Adaptec 2003 Annual Report Download - page 49

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Cash Equivalents, Short−term Investments and Investments in Bonds and Notes:
We regularly maintain a short and long term investment portfolio of various types of government and corporate debt instruments. Our
investments are made in accordance with an investment policy approved by our Board of Directors. Maturities of these instruments
are less than two and one half years, with the majority being within one year. To minimize credit risk, we diversify our investments
and select minimum ratings of P−1 or A by Moody’s, or A−1 or A by Standard and Poor’s, or equivalent. We classify these
securities as available−for−sale.
Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities
may have their fair market value adversely impacted because of a rise in interest rates, while floating rate securities may produce less
income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations
because of changes in interest rates or we may suffer losses in principal if we were to sell securities that have declined in market value
because of changes in interest rates.
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, 2003, 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 $0.6 million, $1.1
million and $1.6 million respectively.
Other Investments
We have a number of strategic investments in privately held companies or venture funds that are carried on our balance sheet at cost,
net of impairments. 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
second quarter of 2003, we recorded an impairment of our other investments of $3.5 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.
Subsequent to year−end, we sold our interest in a private technology company in exchange for total consideration of $10.6 million in
cash. We expect to record the disposition of this investment, which had a carrying value of $1.3 million at December 31, 2003, in the
first quarter of 2004.
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