eBay 2010 Annual Report Download - page 126

eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
equivalent value thereof in cash or property at our election). Each deferred stock unit award granted to a new
non-employee director upon election to the Board vests 25% one year from the date of grant, and at a rate of
2.08% per month thereafter. If the services of the director are terminated at any time, all rights to the unvested
deferred stock units will also terminate. In addition, directors may elect to receive, in lieu of annual retainer and
committee chair fees and at the time these fees would otherwise be payable (i.e., on a quarterly basis in arrears
for services provided), fully vested deferred stock units with an initial value equal to the amount based on the fair
market value of common stock at the date of grant. Deferred stock units are payable following the termination of
a director’s tenure as a director. As of December 31, 2010, there were approximately 203,819 deferred stock
units outstanding included in our restricted stock unit activity below.
Stock Option Valuation Assumptions
We calculated the fair value of each option award on the date of grant using the Black-Scholes option
pricing model. The following weighted-average assumptions were used for each respective period:
Year Ended December 31,
2008 2009 2010
Risk-free interest rates ................................. 2.3% 1.7% 1.4%
Expected life (in years) ................................. 3.8 3.8 3.4
Dividend yield ....................................... — % — % — %
Expected volatility .................................... 34% 47% 37%
Our computation of expected volatility was based on a combination of historical and market-based implied
volatility from traded options on our stock. Our computation of expected life was determined based on historical
experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting
schedules and expectations of future employee behavior. The interest rate for periods within the contractual life
of the award was based on the U.S. Treasury yield curve in effect at the time of grant.
Stock-Based Compensation Expense
The following table presents details of total stock-based compensation expense that is included in each line
item on our consolidated statement of income (in thousands):
Year Ended December 31,
2008 2009 2010
Cost of net revenues ........................... $ 43,417 $ 49,275 $ 48,764
Sales and marketing ........................... 94,314 121,724 106,208
Product development .......................... 95,396 98,609 101,001
General and administrative ..................... 118,915 125,199 125,519
Restructuring ................................ 1,281 — —
Total stock-based compensation expense .......... $353,323 $394,807 $381,492
Capitalized in Product Development .............. $ 10,550 $ 9,060 $ 10,484
As of December 31, 2010, there was approximately $530.1 million of unearned stock-based compensation
that will be expensed from 2011 through 2014. If there are any modifications or cancellations of the underlying
unvested awards, we may be required to accelerate, increase or cancel all or a portion of the remaining unearned
stock-based compensation expense. Future unearned stock-based compensation will increase to the extent we
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