Earnings per share

6 Months Ended

Jun. 30, 2011

Earnings per share [Abstract]

Earnings per share

4. Earnings per share

The computation of basic earnings per share (EPS) is based upon the weighted-average number of our common shares outstanding. The computation of diluted EPS is based upon the weighted-average number of our common shares and dilutive potential common shares outstanding. Dilutive potential common shares outstanding principally include: shares that may be issued under our stock option, restricted stock and performance unit awards; our 2011 Convertible Notes while they were outstanding (see Note 8, Financing arrangements) and 2013 Convertible Notes, as discussed below; and our outstanding warrants (collectively “dilutive securities”). The convertible note hedges purchased in connection with the issuance of our convertible notes are excluded from the calculation of diluted EPS as their impact is always anti-dilutive.

Upon conversion of our convertible notes, the principal amount would be settled in cash and the excess of the conversion value, as defined, over the principal amount may be settled in cash and/or shares of our common stock. Therefore, only the shares of our common stock potentially issuable with respect to the excess of the notes’ conversion value over their principal amount, if any, are considered as dilutive potential common shares for purposes of calculating diluted EPS. For the three and six months ended June 30, 2011 and 2010, the conversion values for our convertible notes were less than the related principal amounts and, accordingly, no shares were assumed to be issued for purposes of computing diluted EPS.

The computation for basic and diluted EPS was as follows (in millions, except per share data):

	Three months ended				Six months ended
	June 30,				June 30,
	2011		2010		2011		2010
Income (Numerator):
Net income for basic and diluted EPS	$	1,170	$	1,202	$	2,295	$	2,369
Shares (Denominator):
Weighted-average shares for basic EPS		927		959		930		970
Effect of dilutive securities		8		5		8		6
Weighted-average shares for diluted EPS		935		964		938		976
Basic EPS	$	1.26	$	1.25	$	2.47	$	2.44
Diluted EPS	$	1.25	$	1.25	$	2.45	$	2.43

For the three and six months ended June 30, 2011, there were employee stock options, calculated on a weighted average basis, to purchase 31 million and 35 million shares of our common stock, respectively, with exercise prices greater than the average market prices of our common stock for these periods that are not included in the computation of diluted EPS as their impact would have been anti-dilutive. For the three and six months ended June 30, 2010, there were employee stock options, calculated on a weighted average basis, to purchase 46 million and 43 million shares of our common stock, respectively, with exercise prices greater than the average market prices of our common stock for these periods that are not included in the computation of diluted EPS as their impact would have been anti-dilutive. In addition, shares of our common stock which may be issued upon exercise of our warrants are not included in the computation of diluted EPS for any of the periods presented above as their impact would have been anti-dilutive.