Cisco 2012 Annual Report Download - page 129

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Acquisition Plans In connection with the Company’s acquisitions of Scientific-Atlanta, Inc. (“Scientific-
Atlanta”) and WebEx Communications, Inc. (“WebEx”), the Company adopted the SA Acquisition Plan and the
WebEx Acquisition Plan, respectively, each effective upon completion of the applicable acquisition. These plans
constitute assumptions, amendments, restatements, and renamings of the 2003 Long-Term Incentive Plan of
Scientific-Atlanta and the WebEx Communications, Inc. Amended and Restated 2000 Stock Incentive Plan,
respectively. The plans permit the grant of stock options, stock, stock units, and stock appreciation rights to
certain employees of the Company and its subsidiaries and affiliates who had been employed by Scientific-
Atlanta or its subsidiaries or WebEx or its subsidiaries, as applicable. As a result of the shareholder approval of
the amendment and extension of the 2005 Plan, as of November 15, 2007, the Company will no longer make
stock option grants or direct share issuances under either the SA Acquisition Plan or the WebEx Acquisition
Plan.
(b) Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan, which includes its subplan, the International Employee
Stock Purchase Plan (together, the “Purchase Plan”), under which 471.4 million shares of the Company’s
common stock have been reserved for issuance as of July 28, 2012. Eligible employees are offered shares
through a 24-month offering period, which consists of four consecutive 6-month purchase periods. Employees
may purchase a limited number of shares of the Company’s stock at a discount of up to 15% of the lesser of the
market value at the beginning of the offering period or the end of each 6-month purchase period. The Purchase
Plan is scheduled to terminate on January 3, 2020. The Company issued 35 million, 34 million, and 27 million
shares under the Purchase Plan in fiscal 2012, 2011, and 2010, respectively. As of July 28, 2012, 87 million
shares were available for issuance under the Purchase Plan.
(c) Summary of Share-Based Compensation Expense
Share-based compensation expense consists primarily of expenses for stock options, stock purchase rights,
restricted stock, and restricted stock units granted to employees. The following table summarizes share-based
compensation expense (in millions):
Years Ended July 28, 2012 July 30, 2011 July 31, 2010
Cost of sales—product .................................... $53 $61 $57
Cost of sales—service .................................... 156 177 164
Share-based compensation expense in cost of sales ............. 209 238 221
Research and development ................................ 401 481 450
Sales and marketing ...................................... 588 651 602
General and administrative ................................ 203 250 244
Share-based compensation expense in operating expenses ........ 1,192 1,382 1,296
Total share-based compensation expense ..................... $1,401 $1,620 $1,517
As of July 28, 2012, the total compensation cost related to unvested share-based awards not yet recognized was
$2.0 billion, which is expected to be recognized over approximately 2.4 years on a weighted-average basis. The
income tax benefit for share-based compensation expense was $335 million, $444 million, and $415 million for
fiscal 2012, 2011, and 2010, respectively.
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