Apple 2003 Annual Report Download - page 59

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Samsung Electronics Co., Ltd (Samsung). These investments have been reflected in the consolidated balance sheets as long term assets within
other assets and have been categorized as available-for-sale requiring that they be carried at fair value with unrealized gains and losses, net of
taxes, reported in equity as a component of accumulated other comprehensive income. All realized gains on the sale of these investments have
been included in total other income and expense. The combined fair value of these investments held by the Company was $5 million and
$39 million as of September 27, 2003 and September 28, 2002, respectively.
EarthLink
In January 2000, the Company invested $200 million in EarthLink, an Internet service provider (ISP). The investment was in EarthLink's
Series C Convertible Preferred Stock, which was convertible by the Company after January 4, 2001, into approximately 7.1 million shares of
EarthLink common stock. Concurrent with this investment, EarthLink and the Company entered into a multi-year agreement to deliver ISP
service to Macintosh users in the United States. Under the terms of the agreement, the Company profits from each new Mac customer that
subscribes to EarthLink's ISP service for a specified period of time, and EarthLink is the default ISP in the Company's Internet Setup Software
included with all Macintosh computers sold in the United States.
During the first quarter of 2003, the Company sold 2,580,000 shares of EarthLink stock for net proceeds of approximately $13.7 million, an
amount that approximated the Company's carrying value of the shares. During the third quarter of 2003, the Company sold all of its remaining
holdings in EarthLink, consisting of 3,960,000 shares of stock for net proceeds of approximately $23 million, and a gain before taxes of
$2 million.
During the first quarter of 2002, the Company sold 117,000 shares of EarthLink stock for net proceeds of $2 million and a gain before taxes of
$223,000. No sales of EarthLink were made in any of the subsequent quarters of fiscal 2002. However, during the fourth quarter of 2002, the
Company determined that the then current decline in the fair value of its investment in EarthLink was other-than-temporary. As a result, the
Company recognized a $44 million charge to earnings to write-down the basis of its investment in EarthLink to $35 million. This charge was
included in gains (losses) on non-current investments, net. As of September 28, 2002, the Company held 6.5 million shares of EarthLink stock
valued at $35 million.
74
During the second quarter of 2001, the Company determined that the decline in the fair value of its investment in EarthLink was other-than-
temporary requiring that its cost basis be written down to fair value as a new cost basis and the amount of the write-down be included in
earnings. As a result, the Company recognized a $114 million charge to earnings to write-down the basis of its investment in EarthLink to
$86 million. This charge was included in gains (losses) on non-current investments, net. During the fourth quarter of 2001, the Company sold a
total of approximately 425,000 shares of EarthLink stock for net proceeds of approximately $6 million, recorded a gain before taxes of
approximately $800,000, and recognized related income tax of approximately $200,000.
Akamai
In June 1999, the Company invested $12.5 million in Akamai, a global Internet content delivery service. The investment was in the form of
convertible preferred stock that converted into 4.1 million shares of Akamai common stock (adjusted for subsequent stock splits) at the time of
Akamai's initial public offering in October 1999. Beginning in the first quarter of 2000, the Company categorized its shares in Akamai as
available-for-sale.
During the fourth quarter of 2003, the Company sold 1,875,000 shares of Akamai stock for net proceeds of $9 million and a gain before taxes
of $8 million. As of September 27, 2003, the Company's remaining investment in Akamai consists of 986,000 shares of Akamai stock valued at
$5 million.
During the first quarter of 2002, the Company sold 250,000 shares of Akamai stock for net proceeds of $2 million and a gain before taxes of
$710,000. No sales of Akamai were made in any of the subsequent quarters of fiscal 2002. However, during the fourth quarter of 2002, the
Company determined that the decline in the fair value of its investment in Akamai was other-than-temporary. As a result, the Company
recognized a $6 million charge to earnings to write-
down the basis of its investment in Akamai to $3 million. This charge was included in gains
(losses) on non-
current investments, net. As of September 28, 2002, the Company held 2.9 million shares of Akamai stock valued at $3 million.
During 2001, the Company sold a total of approximately 1 million shares of Akamai stock for net proceeds of approximately $39 million and
recorded a gain before taxes of approximately $36 million.
ARM
ARM is a publicly held company in the United Kingdom involved in the design and licensing of high performance microprocessors and related
technology.