EMC 2009 Annual Report Download - page 39

Table of Contents
The average value represents an average of the quarter-end values. The high and low valuations represent the highest and lowest values of the quarterly
amounts.
Credit Risk
Financial instruments that potentially subject us to concentration of credit risk consist principally of bank deposits, money market investments, short
and long-term investments, accounts and notes receivable, and foreign currency exchange contracts. Deposits held with banks in the United States may exceed
the amount of FDIC insurance provided on such deposits. Deposits held with banks outside the United States generally do not benefit from FDIC insurance.
The majority of our day-to-day banking operations globally are maintained with Citibank. We believe that Citibank's position as a primary clearing bank,
coupled with the substantial monitoring of their daily liquidity, both by their internal processes and by the Federal Reserve and the FDIC, mitigate some of
our risk.
Our money market investments are placed with money market funds that are 2a-7 qualified. Rule 2a-7, adopted by the SEC under the Investment
Company Act of 1940, establishes strict standards for quality, diversity and maturity, the objective of which is to maintain a constant net asset value of a
dollar. We limit our investments in money market funds to those that are primarily associated with large, money center financial institutions. While some
money market funds were forced to break a one dollar net asset value as a result of the financial crisis in the fourth quarter of 2008, none of the money market
funds in which we were invested were affected.
Our short- and long-term investments are invested primarily in investment grade securities, and we limit the amount of our investment in any single
issuer. Some of our investments have been downgraded from investment grade as a result of the global financial crisis. We routinely monitor these
investments and make assessments of our credit exposure as a result of these downgrades.
We provide credit to customers in the normal course of business. Credit is extended to new customers based upon checks of credit references and
industry reputation. Credit is extended to existing customers based on prior payment history and demonstrated financial stability. The credit risk associated
with accounts and notes receivables is generally limited due to the large number of customers and their broad dispersion over many different industries and
geographic areas. We establish an allowance for the estimated uncollectible portion of our accounts and notes receivable. The allowance was $51.1 and $50.6
at December 31, 2009 and 2008, respectively. We customarily sell the notes receivable we derive from our leasing activity. Generally, we do not retain any
recourse on the sale of these notes. Our sales are generally dispersed to a large number of customers, minimizing the reliance on any particular customer or
group of customers. Dell Inc., one of our channel partners, accounted for 11.5% and 14.3% of our revenues in 2008 and 2007, respectively.
The counterparties to our foreign currency exchange contracts consist of a number of major financial institutions. In addition to limiting the amount of
contracts we enter into with any one party, we monitor the credit quality of the counterparties on an ongoing basis.
We purchase or license many sophisticated components and products from one or a limited number of qualified suppliers. If any of our suppliers were
to cancel or materially change contracts or commitments with us or fail to meet the quality or delivery requirements needed to satisfy customer orders for our
products, we could lose customer orders. We attempt to minimize this risk by finding alternative suppliers or maintaining adequate inventory levels to meet
our forecasted needs.
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