Adaptec 2002 Annual Report Download - page 44

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We do not attempt to reduce or eliminate our exposure to interest rate risk
through the use of derivative financial instruments.
Based on a sensitivity analysis performed on the financial instruments held at December 31, 2002 that are
sensitive to changes in interest rates, the impact to the fair value of our investment portfolio by an
immediate hypothetical parallel shift in the yield curve of plus or minus 50, 100 or 150 basis points would
result in a decline or increase in portfolio value of approximately $2.5 million, $5 million and $7.4
million respectively.
Other Investments
Other investments at December 31, 2002 include a minority investment of approximately 2 million shares of
Sierra Wireless Inc., a publicly traded company. The securities are recorded on the balance sheet at fair
value with unrealized gains or losses reported as a separate component of accumulated other comprehensive
income, net of income taxes.
We also periodically receive distributions of public company stock as a result of venture investments. These
shares are usually subject to resale restrictions and typically include a number of shares held in escrow
that may or may not be released at a later date. At December 31, 2002, we held approximately 16,000 shares
of Intel Corporation, which we received when Intel acquired a private company in which we had an investment.
It is our intention to sell these securities in the first quarter of 2003.
Our public company investments are subject to considerable market price volatility and are additionally
risky due to resale restrictions. We may lose some or all of our investment in these shares.
Our other investments also include numerous strategic investments in privately held companies or venture
funds that are carried on our balance sheet at cost. We expect to make additional investments like these in
the future. These investments are inherently risky, as they typically are comprised of investments in
companies and partnerships that are still in the start−up or development stages. The market for the
technologies or products that they have under development is typically in the early stages, and may never
materialize. In the fourth quarter of 2002, we recorded an impairment of our other investments of $15.3
million in response to declining market valuations for these investments. We could lose our entire
investment in these companies and partnerships or may incur an additional expense if we determine that the
value of these assets have been further impaired.
Foreign Currency
We generate a significant portion of our revenues from sales to customers located outside of the United
States including Canada, Europe, the Middle East and Asia. We are subject to risks typical of an
international business including, but not limited to, differing economic conditions, changes in political
climate, differing tax structures, other regulations and restrictions and foreign exchange rate volatility.
Accordingly, our future results could be materially adversely affected by changes in these or other factors.
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