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NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS − (Continued)
The American Jobs Creation Act of 2004 was signed into law on October 22, 2004. This act creates a temporary incentive for United
States multinationals to repatriate accumulated income earned outside the United States at a federal effective tax rate of 5.25%. On
December 21, 2004, the Financial Accounting Standards Board, or FASB, issued FASB Staff Position No. FAS 109−2, Accounting
and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004, which
allows an enterprise time beyond the financial reporting period of enactment to evaluate the effect of the Act on its plan for
reinvestment or repatriation of foreign earnings We have started an evaluation of the effects of the repatriation provision; however, we
do not expect to be able to complete this evaluation until after Congress or the Treasury Department provide additional clarifying
language on key elements of the provision. We have not provided for United States income taxes on a cumulative total of
approximately $174.7 million of undistributed earnings as of January 30, 2005 for certain non−United States subsidiaries as we
intended to reinvest these earnings indefinitely in operations outside of the United States. We are currently in the process of evaluating
whether or not, and to what extent, if any, this provision may benefit us. We expect to complete such evaluation before the end of our
fiscal 2006. The range of possible amounts that we are considering for repatriation under this provision is between zero and $500
million. The potential range of related income tax expense is between zero and $27 million.
Note 14 − Microsoft Agreement
On March 5, 2000, we entered into an agreement with Microsoft Corporation, or the Microsoft Agreement, in which we agreed, under
certain terms and conditions, to develop and sell processors for use in the Xbox video game console. The terms of the Microsoft
Agreement also state that in the event that an individual or corporation makes an offer to purchase shares equal to or greater than thirty
percent (30%) of the outstanding shares of our common stock, Microsoft has first and last rights of refusal to purchase the stock.
We were engaged with Microsoft Corporation, or Microsoft, in discussions related to pricing and volumes of the Xbox platform
processors. The Microsoft Agreement contemplated the use of a third party to resolve disputed matters, and on April 23, 2002
Microsoft submitted the pricing dispute to binding arbitration. On February 6, 2003, NVIDIA and Microsoft announced that
arbitration was over and the companies had settled all issues related to pricing of the Microsoft Xbox platform processors. In addition
to resolving this pricing dispute, we have agreed to collaborate with Microsoft on future cost reductions for the Xbox, together the
Microsoft Settlement. As a result of the Microsoft Settlement, we recorded $40.4 million in additional revenue in the fourth quarter of
fiscal 2003.
Note 15 − Segment Information
During the second quarter of fiscal 2005, our chief operating decision maker, the Chief Executive Officer, began reviewing financial
information presented on an operating segment basis for purposes of making operating decisions and assessing financial performance.
We now report three product−line operating segments: the GPU business, which is composed of products that support desktop PCs,
notebook PCs and professional workstations; the MCP business, which is composed of NVIDIA nForce and Xbox products; and the
WMP business, which supports handheld personal digital assistants and cellular phones. In addition to these operating segments, we
have the “All Other” category that includes human resources, legal, finance, general administration and corporate marketing expenses,
which total $101.4 million for fiscal 2005, that we do not allocate to our other operating segments. “All Other” also includes the
results of operations of other miscellaneous operating segments that are neither individually reportable, nor aggregated with another
operating segment. Revenue in the “All Other” category is primarily derived from sales of memory.
We do not identify or allocate assets by operating segment. Operating segments do not record intersegment revenue, and, accordingly,
there is none to be reported. The accounting policies for segment reporting are the same as for our company as a whole.
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