EMC 2008 Annual Report Download - page 40

Table of Contents
The following table summarizes our total cash, cash equivalents and short-term and long-term investments along with the respective unrealized gains and
losses as of December 31, 2008:
December 31, 2008
Amortized
Cost Basis Aggregate Fair Value
Net
Unrealized
Gain/(Loss)
Total cash and cash equivalents $5,843.7 $5,843.7 —
Investments:
U.S. government and agency obligations $1,102.7 $1,130.5 $ 27.8
U.S. corporate debt securities 463.9 451.8 (12.1)
Asset and mortgage-backed securities 304.8 263.4 (41.4)
Municipal obligations 1,230.8 1,243.3 12.5
Auction rate securities 230.2 199.2 (31.0)
Foreign debt securities 45.9 45.6 (0.3)
Total investments 3,378.3 3,333.8 (44.5)
Total cash, cash equivalents and investments $9,222.0 $9,177.5 $ (44.5)
Investment Losses
As of December 31, 2008, the gross unrealized losses on our investment portfolio were $89.6. The gross unrealized gains were $45.1. Our unrealized
losses were primarily caused by a major disruption to the global capital markets, including a deterioration of confidence and a severe decline in the
availability of capital and demand for debt securities. The result has been to depress securities values in most types of investments.
We considered $2.6 of unrealized losses to be other than temporary and recognized the losses as a charge to earnings. We considered $89.6 of losses to
be temporary and recognized the estimated decline in value as a component of other comprehensive loss within our stockholders' equity. In making this
determination, we considered the financial condition and near-term prospects of the issuers, the underlying value and performance of the collateral, the time to
maturity, the length of time the investments have been in an unrealized loss position and our ability and intent to hold the investment to maturity if necessary
to avoid losses. The significant components of the temporary impairments are as follows:
Auction Rate Securities
Our auction rate securities are predominantly rated AAA and are primarily collateralized by student loans. The underlying loans of all but two of our
auction rate securities, with a market value of $17.5, have partial guarantees by the U.S. government as part of the Federal Family Education Loan Program
("FFELP") through the U.S. Department of Education. FFELP guarantees at least 95% of the loans which collateralize the auction rate securities. The two
securities whose underlying loans are not guaranteed by the U.S. government have credit enhancements and are insured by third party agencies. We believe
the quality of the collateral underlying all of our auction rate securities will enable us to recover our principal balance in full. As of December 31, 2007, we
held $972.5 of auction rate securities at par value, which was equal to fair value as of that date. During the first quarter of 2008, we sold $684.0 of these
auction rate securities at par through the normal auction process. Beginning in mid-February 2008, liquidity issues in the global credit markets resulted in the
complete failure of auctions associated with our auction rate securities as the amount of securities submitted for sale in those auctions exceeded the amount of
bids. For each unsuccessful auction, the interest rate moves to a maximum rate defined for each security, generally reset periodically at a level higher than
defined short-term interest benchmarks. To date, we have collected all interest payable on all of our auction rate securities when due and expect to continue to
do so in the future. The principal associated with failed auctions will not be accessible until successful auctions occur, a buyer is found outside of the auction
process, the issuers establish a different form of financing to replace these securities, issuers repay principal over time from cash flows prior to final maturity,
or final payments come due according to contractual maturities ranging from 15 to 40 years. We understand that issuers and financial markets are in the
process of developing alternatives that may improve liquidity, although it is not yet clear when or to what extent such efforts will be successful. We expect
that we will receive the entire principal associated with these auction rate securities through one of the means described above. None of the auction rate
securities in our portfolio are mortgage-backed or collateralized debt obligations.
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