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2006 Annual Report 69
The following table presents the option exercises for the year ended July 29, 2006, and option values as of that date for the Named
Executive Ofcers (in millions):
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT JULY 29, 2006
INTRINSIC VALUE OF
UNEXERCISED IN-THE-MONEY
OPTIONS AT JULY 29, 2006
Number
of Shares
Acquired on
Exercise
Value
Realized Exercisable Unexercisable Exercisable Unexercisable
Named Executive Officers 7 $88 39 10 $52 $ 8
Valuation and Expense Information Under SFAS 123(R) On July 31, 2005, the Company adopted SFAS 123(R), which requires the
measurement and recognition of compensation expense for all share-based payment awards made to the Company’s employees and
directors including employee stock options and employee stock purchases based on estimated fair values. Stock-based compensation
expense related to employee stock options and employee stock purchases under SFAS 123(R) for scal 2006 was allocated as follows
(in millions except per-share amounts):
Amount
Cost of sales—product $ 50
Cost of sales—service 112
Stock-based compensation expense included in cost of sales 162
Research and development 346
Sales and marketing 427
General and administrative 115
Stock-based compensation expense included in operating expenses 888
Total stock-based compensation expense related to employee stock options
and employee stock purchases 1,050
Tax benefit (294)
Stock-based compensation expense related to employee stock options and
employee stock purchases, net of tax $ 756
Effect of SFAS 123(R) on basic earnings per share $ 0.12
Effect of SFAS 123(R) on diluted earnings per share $ 0.12
Stock-based compensation expense of $87 million related to acquisitions and investments for scal 2006 is disclosed in Note 3 and is
not included in the above table. There was no stock-based compensation expense recognized for scal 2005 and 2004 other than as
related to acquisitions and investments. As of July 29, 2006, total compensation cost related to nonvested share-based awards not yet
recognized was $2.0 billion, including stock-based compensation relating to acquisition and investments, which is expected to be
recognized over the next 39 months on a weighted-average basis.
Notes to Consolidated Financial Statements