Intel 2008 Annual Report Download - page 105

Table of Contents
INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Equity awards granted to employees in 2008 under our equity incentive plans generally vest over 4 years from the date of
grant, and options expire 7 years from the date of grant. Equity awards granted to key officers, senior-level employees, and
key employees in 2008 may have delayed vesting beginning 2 to 5 years from the date of grant, and options expire 7 to
10 years from the date of grant.
The 2006 Stock Purchase Plan allows eligible employees to purchase shares of our common stock at 85% of the value of our
common stock on specific dates. Under the 2006 Stock Purchase Plan, we made 240 million shares of common stock available
for issuance through August 2011. As of December 27, 2008, 188 million shares were available for issuance under the 2006
Stock Purchase Plan.
Share
-Based Compensation
Effective January 1, 2006, we adopted the provisions of SFAS No. 123(R), as discussed in “Note 2: Accounting Policies.”
Share-based compensation recognized in 2008 was $851 million ($952 million in 2007 and $1,375 million in 2006).
In accordance with SFAS No. 123(R), we adjust share-based compensation on a quarterly basis for changes to our estimate of
expected equity award forfeitures based on our review of recent forfeiture activity and expected future employee turnover. We
recognize the effect of adjusting the forfeiture rate for all expense amortization after January 1, 2006 in the period that we
change the forfeiture estimate. The effect of forfeiture adjustments in 2006, 2007, and 2008 was not significant.
The total share-based compensation cost capitalized as part of inventory as of December 27, 2008 was $46 million
($41 million as of December 29, 2007 and $72 million as of December 30, 2006). During 2008, the tax benefit that we realized
for the tax deduction from option exercises and other awards totaled $147 million ($265 million in 2007 and $139 million in
2006).
We estimate the fair value of restricted stock unit awards using the value of our common stock on the date of grant, reduced by
the present value of dividends expected to be paid on our common stock prior to vesting. We based the weighted average
estimated values of restricted stock unit grants, as well as the weighted average assumptions that we used in calculating the
fair value, on estimates at the date of grant, as follows:
We use the Black-Scholes option pricing model to estimate the fair value of options granted under our equity incentive plans
and rights to acquire common stock granted under our stock purchase plan. We based the weighted average estimated values
of employee stock option grants and rights granted under the stock purchase plan, as well as the weighted average assumptions
used in calculating these values, on estimates at the date of grant, as follows:
96
2008 2007 2006
Estimated values
$
19.94
$
21.13
$
18.70
Risk
-
free interest rate
2.1
%
4.7
%
4.9
%
Dividend yield
2.6
%
2.0
%
2.0
%
Stock Options
Stock Purchase Plan
2008
2007
2006
2008
2007
2006
Estimated values
$
5.74
$
5.79
$
5.21
$
5.32
$
5.18
$
4.56
Expected life (in years)
5.0
5.0
4.9
.5
.5
.5
Risk
-
free interest rate
3.0
%
4.5
%
4.9
%
2.1
%
5.2
%
5.0
%
Volatility
37
%
26
%
27
%
35
%
28
%
29
%
Dividend yield
2.7
%
2.0
%
2.0
%
2.5
%
2.0
%
2.1
%