Stock compensation

9 Months Ended

Sep. 30, 2011

Stock compensation

Stock compensation

6.     Stock compensation

We recorded $7.4 million and $21.5 million of stock compensation expense on our unaudited condensed consolidated statement of operations for the three and nine months ended September 30, 2011, respectively.  We recorded $4.1 million and $10.7 million of stock compensation expense on our unaudited condensed consolidated statement of operations for the three and nine months ended September 30, 2010, respectively.  We utilized the Black-Scholes valuation model for estimating the fair value of the stock compensation granted, with the following weighted-average assumptions:

	Employee Stock Options								Employee Stock Purchase Plan
	For theThreeMonthsEnded				For theNineMonthsEnded				For theThreeMonthsEnded				For theNineMonthsEnded
	September 30,								September 30,
	2011		2010		2011		2010		2011		2010		2011		2010
Average risk-free interest rates	0.54	%	0.75	%	0.99	%	1.12	%	0.57	%	0.72	%	0.57	%	0.72	%
Average expected life (in years)	3.69		3.08		3.29		2.96		0.50		0.50		0.50		0.50
Volatility	70	%	75	%	71	%	74	%	35	%	49	%	35	%	49	%
Weighted-average fair value (in dollars)	8.15		6.72		7.35		5.09		1.13		0.65		1.13		0.65

The risk-free interest rate is derived from the U.S. Federal Reserve rate in effect at the time of grant. The expected life calculation is based on the observed and expected time to the exercise of options by our employees based on historical exercise patterns for similar type options. Expected volatility is based on the historical volatility of our common stock over the period commensurate with the expected life of the options. A dividend yield of zero is assumed based on the fact that we have never paid cash dividends and have no present intention to pay cash dividends.

Based on our historical experience, we have assumed an annualized forfeiture rate of 5% for our options. Under the true-up provisions of the stock based compensation guidance, we will record additional expense if the actual forfeiture rate is lower than we estimated, and will record a recovery of prior expense if the actual forfeiture is higher than we estimated.

Total compensation cost of options granted but not yet vested, as of September 30, 2011, was $23.0 million, which is expected to be recognized over the weighted average period of 3.09 years.

The following table summarizes activity under all stock option plans:

	SharesAvailable forGrant		NumberOutstanding		WeightedAverageExercisePrice perShare
Balance at December 31, 2010	4,786,694		20,107,923		$	8.44
Additional authorized	6,500,000		—		—
Options granted	(4,865,333	)	4,865,333		15.17
Options exercised	—		(2,220,565	)	7.15
Options cancelled	87,134		(196,890	)	18.58
Balance at September 30, 2011	6,508,495		22,555,801		$	9.93
Exercisable, September 30, 2011	—		15,546,166		$	8.31