Note 2. Stock-Based Compensation

3 Months Ended

Mar. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

2. Stock-Based Compensation — The Company has two stock option plans and an employee stock purchase plan—the 1998 Stock Option Plan, the 2004 Equity Incentive Plan and the 2004 Employee Stock Purchase Plan. The Company recognized stock-based compensation expenses for the three months ended March 31, 2012 and 2011, as follows (in thousands):

	Three months ended March 31,
	2012		2011
Non-Employee	$	5	$	4
ESPP		211		152
Restricted Stock		2,180		1,163
Stock Options		919		1,668
TOTAL	$	3,315	$	2,987

2004 Equity Incentive Plan

The Company’s Board of Directors adopted the Company’s 2004 Equity Incentive Plan in March 2004, and the Company’s stockholders approved it in November 2004. Options granted under the 2004 Plan have a maximum term of ten years. New hire grants generally vest over four years at the rate of 25 percent one year from the date of grant and 1/48th monthly thereafter. Refresh grants generally vest over four years at the rate of 50 percent two years from the date of grant and 1/48th monthly thereafter. There were 800,000 shares initially reserved for issuance under the 2004 Plan. The 2004 Plan provides for annual increases in the number of shares available for issuance beginning on January 1, 2005 equal to the least of: 5% of the outstanding shares of common stock on the first day of the year, 2,400,000 shares, or a number of shares determined by the Board of Directors. The following is a summary of the 2004 Plan, which includes stock options and restricted stock awards and units:

Available for Grant as of December 31, 2011	4,291,737
2012 Additions to Plan	1,641,301
2012 Grants	(462,781	)
2012 Cancellations	31,210
Available for Grant as of March 31, 2012	5,501,467

A summary of the status of the Company’s stock option plans at March 31, 2012 and changes during the three months then ended is presented in the table below: 

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2011 (4,202,786 options exercisable at a weighted-average exercise price of $15.05 per share)		4,863,239		$	15.31		3.44	$	8,817,049
Options granted (weighted-average fair value of $6.69 per share)		7,000			15.96
Options exercised		(367,100	)		10.86
Options forfeited and expired		(10,435	)		19.75
Outstanding at March 31, 2012		4,492,704			15.67		3.24		20,443,562
Options exercisable at March 31, 2012 and expected to become exercisable		4,457,906			15.66		3.22		20,307,960
Options vested and exercisable at March 31, 2012		3,979,612		$	15.53		3.04	$	18,590,366

The total fair value of options that vested during the three months ended March 31, 2012 and 2011 was $0.9 million and $1.7 million, respectively.  The total intrinsic value of options exercised during the three months ended March 31, 2012 and 2011 was $2.8 million and $4.7 million, respectively. Net cash proceeds from the exercise of stock options were $4.0 million for the three months ended March 31, 2012 and $3.5 million for the three months ended March 31, 2011. At March 31, 2012, unamortized compensation expense related to unvested options was approximately $3.3 million, net of estimated forfeitures. The weighted average period over which compensation expense related to these options will be recognized is approximately 1.8 years.

The employee stock-based compensation expense recognized under Accounting Standards Codification (“ASC”) 718-10-30 Compensation – Stock Compensation –Overall - Initial Measurement, was determined using the Black-Scholes option pricing model. Option pricing models require the input of subjective assumptions and these assumptions can vary over time. The Company used the following weighted-average assumptions to determine the fair values of stock option awards granted during the three months ended March 31, 2012 and 2011: 

	Three months ended March 31,
	2012			2011
Expected term (years)		4.1			4.1
Expected volatility		53.4	%		52.9	%
Risk-free interest rate		0.6	%		1.7	%
Dividend yield		-			-

In estimating the expected term, the Company considers its historical stock option exercise experience, post vesting cancellations and remaining contractual term of the options outstanding. In estimating the expected volatility, the Company uses its own historical data to determine its estimated expected volatility. The Company uses the U.S. Treasury constant maturity yield based on the expected term for its risk-free interest rate and a dividend yield of zero as it does not issue dividends. The Company applies a forfeiture rate that is based on options that have been forfeited historically.

Restricted Stock

The Company grants restricted stock units, which vest generally over four years as determined by the Company’s Compensation Committee, and are issued upon vesting. Before vesting, these restricted stock units are not eligible for dividends, if and when declared. A summary of the restricted stock units is presented in the table below:

	Restricted Stock Units			Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Recognition Period (Years)
Outstanding at December 31, 2011		1,299,556		$	16.87		2.71
Awards granted		455,781			17.53
Awards released		(120,517	)		17.38
Awards forfeited		(20,775	)		18.17
Outstanding at March 31, 2012		1,614,045		$	17.00		2.45

The total fair value of restricted stock units that vested was $2.2 million for the three months ended March 31, 2012 and $2.5 million for the three months ended March 31, 2011. The intrinsic value related to restricted stock units released for the three months ended March 31, 2012 and 2011 was $2.0 million and $1.6 million, respectively. The intrinsic value related to restricted stock units outstanding at March 31, 2012 and 2011 was $31.7 million and $26.8 million, respectively. At March 31, 2012, the unamortized compensation expense related to unvested restricted stock units was approximately $18.9 million, net of estimated forfeitures, with a weighted average remaining recognition period of 2.5 years.

On February 25, 2010, the Board granted 416,000 performance units to the Company’s executive officers. These performance units generally vest over four years, with a graded acceleration feature that allows all or a portion of these awards to be accelerated if certain performance conditions are satisfied. The amount of shares to be accelerated is based on achieving certain performance targets, with the minimal acceleration occurring if performance exceeds at least 110% of non-GAAP earnings per share as set forth in the Company’s annual operating plan approved by the Board, as determined by the Compensation Committee in its sole discretion. The Compensation Committee has the discretion not to accelerate any shares, if it so chooses, even if the performance targets are met. To date, none of the shares have been accelerated.

On February 14, 2012, the Board granted 413,000 Restricted Stock Units (“RSUs) to the Company’s executive officers. Fifty percent of RSUs granted to Company’s executive officers will vest over two years on a quarterly basis (“Time-based RSUs”) and 50% of their units will be a target number of RSUs awarded upon achievement of a pre-determined target for the Company’s revenue in 2013 (“Performance-based RSUs”). Half of Performance-based RSUs will vest when earned with the remainder vesting during the following two years on a quarterly basis. The Performance-based RSUs earned will be reduced in the event that the Company’s total shareholder return (“TSR”), defined as the cumulative change in share price plus dividends, as compared to the Company’s compensation peer group is below a specified percentile for calendar years 2012 and 2013.

2004 Employee Stock Purchase Plan

Under the 2004 Employee Stock Purchase Plan (the Purchase Plan), eligible employees may purchase common stock through payroll deductions. Participants may not purchase more than 2,000 shares in a six-month offering period or stock having a value greater than $25,000 in any calendar year as measured at the beginning of the offering period in accordance with the Internal Revenue Code and applicable Treasury Regulations. A total of 200,000 shares of common stock were reserved for issuance under the Purchase Plan.  The Purchase Plan provides for an automatic annual increase beginning on January 1, 2005 by an amount equal to the least of: 1,000,000 shares, 2% of the outstanding shares of common stock on the first day of the year, or a number of shares as determined by the Board of Directors. For the three months ended March 31, 2012 and 2011, 97,247 shares and 70,685 shares, respectively, were issued under the Purchase Plan. The following is a summary of the Purchase Plan and changes during the three months ended March 31, 2012:

Available Shares as of December 31, 2011	3,693,210
2012 Additions to Plan	676,520
2012 Purchases	(97,247	)
Available Shares as of March 31, 2012	4,272,483

The Purchase Plan is considered compensatory under ASC 718-50-25, Compensation – Stock Compensation - Employee Share Purchase Plans - Recognition, and is accounted for in accordance with ASC 718-50-30 Compensation – Stock Compensation - Employee Share Purchase Plans - Initial Measurement - Look-Back Plans. The intrinsic value for stock purchased was $0.7 million and $0.2 million for each of the three months ended March 31, 2012 and 2011, respectively. The unamortized expense as of March 31, 2012 was $0.3 million, which will be recognized over 0.4 years. The Black-Scholes option pricing model was used to value the employee stock purchase rights. For the three months ended March 31, 2012 and 2011, the following weighted average assumptions were used in the valuation of the stock purchase rights:

	Three months ended March 31,
	2012			2011
Expected term (years)		0.5			0.5
Expected volatility		50.7	%		37.5	%
Risk-free interest rate		0.1	%		0.2	%
Dividend yield		-			-

Cash proceeds from employee stock purchases for each of the three months ended March 31, 2012 and 2011 was $1.0 million and $0.9 million, respectively.