise of stock options (in thousands)	$	39

Restricted Stock Awards

        The activity related to the Company's unvested restricted stock awards for the three months ended March 30, 2012 was as follows:

	Shares			Weighted average grant-date fair value
Unvested balance at January 1, 2012		602,403		$	2.38
Granted		612,500		$	2.92
Vested		(188,750	)	$	2.88
Forfeited		(6,560	)	$	2.04
Unvested balance at March 30, 2012		1,019,593		$	2.61

        The total fair value of restricted stock award shares that vested during the three months ended March 30, 2012 was $0.5 million.

Performance-Based Stock Awards

        The activity related to the Company's performance stock awards for the three months ended March 30, 2012 was as follows:

	Shares			Weighted average grant-date fair value
Unvested balance at January 1, 2012		1,715,056		$	3.08
Granted		—			—
Vested		—			—
Forfeited		(1,715,056	)	$	3.08
Unvested balance at March 30, 2012		—			—

        At January 1, 2012, the Company had 1.7 million unvested shares of common stock related to performance-based stock awards. The performance conditions for these awards were not satisfied by December 31, 2011, the end of the performance period. As a result, these shares were forfeited on February 21, 2012, the date that the Company issued a press release reporting its financial results for the quarter and year ended December 31, 2011.

        There are 2.5 million shares of the Company's common stock that are not included in the table above, as the Company has not yet established the performance conditions for these awards. The Company will begin to record stock-based compensation expense at the time that the performance conditions are defined and when it becomes probable that the respective performance conditions will be achieved.

Stock-Based Compensation

        The condensed consolidated statements of operations include stock-based compensation for the three months ended March 30, 2012 and March 31, 2011 as follows (in thousands):

	Three months ended
	March 30, 2012		March 31, 2011
Product cost of revenue	$	53	$	108
Service cost of revenue		175		385
Research and development		616		533
Sales and marketing		467		497
General and administrative		806		503
	$	2,117	$	2,026

        There was no income tax benefit for employee stock-based compensation expense for the three months ended March 30, 2012 and March 31, 2011 due to the income tax valuation allowance recorded.

        At March 30, 2012, there was $18.4 million, net of expected forfeitures, of unrecognized stock-based compensation expense related to unvested stock options and restricted stock awards. This expense is expected to be recognized over a weighted average period of approximately three years.