Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes [Abstract]

Income Taxes

(7) Income Taxes

Effective Tax Rate

The Company computes its provision for income taxes by applying the estimated annual effective tax rate to income from recurring operations and adjusts the provision for discrete tax items recorded in the period. The Company’s effective tax rate for the three and nine months ended September 30, 2012 was (3)% and (2)%, respectively, which was lower than the federal statutory tax rate of 34%. The lower tax rate was primarily attributable to a foreign tax differential and non-deductible expenses arising from stock-based compensation, partially offset by state income taxes and California tax credits. During the three months ended September 30, 2012, the Company generated a loss from operations, which decreased its effective income tax rate.

The Company’s effective tax rate for the three and nine months ended September 30, 2011 was 58% and 14%, respectively. The higher tax rate than the federal statutory rate is primarily due to state and foreign income taxes, and the lower tax rate was attributable to the benefit of federal and California research tax credits offset by income taxes and a foreign tax differential.

The Company record liabilities related to uncertain tax positions in accordance with the income tax guidance which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company believes that it has provided adequate reserves for its income tax uncertainties in all open tax years.