Apple 1999 Annual Report Download - page 51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--FINANCIAL INSTRUMENTS (CONTINUED)
method through September 25, 1998. On April 17, 1998, ARM completed an initial public offering of its stock on the London Stock Exchange
and the NASDAQ National Market. The Company sold 18.9% of its shares in the offering for a gain before foreign taxes of approximately $24
million, which was recognized as other income. Foreign tax recognized on this gain was approximately $7 million.
At the time an equity method investee sells existing or newly issued common stock to unrelated parties in excess of its book value, the equity
method requires the net book value of the investment be adjusted to reflect the investor's share of the change in the investee's shareholders'
equity resulting from the sale. It is the Company's policy to record an adjustment reflecting its share of the change in the investee's
shareholders' equity resulting from such a sale as a gain or loss in other income. Consequently, the Company also recognized in the third
quarter of 1998 other income of approximately $16 million to reflect its remaining 25.9% ownership interest in the increased net book value of
ARM following its initial public offering. As of September 25, 1998, the carrying value of the Company's investment in ARM carried in other
assets in the consolidated balance sheet was approximately $22 million. On October 14, 1998, the Company sold 11.6 million shares (split
adjusted) of ARM stock. As a result of this sale, the Company's ownership interest in ARM fell to 19.7%. Consequently, beginning in the first
quarter of fiscal 1999, the Company ceased accounting for its remaining investment in ARM using the equity method and categorized its
remaining shares as available-for-sale requiring the shares be carried at fair value, with unrealized gains and losses net of taxes reported as a
component of accumulated other comprehensive income.
During fiscal 1999, the Company sold a total of approximately 32.6 million shares (split adjusted) of ARM stock for net proceeds of
approximately $245 million, recorded a gain before taxes of approximately $230 million, and recognized related income tax of approximately
$25 million. As of September 25, 1999, the Company holds 16 million shares of ARM stock valued at $226 million. The fair value of the
Company's investment in ARM is reflected in other assets as of September 25, 1999, with an offsetting amount net of $84 million of related
deferred taxes recognized in accumulated other comprehensive income.
OTHER LONG-TERM INVESTMENTS
During the fourth quarter of 1999, the Company invested $100 million in Samsung Electronics Co., Ltd (Samsung) to assist in the further
expansion of Samsung's TFT-LCD flat-panel display production capacity. The investment is in the form of three year unsecured bonds, which
is convertible into approximately 550,000 shares of Samsung common stock beginning in June 2000. The bonds carry an annual coupon rate of
2% and pay a total yield to maturity of 5% if redeemed at their maturity.
In June 1999, the Company invested $12.5 million in Akamai Technologies, Inc. (Akamai), a global Internet content delivery service. The
investment, in the form of convertible preferred stock, is convertible into 4.1 million shares of Akamai common stock (adjusted for subsequent
stock splits). The Company is restricted from selling more than 25% of its shares within one year after the date of the closing of a public
offering of Akamai's stock.
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