LinkedIn 2013 Annual Report Download - page 72

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Item 7A. Quantitative and Qualitative Disclosure about Market Risk
We have operations both within the United States and internationally, and we are exposed to market
risks in the ordinary course of our business. These risks include primarily interest rate, foreign exchange
risks and inflation.
Interest Rate Fluctuation Risk
We had cash, cash equivalents, and marketable securities of $2,329.3 million and $749.5 million as of
December 31, 2013 and 2012, respectively. This amount was invested primarily in money market funds
and highly liquid investment grade fixed income securities. The cash, cash equivalents and marketable
securities are held for working capital purposes. Our investment policy and strategy is focused on the
preservation of capital and supporting our liquidity requirements. We do not enter into investments for
trading or speculative purposes. At December 31, 2013, the weighted-average duration of our investment
portfolio was less than one year.
Our fixed-income portfolio is subject to fluctuations in interest rates, which could affect our results of
operations. Based on our investment portfolio balance as of December 31, 2013, a hypothetical increase in
interest rates of 1% (100 basis points) would have resulted in a decrease in the fair value of our portfolio
of approximately $13.8 million, and a hypothetical increase of 0.5% (50 basis points) would have resulted
in a decrease in the fair value of our portfolio of approximately $6.9 million.
Foreign Currency Exchange Risks
We have foreign currency exchange risks related to our revenue and operating expenses denominated
in currencies other than the U.S. dollar, principally the British Pound Sterling, the Euro, the Australian
dollar, the Canadian dollar, the Indian rupee and the Singapore dollar. The volatility of exchange rates
depends on many factors that we cannot forecast with reliable accuracy. We have experienced and will
continue to experience fluctuations in our net income as a result of gains (losses) related to remeasuring
certain monetary assets and liabilities that are denominated in currencies other than the U.S. dollar. In
the event our foreign currency denominated assets, liabilities, sales or expenses increase, our operating
results may be more greatly affected by fluctuations in the exchange rates of the currencies in which we
do business.
We enter into foreign currency derivative contracts to hedge against assets and liabilities for which we
have foreign currency exposure to minimize the risk that our earnings will be adversely affected by
exchange rate fluctuations. Our foreign currency derivative contracts are not designated as hedging
instruments. These derivative instruments are carried at fair value with changes in the fair value recorded
to other income (expense), net in our consolidated statements of operations. These contracts do not
subject us to material balance sheet risk due to exchange rate movements because gains and losses on
these derivatives are intended to offset gains and losses on the hedged foreign currency denominated
assets and liabilities.
As of December 31, 2013, we had outstanding foreign currency derivative contracts with a total
notional amount of $94.8 million. If overall foreign currency exchange rates appreciated (depreciated)
uniformly by 5% against the U.S. dollar, our foreign currency derivative contracts outstanding as of
December 31, 2013 would experience a loss (gain) of approximately $4.6 million.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or
results of operations. If our costs were to become subject to significant inflationary pressures, we may not
be able to fully offset such higher costs through price increases. Our inability or failure to do so could
harm our business, financial condition and results of operations.
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