Salesforce.com 2004 Annual Report Download - page 51

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Table of Contents
• prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
• provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and
• establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at
stockholder meetings.
In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign currency exchange risk
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro,
British pound, Canadian dollar and Japanese yen. We have a risk management policy that allows us to utilize foreign currency forward and option contracts to
manage currency exposures that exist as part of our ongoing business operations. To date, we have not entered into any hedging contracts since exchange rate
fluctuations have had little impact on our operating results and cash flows.
If we were to enter into hedging contracts, the contracts by policy would have maturities of less than three months and settle before the end of each
quarterly period. Additionally, by policy we would not enter into any hedging contracts for trading or speculative purposes.
Interest rate sensitivity
We had unrestricted cash, cash equivalents and marketable securities totaling $205.9 million at January 31, 2005. These amounts were invested
primarily in money market funds and instruments, corporate notes and bonds, government securities and other debt securities with strong credit ratings. The
unrestricted cash, cash equivalents and short-term marketable securities are held for working capital purposes. We do not enter into investments for trading or
speculative purposes.
Our fixed-income portfolio is subject to interest rate risk. An immediate increase in interest rates of 100-basis points could result in higher interest
income of $0.8 million offset by a principal reduction of $1.6 million for a net reduction of $0.8 million over a 12-month period. Similarly, a 100-basis point
decrease could result in a decrease in interest income of $0.8 million and a principal increase of $1.6 million for a net increase of $0.8 million. Fluctuations in
the value of our investment securities caused by a change in interest rates (gains or losses on the carrying value) are recorded in other comprehensive income,
and are realized only if we sell the underlying securities.
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