Seagate 2006 Annual Report Download - page 81

Download and view the complete annual report

Please find page 81 of the 2006 Seagate annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 148

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of the implied volatility of its traded options and historical volatility of its share price. The impact of this change in
the assumptions used to determine volatility was not significant.
Expected Dividend — The Black-Scholes-Merton valuation model calls for a single expected dividend yield as
an input. The dividend yield is determined by dividing the expected per share dividend during the coming year by the
grant date share price. The expected dividend assumption is based on the Company’s current expectations about its
anticipated dividend policy. Also, because the expected dividend yield should reflect marketplace participants’
expectations, the Company does not incorporate changes in dividends anticipated by management unless those
changes have been communicated to or otherwise are anticipated by marketplace participants.
Risk-Free Interest Rate — The Company bases the risk-free interest rate used in the Black-Scholes-Merton
valuation method on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent
remaining term. Where the expected term of the Company’s stock-
based awards do not correspond with the terms for
which interest rates are quoted, the Company performed a straight-line interpolation to determine the rate from the
available term maturities.
Estimated Forfeitures — When estimating forfeitures, the Company considers voluntary termination behavior
as well as analysis of actual option forfeitures.
Fair Value — The fair value of the Company’s stock options granted to employees, assumed from Maxtor and
issued from the ESPP for fiscal years 2007, 2006 and 2005 were estimated using the following weighted-average
assumptions:
Stock Compensation Expense
Stock Compensation Expense — The Company recorded $101 million and $74 million of stock-based
compensation during fiscal years 2007 and 2006, respectively and the Company also recorded $27 million and
78
Fiscal Years Ended
2007
2006
2005
Options under Seagate Plans
Expected term (in years)
4.0
3.5
-
4.0
3.0
-
3.5
Volatility
37
-
39%
40
-
43%
50
-
80%
Expected dividend
1.3
-
1.9%
1.2
-
2.3%
1.3
-
2.3%
Risk
-
free interest rate
4.4
-
4.8%
4.1
-
5.0%
2.9
-
3.6%
Estimated annual forfeitures
4.5%
4.6
-
4.9%
—
Weighted
-
average fair value
$7.41
$7.15
$6.55
Options under Maxtor Plans
Expected term (in years)
—
0
-
4.8
—
Volatility
—
36
-
39%
—
Expected dividend
—
1.3%
—
Risk
-
free interest rate
—
5.0
-
5.1%
—
Weighted
-
average fair value
—
$
10.49
—
ESPP
Expected term (in years)
0.5
0.5
-
1.0
0.5
-
1.0
Volatility
33
-
34%
37
-
41%
30
-
60%
Expected dividend
1.4
-
1.5%
1.2
-
1.7%
1.9
-
2.1%
Risk
-
free interest rate
5.0
-
5.2%
3.6
-
4.5%
1.6
-
2.2%
Weighted
-
average fair value
$5.80
$7.28
$3.86