Cisco 2010 Annual Report Download - page 39

Quantitative and Qualitative Disclosures About Market Risk
Publicly Traded Equity Securities
The following tables present the hypothetical fair values of publicly traded equity securities as a result of selected potential
decreases and increases in the price of each equity security in the portfolio, excluding hedged equity securities, if any. Potential
fluctuations in the price of each equity security in the portfolio of plus or minus 10%, 20%, and 30% were selected based on
potential near-term changes in those security prices. The hypothetical fair values as of July 31, 2010 and July 25, 2009 are as
follows (in millions):
VALUATION OF SECURITIES
GIVEN AN X% DECREASE IN
EACH STOCK’S PRICE
FAIR VALUE
AS OF
JULY 31,
2010
VALUATION OF SECURITIES
GIVEN AN X% INCREASE IN
EACH STOCK’S PRICE
(30%) (20%) (10%) 10% 20% 30%
Publicly traded equity securities $ 876 $ 1,001 $ 1,126 $ 1,251 $ 1,376 $ 1,501 $ 1,626
VALUATION OF SECURITIES
GIVEN AN X% DECREASE IN
EACH STOCK’S PRICE
FAIR VALUE
AS OF
JULY 25,
2009
VALUATION OF SECURITIES
GIVEN AN X% INCREASE IN
EACH STOCK’S PRICE
(30%) (20%) (10%) 10% 20% 30%
Publicly traded equity securities $ 650 $ 742 $ 835 $ 928 $ 1,021 $ 1,114 $ 1,206
There were no impairment charges on our investments in publicly traded equity securities in fiscal 2010. For fiscal 2009 impairment
charges on our investments in publicly traded equity securities were $39 million, and there were no impairment charges on our
investments in publicly traded equity securities in fiscal 2008.
Investments in Privately Held Companies
We have also invested in privately held companies. These investments are recorded in other assets in our Consolidated Balance
Sheets and are accounted for using either the cost or the equity method. As of July 31, 2010, the total carrying amount of our
investments in privately held companies was $756 million, compared with $709 million at July 25, 2009. Some of the privately held
companies in which we invested are in the startup or development stages. These investments are inherently risky because the
markets for the technologies or products these companies are developing are typically in the early stages and may never
materialize. We could lose our entire investment in these companies. Our evaluation of investments in privately held companies is
based on the fundamentals of the businesses, including, among other factors, the nature of their technologies and potential for
financial return. Our impairment charges on investments in privately held companies were $25 million, $85 million, and $12 million
for fiscal 2010, 2009 and 2008, respectively.
Foreign Currency Exchange Risk
Our foreign exchange forward and option contracts are summarized as follows (in millions):
July 31, 2010 July 25, 2009
Notional
Amount Fair Value
Notional
Amount Fair Value
Forward contracts:
Purchased $ 3,368 $ 26 $ 2,570 $ 5
Sold $ 878 $ (7) $ 912 $ (8)
Option contracts:
Purchased $ 1,582 $ 56 $ 1,796 $ 82
Sold $ 1,507 $ (6) $ 2,213 $(36)
We conduct business globally in numerous currencies. The direct effect of foreign currency fluctuations on sales has not been
material because our sales are primarily denominated in U.S. dollars. However, if the U.S. dollar strengthens relative to other
currencies, such strengthening could have an indirect effect on our sales to the extent it raises the cost of our products to non-U.S.
customers and thereby reduces demand. A weaker U.S. dollar could have the opposite effect. However, the precise indirect effect
of currency fluctuations is difficult to measure or predict because our sales are influenced by many factors in addition to the impact
of such currency fluctuations.
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