Financial, Market and Other Stockholder Information

Selected Financial Data

Management’s Discussion and Analysis

Market Risk

Controls and Financial Reporting

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Consolidated Statements of Stockholders’ Equity

Notes to Consolidated Financial Statements

Financial Highlights Notes and Safe Harbor Statement

Note Regarding Use of Non-GAAP Financial Measures

Reconciliation of Non-GAAP Financial Measures
 

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Notes to Consolidated Financial Statements

NOTE 2. MARKETABLE SECURITIES
Marketable securities were comprised as follows (in millions):

Current Noncurrent
Sept. 25
2005		 ,
 		 Sept. 26
2004		 ,
 		 Sept. 25
2005		 ,
 		 Sept. 26
2004		 ,
 
 
Held-to-maturity:
Government-sponsored enterprise securities $ 60 $ — $ — $ 70
Corporate bonds and notes 70 10 — 60
 
130 10 — 130
 
Available-for-sale:
U.S. Treasury securities 151 267 — —
Government-sponsored enterprise securities 704 542 — —
Municipal bonds 10 — — —
Foreign government bonds 17 8 — —
Corporate bonds and notes 2,645 2,603 14 3
Mortgage-and asset-backed securities 767 1,226 — —
Non-investment grade debt securities 24 — 694 571
Equity mutual funds — — 293 296
Equity securities 30 112 1,132 653
 
4,348 4,758 2,133 1,523
 
$ 4,478 $ 4,768 $ 2,133 $ 1,653
 

As of September 25, 2005, the contractual maturities of debt securities were as follows (in millions):

Years to Maturity
Less than
One Year		 One to
Five Years		 Five to
Ten Years		 Greater than
Ten Years		 No Single
Maturity
Date		 Total
 
Held-to-maturity $ 130 $ — $ — $ — $ — $ 130
Available-for-sale 2,439 1,173 626 217 67 5,026
 
$ 2,569 $ 1,173 $ 626 $ 21 $ 767 $ 5,156
 

Securities with no single maturity date include mortgage-and asset-backed securities.

Available-for-sale securities were comprised as follows (in millions):

   
Cost		 Unrealized
Gains		 Unrealized
Losses		 Fair
Value
 
September 25, 2005
Equity securities $ 1,353    $ 131    $ (29 ) $ 1,455
Debt securities 5,039 14 (27 ) 5,026
 
Total $ 6,392 $ 145 $ (56 ) $ 6,481
 
September 26, 2004
Equity securities $ 1,003 $ 77 $ (19 ) $ 1,061
Debt securities 5,208 27 (15 ) 5,220
 
Total $ 6,211 $ 104 $ (34 ) $ 6,281
 

The fair values of held-to-maturity debt securities at September 25, 2005 and September 26, 2004 approximate cost.

The Company recorded realized gains and losses on sales of available-for-sale marketable securities as follows (in millions):

Fiscal Year Gross
Realized
Gains		 Gross
Realized
Losses		 Net
Realized
Gains
 
2005 $ 198 $ (31 ) $ 167
2004 105 (17 ) 88
2003 82 (13 ) 69

The following table shows the gross unrealized losses and fair values of the Company’s investments in individual securities that have been in a continuous unrealized loss position deemed to be temporary for less than 12 months and for more than 12 months, aggregated by investment category, at September 25, 2005 (in millions):

Less than
12 months		 More than
12 months
Fair
Value		 Unrealized
Losses		 Fair
Value		 Unrealized
Losses
 
U.S. Treasury securities $ — $ — $ 64 $ (1 )
Government-sponsored enterprise securities 159 (1 ) — —
Corporate bonds and notes 821 (6 ) 182 (3 )
Mortgage-and asset-backed securities 304 (2 ) 90 (1 )
Non-investment grade debt securities 337 (12 ) 17 (1 )
Equity securities 384 (29 ) — —
 
$ 2,005      $ (50 ) $ 353      $ (6 )
 

Investment Grade Debt Securities
The Company’s investments in investment grade debt securities consist primarily of investments in certificates of deposit, U.S. Treasury securities, government-sponsored enterprise securities, foreign government bonds, mortgage- and asset-backed securities and corporate bonds and notes. The unrealized losses on the Company’s investments in investment grade debt securities were caused by interest rate increases. Due to the fact that the decline in market value is attributable to changes in interest rates and not credit quality, and because the severity and duration of the unrealized losses were not significant, the Company considered these unrealized losses to be temporary at September 25, 2005.

Non-Investment Grade Debt Securities
The Company’s investments in non-investment grade debt securities consist primarily of investments in corporate bonds. The unrealized losses on the Company’s investment in non-investment grade debt securities were caused by credit quality and industry or company specific events. Because the severity and duration of the unrealized losses were not significant, the Company considered these unrealized losses to be temporary at September 25, 2005.

Marketable Equity Securities
The Company’s investments in marketable equity securities consist primarily of investments in common stock of large companies and equity mutual funds. The unrealized losses on the Company’s investment in marketable equity securities were caused by overall equity market volatility and industry specific events. The duration and severity of the unrealized losses in relation to the carrying amounts of the individual investments were consistent with typical equity market volatility. Current market forecasts support a recovery of fair value up to (or beyond) the cost of the investment within a reasonable period of time. Accordingly, the Company considered these unrealized losses to be temporary at September 25, 2005.


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