STOCKHOLDERS' EQUITY

3 Months Ended

Aug. 31, 2014

Stockholders' Equity [Abstract]

STOCKHOLDERS' EQUITY

10.    STOCKHOLDERS’ EQUITY

Stock Repurchases

Our Board of Directors has approved a program for us to repurchase shares of our common stock. On September 18, 2014, we announced that our Board of Directors approved an expansion of our stock repurchase program by an additional $13.0 billion. Approximately $2.3 billion remained available for stock repurchases as of August 31, 2014, pursuant to our stock repurchase program prior to the additional amount authorized in September 2014. We repurchased 48.8 million shares for $2.0 billion during the three months ended August 31, 2014 (including 2.3 million shares for $94 million that were repurchased but not settled) and 92.8 million shares for $3.0 billion during the three months ended August 31, 2013 under the stock repurchase program.

Our stock repurchase authorization does not have an expiration date and the pace of our repurchase activity will depend on factors such as our working capital needs, our cash requirements for acquisitions and dividend payments, our debt repayment obligations or repurchase of our debt, our stock price, and economic and market conditions. Our stock repurchases may be effected from time to time through open market purchases or pursuant to a Rule 10b5-1 plan. Our stock repurchase program may be accelerated, suspended, delayed or discontinued at any time.

Dividends on Common Stock

In the first quarter of fiscal 2015, our Board of Directors declared a cash dividend of $0.12 per share of our outstanding common stock, which we paid during the same period.

In September 2014, our Board of Directors declared a quarterly cash dividend of $0.12 per share of our outstanding common stock payable on October 29, 2014 to stockholders of record as of the close of business on October 8, 2014. Future declarations of dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors. 

Stock-Based Compensation Expense and Valuations of Stock Awards

During the first quarter of fiscal 2015, we issued 30 million stock options and 22 million restricted stock-based awards, which primarily included awards issued as a part of our annual stock-based award process and awards from companies that we have acquired, that were subject to service-based vesting restrictions. Included in the aforementioned restricted stock-based award total were 3 million of performance-based restricted stock units (PSUs) that vest upon the attainment of certain performance metrics and service-based vesting. Based upon actual attainment relative to the “target” performance metric, certain participants have the ability to be issued up to 150% of the target number of PSUs originally granted, or to be issued no PSUs at all. For each share granted as a restricted stock-based award under our 2000 Long-Term Equity Incentive Plan, an equivalent of 2.5 shares is deducted from our pool of available stock awards. Our stock option and restricted stock-based award issuances were partially offset by forfeitures and cancellations of 6 million shares during the first quarter of fiscal 2015.

We estimated the fair values of our stock options using the Black-Scholes-Merton option-pricing model, which was developed for use in estimating the fair values of stock options. Option valuation models, including the Black-Scholes-Merton option-pricing model, require the input of assumptions, including stock price volatility. Changes in the input assumptions can materially affect the fair value estimates and ultimately how much we recognize as stock-based compensation expense. We recognize stock-based compensation expense on a straight-line basis over the service period of the stock option, which is generally four years. The fair values of our stock options were estimated at the grant dates or at the acquisition dates for options assumed in a business combination. The weighted average input assumptions used and resulting fair values of our stock options were as follows for the three months ended August 31, 2014 and 2013:

	Three Months Ended August 31,
	2014		2013
Expected life (in years)		5.2		5.1
Risk-free interest rate		1.7%		1.4%
Volatility		23%		27%
Dividend yield		1.2%		1.6%
Weighted-average fair value per share	$	8.69	$	6.63

The expected life input is based on historical exercise patterns and post-vesting termination behavior, the risk-free interest rate input is based on U.S. Treasury instruments, the annualized dividend yield input is based on the per share dividend declared by our Board of Directors and the volatility input is calculated based on the implied volatility of our publicly traded options.

We estimated the fair values of our restricted-stock based awards that are solely subject to service-based vesting requirements based upon their intrinsic values as of the grant dates. We recognize expense for these service-based awards on a straight-line basis over the service period of these awards, which is generally four years.

The fair values of our PSUs were also measured at their intrinsic values as of the grant date. The vesting conditions and related terms of our PSUs were communicated to each participating employee as of the grant date and include attainment metrics that are defined, fixed, and based upon consistent U.S. GAAP metrics or internal metrics that are defined, fixed and consistently determined, and that require the employee to render service. Therefore, these awards meet the performance-based award classification criteria as defined within ASC 718. The performance conditions of the PSUs affect the number of PSUs that will ultimately vest and be issued to the grantee based upon a “target” that is subject to certain attainment maximums, with the possibility that none will vest if applicable performance conditions are not met. As the performance conditions to evaluate attainment of each tranche for each participant are independent of the performance conditions for the other tranches, we recognize stock-based compensation expense for our PSUs on a straight-line basis over the service period for each separately vesting tranche, which is generally twelve months.

Stock-based compensation is included in the following operating expense line items in our condensed consolidated statements of operations:

	Three Months Ended August 31,
(in millions)	2014		2013
Sales and marketing	$	43	$	39
Cloud software-as-a-service and platform-as-a-service		2		2
Cloud infrastructure-as-a-service		1		1
Software license updates and product support		5		6
Hardware systems products		1		2
Hardware systems support		1		3
Services		6		6
Research and development		108		97
General and administrative		45		42
Acquisition related and other		3		2
Total stock-based compensation	$	215	$	200