Employee Stock-Based Compensation and Benefit Plans

12 Months Ended

Dec. 31, 2011

Share-based Compensation [Abstract]

Employee Stock-Based Compensation and Benefit Plans

7. EMPLOYEE STOCK-BASED COMPENSATION AND BENEFIT PLANS

Plans

The Company’s stock-based compensation program is a long-term retention program that is intended to attract and reward talented employees and align stockholder and employee interests. As of December 31, 2011, the Company had two stock-based compensation plans under which it was granting stock options and non-vested stock units. The Company is currently granting stock-based awards from its Amended and Restated 2005 Equity Incentive Plan (as amended, the “2005 Plan”) and its Amended and Restated 2005 Employee Stock Purchase Plan (the “2005 ESPP”). In connection with certain of the Company’s acquisitions, the Company has assumed several plans from acquired companies. The Company’s Board of Directors has provided that no new awards will be granted under the Company’s acquired stock plans. The Company’s superseded and expired stock plans include the Amended and Restated 1995 Stock Plan, Second Amended and Restated 2000 Director and Officer Stock Option and Incentive Plan and Second Amended and Restated 1995 Non-Employee Director Stock Option Plan. Awards previously granted under these plans and still outstanding typically expire ten years from the date of grant and will continue to be subject to all the terms and conditions of such plans, as applicable.

Under the terms of the 2005 Plan, the Company is authorized to grant incentive stock options (“ISOs”), non-qualified stock options (“NSOs”), non-vested stock, non-vested stock units, stock appreciation rights (“SARs”), and performance units and to make stock-based awards to full and part-time employees of the Company and its subsidiaries or affiliates, where legally eligible to participate, as well as consultants and non-employee directors of the Company. Currently, the 2005 Plan provides for the issuance of a maximum of 43,100,000 shares of common stock. Under the 2005 Plan, ISOs must be granted at exercise prices no less than fair market value on the date of grant, except for ISOs granted to employees who own more than 10% of the Company’s combined voting power, for which the exercise prices must be no less than 110% of the fair market value at the date of grant. NSOs and SARs must be granted at no less than fair market value on the date of grant, or in the case of SARs in tandem with options, at the exercise price of the related option. Non-vested stock awards may be granted for such consideration in cash, other property or services, or a combination thereof, as determined by the Company’s Compensation Committee of its Board of Directors. All stock-based awards, other than the long-term incentive awards discussed below, are exercisable or issuable upon vesting. The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award. As of December 31, 2011, there were 28,491,056 shares of common stock reserved for issuance pursuant to the Company’s stock-based compensation plans and the Company had authorization under its 2005 Plan to grant 15,651,323 additional stock-based awards.

Under the 2005 ESPP, all full-time and certain part-time employees of the Company are eligible to purchase common stock of the Company twice per year at the end of a six-month payment period (a “Payment Period”). During each Payment Period, eligible employees who so elect may authorize payroll deductions in an amount no less than 1% nor greater than 10% of his or her base pay for each payroll period in the Payment Period. At the end of each Payment Period, the accumulated deductions are used to purchase shares of common stock from the Company up to a maximum of 12,000 shares for any one employee during a Payment Period. Shares are purchased at a price equal to 85% of the fair market value of the Company’s common stock on the last business day of a Payment Period. Employees who, after exercising their rights to purchase shares of common stock in the 2005 ESPP, would own shares representing 5% or more of the voting power of the Company’s common stock, are ineligible to participate under the 2005 ESPP. The 2005 ESPP provides for the issuance of a maximum of 10,000,000 shares of common stock. As of December 31, 2011, 2,214,921 shares had been issued under the 2005 ESPP. The Company recorded stock-based compensation costs related to the 2005 ESPP of $3.5 million and $2.8 million and 2.2 million for the years ended December 31, 2011, 2010 and 2009, respectively.

Expense Information under the Authoritative Guidance

As required by the authoritative guidance, the Company estimates forfeitures of employee stock options and recognizes compensation costs only for those awards expected to vest. Forfeiture rates are determined based on historical experience. The Company also considers whether there have been any significant changes in facts and circumstances that would affect its forfeiture rate quarterly. Estimated forfeitures are adjusted to actual forfeiture experience as needed. The Company recorded stock-based compensation costs, related deferred tax assets and tax benefits of $92.9 million, $28.4 million and $67.9 million, respectively, in 2011, $103.8 million, $31.1 million and $100.1 million, respectively, in 2010 and $111.4 million, $32.8 million and $36.2 million, respectively, in 2009.

The detail of the total stock-based compensation recognized by income statement classification is as follows (in thousands):

Income Statement Classifications	2011		2010		2009
Cost of services revenues	$	1,584	$	1,363	$	1,868
Research and development	31,763		54,123		55,012
Sales, marketing and services	31,354		28,704		32,244
General and administrative	28,208		19,568		22,295
Total	$	92,909	$	103,758	$	111,419

Stock Options

Stock options granted under the 2005 Plan typically have a five-year life and vest over three years at a rate of 33.3% of the shares underlying the option one year from date of grant and at a rate of 2.78% monthly thereafter. The Company also assumes stock options from certain of its acquisitions for which the vesting period is typically reset to vest over three years at a rate of 33.3% of the shares underlying the option one year from date of grant and at a rate of 2.78% monthly thereafter. See Note 3 for more information related to acquisitions.

A summary of the status and activity of the Company’s fixed option awards is as follows:

Options	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2010	11,668,907		$	37.31	3.21
Granted	3,158,617		76.02
Assumed	572,883		12.32
Exercised	(3,944,381	)	31.84
Forfeited or expired	(756,121	)	53.61
Outstanding at December 31, 2011	10,699,905		48.06		3.24	$	186,254
Vested or expected to vest	10,128,946		47.34		3.18	$	181,099
Exercisable at December 31, 2011	4,782,143		34.23		2.20	$	128,380

The Company recognized stock-based compensation expense of $48.2 million, $67.0 million and $78.6 million related to options for the years ended December 31, 2011, 2010 and 2009, respectively. As of December 31, 2011, there was $122.6 million of total unrecognized compensation cost related to stock options. That cost is expected to be recognized over a weighted-average period of 2.33 years. The total intrinsic value of stock options exercised during 2011, 2010 and 2009 was $169.2 million, $293.7 million and $97.7 million, respectively.

Stock Option Valuation Information

The Company currently uses the Black-Scholes option pricing model to determine the fair value of stock options. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price, as well as assumptions regarding a number of complex and subjective variables. These variables include the Company’s expected stock price, volatility over the term of the awards, actual employee exercise behaviors, risk-free interest rate and expected dividends. For purposes of valuing stock options, the Company determined the expected volatility factor by considering the implied volatility in two-year market-traded options of the Company’s common stock based on third party volatility quotes in accordance with the provisions of SAB No. 107, Share Based Payment. The Company’s decision to use implied volatility was based upon the availability of actively traded options on the Company’s common stock and its assessment that implied volatility is more representative of future stock price trends than historical volatility. The approximate risk free interest rate was based on the implied yield available on U.S. Treasury zero-coupon issues with remaining terms equivalent to the Company’s expected terms on stock options. The expected term of stock options was based on the historical employee exercise patterns. The Company also periodically analyzes its historical pattern of option exercises based on certain demographic characteristics and determined that there were no meaningful differences in option exercise activity based on the demographic characteristics. The Company does not intend to pay dividends on its common stock in the foreseeable future. Accordingly, the Company used a dividend yield of zero in its option pricing model. The weighted-average fair value of stock options granted during 2011, 2010 and 2009 was $29.91, $13.74 and $7.22, respectively.

The assumptions used to value option grants under the 2005 Plan are as follows:

	Stock options granted during
	2011	2010	2009
Expected volatility factor	0.38 - 0.50	0.31 - 0.37	0.34 - 0.44
Approximate risk free interest rate	0.6% - 1.1%	0.9% - 1.6%	1.2% - 1.6%
Expected term (in years)	3.27 - 3.91	3.06 - 3.27	3.17 - 3.37
Expected dividend yield	0%	0%	0%

Non-vested Stock Units

Annually, the Company awards senior level employees non-vested performance stock units granted under the 2005 Plan. The number of non-vested stock units underlying each award is determined one year after the date of the award and is based on achievement of a specific corporate financial performance goal. If the performance goal is less than 90% attained, then no non-vested stock units will be issued pursuant to the authorized award. For performance at and above 90%, the number of non-vested stock units issued is based on a graduated slope, with the maximum number of non-vested stock units issuable pursuant to the award capped at 125% of the base number of non-vested stock units set forth in the award agreement. The Company is required to estimate the attainment that will be achieved related to the defined performance goals and the number of non-vested stock units that will ultimately be awarded in order to recognize compensation expense over the vesting period. If the performance goal is met, the awards vest 33.33% on each anniversary subsequent to the date of the award. Each non-vested stock unit, upon vesting, represents the right to receive one share of the Company’s common stock. If the performance goals are not met, no compensation cost will ultimately be recognized in that period and any previously recognized compensation cost will be reversed. For awards of non-vested performance stock units made in 2011 and 2010, the performance goal was achieved within the range of the graduated slope and there was no material adjustment to compensation cost related to non-vested stock units granted to employees.

The Company also awards senior level and certain other employees non-vested stock units granted under the 2005 Plan that vest based on service. The majority of awards vest 33.33% on each anniversary subsequent to the date of the award. The remaining awards vest 100% on the third anniversary of the grant date. Each non-vested stock unit, upon vesting, will represent the right to receive one share of the Company’s common stock. In addition, the Company awards non-vested stock units to all of its non-employee directors. These awards vest monthly in 12 equal installments based on service and, upon vesting, each stock unit represents the right to receive one share of the Company's common stock.

The following table summarizes the Company's non-vested stock unit activity for the year ended December 31, 2011:

	Number of Shares		Weighted- Average Fair Value at Grant Date
Non-vested stock units at December 31, 2010	1,172,312		$	40.86
Granted	1,666,793		72.33
Vested	(527,933	)	40.33
Forfeited	(171,344	)	54.69
Non-vested stock units at December 31, 2011	2,139,828		64.05

For the years ended December 31, 2011, 2010 and 2009, the Company recognized stock-based compensation expense of $40.0 million, $19.3 million and $13.1 million, respectively, related to non-vested stock units. The fair value of the non-vested stock units released in 2011, 2010, 2009 was $21.3 million, $11.6 million and $12.1 million, respectively. As of December 31, 2011, there was $100.5 million of total unrecognized compensation cost related to non-vested stock units. The unrecognized cost is expected to be recognized over a weighted-average period of 2.33 years.

Long-term Incentive Plan

In May 2009, the Company granted certain senior level executives restricted stock unit awards that vest based on market and service conditions as part of a long-term incentive plan. The number of restricted stock units underlying each award was determined at the end of a three-year performance period ending December 31, 2011. In order to vest, the Company’s stock price must have appreciated by at least ten percent by the end of the performance period. The Company’s stock appreciation was at least ten percent, accordingly, the number of restricted stock units ultimately awarded was determined by comparing the Company’s stock price appreciation to the appreciation of the weighted-average of two stock market indices comprised of the Standard & Poor’s 500 Index (the “S&P 500”), which was assigned a two-thirds weighting, and the iShares Standard & Poor’s North America Technology Index (the “IGM”), which was assigned a one-third weighting. In February 2012, based on the level of performance the Compensation Committee of the Board of Directors approved that participants will receive a number of restricted stock units equal to 200% of their target award. The shares underlying the award will be issued at the earliest of (i) six months and one day after the participant’s separation from the Company (other than termination for cause), (ii) the participant’s death, or (iii) the effective date of a change in control of the Company.

The market condition requirements were reflected in the grant date fair value of the award, and the compensation expense for the award was recognized assuming that the requisite service was rendered regardless of whether the market conditions were achieved. The grant date fair value of the restricted stock unit awards was determined through the use of a Monte Carlo simulation model, which utilizes multiple input variables that determine the probability of satisfying the market condition requirements applicable to each award.

The following table summarizes the Company’s restricted stock unit awards for the year ended December 31, 2011:

	Number of Shares		Weighted- Average Fair Value at Grant Date
Restricted stock unit awards at December 31, 2010	175,667		$	24.16
Granted	—		—
Forfeited	(14,000	)	24.16
Restricted stock unit awards at December 31, 2011	161,667		24.16

For the years ended December 31, 2011, 2010 and 2009, the Company recognized stock-based compensation expense of $1.2 million , $1.5 million and $0.9 million, respectively, related to restricted stock units. As of December 31, 2011, there was no unrecognized compensation cost related to these restricted stock unit awards.

Benefit Plan

The Company maintains a 401(k) benefit plan allowing eligible U.S.-based employees to contribute up to 60% of their annual compensation, limited to an annual maximum amount as set periodically by the IRS. The Company, at its discretion, may contribute up to $0.50 for each dollar of employee contribution. The Company’s total matching contribution to an employee is typically made at 3% of the employee’s annual compensation. The Company’s matching contributions were $9.1 million, $8.0 million and $7.2 million in 2011, 2010 and 2009, respectively. The Company’s contributions vest over a four-year period at 25% per year.