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Table of Contents
ORACLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
May 31, 2015
Stock-Based Compensation Expense and Valuation of Stock Awards
We estimated the fair values of our stock options 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 2015, 2014 and 2013:
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.
We estimated the fair values of our restricted stock-based awards that are solely subject to service-based vesting requirements based upon their
intrinsic values as of the grant dates.
The fair values of our PSUs were also measured at their intrinsic values as of their respective grant dates. The vesting conditions and related
terms of our PSUs were communicated to each participating employee as of their respective grant dates and included attainment metrics that
were defined, fixed, and based upon consistent U.S. GAAP metrics or internal metrics that are defined, fixed and consistently determined, and
that require the employee to render service. Therefore, these awards meet the performance-based award classification criteria as defined within
ASC 718.
Stock-based compensation is included in the following operating expense line items in our consolidated statements of operations:
126
Year Ended May 31,
2015
2014
2013
Expected life (in years)
5.1
4.9
5.0
Risk
-
free interest rate
1.7%
1.3%
0.7%
Volatility
23%
27%
31%
Dividend yield
1.2%
1.5%
0.8%
Weighted
-
average fair value per share
$
9.62
$
7.47
$
7.99
Year Ended May 31,
(in millions)
2015
2014
2013
Sales and marketing
$
180
$
165
$
137
Cloud software as a service and platform as a service
10
8
10
Cloud infrastructure as a service
5
4
8
Software license updates and product support
21
22
20
Hardware systems products
6
5
3
Hardware systems support
6
6
5
Services
30
29
23
Research and development
522
385
352
General and administrative
148
171
164
Acquisition related and other
5
10
33
Total stock
-
based compensation
933
805
755
Estimated income tax benefit included in provision for income taxes
(294
)
(260
)
(243
)
Total stock
-
based compensation, net of estimated income tax benefit
$
639
$
545
$
512