Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities" was issued. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, hedging activities, and exposure definition. SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in fair value will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. In June 1999, SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133," was issued. The statement deferred the effective date of SFAS No. 133 until the first quarter of fiscal 2001. The Company will adopt SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as of October 1, 2000. Net of the related income tax effect, the adoption of SFAS No. 133 is expected to have a favorable cumulative-effect-type adjustment to net income of approximately $12 million and a favorable cumulative-effect-type adjustment to other comprehensive income of $15 million. Management does not believe that adoption of SFAS No. 133 will significantly alter the Company's hedging strategies. However, its application may increase the volatility of other income and expense and other comprehensive income.

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." SAB 101, as amended, summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements and provides guidance on revenue recognition issues in the absence of authoritative literature addressing a specific arrangement or a specific industry. The Company will adopt SAB 101 in the first quarter of fiscal year 2001. Adoption of this guidance is not expected to have a material impact on the Company's financial position or results of operations.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2000, the Company had $4.027 billion in cash, cash equivalents, and short-term investments, an increase of $801 million or 25% over the same balances at the end of 1999. During 2000, the Company's primary source of cash was $826 million in cash flows from operating activities. Cash generated by operations was primarily from net income and increases in accounts payable and other current liabilities partially offset by an increase in accounts receivable. The Company's cash and cash equivalent balances as of September 30, 2000 and September 25, 1999 include $7 million and $4 million, respectively, pledged primarily as collateral against outstanding derivative positions.

In addition to the net purchase of short-term investments of $936 million, net cash used by investing activities