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Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2014
Stock-Based Compensation Expense and Valuation of Stock Options
Stock-based compensation is included in the following operating expense line items in our consolidated statements of operations:
We estimate the fair values of our share-based payments using the Black-Scholes-Merton option-pricing model, which was developed for use in
estimating the fair values of stock options. Option valuation models, including the Black-Scholes-Merton option-
pricing model, require the input
of assumptions, including stock price volatility. Changes in the input assumptions can materially affect the fair value estimates and ultimately
how much we recognize as stock-based compensation expense. The fair values of our stock options were estimated at the grant dates or at the
acquisition dates for options assumed in a business combination. The weighted average input assumptions used and resulting fair values of our
stock options were as follows for fiscal 2014, 2013 and 2012:
The expected life input is based on historical exercise patterns and post-vesting termination behavior, the risk-free interest rate input is based on
U.S. Treasury instruments, the annualized dividend yield input is based on the per share dividend declared by our Board of Directors and the
volatility input is calculated based on the implied volatility of our publicly traded options.
Tax Benefits from Exercise of Stock Options and Vesting of Restricted Stock-Based Awards
Total cash received as a result of option exercises was approximately $2.0 billion, $1.4 billion and $622 million for fiscal 2014, 2013 and 2012,
respectively. The aggregate intrinsic value of options exercised and vesting of restricted stock-based awards was $1.5 billion, $1.3 billion and
$587 million for fiscal 2014, 2013 and 2012, respectively. In connection with these exercises and vesting of restricted stock-based awards, the
tax benefits realized by us were $480 million, $410 million and $182 million for fiscal 2014, 2013 and 2012, respectively. Of
122
Year Ended May 31,
(in millions)
2014
2013
2012
Sales and marketing
$
165
$
137
$
115
Cloud software
-
as
-
a
-
service and platform
-
as
-
a
-
service
8
10
7
Cloud infrastructure
-
as
-
a
-
service
4
8
6
Software license updates and product support
22
20
18
Hardware systems products
5
3
1
Hardware systems support
6
5
5
Services
29
23
17
Research and development
385
352
295
General and administrative
171
164
162
Acquisition related and other
10
33
33
Total stock
-
based compensation
805
755
659
Estimated income tax benefit included in provision for income taxes
(260
)
(243
)
(216
)
Total stock
-
based compensation, net of estimated income tax benefit
$
545
$
512
$
443
Year Ended May 31,
2014
2013
2012
Expected life (in years)
4.9
5.0
5.1
Risk
-
free interest rate
1.3%
0.7%
1.6%
Volatility
27%
31%
30%
Dividend yield
1.5%
0.8%
0.8%
Weighted
-
average fair value per share
$
7.47
$
7.99
$
9.30