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changes in the fair value recorded as interest and other income, net. These derivative instruments 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 assets and liabilities being hedged. At November 27, 2009, the outstanding balance sheet hedging
derivatives had maturities of 90 days or less.
A sensitivity analysis was performed on all of our foreign exchange derivatives as of November 27, 2009. This
sensitivity analysis was based on a modeling technique that measures the hypothetical market value resulting from a 10%
shift in the value of exchange rates relative to the U.S. dollar. For option contracts, the Black-Scholes equation model was
used. For forward contracts, duration modeling was used where hypothetical changes are made to the spot rates of the
currency. A 10% increase in the value of the U.S. dollar (and a corresponding decrease in the value of the hedged foreign
currency asset) would lead to an increase in the fair value of our financial hedging instruments by $22.2 million. Conversely,
a 10% decrease in the value of the U.S. dollar would result in a decrease in the fair value of these financial instruments by
$12.9 million.
We do not use derivative financial instruments for speculative trading purposes, nor do we hedge our foreign currency
exposure in a manner that entirely offsets the effects of changes in foreign exchange rates.
As a general rule, we do not use financial instruments to hedge local currency denominated operating expenses in
countries where a natural hedge exists. For example, in many countries, revenue from the local currency product licenses
substantially offsets the local currency denominated operating expenses. We assess the need to utilize financial instruments to
hedge currency exposures, primarily related to operating expenses, on an ongoing basis.
We regularly review our hedging program and may as part of this review determine to change our hedging program.
See Note 5 of our Notes to Consolidated Financial Statements for information regarding our hedging activities.
Interest Rate Risk
Short-Term Investments and Fixed Income Securities
At November 27, 2009, we had debt securities classified as short-term investments of $900.0 million. Changes in
interest rates could adversely affect the market value of these investments. The following table separates these investments,
based on stated maturities, to show the approximate exposure to interest rates (in millions):
Due within one year .....................................................................
$
387.6
Due within two years ....................................................................
249.9
Due within three years ...................................................................
218.6
Due after three years .....................................................................
43.9
Total ................................................................................
$
900.0
A sensitivity analysis was performed on our investment portfolio as of November 27, 2009. The analysis is based on an
estimate of the hypothetical changes in market value of the portfolio that would result from an immediate parallel shift in the
yield curve of various magnitudes.
The following tables present the hypothetical fair values of our debt securities classified as short-term investments
assuming immediate parallel shifts in the yield curve of 50 basis points (“BPS”), 100 BPS and 150 BPS. The analysis is
shown as of November 27, 2009 and November 28, 2008 (dollars in millions):
-150 BPS
-100 BPS
-50 BPS
Fair Value
11/27/2009
+50 BPS
+100 BPS
+150 BPS
910.8
909.2
905.4
900.0
893.9
888.0
882.2
-150 BPS -100 BPS -50 BPS
Fair Value
11/28/2008 +50 BPS +100 BPS +150 BPS
1,145.8
1,142.3
1,136.4
1,129.7
1,123.0
1,116.4
1,109.9