HP 2008 Annual Report Download - page 104
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 2: Stock-Based Compensation (Continued)
The fair value of share-based payment awards was estimated using the Black-Scholes option
pricing model with the following assumptions and weighted-average fair values:
Stock Options(1)
2008 2007 2006
Weighted-average fair value of grants .............................. $15.26 $13.01 $9.38
Risk-free interest rate ......................................... 3.09% 4.68% 4.35%
Dividend yield .............................................. 0.7% 0.8% 1.0%
Expected volatility ............................................ 34% 28% 29%
Expected life in months ........................................ 60 59 57
(1) The fair value calculation was based on stock options granted during the period.
Option activity under the principal option plans as of October 31 during each fiscal year was as
follows:
2008 2007
Weighted- Weighted-
Weighted- Average Weighted- Average
Average Remaining Aggregate Average Remaining Aggregate
Exercise Contractual Intrinsic Exercise Contractual Intrinsic
Shares Price Term Value Shares Price Term Value
In thousands In years In millions In thousands In years In millions
Outstanding at beginning of year . . 367,339 $33 445,740 $31
Granted and assumed through
acquisitions .............. 10,849 $49 45,562 $40
Exercised ................ (54,949) $26 (106,302) $26
Forfeited/cancelled/expired ...... (15,511) $45 (17,661) $43
Outstanding at end of year ...... 307,728 $34 3.4 $2,752 367,339 $33 4.2 $7,375
Vested and expected to vest at end
of year ................ 304,198 $34 3.3 $2,731 361,496 $33 4.2 $7,256
Exercisable at end of year ...... 252,049 $34 2.8 $2,423 265,366 $33 3.4 $5,298
In fiscal 2008, approximately 8 million stock options with a weighted-average exercise price of $50
were assumed through the acquisition of EDS.
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the
difference between HP’s closing stock price on the last trading day of fiscal 2008 and fiscal 2007 and
the exercise price, multiplied by the number of in-the-money options) that would have been received by
the option holders had all option holders exercised their options on October 31, 2008 and 2007. This
amount changes based on the fair market value of HP’s stock. Total intrinsic value of options exercised
in fiscal 2008, 2007 and 2006 was $1.1 billion, $2.0 billion and $1.2 billion, respectively. Total fair value
of options vested and expensed in fiscal 2008, 2007 and 2006 was $264 million, $297 million and $265
million, respectively, net of taxes.
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