Lloyd is primarily exercising options due to expire within a couple of years, and he's doing it under a so-called 10b5-1 trading plan, which allows insiders to conduct sales on a preset schedule.
It might seem like a lot of stock being sold by one of Cisco's highest-paid execs. But he's not actually making much money off of the options, thanks to Cisco's long-stagnant stock price.
As of November, Lloyd owned 2,050,901 shares of Cisco stock, according to Cisco's most recent proxy statement. This includes 63,803 shares held by a trust, 3,298 shares held by his children, options to purchase 1,845,990 shares, and 132,999 shares held through restricted stock units, the document said.
By September, 2014, Lloyd will be exercising up to 879,117 Cisco stock options originally granted in 2005 that are set to expire between June and September 2014. He'll also sell up to 198,313 shares of Cisco restricted stock units that are about to vest.
The stock options are above water, but just barely. Lloyd will pay between $17.86 and $19.24 per share for the stock options. Cisco is currently trading at just over $20.84 so he could walk with around $2 million.
He'll make more from the restricted stock—about $4 million, before taxes. Restricted stock, which represents real shares rather than a priced option to buy shares, has become a popular way for large tech companies to pay their employees and executives. Everyone from Microsoft to Google and Apple and Facebook now uses restricted stock. But in 2003, noted venture capitalist Bill Gurley questioned whether executives paid in restricted stock would have a motive to boost their employer's share price.
Lloyd, a 15-year Cisco veteran, is the third highest-paid exec at Cisco, promoted to president of development and sales at Cisco in October 3. Prior to that, he was executive vice president of worldwide operations.
In 2012, he was paid $6,305,853 including $685,000 in salary and a $1,677,291 bonus (which Cisco labels "non-equity incentive plan compensation.") His pay is third only to CEO John Chambers ($11.7 million in 2012), and COO Gary Moore ($7.3 million).
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