10. Stockholders’ Equity

Stock Options

The following table summarizes activity related to our stock options (in millions, except for exercise price and contractual term):


	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding as of April 26, 2013		19.2		$	31.27
Granted		2.7			38.28
Exercised		(5.7	)		25.91
Forfeited and expired		(1.1	)		42.04

Outstanding as of January 24, 2014		15.1			33.79		3.62	$	176.6


Vested and expected to vest as of January 24, 2014		14.6			33.67		3.54		173.0

Exercisable as of January 24, 2014		10.7			31.86		2.77		145.9

The aggregate intrinsic value represents the pre-tax difference between the exercise price of stock options and the quoted market price of our stock on that day for all in-the-money options.

Additional information related to our stock options is summarized below (in millions, except per share information):


	Three Months Ended				Nine Months Ended
	January 24, 2014		January 25, 2013		January 24, 2014		January 25, 2013
Weighted-average fair value per share granted	$	10.34	$	20.53	$	9.88	$	11.54
Intrinsic value of exercises	$	20.9	$	15.0	$	81.3	$	30.8
Proceeds received from exercises	$	34.5	$	15.8	$	147.7	$	35.3
Fair value of options vested	$	10.6	$	14.5	$	36.0	$	44.0

Restricted Stock Units

The following table summarizes activity related to our restricted stock units (RSUs) (in millions, except for fair value):


	Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding as of April 26, 2013		12.8		$	38.36
Granted		6.3			38.67
Vested		(4.0	)		38.20
Forfeited		(1.4	)		39.23

Outstanding as of January 24, 2014		13.7			38.45

RSUs are converted into common stock upon vesting. We primarily use the net share settlement approach upon vesting, where a portion of the shares are withheld as settlement of statutory employee withholding taxes, which decreases the shares issued to the employee by a corresponding value. The number and value of the shares netted for employee taxes are summarized in the table below (in millions):


	Three Months Ended				Nine Months Ended
	January 24, 2014		January 25, 2013		January 24, 2014		January 25, 2013
Shares withheld for taxes		0.3		0.4		1.3		1.1
Fair value of shares withheld	$	12.1	$	12.2	$	51.4	$	34.8

Employee Stock Purchase Plan

Under the Employee Stock Purchase Plan (ESPP), employees who elect to participate are granted purchase rights that include a purchase price adjustment provision under which the employees may purchase common stock at a 15% discount from the market value of the common stock at certain specified dates within a two-year offering period. Information related to the purchase rights issued under the ESPP is provided below (in millions, except per right information):


	Three Months Ended				Nine Months Ended
	January 24, 2014		January 25, 2013		January 24, 2014		January 25, 2013
Weighted-average fair value per right granted	$	11.03	$	10.37	$	10.83	$	10.36
Shares issued under the ESPP		1.8		1.9		3.8		3.8
Proceeds from issuance of shares	$	45.6	$	46.8	$	95.5	$	95.0

Stock-Based Compensation Expense

Stock-based compensation expense is included in the condensed consolidated statements of operations as follows (in millions):


	Three Months Ended				Nine Months Ended
	January 24, 2014		January 25, 2013		January 24, 2014		January 25, 2013
Cost of product revenues	$	1.5	$	1.4	$	4.2	$	4.7
Cost of service revenues		4.6		4.8		12.8		15.0
Sales and marketing		33.0		31.9		94.6		101.8
Research and development		23.6		20.8		66.6		63.8
General and administrative		9.2		8.4		27.6		26.2

Total stock-based compensation expense	$	71.9	$	67.3	$	205.8	$	211.5

As of January 24, 2014, total unrecognized compensation expense related to our equity awards was $449.3 million, which is expected to be recognized on a straight-line basis over a weighted-average remaining service period of 2.5 years.

Total income tax benefits associated with employee stock transactions and recognized in stockholders’ equity were as follows (in millions):


	Nine Months Ended
	January 24, 2014		January 25, 2013
Income tax benefits associated with employee stock transactions	$	22.5	$	35.4

Valuation Assumptions

The fair value of each stock option and ESPP purchase right is estimated on the grant date using the Black-Scholes option pricing model and the following weighted-average assumptions:


	Stock Options
	Three Months Ended						Nine Months Ended
	January 24, 2014			January 25, 2013			January 24, 2014			January 25, 2013
Expected term in years		4.8			4.5			4.8			4.8
Risk-free interest rate		1.4	%		0.6	%		1.1	%		0.6	%
Volatility		32	%		43	%		34	%		42	%
Dividend yield		1.6	%		0.0	%		1.6	%		0.0	%


	ESPP
	Three Months Ended						Nine Months Ended
	January 24, 2014			January 25, 2013			January 24, 2014			January 25, 2013
Expected term in years		1.2			1.2			1.2			1.2
Risk-free interest rate		0.2	%		0.2	%		0.2	%		0.2	%
Volatility		30	%		41	%		31	%		40	%
Dividend yield		1.6	%		0.0	%		1.6	%		0.0	%

The weighted-average assumptions used to value RSUs are summarized as follows:


	Three Months Ended						Nine Months Ended
	January 24, 2014			January 25, 2013			January 24, 2014			January 25, 2013
Grant date fair value per share	$	39.87		$	30.69		$	38.67		$	29.45
Expected dividend		1.6	%		0.0	%		1.6	%		0.0	%

Prior to the initial declaration of a quarterly cash dividend on May 21, 2013, the fair value of RSUs was measured based on the grant date share price, as we did not historically pay cash dividends on our common stock. For awards granted on or subsequent to May 21, 2013, the fair value of RSUs was measured based on the grant date share price, less the present value of expected dividends during the vesting period, discounted at a risk-free interest rate.

Stock Repurchase Program

As of January 24, 2014, our Board of Directors has authorized the repurchase of up to $7.1 billion of our common stock. Under this program, which we may suspend or discontinue at any time, we may purchase shares of our outstanding common stock through open market and privately negotiated transactions at prices deemed appropriate by our management.

The following table summarizes activity related to this program for the nine months ended January 24, 2014 (in millions, except per share information):


Number of shares repurchased		37.6
Average price per share	$	40.04
Aggregate purchase price	$	1,507.0
Remaining authorization at end of period	$	1,499.2

The aggregate purchase price of our stock repurchases for the nine months ended January 24, 2014 consisted of $750.0 million under an accelerated share repurchase agreement (ASR) and $757.0 million of open market purchases, for which collectively $585.7 million and $921.3 million was allocated to additional paid-in capital and retained earnings, respectively.

During the nine months ended January 24, 2014, we retired 104.3 million shares of common stock repurchased in prior years and previously reported as treasury stock, resulting in reductions of $0.1 million in common stock (par value), $614.0 million in additional paid-in capital and $2,313.3 million in retained earnings.

Accelerated Share Repurchase Agreement

On June 5, 2013, we entered into a collared ASR with a counterparty under which we prepaid $750.0 million to purchase shares of our common stock. The aggregate number of shares ultimately purchased was determined based on the volume weighted-average share price of our common stock over a specified period of time. The contract was settled in July 2013. The total number of shares repurchased under this ASR was 19.2 million shares, at an average price per share of $39.13. The value of the ASR forward contract was determined to be $13.9 million, which has been recorded as additional paid-in capital.

Dividends

During the nine months ended January 24, 2014, we declared and paid quarterly cash dividends of $0.15 per share of outstanding common stock, or an aggregate of $153.1 million, of which $50.4 million and $102.7 million was allocated to additional paid-in capital and retained earnings, respectively. On February 12, 2014, we declared a cash dividend of $0.15 per share of common stock, payable on April 22, 2014 to holders of record as of the close of business on April 10, 2014. No dividends were declared or paid during the nine months ended January 25, 2013. The timing and amount of future dividends will depend on market conditions, corporate business and financial considerations and regulatory requirements. All dividends declared have been determined by the Company to be legally authorized under the laws of the state in which we are incorporated.

Retained Earnings

A reconciliation of retained earnings for the nine months ended January 24, 2014 is as follows (in millions):


Balance as of April 26, 2013	$	2,896.8
Net income		440.5
Repurchases of common stock		(921.3	)
Retirement of treasury stock		(2,313.3	)
Dividends		(102.7	)

Balance as of January 24, 2014	$	0.0

Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income (AOCI) by component, net of tax, for the nine months ended January 24, 2014 are summarized below (in millions):


	Foreign Currency Translation Adjustments		Defined Benefit Obligation Adjustments			Unrealized Gains on Available- for-Sale Securities			Unrealized Gains on Derivative Instruments			Total
Balance as of April 26, 2013	$	2.0	$	(5.7	)	$	11.4		$	1.0		$	8.7

Other comprehensive income (loss) (OCI) before reclassifications		0.9		0.3			(1.3	)		(2.0	)		(2.1	)
Amounts reclassified from AOCI, net of tax		0.0		0.0			(1.1	)		1.2			0.1

Net OCI		0.9		0.3			(2.4	)		(0.8	)		(2.0	)

Balance as of January 24, 2014	$	2.9	$	(5.4	)	$	9.0		$	0.2		$	6.7

The amounts reclassified out of AOCI are as follows (in millions):


	Three Months Ended					Nine Months Ended
	January 24, 2014			January 25, 2013		January 24, 2014			January 25, 2013
OCI Components	Amounts Reclassified from AOCI					Amounts Reclassified from AOCI						Statements of Operations Location
Realized losses (gains) on available-for-sale securities	$	0.0		$	0.1	$	(1.1	)	$	(0.5	)		Other income (expense), net
Realized losses (gains) on cash flow hedges		(0.2	)		3.1		1.2			1.2			Net revenues

Total reclassifications	$	(0.2	)	$	3.2	$	0.1		$	0.7