Equity Incentive Plans

9 Months Ended

Apr. 30, 2011

10. Equity Incentive Plans

Stock Option Activity

The following table summarizes the information about shares available for grant and outstanding stock option activity:


				Options Outstanding
							Weighted				Weighted
							Average		Weighted		Average
	Shares						Exercise		Average		Remaining		Aggregate
	Available for			Number of			Price		Fair Value		Contractual		Intrinsic
	Grant			Shares			per Share		per Share		Term (Years)		Value
As of July 31, 2010		635,877			23,640,524		$	5.00				5.9	$	283,285,534
Shares reserved for issuance		4,680,314			—
Restricted stock awards granted		(3,908,215	)		—
Restricted stock awards forfeited		273,871			—
Options granted		(1,853,890	)		1,853,890			21.88	$	11.70
Options exercised		—			(5,523,623	)		4.52						116,601,565
Options cancelled		740,920			(740,920	)		9.26

As of April 30, 2011		568,877			19,229,871		$	6.60				5.2	$	563,779,336

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the fair value of the Company’s common stock on the date of each option exercise. Stock-based compensation expense recognized for stock options for the three and nine months ended April 30, 2011 was $4.7 million and $14.4 million, respectively. Stock-based compensation expense recognized for stock options for the three and nine months ended April 30, 2010 was $4.6 million and $11.8 million, respectively.

Restricted Stock Award Activity

The following table summarizes the non-vested restricted stock awards activity:


				Weighted Average
				Grant Date
				Fair Value
	Shares			per Share
As of July 31, 2010		2,215,932		$	9.74
Awards granted		3,908,215			23.61
Awards vested		(1,030,119	)		14.30
Awards forfeited		(273,871	)		15.37

As of April 30, 2011		4,820,157		$	19.69

The estimated fair value of restricted stock awards is based on the market price of the Company’s stock on the grant date. Stock-based compensation expense recognized for restricted stock awards for the three and nine months ended April 30, 2011 was $11.6 million and $27.1 million, respectively. Stock-based compensation expense recognized for restricted stock awards for the three and nine months ended April 30, 2010 was $4.2 million and $12.2 million, respectively.

Employee Stock Purchase Plan Activity

During the three months ended April 30, 2011, 1,056,930 shares of the Company’s stock were purchased under its Employees Stock Purchase Plan (“ESPP”) at an average price per share of $3.68. The Company also modified the terms of certain existing awards under its ESPP as a result of employees who previously participated in ESPP and subsequently elected to increase their contribution. Consequently, the Company will recognize $0.4 million in incremental stock-based compensation expense over the vesting period. The Company recognized $0.1 million in incremental stock-based compensation expense arising from the award modification for the three months ended April 30, 2011.

Stock-based compensation expense recognized in connection with the ESPP for the three and nine months ended April 30, 2011 was $1.3 million and $4.3 million, respectively. Compensation expense recognized in connection with the ESPP for the three and nine months ended April 30, 2010 was $1.1 million and $2.8 million, respectively.

Fair Value Disclosures

The fair value of each option grant is estimated on the date of grant using the Black-Scholes model with the following weighted average assumptions:

Employee Stock Options


	Three months ended April 30,					Nine months ended April 30,
	2011		2010			2011			2010

Risk-free interest rate		—		1.9	%		1.6	%		1.8	%
Expected term (in years)		—		4.3			4.0			4.3
Dividend yield		—		0			0			0
Volatility		—		71	%		71	%		71	%

There were no stock options granted during the three months ended April 30, 2011.

Employee Stock Purchase Plan


	Three and nine months ended	Three and nine months ended
	April 30, 2011	April 30, 2010

Risk-free interest rate	0.2% to 0.7%	0.2% to 0.8%
Expected term (in years)	0.5 – 2.0	0.5 – 2.0
Dividend yield	0	0
Volatility	50% to 56%	43% to 81%

The expected term of the stock-based awards represents the period of time that the Company expects such stock-based awards to be outstanding, giving consideration to the contractual term of the awards, vesting schedules and expectations of future employee behavior. The Company gave consideration to its historical exercises, the vesting term of its stock options, the post vesting cancellation history of its stock options and the stock options’ contractual terms. The contractual term of stock options granted is generally seven years. Prior to the third quarter of fiscal 2011, the Company computed expected volatility based on its historical volatility and the historical volatility of comparable companies. Beginning in March 2011, the Company computes expected volatility solely based on its own historical volatility. The Company made an estimate of expected forfeitures, and is recognizing stock-based compensation only for those equity awards that it expects to vest. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury Constant Maturity rate as of the date of grant.

Stock-based Compensation Expenses

Total stock-based compensation expense for the three and nine months ended April 30, 2011 was $17.6 million and $45.8 million, respectively. Total stock-based compensation expense for the three and nine months ended April 30, 2010 was $9.9 million and $26.8 million, respectively. The Company did not capitalize stock-based compensation during the three and nine months ended April 30, 2011 and 2010, due to the amount qualifying for capitalization being immaterial.