Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Employee Compensation

v2.4.0.8
Stock-Based Employee Compensation
9 Months Ended
Sep. 30, 2013
Stock-Based Employee Compensation [Abstract]  
Stock-Based Employee Compensation
4. Stock-Based Employee Compensation
 
We estimate the fair value of share-based payment awards on the date of grant using an option-pricing model and recognize stock-based compensation expense during each period based on the value of that portion of share-based payment awards that is ultimately expected to vest during the period, reduced for estimated forfeitures. We estimate forfeitures at the time of grant based on historical data and revise, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense recognized for all employee stock options granted is recognized using the straight-line method over their respective vesting periods of up to five years.
The following table sets forth the stock-based compensation expense that we recognized for the periods indicated (in thousands):
 
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2013
   
2012
   
2013
   
2012
 
Stock-based compensation expense relating to:
               
Employee and director stock options
 
$
904
   
$
798
   
$
2,828
   
$
2,622
 
Employee stock purchases
   
441
     
86
     
740
     
553
 
Total stock-based compensation expense
 
$
1,345
   
$
884
   
$
3,568
   
$
3,175
 
 
                               
 
                               
Stock-based compensation expense relating to:
                               
Cost of revenues
 
$
130
   
$
69
   
$
317
   
$
265
 
Sales and marketing
   
260
     
197
     
678
     
692
 
Research and development
   
353
     
204
     
812
     
726
 
General and administrative
   
602
     
414
     
1,761
     
1,492
 
Total stock-based compensation expense
 
$
1,345
   
$
884
   
$
3,568
   
$
3,175
 
 
                               
We use the Black-Scholes option valuation model to estimate the fair value of share-based payment awards on the date of grant, which requires us to make a number of highly complex and subjective assumptions, including stock price volatility, expected term, risk-free interest rates. In the case of options we grant, our assumption of expected volatility is based on the historical volatility of our stock price over the term equal to the expected life of the options. We base the risk-free interest rate on U.S. Treasury zero-coupon issues with a remaining term approximately equal to the expected life of the options assumed at the date of grant.  The estimated expected life represents the weighted-average period the stock options are expected to remain outstanding, determined based on an analysis of historical exercise behavior.
 
The following are the weighted average assumptions used in the Black-Scholes valuation model for the periods indicated:
 
 
 
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
 
 
2013
   
2012
   
2013
   
2012
 
Expected dividend yield
   
     
     
     
 
Risk-free interest rate
   
0.7
%
   
0.4
%
   
0.5
%
   
0.4
%
Expected volatility
   
49
%
   
49
%
   
48
%
   
51
%
Expected life (in years)
   
3.5
     
3.7
     
3.6
     
3.7
 
Expected forfeiture rate
   
7
%
   
6
%
   
6
%
   
7
%