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Tech Industry

Netscape hedges its foreign bets

The company initiates a hedging program to protect against foreign exchange rate fluctuations, citing increased exposure in foreign markets.

Netscape initiated a hedging program in June to protect against foreign exchange rate fluctuations, citing increased exposure in foreign markets such as Japan, according to a regulatory filing today.

It is another sign of a U.S. high-tech company hedging its bets--literally--to protect against currency rate fluctuations. The Asian economic crisis has increased the risk for the technology industry.

"The effect of foreign exchange rate fluctuations on Netscape in 1997 and through the three months ended July 31, 1998, was not material," according to Netscape's "10Q" regulatory filing with the Securities and Exchange Commission. "However, for the three months ended July 31, because foreign exchange exposure to these fluctuations increases as sales and intercompany balances grow, Netscape initiated a hedging program...Netscape is using foreign exchange forward contracts as a vehicle for hedging these balances."

The company's hedge positions totaled the equivalent of $3.8 million as of July 31, the filing said. Hedging is a common practice among multinational corporations such as oil companies, but technology companies also have adopted the practice as their businesses expand worldwide.

Netscape invoices the customers of its international subsidiaries primarily in U.S. dollars, with the notable exception of Japan.