Equity Plans

As of September 1, 2011, we had an aggregate of 177.9 million shares of common stock reserved for issuance of stock options and restricted stock awards, of which 108.1 million shares were subject to outstanding awards and 69.8 million shares were available for future awards. Awards are subject to terms and conditions as determined by our Board of Directors.

Stock Options

Our stock options are generally exercisable in increments of either one-fourth or one-third per year beginning one year from the date of grant. Stock options issued after September, 2004 generally expire six years from the date of grant. All other options expire ten years from the grant date.

Option activity for 2011 is summarized as follows:



	Number of Shares		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (In Years)	Aggregate Intrinsic Value
Outstanding at September 2, 2010	116.3		$	12.79
Granted	15.3		9.05
Exercised	(6.1	)	4.61
Cancelled or expired	(26.2	)	19.07
Outstanding at September 1, 2011	99.3		11.06		2.6	$	41

Exercisable at September 1, 2011	61.8		$	13.53	1.5	$	15
Expected to vest after September 1, 2011	36.5		6.92		4.3	26

The following table summarizes information about options outstanding as of September 1, 2011:



	Outstanding Options				Exercisable Options
Range of Exercise Prices	Number of Shares	Weighted-Average Remaining Contractual Life (In Years)	Weighted-Average Exercise Price Per Share		Number of Shares	Weighted-Average Exercise Price Per Share
$ 1.56 - $ 6.86	19.5	3.1	$	3.72	8.2	$	4.06
7.01 - 9.97	28.6	4.7	8.31		3.8	7.82
10.00 - 12.93	23.7	1.9	12.24		22.3	12.36
13.00 - 19.61	14.7	1.0	14.86		14.7	14.86
20.98 - 39.50	12.8	0.1	21.81		12.8	21.81
	99.3	2.6	11.06		61.8	13.53

The weighted-average grant-date fair value per share was $4.46, $4.13 and $1.71 for options granted during 2011, 2010 and 2009, respectively. The total intrinsic value was $35 million, $13 million, and de minimis for options exercised during 2011, 2010 and 2009, respectively.

As of September 1, 2011, $96 million of total unrecognized compensation cost related to nonvested awards was expected to be recognized through the fourth quarter of 2015, resulting in a weighted-average period of 1.3 years. As of September 1, 2011, nonvested options had a weighted-average exercise price of $6.99, a weighted-average remaining contractual life of 4.3 years and an aggregate intrinsic value of $26 million.

The fair values of option awards were estimated as of the dates of grant using the Black-Scholes option valuation model. The Black-Scholes model requires the input of assumptions, including the expected stock price volatility and estimated option life. The expected volatilities utilized were based on implied volatilities from traded options on our stock and on historical volatility. Since 2009, the expected lives of options granted were based, in part, on historical experience and on the terms and conditions of the options. Prior to 2009, the expected lives of options granted were based on the simplified method provided by the Securities and Exchange Commission. The risk-free interest rates utilized were based on the U.S. Treasury yield in effect at the time of the grant. No dividends were assumed in estimated option values. Assumptions used in the Black-Scholes model are presented below:



	2011		2010		2009
Average expected life in years	5.1		5.1		4.9
Weighted-average expected volatility	56	%	60	%	73	%
Weighted-average risk-free interest rate	1.8	%	2.3	%	1.9	%

Restricted Stock and Restricted Stock Units ("Restricted Stock Awards")

As of September 1, 2011, there were 8.8 million shares of Restricted Stock Awards outstanding, of which 1.2 million were performance-based Restricted Stock Awards. For service-based Restricted Stock Awards, restrictions generally lapse either in one-fourth or one-third increments during each year of employment after the grant date. For performance-based Restricted Stock Awards, vesting is contingent upon meeting certain performance goals. Restricted Stock Awards activity for 2011 is summarized as follows:



	Number of Shares		Weighted-Average Grant Date Fair Value Per Share
Outstanding at September 2, 2010	8.6		$	7.89
Granted	5.6		8.72
Restrictions lapsed	(5.0	)	8.26
Cancelled	(0.4	)	8.85
Outstanding at September 1, 2011	8.8		8.17

Expected to vest after September 1, 2011	8.5		8.13

Restricted Stock Awards granted for 2011, 2010 and 2009 were as follows:



	2011		2010		2009
Service-based awards	4.4		5.9		1.9
Performance-based awards	1.2		1.8		1.7
Weighted-average grant-date fair values per share	$	8.72	$	8.29	$	4.40

Restricted Stock Awards granted during 2010 included 4.1 million of service-based and 0.7 million of performance-based Restricted Stock Awards as part of our acquisition of Numonyx. The aggregate fair value at the lapse date of awards for which restrictions lapsed during 2011, 2010 and 2009 was $43 million, $65 million and $8 million, respectively. As of September 1, 2011, there was $48 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested restricted stock awards, which is expected to be recognized through the fourth quarter of 2015, resulting in a weighted-average period of 1.3 years.

Stock-based Compensation Expense

Total compensation costs for our equity plans were as follows:



	2011		2010		2009
Stock-based compensation expense by caption:
Cost of goods sold	$	20	$	23	$	16
Selling, general and administrative	38		50		16
Research and development	17		18		13
Other operating (income) expense	1		2		(1		)
	$	76	$	93	$	44

Stock-based compensation expense by type of award:
Stock options	$	44	$	37	$	29
Restricted stock awards	32		56		15
	$	76	$	93	$	44

Stock-based compensation expense of $5 million and $4 million was capitalized and remained in inventory as of September 1, 2011 and September 2, 2010, respectively. As of September 1, 2011, $144 million of total unrecognized compensation costs, net of estimated forfeitures, related to non-vested awards were expected to be recognized through the fourth quarter of 2015, resulting in a weighted-average period of 1.3 years. During 2010, we determined that certain performance-based restricted stock that previously had not been expensed met the probability threshold for expense recognition due to improved operating results. Stock-based compensation expense in the above presentation does not reflect any significant income tax benefits, which is consistent with our treatment of income or loss from our U.S. operations. (See "Income Taxes" note.)