Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation Expense by Award Type

The Company recognized the following amounts of stock-based compensation expense by award type in the periods indicated (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
Award type:	2011		2010		2011		2010
Stock appreciation rights (SARs)	$	0.9	$	1.1	$	2.4	$	2.8
Common stock equivalents (CSEs)		0.1		0.1		0.3		0.2
Restricted stock units (RSUs)		6.8		5.6		14.3		13.0
Total	$	7.8	$	6.8	$	17.0	$	16.0

Stock-Based Compensation Expense Recognized in the Consolidated Statements of Operations

Stock-based compensation expense was recognized in the Consolidated Statements of Operations as follows (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
Amount recorded in:	2011		2010		2011		2010
Cost of services and product development	$	3.4	$	3.1	$	7.9	$	7.8
Selling, general and administrative		4.4		3.7		9.1		8.2
Total stock-based compensation expense	$	7.8	$	6.8	$	17.0	$	16.0

Weighted-Average Assumptions Used to Determine the Fair Value of the SARs Grants on the Date of the Grant Using the Black-Scholes-Merton Valuation Model

The fair value of the SARs was estimated on the date of grant using the Black-Scholes-Merton valuation model with the following weighted-average assumptions:

	Six Months Ended June 30, (1)
	2011			2010
Expected dividend yield (2)		0	%		0	%
Expected stock price volatility (3)		38	%		40	%
Risk-free interest rate (4)		2.2	%		2.4	%
Expected life in years (5)		4.8			4.8

(1)	The Company did not make any SARs grants during the three months ended June 30, 2011 or June 30, 2010.
(2)	The dividend yield assumption is based on the history and expectation of the Company’s dividend payouts. Historically, Gartner has not paid cash dividends on its Common Stock.
(3)	The determination of expected stock price volatility was based on both historical Company Common Stock prices and implied volatility from publicly traded options in the Common Stock.
(4)	The risk-free interest rate is based on the yield of a U.S. Treasury security with a maturity similar to the expected life of the award.
(5)	The expected life represents a weighted-average estimate of the period of time the SARs are expected to be outstanding (that is, the period between the service inception date and the expected exercise date). The expected life in years is based on the “simplified” calculation permitted by SEC SAB No. 107. Under the simplified method, the expected life is calculated by taking the average of the vesting period plus the original contractual term and dividing by two.

Summary of Changes in Stock Options Outstanding

A summary of the changes in stock options outstanding in the six months ended June 30, 2011 follows:

	Options in millions			Per Share Weighted- Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (in millions)
Vested and outstanding at December 31, 2010		2.6		$	11.13		2.59 years	$	58.2
Expired		—			—		na		na
Exercised (1)		(1.3	)		11.50		na		na
Vested and outstanding at June 30, 2011		1.3		$	10.79		1.80 years	$	40.5

na=not applicable
(1)	Options exercised during the six months ended June 30, 2011 had an intrinsic value of $34.0 million.

Stock Appreciation Rights

Summary of Changes in Stock-Based Compensation Awards Outstanding

A summary of the changes in SARs outstanding for the six months ended June 30, 2011, follows:

	SARs in millions			Per Share Weighted- Average Exercise Price		Per Share Weighted- Average Grant Date Fair Value		Weighted Average Remaining Contractual Term
Outstanding at December 31, 2010		2.5		$	17.22	$	6.62		4.55 years
Granted		0.4			38.05		13.58		6.65 years
Forfeited		—			—		—		na
Exercised		(0.3	)		16.96		6.62		na
Outstanding at June 30, 2011 (1), (2)		2.6		$	20.13	$	7.58		4.50 years
Vested and exercisable at June 30, 2011 (1)		1.2		$	17.71	$	6.67		3.54 years

na=not applicable

(1)	Total SARs outstanding had an intrinsic value of $52.0 million. SARs vested and exercisable had an intrinsic value of $27.1 million.
(2)	Approximately 1.4 million of these outstanding SARs were unvested. The Company expects that substantially all of these unvested awards will vest in future periods.

Restricted Stock Units

Summary of Changes in Stock-Based Compensation Awards Outstanding

A summary of the changes in RSUs during the six months ended June 30, 2011 follows:

	Restricted Stock Units (RSUs)			Per Share Weighted Average Grant Date Fair Value
Outstanding at December 31, 2010		3,868,271		$	16.52
Granted (1)		668,458			38.07
Vested		(1,390,310	)		17.17
Forfeited		(84,126	)		20.20
Outstanding at June 30, 2011 (2), (3)		3,062,293		$	21.48

(1)	The 0.7 million RSUs granted in 2011 consisted of 0.3 million performance-based RSUs awarded to executives and 0.4 million service-based RSUs awarded to non-executive employees and certain board members. The 0.3 million performance-based RSUs represents the target amount of the award. The actual number of performance-based RSUs that will ultimately be granted will be between 0% and 200% of the target amount, depending on the performance metric achieved. For 2011, the performance metric is the dollar level of the Company’s subscription-based contract value at December 31, 2011. If the specified minimum level of achievement is not met, the performance-based RSUs will be forfeited in their entirety, and any compensation expense already recorded will be reversed.
(2)	The Company expects that substantially all of the outstanding awards will vest in future periods.
(3)	The weighted-average remaining contractual term of the outstanding RSUs is approximately 1.5 years.

Common Stock Equivalents

Summary of Changes in Stock-Based Compensation Awards Outstanding

A summary of changes in CSEs during the six months ended June 30, 2011, follows:

	Common Stock Equivalents (RSUs)			Per Share Weighted Average Grant Date Fair Value
Outstanding at December 31, 2010		117,208		$	na
Granted		6,057			41.30
Converted to common shares		(2,834	)		na
Forfeited		—			na
Outstanding at June 30, 2011		120,431		$	na

na=not available