Earnings per Share

We compute earnings per share (EPS) of Class A and Class B common stock using the two-class method required for participating securities. Prior to the date of the IPO, we considered all series of our convertible preferred stock to be participating securities due to their non-cumulative dividend rights. Immediately after the completion of our IPO in May 2012, all outstanding shares of convertible preferred stock converted to Class B common stock. Additionally, we consider restricted stock awards to be participating securities, because holders of such shares have non-forfeitable dividend rights in the event of our declaration of a dividend for common shares.

Undistributed earnings allocated to these participating securities are subtracted from net income in determining net income attributable to common stockholders. Net losses, if any are not allocated to these participating securities. Basic EPS is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of our Class A and Class B common stock outstanding, adjusted for outstanding shares that are subject to repurchase.

For the calculation of diluted EPS, net income attributable to common stockholders for basic EPS is adjusted by the effect of dilutive securities, including awards under our equity compensation plans. In addition, the computation of the diluted EPS of Class A common stock assumes the conversion from Class B common stock, while the diluted EPS of Class B common stock does not assume the conversion of those shares. Diluted EPS attributable to common stockholders is computed by dividing the resulting net income attributable to common stockholders by the weighted-average number of fully diluted common shares outstanding.

Dilutive securities in our diluted EPS calculation for the years ended December 31, 2011 and 2010 do not include Pre-2011 RSUs. Vesting of these RSUs is dependent upon the satisfaction of both a service condition and a liquidity condition. The liquidity condition is satisfied upon the occurrence of a qualifying event, defined as a change of control transaction or six months following the completion of our IPO. Our IPO did not occur until May 2012. Therefore, prior to this date the holders of these RSUs had no rights in our undistributed earnings and accordingly, they are excluded from the effect of basic and dilutive securities. However, subsequent to the completion of our IPO in May 2012, these RSUs are included in our basic and diluted EPS calculation. Post-2011 RSUs are not subject to a liquidity condition in order to vest, and are thus included in the calculation of diluted EPS. We also excluded 15 million and three million Post-2011 RSUs for the years ended December 31, 2012 and December 31, 2011, respectively, and two million shares issuable upon exercise of employee stock options for the year ended December 31, 2010 because the impact would be anti-dilutive.

Basic and diluted EPS are the same for each class of common stock because they are entitled to the same liquidation and dividend rights.

The numerators and denominators of the basic and diluted EPS computations for our common stock are calculated as follows (in millions, except per share amounts):



	Year Ended December 31,
	2012				2011				2010
	Class A		Class B		Class A		Class B		Class A		Class B
Basic EPS:
Numerator
Net income	$	18	$	35	$	85	$	915	$	18	$	588
Less: Net income attributable to participating securities	7		14		28		304		7		227
Net income attributable to common stockholders	$	11	$	21	$	57	$	611	$	11	$	361
Denominator
Weighted average shares outstanding	668		1,344		110		1,189		32		1,081
Less: Shares subject to repurchase	1		5		—		5		—		6
Number of shares used for basic EPS computation	667		1,339		110		1,184		32		1,075
Basic EPS	$	0.02	$	0.02	$	0.52	$	0.52	$	0.34	$	0.34
Diluted EPS:
Numerator
Net income attributable to common stockholders	$	11	$	21	$	57	$	611	$	11	$	361
Reallocation of net income attributable to participating securities	—		—		31		—		30		—
Reallocation of net income as a result of conversion of Class B to Class A common stock	21		—		611		—		361		—
Reallocation of net income to Class B common stock	—		1		—		37		—		32
Net income attributable to common stockholders for diluted EPS	$	32	$	22	$	699	$	648	$	402	$	393
Denominator
Number of shares used for basic EPS computation	667		1,339		110		1,184		32		1,075
Conversion of Class B to Class A common stock	1,339		—		1,184		—		1,075		—
Weighted average effect of dilutive securities:
Employee stock options	134		134		204		204		295		295
RSUs	23		23		5		5		—		—
Shares subject to repurchase	3		3		3		3		4		4
Warrants	—		—		2		2		8		8
Number of shares used for diluted EPS computation	2,166		1,499		1,508		1,398		1,414		1,382
Diluted EPS	$	0.01	$	0.01	$	0.46	$	0.46	$	0.28	$	0.28