Dell 1998 Annual Report Download - page 31

generally issued at fair market value. Under the Incentive Plan, each
nonemployee director of the Company automatically receives nonqualified stock
options annually.
40
<PAGE> 42
The following table summarizes stock option activity:
FISCAL YEAR ENDED
---------------------------------------------------------
JANUARY 29, 1999 FEBRUARY 1, 1998 FEBRUARY 2, 1997
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
(SHARE DATA IN MILLIONS)
Outstanding at beginning of year... 439 $ 2.25 451 $ 0.97 374 $ 0.53
Granted............................ 60 19.94 86 6.80 171 1.65
Canceled........................... (26) 2.63 (19) 1.55 (27) 0.59
Exercised.......................... (110) 1.29 (79) 0.76 (67) 0.38
---- --- ---
Outstanding at end of year......... 363 5.40 439 2.25 451 0.97
==== === ===
Exercisable at year-end.......... 103 2.27 98 0.84 75 0.45
The following is additional information relating to options outstanding as of
January 29, 1999:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE AVERAGE NUMBER AVERAGE
OF EXERCISE CONTRACTUAL OF EXERCISE
EXERCISE PRICE RANGE SHARES PRICE LIFE (YEARS) SHARES PRICE
-------------------- ------ -------- ------------ ------- ---------
(SHARE DATA IN MILLIONS)
$ 0.01 - $ 0.99............................ 127 $ 0.60 5.76 53 $ 0.59
1.00 - 2.49............................ 94 1.50 7.24 23 1.51
2.50 - 4.99............................ 41 3.62 7.86 17 3.57
5.00 - 12.49............................ 49 9.05 8.31 7 9.34
12.50 - 41.55............................ 52 22.07 9.27 3 15.36
--- ---
363 103
=== ===
During fiscal years 1999, 1998 and 1997, the Company granted one million shares,
two million shares and 10 million shares, respectively, of restricted stock. For
substantially all restricted stock grants, at the date of grant, the recipient
has all rights of a stockholder, subject to certain restrictions on
transferability and a risk of forfeiture. Restricted shares typically vest over
a seven-year period beginning on the date of grant. The Company records unearned
compensation equal to the market value of the restricted shares on the date of
grant and charges the unearned compensation to expense over the vesting period.
There were 162 million, 40 million and 116 million shares of common stock
available for future grants under the Incentive Plan at January 29, 1999,
February 1, 1998 and February 2, 1997, respectively.
The Company also has an employee stock purchase plan that qualifies under
Section 423 of the Internal Revenue Code and permits substantially all employees
to purchase shares of common stock. Participating employees may purchase common
stock through payroll deductions at the end of each participation period at a
purchase price equal to 85% of the lower of the fair market value of the common
stock at the beginning or the end of the participation period. Common stock
reserved for future employee purchases under the plan aggregated 47 million
shares at January 29, 1999, 52 million shares at February 1, 1998 and 62 million
shares at February 2, 1997. Common stock issued under this plan totaled five
million shares in fiscal year 1999, nine million shares in fiscal year 1998 and
13 million shares in fiscal year 1997.
The weighted average fair value of stock options at date of grant was $11.77,
$4.06, and $0.93 per option for options granted during fiscal years 1999, 1998,
and 1997, respectively. Additionally, the weighted average fair value of the
purchase rights under the employee stock purchase plan granted
41
<PAGE> 43
in fiscal years 1999, 1998, and 1997 was $2.51, $1.53, and $0.51 per right,
respectively. The weighted average fair value of options and purchase rights
under the employee stock purchase plan was determined based on the Black-Scholes