Dell 1997 Annual Report Download - page 25

purchase shares under the existing stock option agreements typically vests
pro-rata at each option anniversary date over a five-year period. Stock options
must be exercised within ten years from date of grant. Stock options are
generally issued at fair market value. Under the Incentive Plan, each
nonemployee director of the Company automatically receives nonqualified stock
options annually.
The following table summarizes stock option activity:
FISCAL YEAR ENDED
---------------------------------------------------------
FEBRUARY 1, 1998 FEBRUARY 2, 1997 JANUARY 28, 1996
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
(SHARE DATA IN MILLIONS)
Outstanding at beginning of year... 113 $ 3.89 94 $2.10 90 $1.13
Granted............................ 22 $27.21 43 $6.58 32 $3.91
Canceled........................... (5) $ 6.19 (7) $2.34 (8) $1.02
Exercised.......................... (20) $ 3.02 (17) $1.50 (20) $1.05
--- --- ---
Outstanding at end of year......... 110 $ 8.99 113 $3.89 94 $2.10
=== === ===
Exercisable at year-end............ 25 $11.90 19 $1.81 19 $1.30
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The following is additional information relating to options outstanding as of
February 1, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
EXERCISE NUMBER AVERAGE AVERAGE NUMBER AVERAGE
PRICE OF EXERCISE CONTRACTUAL OF EXERCISE
RANGE SHARES PRICE LIFE (YEARS) SHARES PRICE
--------------- ------ -------- ------------ ------- ---------
(SHARE DATA IN MILLIONS)
$ 0.01 - $ 1.99 28 $ 1.16 5.8 12 $ 1.38
$ 2.00 - $ 4.99 27 $ 3.61 7.5 7 $ 3.47
$ 5.00 - $ 9.99 27 $ 6.16 8.3 4 $ 6.18
$10.00 - $19.99 14 $14.08 8.9 2 $11.24
$20.00 - $50.50 14 $36.00 9.4 -- $ --
--- --
110 25
=== ==
During fiscal 1998, 1997 and 1996 the Company granted 1 million shares, 3
million shares and 6 million shares, respectively, of restricted stock. For
substantially all restricted stock grants, at the date of grant, the recipient
has all rights of a stockholder, subject to certain restrictions on
transferability and a risk of forfeiture. Restricted shares typically vest over
a seven-year period beginning on the date of grant and restrictions may not
extend more than ten years from the date of grant. The Company records unearned
compensation equal to the market value of the restricted shares on the date of
grant and charges the unearned compensation to expense over the vesting period.
There were 10 million, 29 million and 68 million shares of common stock
available for future grants under the Incentive Plan at February 1, 1998,
February 2, 1997, and January 28, 1996, respectively.
The Company also has an employee stock purchase plan that qualifies under
Section 423 of the Internal Revenue Code and permits substantially all employees
to purchase shares of common stock. Participating employees may purchase common
stock through payroll deductions at the end of each participation period at a
purchase price equal to 85% of the lower of the fair market value of the common
stock at the beginning or the end of the participation period. Common stock
reserved for future employee purchases under the plan aggregated 13 million
shares at February 1, 1998, 15 million shares at February 2, 1997, and 19
million shares at January 28, 1996. Shares issued under this plan were 2 million
shares in fiscal 1998, 3 million shares in fiscal 1997 and 3 million shares in
fiscal 1996.
The weighted average fair value of stock options at date of grant was $16.26,
$3.73, and $2.22 per option for options granted during fiscal years 1998, 1997,
and 1996, respectively. Additionally, the weighted average fair value of the
purchase rights under the employee stock purchase plan granted in fiscal years
1998, 1997, and 1996 was $6.11, $2.04, and $1.01 per right, respectively. The
weighted average fair value of options was determined based on the Black-Scholes
model, utilizing the following weighted average assumptions: