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0000320193
20101027
10-K
1,174
As of September 25, 2010 and September 26, 2009, $30.8 billion and $17.4 billion, respectively, of the Company’s cash, cash equivalents and marketable securities were held by foreign subsidiaries and are generally based in U.S. dollar-denominated holdings.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,175
Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the U.S.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,176
Deferred tax assets and liabilities reflect the effects of tax losses, credits, and the future income tax effects of temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply t...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,177
As of September 25, 2010 and September 26, 2009, the significant components of the Company’s deferred tax assets and liabilities were (in millions): A reconciliation of the provision for income taxes, with the amount computed by applying the statutory federal income tax rate (35% in 2010, 2009 and 2008) to income befor...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,178
For stock options, the Company receives an income tax benefit calculated as the difference between the fair market value of the stock issued at the time of the exercise and the option price, tax effected.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,179
For RSUs, the Company receives an income tax benefit upon the award’s vesting equal to the tax effect of the underlying stock’s fair market value.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,180
The Company had net excess tax benefits from employee stock plan awards of $742 million, $246 million and $770 million in 2010, 2009 and 2008, respectively, which were reflected as increases to common stock.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,181
Uncertain Tax Positions Tax positions are evaluated in a two-step process.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,182
The Company first determines whether it is more likely than not that a tax position will be sustained upon examination.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,183
If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,184
The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,185
The Company classifies gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as non-current liabilities in the Consolidated Balance Sheets.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,186
As of September 25, 2010, the total amount of gross unrecognized tax benefits was $943 million, of which $404 million, if recognized, would affect the Company’s effective tax rate.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,187
As of September 26, 2009, the total amount of gross unrecognized tax benefits was $971 million, of which $307 million, if recognized, would affect the Company’s effective tax rate.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,188
The aggregate changes in the balance of gross unrecognized tax benefits, which excludes interest and penalties, for the three years ended September 25, 2010, is as follows (in millions): The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,189
As of September 25, 2010 and September 26, 2009, the total amount of gross interest and penalties accrued was $247 million and $291 million, respectively, which is classified as non-current liabilities in the Consolidated Balance Sheets.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,190
In 2010 and 2009, the Company recognized an interest benefit of $43 million and interest expense of $64 million, respectively, in connection with tax matters.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,191
The Company is subject to taxation and files income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,192
For U.S. federal income tax purposes, all years prior to 2004 are closed.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,193
The Internal Revenue Service (the “IRS”) has completed its field audit of the Company’s federal income tax returns for the years 2004 through 2006 and proposed certain adjustments.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,194
The Company has contested certain of these adjustments through the IRS Appeals Office.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,195
The IRS is currently examining the years 2007 through 2009.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,196
During the third quarter of 2010, the Company reached a tax settlement with the IRS for the years 2002 through 2003.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,197
In connection with the settlement, the Company reduced its gross unrecognized tax benefits by $100 million and recognized a $52 million tax benefit in the third quarter of 2010.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,198
In addition, the Company is also subject to audits by state, local and foreign tax authorities.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,199
In major states and major foreign jurisdictions, the years subsequent to 1988 and 2001, respectively, generally remain open and could be subject to examination by the taxing authorities.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,200
Management believes that an adequate provision has been made for any adjustments that may result from tax examinations.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,201
However, the outcome of tax audits cannot be predicted with certainty.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,202
If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,203
Although timing of the resolution and/or closure of audits is not certain, the Company does not believe it is reasonably possible that its unrecognized tax benefits would materially change in the next 12 months.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,204
Note 7 - Shareholders’ Equity and Stock-Based Compensation Preferred Stock The Company has five million shares of authorized preferred stock, none of which is issued or outstanding.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,205
Under the terms of the Company’s Restated Articles of Incorporation, the Board of Directors is authorized to determine or alter the rights, preferences, privileges and restrictions of the Company’s authorized but unissued shares of preferred stock.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,206
Comprehensive Income Comprehensive income consists of two components, net income and other comprehensive income.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,207
Other comprehensive income refers to revenue, expenses, gains and losses that under GAAP are recorded as an element of shareholders’ equity but are excluded from net income.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,208
The Company’s other comprehensive income consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency, unrealized gains and losses on marketable securities categorized as available-for-sale, and net deferred gains and losses on certain derivative in...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,209
The following table summarizes the components of AOCI, net of taxes, as of the three years ended September 25, 2010 (in millions): The change in fair value of available-for-sale securities included in other comprehensive income was $123 million, $118 million and $(63) million, net of taxes in 2010, 2009 and 2008, respe...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,210
The tax effect related to the change in unrealized gains/losses on available-for-sale securities was $(72) million, $(78) million and $42 million for 2010, 2009 and 2008, respectively.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,211
The following table summarizes activity in other comprehensive income related to derivatives, net of taxes, held by the Company during the three years ended September 25, 2010 (in millions): The tax effect related to the changes in fair value of derivatives was $97 million, $(135) million and $(5) million for 2010, 200...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,212
The tax effect related to derivative gains/losses reclassified from other comprehensive income to net income was $43 million, $149 million and $(9) million for 2010, 2009 and 2008, respectively.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,213
Employee Benefit Plans 2003 Employee Stock Plan The 2003 Employee Stock Plan (the “2003 Plan”) is a shareholder approved plan that provides for broad-based equity grants to employees, including executive officers.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,214
The 2003 Plan permits the granting of incentive stock options, nonstatutory stock options, RSUs, stock appreciation rights, stock purchase rights and performance-based awards.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,215
Options granted under the 2003 Plan generally expire seven to ten years after the grant date and generally become exercisable over a period of four years, based on continued employment, with either annual, semi-annual or quarterly vesting.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,216
In general, RSUs granted under the 2003 Plan vest over two to four years, are subject to the employees’ continued employment and are paid upon vesting in shares of the Company’s common stock on a one-for-one basis.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,217
At the Company’s 2010 annual meeting of shareholders, the 2003 Plan was amended to (i) increase the number of shares of the Company’s common stock that may be delivered pursuant to awards granted under the 2003 Plan by an additional 36,000,000 shares and (ii) extend the Company’s authority to grant awards under the 200...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,218
As of September 25, 2010, approximately 62.5 million shares were reserved for future issuance under the 2003 Plan.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,219
1997 Employee Stock Option Plan In August 1997, the Company’s Board of Directors approved the 1997 Employee Stock Option Plan (the “1997 Plan”), a non-shareholder approved plan for grants of stock options to employees who are not officers of the Company.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,220
Options granted under the 1997 Plan generally expire seven to ten years after the grant date.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,221
All stock options granted under the 1997 Plan are fully vested.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,222
In October 2003, the Company terminated the 1997 Plan, and no new options can be granted from this plan.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,223
1997 Director Stock Plan In August 1997, the Company’s Board of Directors (the “Board”) adopted a Director Stock Option Plan, which was subsequently renamed the 1997 Director Stock Plan (the “Director Plan”) and has been approved by shareholders.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,224
As amended, the Director Plan (i) permits the Company to grant awards of RSUs or stock options to the Company’s non-employee directors, (ii) beginning February 25, 2010, provides for automatic initial grants of RSUs upon a non-employee director joining the Board and automatic annual grants of RSUs at each annual meetin...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,225
Each share issued with respect to RSUs granted under the plan reduces the number of shares available for grant under the plan by two shares.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,226
The Director Plan expires November 9, 2019.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,227
As of September 25, 2010, approximately 199,000 shares were reserved for future issuance under the Director Plan.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,228
Rule 10b5-1 Trading Plans During the fourth quarter of 2010, executive officers Timothy D. Cook, Peter Oppenheimer, D. Bruce Sewell, Philip W. Schiller and Bertrand Serlet had trading plans pursuant to Rule 10b5-1(c)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,229
A trading plan is a written document that pre-establishes the amounts, prices and dates (or formula for determining the amounts, prices and dates) of future purchases or sales of the Company’s stock including the exercise and sale of employee stock options and shares acquired pursuant to the Company’s employee stock pu...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,230
Employee Stock Purchase Plan The Company has a shareholder approved employee stock purchase plan (the “Purchase Plan”), under which substantially all employees may purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginni...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,231
An employee’s payroll deductions under the Purchase Plan are limited to 10% of the employee’s compensation and employee’s may not purchase more than $25,000 of stock for any calendar year.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,232
Additionally, no more than 1,000,000 shares may be purchased in the aggregate in any one offering period.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,233
As of September 25, 2010, approximately 3.8 million shares were reserved for future issuance under the Purchase Plan.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,234
Employee Savings Plan The Company has an employee savings plan (the “Savings Plan”) qualifying as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,235
Under the Savings Plan, participating U.S. employees may defer a portion of their pre-tax earnings, up to the IRS annual contribution limit ($16,500 for calendar year 2010).
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,236
The Company matches 50% to 100% of each employee’s contributions, depending on length of service, up to a maximum 6% of the employee’s eligible earnings.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,237
The Company’s matching contributions to the Savings Plan were $72 million, $59 million and $50 million in 2010, 2009 and 2008, respectively.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,238
Restricted Stock Units A summary of the Company’s RSU activity and related information for the three years ended September 25, 2010, is as follows (in thousands, except per share amounts): The fair value as of the vesting date of RSUs was $1 billion, $221 million and $320 million for 2010, 2009 and 2008, respectively.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,239
Upon vesting, the RSUs are generally net share-settled to cover the required withholding tax and the remaining amount is converted into an equivalent number of shares of common stock.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,240
The majority of RSUs that vested in 2010, 2009 and 2008, were net-share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,241
The total shares withheld were approximately 1.8 million, 707,000 and 857,000 for 2010, 2009 and 2008, respectively, and were based on the value of the RSUs on their vesting date as determined by the Company’s closing stock price.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,242
Total payments for the employees’ tax obligations to the taxing authorities were $406 million, $82 million and $124 million in 2010, 2009 and 2008, respectively, and are reflected as a financing activity within the Consolidated Statements of Cash Flows.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,243
These net-share settlements had the effect of share repurchases by the Company as they reduced and retired the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,244
Stock Option Activity A summary of the Company’s stock option and RSU activity and related information for the three years ended September 25, 2010, is as follows (in thousands, except per share amounts and contractual term in years): Aggregate intrinsic value represents the value of the Company’s closing stock price o...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,245
The aggregate intrinsic value excludes the effect of stock options that have a zero or negative intrinsic value.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,246
Total intrinsic value of options at time of exercise was $2.0 billion, $827 million and $2.0 billion for 2010, 2009 and 2008, respectively.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,247
RSUs granted are deducted from the shares available for grant under the Company’s stock option plans utilizing a factor of two times the number of RSUs granted.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,248
Similarly, RSUs cancelled are added back to the shares available for grant under the Company’s stock option plans utilizing a factor of two times the number of RSUs cancelled.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,249
Outstanding RSU balances are not included in the outstanding options balances in the stock option activity table.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,250
Stock-Based Compensation Stock-based compensation cost for RSUs is measured based on the closing fair market value of the Company’s common stock on the date of grant.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,251
Stock-based compensation cost for stock options and employee stock purchase plan rights (“stock purchase rights”) is estimated at the grant date and offering date, respectively, based on the fair-value as calculated by the BSM option-pricing model.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,252
The BSM option-pricing model incorporates various assumptions including expected volatility, expected life and interest rates.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,253
The expected volatility is based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of the Company’s stock options and other relevant factors including implied volatility in market traded options on the Company’s common stock.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,254
The Company bases its expected life assumption on its historical experience and on the terms and conditions of the stock awards it grants to employees.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,255
The Company recognizes stock-based compensation cost as expense ratably on a straight-line basis over the requisite service period.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,256
The weighted-average assumptions used for stock options granted do not apply to employee stock options assumed in conjunction with business acquisitions during the year ended September 25, 2010.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,257
The weighted-average fair value of stock options assumed during the year ended September 25, 2010 was $216.82.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,258
There were no stock options assumed during 2009 and 2008.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,259
The weighted-average assumptions used for the three years ended September 25, 2010, and the resulting estimates of weighted-average fair value per share of options granted and of stock purchase rights during those periods are as follows: The following table provides a summary of the stock-based compensation expense inc...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,260
The income tax benefit related to stock-based compensation expense was $314 million, $266 million and $169 million for 2010, 2009 and 2008, respectively.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,261
The total unrecognized compensation cost related to stock options and RSUs expected to vest was $1.9 billion as of September 25, 2010, which is expected to be recognized over a weighted-average period of 2.73 years.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,262
Note 8 - Commitments and Contingencies Lease Commitments The Company leases various equipment and facilities, including retail space, under noncancelable operating lease arrangements.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,263
The Company does not currently utilize any other off-balance sheet financing arrangements.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,264
The major facility leases are typically for terms not exceeding 10 years and generally provide renewal options for terms not exceeding five additional years.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,265
Leases for retail space are for terms ranging from five to 20 years, the majority of which are for ten years, and often contain multi-year renewal options.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,266
As of September 25, 2010, the Company’s total future minimum lease payments under noncancelable operating leases were $2.1 billion, of which $1.7 billion related to leases for retail space.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,267
Rent expense under all operating leases, including both cancelable and noncancelable leases, was $271 million, $231 million and $207 million in 2010, 2009 and 2008, respectively.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,268
Future minimum lease payments under noncancelable operating leases having remaining terms in excess of one year as of September 25, 2010, are as follows (in millions): Accrued Warranty and Indemnifications The Company offers a basic limited parts and labor warranty on its hardware products.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,269
The basic warranty period for hardware products is typically one year from the date of purchase by the end-user.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,270
The Company also offers a 90-day basic warranty for its service parts used to repair the Company’s hardware products.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,271
The Company provides currently for the estimated cost that may be incurred under its basic limited product warranties at the time related revenue is recognized.
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,272
Factors considered in determining appropriate accruals for product warranty obligations include the size of the installed base of products subject to warranty protection, historical and projected warranty claim rates, historical and projected cost-per-claim, and knowledge of specific product failures that are outside o...
0001193125-10-238044/full-submission.txt
0000320193
20101027
10-K
1,273
The Company assesses the adequacy of its pre-existing warranty liabilities and adjusts the amounts as necessary based on actual experience and changes in future estimates.
0001193125-10-238044/full-submission.txt