Dell 2006 Annual Report Download - page 49

Table of Contents
Stock-Based Compensation
We have four stock-based compensation plans, in addition to an employee stock purchase plan, with outstanding stock or
stock options. We currently use the 2002 Long-Term Incentive Plan for stock-based incentive awards. These awards can be
in the form of stock options, stock appreciation rights, stock bonuses, restricted stock, restricted stock units, performance
units, or performance shares.
Stock-based compensation expense totaled $368 million for Fiscal 2007, compared to $17 million and $18 million for Fiscal
2006 and Fiscal 2005, respectively. The increase is due to the implementation of SFAS 123(R). We adopted SFAS 123(R)
using the modified prospective transition method under SFAS 123(R) effective the first quarter of Fiscal 2007. Included in
stock-based compensation for Fiscal 2007 is the fair value of stock-based awards earned during the year, including restricted
stock, restricted stock units, and stock options, as well as the discount associated with stock purchased under our employee
stock purchase plan. Prior to the adoption of SFAS 123(R), we accounted for our equity incentive plans under the intrinsic
value recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees, ("APB 25") and its related interpretations. Accordingly, stock-based compensation for the fair value of
employee stock options with no intrinsic value at the grant date and the discount associated with the stock purchase under
our employee stock purchase plan was not recognized in net income prior to Fiscal 2007. For further discussion on stock-
based compensation, see Note 6 of Notes to Consolidated Financial Statement included in "Part II — Item 8 — Financial
Statements and Supplementary Data."
At February 2, 2007 there was $139 million and $356 million of total unrecognized stock-based compensation expense
related to stock options and non-vested restricted stock, respectively, with the unrecognized stock-based compensation
expense expected to be recognized over a weighted-average period of 1.7 years and 2.4 years, respectively.
As a result of our inability to timely file our Annual Report on Form 10-K for Fiscal 2007, we suspended the exercise of
employee stock options, the vesting of restricted stock units, and the purchase of shares under our employee stock purchase
plan. With the filing of this report and our other past due periodic reports, we are again current in our periodic reporting
obligations and, accordingly, expect to resume the exercise of employee stock options by employees, the vesting of
restricted stock units, and the purchase of shares under our employee stock purchase plan.
We agreed to pay cash to certain current and former employees who held in-the-money stock options (options that have an
exercise price less than the current stock market price) that expired during the period of unexercisability. Within 45 days after
we file this report, we will make payments relating to in-the-money stock options that expired in the second and third quarters
of Fiscal 2008, which are expected to total approximately $113 million. We will not continue to pay cash for expired in-the-
money stock options once the options again become exercisable.
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