Earnings per share

12 Months Ended

Dec. 31, 2011

Earnings per share [Abstract]

Earnings per share

5. Earnings per share

The computation of basic earnings per share (EPS) is based on the weighted-average number of our common shares outstanding. The computation of diluted EPS is based on the weighted-average number of our common shares outstanding and dilutive potential common shares, which principally include: shares that may be issued under our stock option, RSU and performance unit awards, determined using the treasury stock method; our outstanding convertible notes, as discussed below; and our outstanding warrants (collectively “dilutive securities”). The convertible note hedges purchased in connection with the issuance of our convertible notes are excluded from the calculation of diluted EPS because their impact is always anti-dilutive. For further information regarding our convertible notes and warrants, see Note 14, Financing arrangements.

Upon conversion of our convertible notes, the principal amount would be settled in cash, and the excess of the conversion value, as defined, over the principal amount may be settled in cash and/or shares of our common stock. Therefore, only the shares of our common stock potentially issuable with respect to the excess of the notes’ conversion value over their principal amount, if any, are considered as dilutive potential common shares for purposes of calculating diluted EPS. For the years ended December 31, 2011, 2010 and 2009, the conversion values for our convertible notes were less than the related principal amounts and, accordingly, no shares were assumed to be issued for purposes of computing diluted EPS.

The computation for basic and diluted EPS was as follows (in millions, except per share data):

	2011		2010		2009
Income (Numerator):
Net income for basic and diluted EPS	$	3,683	$	4,627	$	4,605
Shares (Denominator):
Weighted-average shares for basic EPS		905		960		1,016
Effect of dilutive securities		7		5		5
Weighted-average shares for diluted EPS		912		965		1,021
Basic EPS	$	4.07	$	4.82	$	4.53
Diluted EPS	$	4.04	$	4.79	$	4.51

For the years ended December 31, 2011, 2010 and 2009, there were employee stock-based awards, calculated on a weighted-average basis, to purchase 33 million, 43 million and 42 million shares of our common stock, respectively, that are not included in the computation of diluted EPS because their impact would have been anti-dilutive. In addition, shares of our common stock that may be issued upon exercise of our warrants are not included in the computation of diluted EPS for any of the periods presented above because their impact would have been anti-dilutive.