Shareholders’ Equity

Stock-based Compensation Expense

The following tables present the Company’s stock-based compensation for equity-settled awards and related tax benefit by type and financial statement line included in the Company’s condensed consolidated statements of operations:



	Three Months Ended						Nine Months Ended
	March 31, 2017			April 1, 2016			March 31, 2017			April 1, 2016
	(in millions)
Options	$	10		$	16		$	33		$	42
Employee stock purchase plan	7			3			16			9
Restricted and performance stock units	85			23			254			70
Subtotal	102			42			303			121
Tax benefit	(26		)	(11		)	(80		)	(31		)
Total	$	76		$	31		$	223		$	90



	Three Months Ended						Nine Months Ended
	March 31, 2017			April 1, 2016			March 31, 2017			April 1, 2016
	(in millions)
Cost of revenue	$	13		$	4		$	37		$	13
Research and development	45			17			132			46
Selling, general, and administrative	40			15			125			53
Employee termination, asset impairment, and other charges	4			6			9			9
Subtotal	102			42			303			121
Tax benefit	(26		)	(11		)	(80		)	(31		)
Total	$	76		$	31		$	223		$	90

As of March 31, 2017, compensation cost related to unvested stock options was $71 million and will be amortized on a straight-line basis over a weighted average service period of approximately 2.7 years. As of March 31, 2017, compensation cost related to the Company’s Employee Stock Purchase Plan (“ESPP”) rights issued to employees but not yet recognized was $34 million and will be amortized on a straight-line basis over a weighted average service period of approximately 1.2 years.

As of March 31, 2017, the aggregate unamortized fair value of all unvested restricted stock units (“RSUs”) and performance stock units (“PSUs”) was $537 million, which will be recognized on a straight-line basis over a weighted average vesting period of approximately 2.5 years, assuming the performance metrics are met for the PSUs.

Stock Option Activity

The following table summarizes stock option activity under the Company’s incentive plans:



	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(in millions)				(in years)	(in millions)
Options outstanding at July 1, 2016	9.0		$	55.74	3.9	$	60
Granted	2.8		44.83
Exercised	(2.4	)	34.27
Canceled or expired	(0.8	)	73.01
Options outstanding at March 31, 2017	8.6		56.66		4.4	245
Exercisable at March 31, 2017	4.0		57.96		3.0	115
Vested and expected to vest after March 31, 2017	8.3		56.88		4.4	235

As of March 31, 2017, the Company had options outstanding to purchase an aggregate of 6.4 million shares with an exercise price below the quoted price of the Company’s stock on that date resulting in an aggregate intrinsic value of $245 million at that date.

RSU and PSU Activity

The following table summarizes RSU and PSU activity under the Company’s incentive plans:



	Number of Shares		Weighted Average Grant Date Fair Value
	(in millions)
RSUs and PSUs outstanding at July 1, 2016	15.7		$	41.92
Granted	5.7		45.94
Vested	(5.5	)	47.44
Forfeited	(1.7	)	44.08
RSUs and PSUs outstanding at March 31, 2017	14.2		44.43
Expected to vest after March 31, 2017	13.3		44.55

RSUs and PSUs are generally settled in an equal number of shares of the Company’s common stock at the time of vesting of the units. The aggregate value of RSUs and PSUs that became fully-vested during the nine months ended March 31, 2017 was $363 million, determined as of the vest date.

SARs Activity

As of March 31, 2017, all outstanding stock appreciation rights (“SARs”) issued to employees were fully vested and will be settled in cash upon exercise. The fair value of SARs is solely subject to market price fluctuations. The following table presents the adjustments to the fair market value of SARs for the three and nine months ended March 31, 2017 and April 1, 2016:



	Three Months Ended						Nine Months Ended
	March 31, 2017			April 1, 2016			March 31, 2017			April 1, 2016
	(in millions)
SAR expense (benefit)	$	(1	)	$	(7	)	$	7		$	(18	)
Tax expense (benefit)	1			1			(1		)	2
Total SAR expense (benefit)	$	—		$	(6	)	$	6		$	(16	)

The Company had a total liability of $6 million and $20 million related to SARs included in Accrued expenses in the Company’s condensed consolidated balance sheet as of March 31, 2017 and July 1, 2016, respectively. As of March 31, 2017, an immaterial number of SARs were outstanding with a weighted average exercise price of $24.10.

Stock Repurchase Program

The Company’s Board of Directors (the “Board”) has authorized $5.0 billion for the repurchase of the Company’s common stock. The stock repurchase program is effective until February 3, 2020. The Company did not repurchase any shares of common stock during the three and nine months ended March 31, 2017. The remaining amount available to be purchased under the Company’s stock repurchase program as of March 31, 2017 was $2.1 billion.

Dividends to Shareholders

On September 13, 2012, the Company announced that the Board had authorized the adoption of a quarterly cash dividend policy. Under the cash dividend policy, holders of the Company’s common stock receive dividends when and as declared by the Board. During the three and nine months ended March 31, 2017, the Company paid dividends of $144 million and $428 million, respectively.

On February 1, 2017, the Board declared a cash dividend for the quarter ended March 31, 2017 of $0.50 per share of the Company’s common stock. The cash dividend of $145 million was paid on April 17, 2017 to the Company’s shareholders of record as of March 31, 2017.

On May 3, 2017, the Board declared a cash dividend for the quarter ending June 30, 2017 of $0.50 per share of the Company’s common stock. The cash dividend will be paid on July 17, 2017 to shareholders of record as of June 30, 2017.

The Company may modify, suspend or cancel its cash dividend policy in any manner and at any time.