Dell 2000 Annual Report Download - page 27

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Table of Contents
NOTE 2 — Special Charges
During the fourth quarter of fiscal 2001, the Company undertook a program to reduce its workforce and to exit certain facilities during
fiscal year 2002. Total charges recorded were $105 million, which are expected to be fully paid by the end of fiscal 2002. The charges
consisted of approximately $50 million in employee termination benefits with the remainder relating to facilities closure costs. The
employee separations, which occurred primarily in the United States, affected 1,700 employees across a majority of the Company's
business functions and job classes.
On October 20, 1999, the Company acquired all the outstanding shares of ConvergeNet Technologies, Inc. ("ConvergeNet"),
developer of storage domain management technology, in exchange for 6.9 million shares of the Company's common stock and
$4.5 million cash for total purchase consideration of $332 million, as valued on that date. The ConvergeNet acquisition was recorded
under the purchase method of accounting. Accordingly, the purchase price was allocated to the net assets acquired based on their
estimated fair values. The amount allocated to purchased in-process research and development of $194 million was determined based
on an appraisal completed by an independent third party using established valuation techniques in the storage management industry
and expensed upon acquisition because technological feasibility had not been established and no future alternative uses existed. The
excess of cost over net assets acquired was recorded as goodwill and included in other assets.
NOTE 3 — Financial Instruments
Disclosures About Fair Values of Financial Instruments
The fair value of investments, long-term debt and related interest rate derivative instruments has been estimated based upon market
quotes from brokers. The fair value of foreign currency forward contracts has been estimated using market quoted rates of foreign
currencies at the applicable balance sheet date. The estimated fair value of foreign currency purchased option contracts is based on
market quoted rates at the applicable balance sheet date and the Black-Scholes options pricing model. Considerable judgment is
necessary in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a current market exchange. Changes in assumptions could
significantly affect the estimates.
Cash and cash equivalents, accounts receivable, accounts payable and accrued and other liabilities are reflected in the accompanying
consolidated financial statements at cost, which approximates fair value because of the short-term maturity of these instruments.
34
Table of Contents
Investments
The following table summarizes by major security type the fair market value and cost of the Company's investments.
February 2, 2001 January 28, 2000
Fair Unrealized Fair Unrealized
Market Gain Market Gain
Value Cost (Loss) Value Cost (Loss)
(in millions)
Equity securities $ 938 $ 826 $ 112 $ 1,451 $ 595 $ 856
Debt securities:
U.S. corporate and bank debt 1,454 1,442 12 1,256 1,242 14
State and municipal securities 105 104 1 115 117 (2)
U.S. government and agencies 449 439 10 192 195 (3)
International corporate and bank debt — — — 30 30 —
Total debt securities 2,008 1,985 23 1,593 1,584 9
Total investments $ 2,946 $ 2,811 $ 135 $ 3,044 $ 2,179 $ 865
At February 2, 2001, debt securities with a carrying amount of $524 million mature within one year; the remaining debt securities
mature within five years. The Company's gross recognized gains and losses on investments, including impairments of certain
investments, for fiscal year 2001 were $473 million and $166 million, respectively. The Company's gross recognized gains and losses
on the sale of investments for fiscal year 2000 were $81 million and $1 million, respectively. The Company's gross recognized gains
and losses on the sale of investments for fiscal year 1999 were not material. Gross unrealized gains and losses at February 2, 2001
were $262 million and $127 million, respectively. Gross unrealized gains and losses at January 28, 2000 were $879 million, and
$13 million, respectively.