9. Stockholders’ Equity

Equity Incentive Awards

As of July 31, 2015, we have outstanding certain equity incentive awards (awards), which include stock options, restricted stock units (RSUs), which have been granted in the form of time-based RSUs and performance-based RSUs (PBRSUs), and Employee Stock Purchase Plan (ESPP) awards.

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 24, 2015		12		$	37.74
Exercised		(1	)	$	23.37
Forfeited and expired		(1	)	$	37.67
Outstanding as of July 31, 2015		10		$	38.18		3.04	$	13
Vested and expected to vest as of July 31, 2015		10		$	38.23		2.92	$	13
Exercisable as of July 31, 2015		8		$	38.74		2.35	$	13

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):

	Three Months Ended
	July 31, 2015		July 25, 2014
Intrinsic value of exercises	$	3	$	7
Proceeds received from exercises	$	7	$	13
Fair value of options vested	$	6	$	9

Restricted Stock Units

In the three months ended July 31, 2015, we granted PBRSUs to certain of our executives, all of which were outstanding at the end of the period. Each PBRSU has performance-based vesting criteria (in addition to the service based vesting criteria) such that the PBRSU cliff-vests at the end of either a two year or three year performance period, which begins the first day of fiscal 2016 and ends the last day of fiscal 2017 or 2018, respectively. The number of shares of common stock that will be issued to settle the PBRSUs at the end of the applicable performance and service period will range from 0% to 200% of a target number of shares originally granted, and will depend upon our Total Stockholder Return (TSR) as compared to an index TSR (each expressed as a growth rate percentage) calculated as of the applicable period end date. The fair value of the PBRSUs was fixed at grant date using a Monte Carlo simulation model and the related aggregate compensation cost of $15 million will be recognized, adjusted for forfeitures, over the shorter of the remaining performance or service period.

RSUs are converted into common stock upon vesting. Time-based RSUs generally vest with only service-based criteria at 25% annually over four years, except for the PBRSUs described above and 4 million time-based RSUs granted in the three months ended July 31, 2015, which will vest at 50% annually over two years.

The following table summarizes activity for the three months ended July 31, 2015 related to RSUs, including PBRSUs, (in millions, except for fair value):

	Number of Shares			Weighted- Average Grant Date Fair Value
Outstanding as of April 24, 2015		13		$	36.58
Granted		5		$	31.38
Vested		(3	)	$	37.48
Forfeited		(1	)	$	35.95
Outstanding as of July 31, 2015		14		$	34.54

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
	July 31, 2015		July 25, 2014
Shares withheld for taxes		1		1
Fair value of shares withheld	$	38	$	34

Employee Stock Purchase Plan

The following table summarizes activity related to the purchase rights issued under the ESPP (in millions):

	Three Months Ended
	July 31, 2015		July 25, 2014
Shares issued under the ESPP		2		2
Proceeds from issuance of shares	$	50	$	49

Stock-Based Compensation Expense

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

	Three Months Ended
	July 31, 2015		July 25, 2014
Cost of product revenues	$	2	$	1
Cost of hardware maintenance and other services revenues		6		5
Sales and marketing		31		27
Research and development		26		21
General and administrative		12		8
Total stock-based compensation expense	$	77	$	62

As of July 31, 2015, total unrecognized compensation expense related to our equity awards was $426 million, which is expected to be recognized on a straight-line basis over a weighted-average remaining service period of 2.2 years.

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

Three Months Ended

July 31,

2015

July 25,

2014

Income tax benefit associated with employee stock transactions

Stock Repurchase Program

As of July 31, 2015, our Board of Directors has authorized the repurchase of up to $9.6 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 three months ended July 31, 2015 (in millions, except per share information):

Number of shares repurchased		13
Average price per share	$	32.35
Aggregate purchase price	$	430
Remaining authorization at end of period	$	2,030

The aggregate purchase price of our stock repurchases for the three months ended July 31, 2015 consisted of $430 million of open market purchases, of which $376 million and $54 million was allocated to additional paid-in capital and retained earnings, respectively.

Since the May 13, 2003 inception of our stock repurchase program through July 31, 2015, we repurchased a total of 227 million shares of our common stock at an average price of $33.42 per share, for an aggregate purchase price of $7.6 billion.

Dividends

The following is a summary of our activities related to dividends on our common stock (in millions, except per share amounts):

	Three Months Ended
	July 31, 2015		July 25, 2014
Dividends per share declared	$	0.180	$	0.165
Dividend payments allocated to additional paid-in capital	$	54	$	—
Dividend payments allocated to retained earnings	$	—	$	53

On August 19 2015, we declared a cash dividend of $0.18 per share of common stock, payable on October 21, 2015 to holders of record as of the close of business on October 9, 2015. 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 (Accumulated Deficit)

A reconciliation of retained earnings (accumulated deficit) for the three months ended July 31, 2015 is as follows (in millions):

Balance as of April 24, 2015	$	53
Net loss		(30	)
Repurchases of common stock		(54	)
Balance as of July 31, 2015	$	(31	)

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) (AOCI) by component, net of tax, for the three months ended July 31, 2015 are summarized below (in millions):

	Foreign Currency Translation Adjustments			Defined Benefit Obligation Adjustments			Unrealized Gains on Available- for-Sale Securities			Unrealized Gains (Losses) on Derivative Instruments			Total
Balance as of April 24, 2015	$	(23	)	$	(13	)	$	11		$	1		$	(24	)
OCI before reclassifications, net of tax		(1	)		—			(9	)		(2	)		(12	)
Amounts reclassified from AOCI, net of tax		—			1			—			1			2
Total OCI		(1	)		1			(9	)		(1	)		(10	)
Balance as of July 31, 2015	$	(24	)	$	(12	)	$	2		$	—		$	(34	)

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

	Three Months Ended
	July 31, 2015		July 25, 2014
	Amounts Reclassified from AOCI				Statements of Operations Location
Recognized losses on defined benefit obligations	$	1	$	—	Operating expenses
Realized losses on cash flow hedges		1		2	Net revenues
Total reclassifications	$	2	$	2