Shareholders’ Equity

Stock-based Compensation Expense

The following tables present the Company’s stock-based compensation for equity-settled awards and related tax benefit by type and financial statement line included in the Company’s condensed consolidated statements of operations:



	Three Months Ended						Six Months Ended
	December 30, 2016			January 1, 2016			December 30, 2016			January 1, 2016
	(in millions)
Options	$	11		$	12		$	23		$	26
Employee stock purchase plan	1			1			9			6
Restricted stock units ⁽¹⁾	90			24			169			47
Subtotal	102			37			201			79
Tax benefit	(29		)	(10		)	(54		)	(20		)
Total	$	73		$	27		$	147		$	59


⁽¹⁾	Restricted stock units (“RSUs”) include performance stock units (“PSUs”)



	Three Months Ended						Six Months Ended
	December 30, 2016			January 1, 2016			December 30, 2016			January 1, 2016
	(in millions)
Cost of revenue	$	11		$	4		$	24		$	9
Research and development	43			15			87			30
Selling, general and administrative	43			18			85			40
Restructuring	5			—			5			—
Subtotal	102			37			201			79
Tax benefit	(29		)	(10		)	(54		)	(20		)
Total	$	73		$	27		$	147		$	59

As of December 30, 2016, total compensation cost related to unvested stock options was $83 million and will be amortized on a straight-line basis over a weighted average service period of approximately 2.8 years. As of December 30, 2016, total compensation cost related to the Company’s Employee Stock Purchase Plan (“ESPP”) rights issued to employees but not yet recognized was $41 million and will be amortized on a straight-line basis over a weighted average service period of approximately 1.4 years.

As of December 30, 2016, the aggregate unamortized fair value of all unvested RSUs and PSUs was $611 million, which will be recognized on a straight-line basis over a weighted average vesting period of approximately 2.6 years, assuming the performance metrics are met for the PSUs.

Stock Option Activity

The following table summarizes stock option activity under the Company’s incentive plans:



	Number of Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(in millions)				(in years)	(in millions)
Options outstanding at July 1, 2016	9.0		$	55.74	3.9	$	60
Granted	2.8		44.83
Exercised	(1.5	)	34.56
Canceled or expired	(0.6	)	69.91
Options outstanding at December 30, 2016	9.7		54.86		4.4	187
Exercisable at December 30, 2016	4.8		53.61		2.8	101
Vested and expected to vest after December 30, 2016	9.4		55.00		4.3	180

As of December 30, 2016, the Company had options outstanding to purchase an aggregate of 6.6 million shares with an exercise price below the quoted price of the Company’s stock on that date resulting in an aggregate intrinsic value of $187 million at that date.

RSU and PSU Activity

The following table summarizes RSU and PSU activity under the Company’s incentive plans:



	Number of Shares		Weighted Average Grant Date Fair Value
	(in millions)
RSUs and PSUs outstanding at July 1, 2016	15.7		$	41.92
Granted	5.5		45.23
Vested	(2.3	)	62.49
Forfeited	(1.4	)	44.06
RSUs and PSUs outstanding at December 30, 2016	17.5		42.82
Expected to vest after December 30, 2016	16.3		42.83

RSUs and PSUs are generally settled in an equal number of shares of the Company’s common stock at the time of vesting of the units. The aggregate value of RSUs and PSUs that became fully-vested during the six months ended December 30, 2016 was $117 million, determined as of the vest date.

SARs Activity

As of December 30, 2016, all outstanding stock appreciation rights (“SARs”) issued to employees were fully vested and will be settled in cash upon exercise. The fair value of SARs is solely subject to market price fluctuations. The following table presents the adjustments to the fair market value of SARs for the three and six months ended December 30, 2016 and January 1, 2016:



	Three Months Ended						Six Months Ended
	December 30, 2016			January 1, 2016			December 30, 2016			January 1, 2016
	(in millions)
SAR expense (benefit)	$	3		$	(10	)	$	8		$	(11	)
Tax expense (benefit)	(1		)	1			(2		)	1
Total SAR expense (benefit)	$	2		$	(9	)	$	6		$	(10	)

The Company had a total liability of $24 million and $20 million related to SARs included in Accrued expenses in the Company’s condensed consolidated balance sheet as of December 30, 2016 and July 1, 2016, respectively. As of December 30, 2016, 0.4 million SARs were outstanding with a weighted average exercise price of $7.99.

Stock Repurchase Program

The Company’s Board of Directors (the “Board”) has authorized $5.0 billion for the repurchase of the Company’s common stock. The stock repurchase program is effective until February 3, 2020. The Company did not repurchase any shares of common stock during the three and six months ended December 30, 2016. The remaining amount available to be purchased under the Company’s stock repurchase program as of December 30, 2016 was $2.1 billion.

Dividends to Shareholders

On September 13, 2012, the Company announced that the Board had authorized the adoption of a quarterly cash dividend policy. Under the cash dividend policy, holders of the Company’s common stock receive dividends when and as declared by the Board. The Company paid $142 million in cash of dividends on July 15, 2016 relating to dividends declared on May 3, 2016 and paid $143 million in cash of dividends on October 17, 2016 relating to dividends declared on August 3, 2016.

On November 3, 2016, the Board declared a cash dividend for the quarter ended December 30, 2016 of $0.50 per share of the Company’s common stock, $0.01 par value per share. The cash dividend of $144 million was paid on January 17, 2017 to the Company’s shareholders of record as of December 30, 2016.

On February 1, 2017, the Board declared a cash dividend for the quarter ending March 31, 2017 of $0.50 per share of the Company’s common stock, $0.01 par value per share. The cash dividend will be paid on April 17, 2017 to shareholders of record as of March 31, 2017.

The Company may modify, suspend or cancel its cash dividend policy in any manner and at any time.