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Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2007
Weighted Average
Options Outstanding Remaining Options Exercisable Weighted Average
as of May 31, 2007 Contractual Life Weighted Average as of May 31, 2007 Exercise Price of
Range of Exercise Prices (in millions) (in years) Exercise Price (in millions) Exercisable Options
$ 0.13—$ 6.60 34 1.28 $ 4.52 34 $ 4.53
$ 6.61—$ 6.87 71 2.01 $ 6.87 71 $ 6.87
$ 6.88—$ 9.90 60 5.55 $ 8.96 45 $ 8.76
$ 9.91—$ 11.85 30 4.59 $ 10.79 18 $ 10.88
$11.86—$ 12.34 49 7.85 $ 12.32 12 $ 12.30
$12.35—$ 14.26 41 6.36 $ 12.88 24 $ 12.91
$14.27—$ 14.57 55 8.80 $ 14.57 2 $ 14.53
$14.58—$ 20.64 54 4.71 $ 17.40 46 $ 17.40
$20.65—$126.59 40 2.87 $ 38.78 40 $ 38.86
$ 0.13—$126.59 434 4.97 $ 13.65 292 $ 13.93
Options outstanding that have vested and that are expected to vest as of May 31, 2007 are as follows:
Weighted
Average In-the-Money Aggregate
Outstanding Weighted Remaining Options as of Intrinsic
Options Average Contract Term May 31, 2007 Value(1)
(in millions) Exercise Price (in years) (in millions) (in millions)
Vested 292 $ 13.93 3.5 241 $ 2,378
Expected to vest(2) 120 $ 12.97 7.9 120 758
Total 412 $ 13.65 4.8 361 $ 3,136
(1) The aggregate intrinsic value was calculated based on the difference between our closing stock price on
May 31, 2007 of $19.38 and the exercise prices for all in-the-money options outstanding.
(2) The unrecognized compensation expense calculated under the fair value method for shares expected to
vest (unvested shares net of expected forfeitures) as of May 31, 2007 was approximately $356 million and
is expected to be recognized over a weighted average period of 1.3 years. Approximately 22 million
shares outstanding as of May 31, 2007 are not expected to vest.
Valuation of Options Granted
We estimate the fair value of our options using the Black-Scholes-Merton option-pricing model, which was
developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully
transferable. Option valuation models require the input of assumptions, including stock price volatility.
Changes in the input assumptions can materially affect the fair value estimates. The fair value of employee
and director stock options granted, including options assumed from acquisitions, were estimated at the date of
grant (or date of acquisition for acquired options assumed). The weighted average assumptions used were as
follows:
Year Ended May 31,
2007 2006 2005
Expected life (in years) 4.9 4.5 4.7
Risk-free interest rate 5.0% 4.3% 3.0%
Volatility 26% 26% 33%
Dividend yield — — —
Weighted-average fair value of grants $ 6.17 $ 3.89 $ 4.72
93
Source: ORACLE CORP, 10-K, June 29, 2007 Powered by Morningstar® Document Research℠