Stock-Based Compensation

3 Months Ended

Dec. 29, 2012

Stock-Based Compensation

(10) Stock-Based Compensation

The following presents stock-based compensation expense in the Company’s Consolidated Statements of Income:

	Three Months Ended
	December 29, 2012		December 24, 2011
Cost of revenues	$	1,834	$	1,107
Research and development		1,868		1,201
Selling and marketing		2,201		1,550
General and administrative		5,941		4,799
Restructuring		222		—
	$	12,066	$	8,657

The Company granted approximately 2.1 million and 2.0 million stock options during the three months ended December 29, 2012 and December 24, 2011, respectively, with weighted average exercise prices of $19.86 and $17.02, respectively. There were 19.0 million options outstanding at December 29, 2012 with a weighted average exercise price of $17.86.

The Company uses a binomial model to determine the fair value of its stock options. The weighted-average assumptions utilized to value these stock options are indicated in the following table:

	Three Months Ended
	December 29, 2012			December 24, 2011
Risk-free interest rate		0.5	%		0.7	%
Expected volatility		43.7	%		46.9	%
Expected life (in years)		4.4			4.3
Dividend yield		—			—
Weighted average fair value of options granted	$	7.06		$	6.41

The Company granted approximately 1.8 million and 1.5 million restricted stock units (RSU) during the three months ended December 29, 2012 and December 24, 2011, respectively, with weighted average grant date fair values of $19.86 and $17.08, respectively. As of December 29, 2012, there were 4.2 million unvested RSUs outstanding with a weighted average grant date fair value of $18.00. The Company also granted approximately 0.1 million market stock units (MSU) during the three months ended December 29, 2012 to its chief executive officer and chief financial officer. The MSUs were valued at $18.49 using the Monte Carlo simulation model. Each recipient of the MSUs is eligible to receive between zero and 200% of the target number of shares of the Company’s common stock at the end of three years provided the Company’s stock price achieves the defined measurement criteria. The Company will recognize compensation expense over the required service period, and since these are market-based awards, the compensation expense will be recognized by the Company regardless of whether the required criteria is met to receive such shares.

The Company uses the straight-line attribution method to recognize stock-based compensation expense for stock options and RSUs. The vesting term of stock options granted to employees is generally five years with annual vesting of 20% per year on the anniversary of the grant date, and RSUs granted to employees generally vest over four years with annual vesting at 25% per year on the anniversary of the grant date. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that is ultimately expected to vest. Based on an analysis of historical forfeitures, the Company has determined a specific forfeiture rate for certain employee groups and has applied forfeiture rates ranging from 0% to 7% as of December 29, 2012. This analysis is periodically re-evaluated and forfeiture rates will be adjusted as necessary. Ultimately, the actual stock-based compensation expense recognized will only be for those stock options and RSUs that vest.

At December 29, 2012, there was $54.1 million and $66.1 million of unrecognized compensation expense related to stock options and stock units (comprised of RSUs and MSUs), respectively, to be recognized over a weighted average period of 3.5 years and 3.1 years, respectively.