Stockholders' Equity

9 Months Ended

Sep. 28, 2013

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Stock-based Compensation Plans

The Company’s stock-based compensation plans include stock options, RSUs, PSUs and employee stock purchases under the Company’s ESPP. As of September 28, 2013, there were a total of 16.8 million shares available for grant under the Company’s 2007 Equity Incentive Plan. The following tables summarize the Company’s equity award activity and related information (in thousands, except per share data):

	Number of Options		Average Exercise Price   Per Share		Aggregate   Intrinsic Value
Outstanding at December 29, 2012	9,008		$	7.13	$	5,726
Options exercised	(1,988	)	$	6.53	$	6,848
Options canceled	(417	)	$	7.96
Outstanding at September 28, 2013	6,603		$	7.26	$	27,954
Vested and expected to vest as of September 28, 2013	6,592				$	27,916
Exercisable at September 28, 2013	6,187		$	7.22	$	26,493

	Number of Restricted Stock Units		Weighted- Average  Grant Date  Fair Value Per Share		Aggregate   Intrinsic Value
Outstanding at December 29, 2012	6,703		$	8.01	$	38,873
RSUs granted	3,258		$	7.36
RSUs released	(2,903	)	$	8.27	$	23,389
RSUs canceled	(499	)	$	7.67
Outstanding at September 28, 2013	6,559		$	7.60	$	74,768
Expected to vest at September 28, 2013	6,375				$	72,679

	Number of Performance Stock Units		Weighted- Average  Grant Date  Fair Value Per Share		Aggregate   Intrinsic Value
Outstanding at December 29, 2012	1,368		$	10.53	$	7,933
PSUs granted	552		$	6.70
PSUs released	(684	)	$	10.53	$	4,284
PSUs canceled	(515	)	$	11.31
Outstanding at September 28, 2013	721		$	7.04	$	8,214
Expected to vest at September 28, 2013	490				$	5,587

The aggregate intrinsic value of unexercised options, unreleased RSUs and unreleased PSUs is calculated as the difference between the closing price of the Company’s common stock of $11.40 at September 27, 2013 and the exercise prices of the underlying equity awards. The aggregate intrinsic value of the options which have been exercised and RSUs released is calculated as the difference between the fair market value of the common stock at the date of exercise or release and the exercise price of the underlying equity awards.

The following table presents total stock-based compensation cost for instruments granted but not yet amortized, net of estimated forfeitures, of the Company’s equity compensation plans as of September 28, 2013. These costs are expected to be amortized on a straight-line basis over the following weighted-average periods (in thousands, except for weighted-average period):

	Unrecognized Compensation Expense, Net	Weighted- Average Period (in years)
Stock options	1,420	1.02
RSUs	32,616	2.26
PSUs	2,183	1.70

Employee Stock Options

The ranges of estimated values of stock options and performance-based stock options granted, as well as ranges of assumptions used in calculating these values were based on estimates as follows:

	Three Months Ended				Nine Months Ended
Employee and Director Stock Options	September 28,      2013		September 29,      2012		September 28,      2013		September 29, 2012
Volatility	N/A		N/A		N/A		65% - 68%
Risk-free interest rate	N/A		N/A		N/A		0.7%-1.0%
Expected life	N/A		N/A		N/A		4.0 - 5.3 years
Estimated fair value	N/A		N/A		N/A		$3.75 - $3.76
Stock-based compensation expense (in thousands)	$	665	$	2,553	$	2,190	$	7,121

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N/A Not applicable because the Company did not grant any options to employees for the periods presented.

Employee Stock Purchase Plan

The fair value of the ESPP shares was estimated at the date of grant using the following assumptions:

	Three Months Ended				Nine Months Ended
Employee Stock Purchase Plan	September 28,     2013		September 29,     2012		September 28,     2013		September 29,     2012
Volatility	49%		54%		46% - 49%		54% - 57%
Risk-free interest rate	0.10%		0.17%		0.10% - 0.14%		0.16% - 0.17%
Expected life	0.5 years		0.5 years		0.5 years		0.5 years
Estimated fair value	$	3.00	$	1.73	$1.87 - $3.00		$1.73 - $2.63
Stock-based compensation expense (in thousands)	$	777	$	895	$	2,050	$	2,653

Restricted Stock Units

During the three and nine months ended September 28, 2013, the Company granted RSUs to members of the Company’s board of directors and employees to receive an aggregate of 0.4 million shares and 3.3 million shares of the Company’s common stock, respectively, at no cost. The Company accounted for the fair value of the RSUs using the closing market price of the Company’s common stock on the date of grant. Amortization of stock-based compensation related to RSUs in the three and nine months ended September 28, 2013 and September 29, 2012 was approximately $5.5 million and $18.2 million, respectively, and $6.9 million and $20.6 million, respectively.

Performance Stock Units

Pursuant to the Company’s 2007 Equity Incentive Plan, during 2009, the Company granted PSUs primarily to members of the Company’s board of directors and executive officers. The number of shares to be issued upon vesting of PSUs range from 0.5 to 2.0 times the number of PSUs granted depending on the relative performance of the Company’s common stock price compared to the NASDAQ Composite Index over a three-year or four-year period. During the nine months ended September 28, 2013, the Company released 0.5 million shares of PSUs based on a payout of 0.5 times of the target number of PSUs.

Pursuant to the Company’s 2007 Equity Incentive Plan, during 2012, the Company granted 0.5 million shares of PSUs to certain of the Company’s executive officers. These PSUs will only vest upon the achievement of certain specific revenue and operating profit criteria and are subject to each named executive officer’s continued service to the Company. If the financial performance metrics are not met within the time limits specified in the award agreements, the PSUs will be canceled. During the nine months ended September 28, 2013, the Company released 0.2 million shares of PSUs upon achievement of certain performance goals.

Pursuant to the Company’s 2007 Equity Incentive Plan, during the three and nine months ended September 29, 2013, the Company granted zero and 0.6 million shares of PSUs, respectively, to certain of the Company’s executive officers. The number of shares to be issued upon vesting of PSUs range from 0 to 1.5 times the number of PSUs granted depending on the relative performance of the Company’s common stock price compared to the NASDAQ Telecom Composite Index over the span of one, two and three years of total shareholder returns.

Amortization of stock-based compensation related to PSUs in the three months ended September 28, 2013 was approximately $0.5 million. Amortization of stock-based compensation related to PSUs in the nine months ended September 28, 2013 was approximately $0.1 million, including $1.5 million of expense offset by a $1.4 million decrease in fair value for one award classified as a liability award, in accordance with Accounting Standard Codification 718, Compensation – Stock Compensation. Amortization of stock-based compensation related to PSUs in the three and nine months ended September 28, 2012 was approximately $1.0 million and $2.8 million, respectively.

Common Stock Warrants

During the first quarter of 2013, warrants to purchase 92,592 shares of common stock were net exercised. The aggregate consideration for such exercises was approximately $0.5 million. As of September 28, 2013, there were no warrants of common stock outstanding.

Stock-Based Compensation

The following tables summarize the effects of stock-based compensation on the Company’s condensed consolidated balance sheets and statements of operations for the periods presented (in thousands):

	September 28,     2013		December 29, 2012
Stock-based compensation effects in inventory	$	3,656	$	4,891
Stock-based compensation effects in deferred inventory cost	$	16	$	42
Stock-based compensation effects in fixed assets	$	152	$	171

	Three Months Ended				Nine Months Ended
	September 28,     2013		September 29,     2012		September 28,     2013		September 29,     2012
Stock-based compensation effects in net income (loss) before income taxes
Cost of revenue	$	422	$	683	$	1,382	$	1,975
Research and development	2,434		3,439		8,175		10,454
Sales and marketing	1,853		2,685		5,659		7,648
General and administration	1,807		2,804		4,167		7,732
	6,516		9,611		19,383		27,809
Cost of revenue – amortization from balance sheet (1)	1,127		1,706		4,419		3,875
Total stock-based compensation expense	$	7,643	$	11,317	$	23,802	$	31,684

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⁽¹⁾  Stock-based compensation expense deferred to inventory and deferred inventory costs in prior periods and recognized in the current period.