What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2020-12-18 compared with 2019-12-20 · 260 added, 238 removed, 352 unchanged (59% of the section changed)

7 unchanged sentences

Our infrastructure software solutions enable customers to plan, develop, automate, manage and secure applications across mainframe, distributed, mobile and cloud platforms.

Through our fiscal year ended November 3, 2019 (“fiscal year 2019”), we had three reportable segments:

semiconductor solutions, infrastructure software and intellectual property (“IP”) licensing.

We offer a cyber security solutions portfolio, including endpoint, network, information and identity security solutions.

We also offer mission critical fibre channel storage area networking (“FC SAN”) products and related software in the form of modules, switches and subsystems incorporating multiple semiconductor products.

During the first quarter of our fiscal year ended November 1, 2020 (“fiscal year 2020”), we changed our organizational structure, resulting in two reportable segments:

semiconductor solutions and infrastructure software.

In addition, during the fourth quarter of our fiscal year 2020, we refined our allocation methodology for certain selling, general and administrative expenses to more closely align these costs with the segment benefiting from the shared expenses.

Prior period segment results have been recast to conform to the current presentation.

Our strategy is to combine best-of-breed technology leadership in semiconductor and infrastructure software solutions, with unmatched scale, on a common sales and administrative platform to deliver a comprehensive suite of infrastructure technology products to the world’s leading business and government customers.

8 unchanged sentences

• the timing, rescheduling or cancellation of expected customer orders.

Uncertainty in global economic conditions poses significant risks to our business.

For example, customers may defer purchases in response to tighter credit and negative financial news, which would in turn adversely affect product demand and our results of operations.

Our fiscal year 2019 and our fiscal year ended October 29, 2017 (“fiscal year 2017”) were 52-week fiscal years compared to our fiscal year ended November 4, 2018 (“fiscal year 2018”), which was a 53-week fiscal year.

The additional week in the first quarter of fiscal year 2018 resulted in higher net revenue, gross margin dollars, research and development expense, and selling general and administrative expense for fiscal year 2018, compared to fiscal years 2019 and 2017.

Our fiscal year 2020 and our fiscal year ended November 3, 2019 (“fiscal year 2019”) were 52-week fiscal years compared to our fiscal year ended November 4, 2018 (“fiscal year 2018”), which was a 53-week fiscal year.

COVID-19 Update

In response to the ongoing COVID-19 pandemic and the various resulting government directives, we have taken extensive measures to protect the health and safety of our employees and contractors at our facilities.

We modified our workplace practices globally, which resulted in most of our employees working remotely for an extended periods of time.

While we have implemented a phased-in return of employees to many of our facilities, if the spread of COVID-19 worsens significantly, we may need to further limit onsite operations or otherwise modify our business practices.

We continue to monitor the implications of the COVID-19 pandemic on our business, as well as our customers’ and suppliers’ businesses.

The demand environment for our semiconductor products was consistent with our expectations for our fourth quarter of fiscal year 2020, with continued demand for products and infrastructure to support a dramatic increase around the world in remote or tele-work and learning due to COVID-19.

While we continue to see robust demand in this area, the macroeconomic environment remains uncertain and it may not be sustainable over the longer term.

To date, the impact of COVID-19 on the demand environment for our software products has been limited.

On the product supply side, we continue to experience various constraints in our supply chain due to the pandemic, including with respect to wafers and substrates.

As a result, supply lead times are still extended and we continue to have difficulties in obtaining some necessary components and inputs in a timely manner.

However, the disruptions in our outsourced assembly and test capacity that we experienced previously, as a result of COVID-19 related shutdowns, have now largely resolved.

We have also taken various actions to de-risk our business in light of the ongoing uncertainty.

For example, we are largely building semiconductor products to order, instead of based on customer forecasts.

In addition, during the fourth fiscal quarter, we continued to strengthen our balance sheet, including closely managing working capital and reducing our total debt outstanding.

Overall, in light of the changing nature and continuing uncertainty around the COVID-19 pandemic, our ability to predict the impact of COVID-19 on our business in future periods remains limited.

The effects of the pandemic on our business are unlikely to be fully realized, or reflected in our financial results, until future periods.

Fiscal Year Highlights

Highlights during fiscal year 2020 include the following:

On September 30, 2019, we completed an offering of approximately 4 million shares of 8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value per share (the “Mandatory Convertible Preferred Stock”), which generated net proceeds of $3,679 million .

We used the net proceeds, together, with cash on hand, to repay $4.8 billion of our long-term debt.

• We acquired the Symantec Corporation Enterprise Security business (the “Symantec Business”).

• We generated $12,061 million of cash from operations.

We paid $5,435 million to repurchase shares of our common stock under our stock repurchase program, $4,235 million for cash dividends and distributions and $972 million in employee withholding taxes related to net share settled equity awards.

On November 5, 2018 , we completed the acquisition of CA, Inc.

(“CA”) for aggregate consideration of approximately $18.8 billion .

Recent Developments

Purchase of Symantec Corporation’s Enterprise Security Business

On November 4, 2019, we completed the purchase and assumption of certain assets and certain liabilities, respectively, of Symantec Corporation’s Enterprise Security business (“Symantec Business”) for approximately $10.7 billion in cash (the “Symantec Asset Purchase”).

In connection with the Symantec Asset Purchase, we entered into a credit agreement with certain financial institutions to provide (i) up to $12 billion in term loans to fund the Symantec Asset Purchase and related working capital needs and (ii) $3.5 billion in term loans to refinance certain existing senior notes maturing in the first quarter of our fiscal year ending November 1, 2020 (“fiscal year 2020”).

The discussions below relate to our business, reporting segments and financial results for fiscal year 2019 and prior periods and do not include any impact from or information relating to the Symantec Asset Purchase.

• We paid $5,534 million in cash dividends.

Acquisitions and Divestitures

The discussion and analysis in this section and the accompanying consolidated financial statements include the results of operations of acquired companies commencing on their respective acquisition dates.

Acquisition of Symantec Corporation’s Enterprise Security Business

On November 4, 2019, we completed the purchase and assumption of certain assets and certain liabilities, respectively, of the Symantec Business for $10.7 billion in cash (the “Symantec Asset Purchase”).

We financed this acquisition with the net proceeds from the borrowings under the November 2019 Term Loans, as defined in Note 10.

“Borrowings” included in Part II, Item 8 of this Annual Report on Form 10-K.

Acquisition of CA, Inc.

On November 5, 2018 (the “CA Acquisition Date”), we acquired CA for approximately $18.8 billion in aggregate cash purchase consideration and assumed $2.25 billion of outstanding unsecured bonds (the “CA Merger”).

We financed the CA Merger with $18 billion of term loans borrowed on the CA Acquisition Date, as well as cash on hand of the combined companies.

“ Borrowings ” included in Part II, Item 8.

of this Annual Report on Form 10-K for further detail.

On November 5, 2018, we acquired CA, Inc.

(“CA”) for $18.8 billion in aggregate cash purchase consideration and assumed $2.25 billion of outstanding unsecured bonds (the “CA Merger”).

We financed the CA Merger with $18 billion of term loans, as well as cash on hand of the combined companies.

We also assumed all eligible unvested CA equity awards in the transaction.

3 unchanged sentences

On November 17, 2017, we acquired Brocade Communications Systems, Inc.

(“Brocade”) for approximately $6.0 billion in cash, including retirement of their term loan debt (the “Brocade Merger”), which we financed using the net proceeds from the issuance of our senior unsecured notes, issued in October 2017, as well as cash on hand.

(“Brocade”) for $6.0 billion in cash, including retirement of their term loan debt, which we financed using the net proceeds from the issuance of our senior unsecured notes, issued in October 2017, as well as cash on hand.

We also assumed all eligible unvested Brocade equity awards in the transaction.

On December 1, 2017, we sold certain Brocade businesses for an aggregate of $800 million in cash.

On December 1, 2017, we sold certain Brocade business for an aggregate of $800 million in cash.

A majority of our net revenue is derived from sales of a broad range of semiconductor devices that are incorporated into electronic products, as well as from modules, switches and subsystems.

Net revenue is also generated from the sale of software solutions that enable our customers to plan, develop, automate, manage, and secure applications across mainframe, distributed, mobile, and cloud platforms.

Our three reportable segments in fiscal year 2019 were:

semiconductor solutions, infrastructure software and IP licensing.

Our overall net revenue, as well as the percentage of total net revenue generated by sales in our semiconductor solutions and infrastructure software segments, has varied from quarter to quarter, due largely to fluctuations in end-market demand, including the effects of seasonality, which are discussed in detail in Part I, Item 1.

6 unchanged sentences

Certain customers require us to contract with them directly and with specified intermediaries, such as contract manufacturers.

Many of our major customer

relationships have been in place for many years and are often the result of years of collaborative product development.

This has enabled us to build our extensive IP portfolio and develop critical expertise regarding our customers’ requirements, including substantial system-level knowledge.

Many of our major customer relationships have been in place for many years and are often the result of years of collaborative product development.

This has enabled us to build our extensive intellectual property (“IP”) portfolio and develop critical expertise regarding our customers’ requirements, including substantial system-level knowledge.

This collaboration has provided us with key insights into our customers' businesses and has enabled us to be more efficient and productive and to better serve our target markets and customers.

14 unchanged sentences

inventory adjustments, including write-downs for inventory obsolescence;

and acquisition costs, which include direct transaction costs and integration-related costs.

and acquisition costs, which include direct transaction costs and acquisition-related costs.

Although we outsource a significant portion of our manufacturing activities, we do have some proprietary semiconductor fabrication facilities.

11 unchanged sentences

Amortization of acquisition-related intangible assets.

In connection with our acquisitions, we recognize intangible assets that are being amortized over their estimated useful lives of 1 year to 25 years .

We also recognize goodwill, which is not amortized, and in-process research and development (“IPR&D”), which is initially capitalized as an indefinite-lived intangible asset, in connection with acquisitions.

Upon completion of each underlying project, IPR&D assets are reclassified as an amortizable purchased intangible asset and amortized over their estimated useful lives.

In connection with our acquisitions, we recognize intangible assets that are being amortized over their estimated useful lives.

Upon completion of each underlying project, IPR&D assets are reclassified as amortizable purchased intangible assets and amortized over their estimated useful lives.

Restructuring, impairment and disposal charges.

Restructuring, impairment and disposal charges consist primarily of compensation costs associated with employee exit programs, alignment of our global manufacturing operations, rationalizing product development program costs, IPR&D impairment, fixed asset impairment, facility and lease abandonments, and other exit costs, including curtailment of service or supply agreements.

Restructuring, impairment and disposal charges consist primarily of compensation costs associated with employee exit programs, alignment of our global manufacturing operations, rationalizing product development program costs, facility and lease abandonments, fixed asset impairment, IPR&D impairment, and other exit costs, including curtailment of service or supply agreements.

Interest expense.

Interest expense includes coupon interest, commitment fees, accretion of original issue discount, and amortization of debt premiums and debt issuance costs, and expenses related to debt modification.

Interest expense includes coupon interest, commitment fees, accretion of original issue discount, amortization of debt premiums and debt issuance costs, and expenses related to debt modifications or extinguishments.

Other income, net.

Other income, net includes interest income, gains (losses) on investments and on foreign currency remeasurement, and other miscellaneous items.

Other income, net includes interest income, gains or losses on investments, foreign currency remeasurement, and other miscellaneous items.

Provision for (benefit from) income taxes.

Tax Cuts and Jobs Act ( “2017 Tax Reform Act”) made significant changes to the U.S.

We have structured our operations to maximize the benefit from tax incentives extended to us in various jurisdictions to encourage investment or employment.

Our tax incentives from the Singapore Economic Development Board provide that any qualifying income earned in Singapore is subject to tax incentives or reduced rates of Singapore income tax.

Subject to our compliance with the conditions specified in these incentives and legislative developments, these Singapore tax incentives are presently expected to expire in November 2025.

The corporate income tax rate in Singapore that would otherwise apply to us would be 17%.

We also have a tax holiday on our qualifying income in Malaysia, which is scheduled to expire in fiscal year 2028.

Each tax incentive and tax holiday is also subject to our compliance with various operating and other conditions.

If we cannot, or elect not to, comply with any such operating conditions specified, we could, in some instances, be required to refund previously realized material tax benefits, or if such tax incentive or tax holiday is terminated prior to its expiration absent a new incentive applying, we will lose the related tax benefits earlier than scheduled.

We may elect to modify our operational structure and tax strategy, which may not be as beneficial to us as the benefits provided under the present tax concession arrangements.

Before taking into consideration the effects of the U.S.

Tax Cuts and Jobs Act (“2017 Tax Reform Act”) and other indirect tax impacts, the effect of these tax incentives and tax holiday was to increase the benefit from income taxes by approximately $833 million, $923 million and $590 million for fiscal years 2020, 2019 and 2018, respectively.

Our interpretations and conclusions regarding the tax incentives are not binding on any taxing authority, and if our assumptions about tax and other laws are incorrect or if these tax incentives are substantially modified or rescinded we could suffer material adverse tax and other financial consequences, which would increase our expenses, reduce our profitability and adversely affect our cash flows.

In addition, taxable income in any jurisdiction is dependent upon acceptance of our operational practices and intercompany transfer pricing by local tax authorities as being on an arm’s length basis.

Due to inconsistencies in application of the arm’s length standard among taxing authorities, as well as lack of adequate treaty-based protection, transfer pricing challenges by tax authorities could, if successful, substantially increase our income tax expense.

The 2017 Tax Reform Act made significant changes to the U.S.

Internal Revenue Code, including (1) a decrease in the U.S.

corporate tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, (2) the accrual of U.S.

income tax on foreign earnings when earned, allowing

certain foreign dividends to then be tax-exempt, rather than deferring such income tax payments until the foreign earnings are repatriated into the U.S., and (3) the transition tax on the mandatory deemed repatriation of accumulated non-U.S.

income tax on foreign earnings when earned, allowing certain foreign dividends to then be tax-exempt, rather than deferring such income tax payments until the foreign earnings are repatriated into the U.S., and (3) the transition tax on the mandatory deemed repatriation of accumulated non-U.S.

earnings of U.S.

4 unchanged sentences

Treasury regulations issued in fiscal year 2019 related to the 2017 Tax Reform Act.

We also recognized an income tax benefit of $1,162 million in fiscal year 2018 primarily as a result of our redomiciliation to the United States in April 2018 (the “Redomiciliation Transaction”).

We have structured our operations to maximize the benefit from tax incentives extended to us in various jurisdictions to encourage investment or employment.

Our tax incentives from the Singapore Economic Development Board, an agency of the Government of Singapore, provide that any qualifying income earned in Singapore is subject to tax incentives or reduced rates of Singapore income tax.

Subject to our compliance with the conditions specified in these incentives and legislative developments, these Singapore tax incentives are presently expected to expire in November 2025, subject in certain cases to potential extensions, which we may or may not be able to obtain.

Absent these tax incentives, the corporate income tax rate in Singapore that would otherwise apply to us would be 17% .

We also have a tax holiday on our qualifying income in Malaysia, which is scheduled to expire in fiscal year 2028.

The tax incentives and tax holiday that we have obtained are also subject to our compliance with various operating and other conditions.

If we cannot, or elect not to, comply with the operating conditions included in any particular tax incentive, we will lose the related tax benefits and we could be required to refund previously realized material tax benefits.

Depending on the incentive at issue, we could also be required to modify our operational structure and tax strategy, which may not be as beneficial to us as the benefits provided under the present tax concession arrangements.

Before taking into consideration the effects of the 2017 Tax Reform Act and other indirect tax impact, the effect of these tax incentives and tax holiday was to increase the benefit from income taxes by approximately $923 million and $590 million for fiscal years 2019 and 2018, respectively.

For fiscal year 2017, the effect of these tax incentives and tax holiday was to reduce the overall provision for income taxes by approximately $237 million .

We also recognized an income tax benefit of $1,162 million in fiscal year 2018 primarily as a result of our redomiciliation to the United States in April 2018.

Critical Accounting Estimates

7 unchanged sentences

Revenue recognition.

We account for a contract with a customer when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable we will collect substantially all of the consideration we are entitled to.

contract has commercial substance, and it is probable we will collect substantially all of the consideration we are entitled to.

Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer.

20 unchanged sentences

Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based, in part, on histor ical experience and information obtained from management of the acquired companies and are inherently uncertain.

Critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited to, future expected cash flows from product sales, customer contracts and acquired technologies, expected costs to develop IPR&D into commercially viable products, estimated cash flows from the projects when completed, and discount rates.

Critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited to, future expected cash flows from product sales, customer contracts and acquired technologies, revenue growth rate, customer ramp-up period, technology obsolescence rates, expected costs to develop IPR&D into commercially viable products, estimated cash flows from the projects when completed, and discount rates.

The discount rates used to discount expected future cash flows to present value are typically derived from a weighted-average cost of capital analysis and adjusted to reflect inherent risks.

14 unchanged sentences

Our goodwill impairment test uses both the income approach and the market approach to estimate a reporting unit's fair value.

The income approach is based on the discounted cash flow method that uses the reporting unit estimates for forecasted future financial performance including revenues, operating expenses, and taxes, as well as working capital and capital asset requirements.

income approach is based on the discounted cash flow method that uses the reporting unit estimates for forecasted future financial performance including revenues, operating expenses, and taxes, as well as working capital and capital asset requirements.

These estimates are developed as part of our long-term planning process based on assumed market segment growth rates and our assumed market segment share, estimated costs based on historical data and various internal estimates.

Projected cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated market

weighted-average cost of capital, as well as any risk unique to the subject cash flows.

Projected cash flows are then discounted to a present value employing a discount rate that properly accounts for the estimated market weighted-average cost of capital, as well as any risk unique to the subject cash flows.

The market approach is based on weighting financial multiples of comparable companies and applies a control premium.

5 unchanged sentences

We also consider market factors specific to the business and estimate future cash flows to be generated by the business, which requires significant judgment as it is based on assumptions about market demand for our products over a number of future years.

Based on these assumptions and estimates, we determine whether we need to take an impairment charge to reduce the value of the long-lived asset stated on our consolidated balance sheet to reflect its estimated fair value.

Assumptions and estimates about future values and remaining useful lives are complex and often subjective.

9 unchanged sentences

Income taxes.

Significant management judgment is required in developing our provision for income taxes, including the determination of deferred tax assets and liabilities and any valuation allowances that might be required against the deferred tax assets.

Significant management judgment is required in developing our provision for or benefit from income taxes, including the determination of deferred tax assets and liabilities and any valuation allowances that might be required against the deferred tax assets.

We have considered projected future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for valuation allowances.

14 unchanged sentences

We evaluate these assumptions at least annually.

The discount rate is used to determine the present value of future benefit payments at the relevant measurement dates — November 3, 2019 and November 4, 2018 , for both U.S.

plans, in fiscal years 2019 and 2018 , respectively.

plans, we use October 31, the month end closest to our fiscal year end, as the annual discount rate measurement date to determine the present value of future benefit payments .

discount rates are based on the results of matching expected plan benefit payments with cash flows from a hypothetical yield curve constructed with high-quality corporate bond yields.

5 unchanged sentences

Actuarial assumptions are based on our best estimates and judgment.

Material changes may occur in retirement benefit costs in the future if these assumptions differ from actual events or experience.

We performed a sensitivity analysis on the discount rate, which is the key assumption in calculating U.S.

pension and post-retirement benefit obligations as of November 3, 2019 .

Each change of 25 basis points in the discount rate assumption would have had an estimated $40 million impact on the benefit obligations as of November 3, 2019 .

Each change of 25 basis points in the discount rate assumption or expected rate of return assumption would not have a material impact on annual net retirement benefit costs for fiscal year 2020 .

Material changes may occur in retirement benefit costs in the future if these assumptions differ from actual events or experiences.

We performed a sensitivity analysis on the discount rate, which is the key assumption in calculating the U.S.

pension and post-retirement benefit obligations.

Each change of 25 basis points in the discount rate assumption would have had an estimated $40 million impact on the benefit obligations as of the fiscal year 2020 measurement date.

Each change of 25 basis points in the discount rate assumption or expected rate of return assumption would not have a material impact on annual net retirement benefit costs for the fiscal year ending October 31, 2021 (“fiscal year 2021”).

Stock-based compensation expense.

Stock-based compensation expense consists of expense for RSUs and stock options granted to employees and non-employees or assumed from acquisitions as well as expense associated with Broadcom employee stock purchase plan (“ESPP”).

Stock-based compensation expense consists of expense for restricted stock units (“RSUs”) and stock options granted to employees and non-employees or assumed from acquisitions as well as expense associated with Broadcom employee stock purchase plan (“ESPP”).

We recognize compensation expense for time-based stock options and ESPP rights based on the estimated grant-date fair value method required under the authoritative guidance using the Black-Scholes valuation model.

17 unchanged sentences

Fiscal Year Ended

(In millions)

(As a percentage of net revenue)

2020 November 3,

2019 November 1,

2020 November 3,

(In millions) (As a percentage of net revenue)

Statements of Operations Data:

Products $ 17,435 $ 18,117 73 % 80 %

Subscriptions and services 6,453 4,480 27 20

3 unchanged sentences

Cost of subscriptions and services 626 515 2 2

Purchase accounting effect on inventory

Amortization of acquisition-related intangible assets 3,819 3,314 16 15

1 unchanged sentence

Total cost of revenue 10,372 10,114 43 45

Gross margin 13,516 12,483 57 55

Research and development 4,968 4,696 21 21

2 unchanged sentences

Restructuring, impairment and disposal charges 198 736 1 3

Litigation settlements

Total operating expenses 9,502 9,039 40 40

2 unchanged sentences

Sales of products to distributors accounted for 42% and 46% of our net revenue for fiscal years 2020 and 2019, respectively.

Direct sales to WT Microelectronics, a distributor, accounted for 17% of our net revenue for fiscal year 2019.

No direct customer represented more than 10% of our net revenue during fiscal year 2018.

We believe our aggregate sales to our top five end customers through all channels accounted for more than 30% and more than 40% of our net revenue for fiscal years 2019 and 2018 , respectively.

We believe aggregate sales to Apple Inc., through all channels, accounted for approximately 20% of our net revenue for fiscal year 2019 and approximately 25% for fiscal year 2018 .

Direct sales to WT Microelectronics, a distributor, accounted for 13% and 17% of our net revenue for fiscal years 2020 and 2019, respectively.

We believe our aggregate sales to our top five end customers through all channels accounted for more than 30% of our net revenue for each of our fiscal years 2020 and 2019.

We believe aggregate sales to Apple Inc., through all channels, accounted for approximately 15% and 20% of our net revenue for fiscal years 2020 and 2019, respectively.

We expect to continue to experience significant customer concentration in future periods.

The loss of, or significant decrease in demand from, any of our top five end customers could have a material adverse effect on our business, results of operations and financial condition.

Additionally, if export restrictions on one of our larger customers continue, revenue in future periods may continue to be adversely impacted.

From time to time, some of our key semiconductor customers place large orders or delay orders, causing our quarterly net revenue to fluctuate significantly.

This is particularly true for our wireless products as fluctuations may be magnified by the launches of, and seasonal variations in sales of mobile handsets.

This is particularly true of our wireless products as fluctuations may be magnified by the timing of launches, and seasonal variations in sales, of mobile handsets.

In addition, the ongoing COVID-19 pandemic and related challenges and uncertainties may also cause our net revenue to fluctuate significantly and adversely affect our results of operations, as discussed above.

Additionally, if export restrictions on one of our larger customers continue, revenue in future periods may continue to be adversely impacted.

Although we recognize revenue for the majority of our products when title and control transfer in Penang, Malaysia, we disclose net revenue by country based on the geographic shipment or delivery location specified by distributors, OEMs, contract manufacturers, channel partners, or software customers.

In fiscal year 2019, approximately 35% of our net revenue came from shipments or deliveries to China (including Hong Kong), compared to approximately 50% for both fiscal years 2018 and 2017.

In each of fiscal years 2020 and 2019, approximately 35% of our net revenue came from shipments or deliveries to China (including Hong Kong), compared to approximately 50% for fiscal year 2018.

However, the end customers for either our products or for the end products into which our products are incorporated, are frequently located in countries other than China (including Hong Kong).

2 unchanged sentences

Fiscal Year Ended

Net Revenue by Segment

Net Revenue by Segment November 1,

2020 November 3,

2019 $ Change % Change

(In millions, except for percentages)

3 unchanged sentences

Fiscal Year Ended

Net Revenue by Segment

November 3, 2019

November 4, 2018

Net Revenue by Segment November 1, 2020 November 3, 2019

(As a percentage of net revenue)

2 unchanged sentences

Total net revenue 100 % 100 %

Our total net revenue increased primarily due to the acquisition of CA in fiscal year 2019 .

Net revenue from our semiconductor solutions segment decreased due to lower demand for our wireless content in mobile handsets, as well as lower demand for our broadband, optocoupler, set-top box and server storage connectivity.

Fiscal year 2018 semiconductor solutions revenue benefited from a later than typical new mobile handset ramp with a major customer in the first quarter, which resulted in higher shipments in that quarter, as well as an extra week in the fiscal year as compared to fiscal year 2019.

Net revenue from our infrastructure software segment increased primarily due to contributions from our CA mainframe and enterprise software products.

Gross margin was $12,483 million for fiscal year 2019 compared to $10,733 million for fiscal year 2018 .

Gross margin as a percentage of net revenue increased to 55% in fiscal year 2019 from 52% for fiscal year 2018 .

These increases were primarily due to contributions from our CA mainframe and enterprise software products and favorable product mix within our semiconductor solutions segment.

These increases were partially offset by higher amortization of acquisition-related intangible assets and restructuring charges as a result of the CA Merger and higher stock-based compensation expense.

We expect to incur additional amortization of acquisition-related intangible assets in future periods as a result of our acquisition of the Symantec Business and any further acquisitions we may make.

Our total net revenue increased primarily due to contributions from the Symantec enterprise security solutions in fiscal year 2020 compared to the prior fiscal year.

Net revenue from our semiconductor solutions segment decreased primarily due to delays in the production ramp of a new mobile handset by a major customer that resulted in lower than expected shipments in the year, partially offset by higher demand for our networking and storage products.

Net revenue from our infrastructure software segment increased primarily due to contributions from our Symantec enterprise security solutions.

Gross margin was $13,516 million, or 57% of net revenue, for fiscal year 2020, compared to $12,483 million, or 55% of our net revenue, for fiscal year 2019.

The increase was primarily due to contributions from our Symantec enterprise security solutions, as well as favorable product mix within our semiconductor solutions segment, compared to the corresponding prior fiscal year.

Research and Development Expense

Research and development expense increased $928 million , or 25% , in fiscal year 2019 .

Research and development expense as a percentage of net revenue was 21% and 18% for fiscal years 2019 and 2018 , respectively.

The increase was primarily due to the acquisition of CA and higher stock-based compensation expense, offset by lower variable employee compensation expense.

Stock-based compensation expense increased primarily due to the issuance of multi-year equity grants of time- and market-based RSUs (the “Multi-Year Equity Awards”) in the first quarter of fiscal year 2019, the impact of the change from annual to quarterly vesting of equity awards and the assumed CA equity awards.

Our stock-based compensation expense for fiscal year 2019 included employee equity awards granted at higher grant-date fair values than those granted in prior years, which also contributed to the increase.

We expect to incur additional research and development expense in future periods as a result of our acquisition of the Symantec Business and any future acquisitions we may make.

Research and development expense increased $272 million, or 6%, in fiscal year 2020, compared to the prior fiscal year.

The increase was primarily due to our acquisition of the Symantec Business, partially offset by a decrease in stock-based compensation expense resulting from restructuring actions.

Selling, General and Administrative Expense

Selling, general and administrative expense increased $653 million , or 62% , in fiscal year 2019 .

Selling, general and administrative expense as a percentage of net revenue was 8% and 5% for fiscal years 2019 and 2018 , respectively.

The increase was primarily due to the acquisition of CA and higher stock-based compensation expense.

Stock-based compensation expense increased primarily due to the issuance of the Multi-Year Equity Awards, the impact of the change from annual to quarterly vesting of equity awards and the assumed CA equity awards.

Selling, general and administrative expense increased $226 million, or 13%, in fiscal year 2020, compared to the prior fiscal year.

The increase was primarily due to our acquisition of the Symantec Business and associated acquisition-related costs, partially offset by a decrease in compensation expense, including stock-based compensation, resulting from restructuring actions.

Amortization of Acquisition-Related Intangible Assets

Amortization of acquisition-related intangible assets recognized in operating expenses increased $1,357 million , or 251% , in fiscal year 2019.

The increase was primarily due to the addition of amortization of intangible assets acquired in the CA Merger.

We expect to incur additional amortization of acquisition-related intangible assets in future periods as a result of our acquisition of the Symantec Business and any further acquisitions we may make.

Amortization of acquisition-related intangible assets recognized in operating expenses increased $503 million, or 27%, in fiscal year 2020, compared to the prior fiscal year.

The increase was primarily due to the addition of amortization of intangible assets as a result of our acquisition of the Symantec Business.

Restructuring, Impairment and Disposal Charges

Restructuring, impairment and disposal charges included in operating expenses increased $517 million , or 236% , in fiscal year 2019 .

The increase was primarily due to employee termination costs, as well as lease and other exit costs resulting from the CA Merger.

We expect to incur additional restructuring charges in future periods as a result of our acquisition of the Symantec Business and any further acquisitions we may make.

Restructuring, impairment and disposal charges included in operating expenses decreased $538 million, or 73%, in fiscal year 2020, compared to the prior fiscal year .

The decrease was primarily due to higher employee termination costs, as well as lease and other exit costs resulting from the CA Merger, in the prior fiscal year.

Segment Operating Results

Fiscal Year Ended

Operating Income (Loss)

November 3, 2019

November 4, 2018

Operating Income (Loss) November 1, 2020 November 3, 2019 $ Change % Change

(In millions, except for percentages)

3 unchanged sentences

Total operating income $ 4,014 $ 3,444 $ 570 17 %

Operating income from our semiconductor solutions segment decreased primarily due to lower demand for our wireless content in mobile handsets, as well as lower demand for our optocoupler, broadband, server storage connectivity and set-top box products.

Fiscal year 2018 semiconductor solutions operating income benefited from a later than typical new mobile handset ramp with a major customer in the first quarter, which resulted in higher shipments in that quarter, as well as an extra week in the fiscal year as compared to fiscal year 2019.

Operating income from our infrastructure software segment increased primarily due to contributions from our CA mainframe and enterprise software products.

Operating income from our semiconductor solutions segment increased slightly, primarily due to higher demand for storage products, largely offset by delays in the production ramp of a new mobile handset by a major customer, which resulted in lower than expected shipments in the year.

Operating income from our infrastructure software segment increased primarily due to contributions from our Symantec enterprise security solutions.

Unallocated expenses include amortization of acquisition-related intangible assets;

3 unchanged sentences

and other costs that are not used in evaluating the results of, or in allocating resources to, our segments.

Unallocated expenses increased 61% in fiscal year 2019 mainly due to higher amortization of acquisition-related intangible assets, stock-based compensation expense, and restructuring, impairment and disposal charges primarily related to the CA Merger.

The increase in stock-based compensation expense also due to the issuance of the Multi-Year Equity Awards and the impact of the change from annual to quarterly vesting of certain time-based equity awards.

Unallocated expenses increased 5% in fiscal year 2020, compared to the prior year fiscal period, primarily due to higher amortization of acquisition-related intangible assets and acquisition-related costs, partially offset by lower restructuring, impairment and disposal charges and stock-based compensation expense.

Non-Operating Income and Expenses

1 unchanged sentence

Interest expense was $1,777 million and $1,444 million for fiscal years 2020 and 2019, respectively.

Interest expense was higher in fiscal year 2019 primarily due to interest on the debt we incurred to finance the CA Merger in the first quarter of fiscal year 2019.

We expect to incur additional interest expense in future periods as a result of term loan indebtedness associated with any future acquisitions, including our acquisition of the Symantec Business.

The increase was primarily due to the increase in debt associated with the financing of our acquisition of the Symantec Business, as well as losses on extinguishment of debt related to refinancing activities during fiscal year 2020.

Other income, net.

Other income, net was $226 million and $144 million in fiscal years 2019 and 2018, respectively.

The increase was primarily due to an increase in unrealized gains on investments partially offset by losses on foreign currency remeasurement.

Other income, net, which includes interest income, gains or losses on investments, foreign currency remeasurement and other miscellaneous items, was $206 million and $226 million for fiscal years 2020 and 2019, respectively.

The decrease was primarily due to lower gains on investments, partially offset by a $116 million one-time gain from the lapse of a tax indemnification arrangement.

Benefit from income taxes.

Benefit from income taxes was $518 million and $510 million for fiscal years 2020 and 2019, respectively.

The benefit from income taxes in fiscal year 2019 was primarily due to $232 million of excess benefit from stock-based awards that vested or were exercised during the year, $131 million from the recognition of gross unrecognized tax benefits as a result of audit settlements and lapses of statutes of limitations net of increases in balances related to tax positions taken during the current year, $80 million of benefit from deferred tax measurement in state and foreign jurisdictions, $66 million of benefit related to internal reorganizations, and $54 million of benefit from the partial release of our valuation allowance as a result of the CA Merger, partially offset by $113 million of expense from a change in estimate of our fiscal year 2018 benefit as a result of proposed U.S.

Treasury regulations issued in fiscal year 2019 related to the 2017 Tax Reform Act.

The benefit from income taxes in fiscal year 2018 was primarily due to income tax benefits recognized from the enactment of the 2017 Tax Reform Act and the Redomiciliation Transaction.

The benefit from income taxes in fiscal year 2020 was primarily due to the jurisdictional mix of income and expense, the recognition of gross uncertain tax benefits as a result of lapses of statues of limitations, the remeasurement of certain foreign deferred tax assets and liabilities, and excess benefit from stock-based awards.

The benefit from income taxes in fiscal year 2019 was primarily due to excess tax benefits from stock-based awards, the recognition of gross uncertain tax benefits as a result of audit settlements and lapses of statutes of limitations, deferred tax remeasurement in state and foreign jurisdictions, internal reorganizations, and the partial release of our valuation allowance as a result of the CA Merger.

This was partially offset by a change in estimate of our fiscal year 2018 provision resulting from regulations issued related to the 2017 Tax Reform Act.

Fiscal Year 2019 Compared to Fiscal Year 2018

The following tables set forth our results of operations for the periods presented:

The following table sets forth our results of operations for the periods presented:

Fiscal Year Ended

Statements of Operations Data:

November 4, 2018

October 29, 2017

November 4, 2018

October 29, 2017

(In millions)

(As a percentage of net revenue)

November 3, 2019 November 4, 2018 November 3, 2019 November 4, 2018

(In millions) (As a percentage of net revenue)

Products $ 18,117 $ 19,754 80 % 95 %

Subscriptions and services 4,480 1,094 20 5

7 unchanged sentences

Total cost of revenue 10,114 10,115 45 48

Gross margin 12,483 10,733 55 52

Research and development 4,696 3,768 21 18

5 unchanged sentences

Operating income $ 3,444 $ 5,135 15 % 25 %

The following table sets forth net revenue by segment for the periods presented:

The following tables set forth net revenue by segment for the periods presented:

Fiscal Year Ended

Net Revenue by Segment

November 4, 2018

October 29, 2017

Net Revenue by Segment November 3, 2019 November 4, 2018 $ Change % Change

(In millions, except for percentages)

3 unchanged sentences

Fiscal Year Ended

Net Revenue by Segment

November 4, 2018

October 29, 2017

Net Revenue by Segment November 3, 2019 November 4, 2018

(As a percentage of net revenue)

2 unchanged sentences

Total net revenue 100 % 100 %

Our total net revenue increased primarily due to the acquisition of Brocade in fiscal year 2018, as well as strong organic year-over-year growth.

Net revenue from our semiconductor solutions segment increased due to an increase in our wireless content in handsets and a later than typical new handset ramp with a major customer, which resulted in product shipments that typically would have occurred in the fourth quarter of fiscal year 2017 occurring in the first quarter of fiscal year 2018.

Additionally, net revenue from our semiconductor solutions segment increased due to an increase in demand for our networking application-specific integrated circuit (“ASIC”) products.

These increases were partially offset by a decrease in demand for our set top box and optical products.

Net revenue from our infrastructure software segment increased due to contributions from our FC SAN business.

Gross margin was $10,733 million for fiscal year 2018 compared to $8,509 million for fiscal year 2017.

Gross margin as a percentage of net revenue increased to 52% in fiscal year 2018 from 48% for fiscal year 2017.

The fiscal year 2018 increases were primarily due to the addition of Brocade products, as well as a more favorable product mix, partially offset by an increase in amortization of acquisition-related intangible assets.

Our total net revenue increased primarily due to the CA Merger in fiscal year 2019.

revenue from our infrastructure software segment increased primarily due to contributions from our mainframe and enterprise software solutions.

Gross margin was $12,483 million, or 55% of net revenue, for fiscal year 2019 compared to $10,733 million, or 52% of net revenue, for fiscal year 2018.

The increase in gross margin was primarily due to contributions from our mainframe and enterprise software solutions and favorable product mix within our semiconductor solutions segment, compared to the prior fiscal year, partially offset by higher amortization of acquisition-related intangible assets and restructuring charges as a result of the CA Merger and higher stock-based compensation expense.

Research and Development Expense

Research and development expense increased $466 million , or 14% , in fiscal year 2018.

Research and development expense remained relatively flat as a percentage of net revenue at 18% and 19% for fiscal years 2018 and 2017, respectively.

The increase in research and development expense dollars for fiscal year 2018 was primarily due to the acquisition of Brocade, higher stock-based compensation expense, and higher variable employee compensation expense due to fiscal year 2018 operating performance.

Stock-based compensation expense was higher in fiscal year 2018 primarily due to annual employee equity awards granted at higher grant-date fair values.

Research and development expense increased $928 million, or 25%, in fiscal year 2019, compared to the prior fiscal year.

Research and development expense as a percentage of net revenue was 21% and 18% for fiscal years 2019 and 2018, respectively.

The increase was primarily due to the CA Merger and higher stock-based compensation expense, offset by lower variable employee compensation expense.

Stock-based compensation expense increased primarily due to the issuance of the multi-year equity grants of time- and market-based RSUs (the “Multi-Year Equity Awards”) in the first quarter of fiscal year 2019, the impact of the change from annual to quarterly vesting of equity awards and the assumed CA equity awards.

Selling, General and Administrative Expense

Selling, general and administrative expense increased $267 million , or 34% , in fiscal year 2018.

Selling, general and administrative expense as a percentage of net revenue remained relatively flat at 5% and 4% for fiscal years 2018 and 2017, respectively.

The increase in selling, general and administrative expense dollars for fiscal year 2018 was primarily due to the acquisition of Brocade and associated acquisition-related costs, as well as higher stock-based compensation expense.

Stock-based compensation expense was higher in fiscal year 2018 primarily due to annual employee equity awards granted at higher grant-date fair values.

Selling, general and administrative expense increased $653 million, or 62%, in fiscal year 2019, compared to the prior fiscal year.

Selling, general and administrative expense as a percentage of net revenue was 8% and 5% for fiscal years 2019 and 2018, respectively.

The increase was primarily due to the CA Merger and higher stock-based compensation expense.

Amortization of Acquisition-Related Intangible Assets

Amortization of acquisition-related intangible assets recognized in operating expenses decreased $1,223 million , or 69% , in fiscal year 2018.

The decrease was primarily due to the full amortization of certain intangible assets acquired as part of our acquisition of Broadcom Corporation, partially offset by the addition of amortization of intangible assets acquired in the Brocade Merger.

Amortization of acquisition-related intangible assets recognized in operating expenses increased $1,357 million, or 251%, in fiscal year 2019, compared to the prior fiscal year.

The increase was primarily due to the addition of amortization of intangible assets acquired in the CA Merger.

Restructuring, Impairment and Disposal Charges

Restructuring, impairment and disposal charges included in operating expenses increased $58 million , or 36% , in fiscal year 2018 .

The increase was primarily due to an increase in restructuring activities resulting from the Brocade Merger, partially offset by a decrease in restructuring activities resulting from our acquisition of Broadcom Corporation.

Litigation Settlements

During fiscal years 2018 and 2017, we incurred $14 million and $122 million of litigation charges, respectively, associated with certain legal settlement agreements.

Restructuring, impairment and disposal charges included in operating expenses increased $517 million, or 236%, in fiscal year 2019, compared to the prior fiscal year .

The increase was primarily due to employee termination costs, as well as lease and other exit costs resulting from the CA Merger.

Segment Operating Results

Fiscal Year Ended

Operating Income by Segment

November 4, 2018

October 29, 2017

Operating Income by Segment November 3, 2019 November 4, 2018 $ Change % Change

(In millions, except for percentages)

3 unchanged sentences

Total operating income $ 3,444 $ 5,135 $ (1,691) (33) %

Operating income from our semiconductor solutions segment increased due to an increase in our wireless content in handsets, as well as a later than typical new handset ramp with a major customer, which resulted in higher shipments in fiscal year 2018.

Additionally, we experienced an increase in demand for our networking ASIC products.

These increases were partially offset by a decrease in demand for our set-top box and optical products.

Operating income from our infrastructure software segment increased primarily due to contributions from our FC SAN business.

Unallocated expenses include amortization of acquisition-related intangible assets, stock-based compensation expense, restructuring, impairment and disposal charges, acquisition-related costs, charges for litigation settlements, and other costs that are not used in evaluating the results of, or in allocating resources to, our segments.

Unallocated expenses decreased 6% in fiscal year 2018 primarily due to decreases in amortization of acquisition-related intangible assets and charges for litigation settlements, substantially offset by increases in stock-based compensation expense, acquisition-related costs, purchase accounting effect on inventory, and restructuring, impairment and disposal charges.

Operating income from our infrastructure software segment increased primarily due to contributions from our mainframe and enterprise software solutions.

Unallocated expenses include amortization of acquisition-related intangible assets;

stock-based compensation expense;

acquisition-related costs;

restructuring, impairment and disposal charges;

and other costs that are not used in evaluating the results of, or in allocating resources to, our segments.

Unallocated expenses increased 61% in fiscal year 2019, compared to the prior fiscal year, primarily due to higher amortization of acquisition-related intangible assets, stock-based compensation expense, and restructuring, impairment and disposal charges primarily related to the CA Merger.

Non-Operating Income and Expenses

1 unchanged sentence

Interest expense was $1,444 million and $628 million for fiscal years 2019 and 2018, respectively.

Interest expense was higher in fiscal year 2018 primarily due to the October 2017 issuance of unsecured senior notes, as well as debt commitment fees paid in connection with the Brocade Merger.

Impairment on investment.

We recognized $106 million in fiscal year 2018 for an other than temporary impairment of one of our cost method investments.

Loss on extinguishment of debt.

Loss on extinguishment of debt was $166 million for fiscal year 2017.

We issued senior unsecured notes in January 2017 to repay all of the term loans outstanding under our guaranteed, collateralized credit agreement dated February 1, 2016.

As a result, we wrote-off $166 million of debt issuance costs.

Interest expense was higher in fiscal year 2019 primarily due to interest on the debt we incurred to finance the CA Merger in the first quarter of fiscal year 2019.

Other income, net.

Other income, net was $226 million and $144 million in fiscal years 2019 and 2018, respectively.

The increase was primarily due to increases in interest income and gains on foreign currency remeasurement.

Provision for (benefit from) income taxes.

Our benefit from income taxes was $8,084 million for fiscal year 2018, compared to a provision for income taxes of $35 million for fiscal year 2017.

The benefit from income taxes in fiscal year 2018 was primarily due to the income tax benefits recognized from the enactment of the 2017 Tax Reform Act and the Redomiciliation Transaction.

The provision for income taxes in fiscal year 2017 was primarily due to an increase in profit before tax and a discrete expense of $76 million resulting from entity reorganizations, partially offset by the recognition of $273 million of excess tax benefits from stock-based equity awards that vested or were exercised during fiscal year 2017 and, to a lesser extent, the recognition of previously unrecognized tax benefits primarily as a result of audit settlements.

The increase was primarily due to an increase in unrealized gains on investments partially offset by losses on foreign currency remeasurement.

Benefit from income taxes.

Benefit from income taxes was $510 million and $8,084 million for fiscal years 2019 and 2018, respectively.

The benefit from income taxes in fiscal year 2019 was primarily due to excess benefit from stock-based awards, the recognition of gross unrecognized tax benefits as a result of audit settlements and lapses of statutes of limitations net of increases in balances related to tax positions taken during the current year, benefit from deferred tax measurement in state and foreign jurisdictions, benefit related to internal reorganizations, and benefit from the partial release of our valuation allowance as a result of the CA Merger, partially offset from a change in estimate of our fiscal year 2018 provision resulting from regulations issued related to the 2017 Tax Reform Act.

The benefit from income taxes in fiscal year 2018 was primarily due to income tax benefits recognized from the enactment of the 2017 Tax Reform Act and as a result of our redomiciliation to the United States on April 4, 2018.

Liquidity and Capital Resources

3 unchanged sentences

Our primary sources of liquidity as of November 1, 2020 consisted of:

(i) $5,055 million in cash and cash equivalents, (ii) cash we expect to generate from operations, (iii) available capacity under our $5 billion revolving credit facility (the “Revolving

Facility”), and (iv) available capacity under our $2 billion commercial paper program.

(i) $7,618 million in cash and cash equivalents, (ii) cash we expect to generate from operations and (iii) available capacity under our $5 billion unsecured revolving credit facility (the “Revolving Facility”).

In addition, we may also generate cash from the sale of assets and debt or equity financing from time to time.

Our short-term and long-term liquidity requirements primarily arise from:

(i) business acquisitions and investments we may make from time to time, (ii) working capital requirements, (iii) research and development and capital expenditure needs, (iv) cash dividend payments (if and when declared by the Board of Directors), (v) interest and principal payments related to outstanding indebtedness and (vi) payment of income taxes.

Beginning April 2018, we settle withholding tax amounts due upon vesting of compensatory equity awards using cash on hand, and withholding from the grant recipient that number of shares having a value equivalent to the withholding tax amount (“Tax Shares”).

This net settlement method reduces the dilutive effects of such awards as they vest.

Previously, the Tax Shares were issued and mandatorily sold into the market, and the cash proceeds were used to pay such withholding tax amounts.

This change results in an increased use of our cash as our outstanding equity awards vest.

(i) business acquisitions and investments we may make from time to time, (ii) working capital requirements, (iii) research and development and capital expenditure needs, (iv) cash dividend payments (if and when declared by our Board of Directors), (v) interest and principal payments related to our outstanding indebtedness and (vi) payment of income taxes.

Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and, therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control.

Our capital expenditures for fiscal year 2019 were lower than fiscal year 2018 , due primarily to the completion of construction at our Irvine and San Jose campuses.

We expect capital expenditures to be higher in fiscal year 2020 as compared to fiscal year 2019 due to the Symantec Asset Purchase on November 4, 2019.

Our debt and liquidity needs increased as a result of completing the Symantec Asset Purchase.

We funded $10.7 billion of cash consideration needed for that transaction with debt financing.

We believe that our cash and cash equivalents on hand, cash flows from operations, and the Revolving Facility will provide sufficient liquidity to operate our business and fund our current and assumed obligations for at least the next 12 months.

We expect a slight increase in capital expenditures in fiscal year 2021 as compared to fiscal year 2020.

From time to time, we engage in discussions with third parties regarding potential acquisitions of, or investments in, businesses, technologies and product lines.

3 unchanged sentences

However, we cannot assure you that such additional financing will be available on terms acceptable to us or at all.

Our ability to service our senior unsecured notes and outstanding term loans (including those we borrowed to fund our acquisition of the Symantec Business) and any other indebtedness we may incur will depend on our ability to generate cash in the future.

Our ability to service our senior unsecured notes, outstanding term loans and any other indebtedness we may incur will depend on our ability to generate cash in the future.

We may also elect to sell additional debt or equity securities for reasons other than those specified above.

In addition, we may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash tenders and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise.

Such tenders, exchanges or purchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

The amounts involved may be material.

Working Capital

Working capital increased to $5,524 million at November 1, 2020 from $3,018 million at November 3, 2019.

The increase was attributable to the following:

• Cash and cash equivalents increased to $7,618 million at November 1, 2020 from $5,055 million at November 3, 2019, primarily due to $27,802 million in proceeds from long-term borrowings, $12,061 million in net cash provided by operating activities, and $218 million in proceeds from the sales of businesses, partially offset by $20,099 million of debt repayments, $10,700 million paid for the Symantec Asset Purchase, $5,534 million of dividend payments and $765 million in payments of employee withholding taxes related to net share settled equity awards.

See the “Cash Flows” section below for further details.

• Current portion of long-term debt decreased $1,960 million primarily due to repayment of certain debt, partially offset by additional amounts coming due within twelve months.

• Other current assets increased to $977 million at November 1, 2020 from $729 million at November 3, 2019, primarily due to increases in prepaid taxes and short-term investments.

• Inventory increased to $1,003 million at November 1, 2020 from $874 million at November 3, 2019, primarily due to timing of customer product ramps.

These increases in working capital were offset in part by the following:

• Other current liabilities increased to $3,831 million at November 1, 2020 from $2,616 million at November 3, 2019, primarily due to increases in contract liabilities, interest payable, taxes payable, and lease liabilities resulting from the adoption of Accounting Standard Codification Topic 842 (“Topic 842”), partially offset by repayments of notional pooling liabilities.

• Accounts receivable decreased to $2,297 million at November 1, 2020 from $3,259 million at November 3, 2019, primarily due to revenue linearity and additional receivables sold through factoring arrangements.

• Employee compensation and benefits increased to $877 million at November 1, 2020 from $641 million at November 3, 2019, primarily due to the employee bonus plan.

Working capital decreased to $3,018 million at November 3, 2019 from $6,769 million at November 4, 2018.

3 unchanged sentences

• Current portion of long-term debt increased $2,787 million primarily due to certain unsecured senior notes becoming due within the next twelve months.

Other current liabilities increased to $2,616 million at November 3, 2019 from $812 million at November 4, 2018 primarily due to the CA Merger and increases in contract liabilities from adoption of Accounting Standard Codification Topic 606 (“Topic 606”), notional pooling liabilities, restructuring reserves, taxes payable and interest payable.

• Other current liabilities increased to $2,616 million at November 3, 2019 from $812 million at November 4, 2018, primarily due to the CA Merger and increases in contract liabilities from the adoption of Topic 606, notional pooling liabilities, restructuring reserves, taxes payable and interest payable.

These decreases in working capital were offset in part by the following:

Cash and cash equivalents increased to $5,055 million at November 3, 2019 from $4,292 million at November 4, 2018 primarily due to $30,034 million in proceeds from borrowings, $9,697 million in net cash provided by operating activities, $3,679 million of Mandatory Convertible Preferred Stock issuance proceeds and $957 million in proceeds from sale of Veracode, partially offset by $16,800 million of debt repayments, $16,027 million paid for the CA Merger, $5,435 million of common stock repurchases, $4,235 million of dividend payments, and $972 million in payments of employee withholding taxes related to net share settled equity awards.

• Cash and cash equivalents increased to $5,055 million at November 3, 2019 from $4,292 million at November 4, 2018 primarily due to $30,034 million in proceeds from long-term borrowings, $9,697 million in net cash provided by operating activities, $3,679 million of Mandatory Convertible Preferred Stock issuance proceeds and $957 million in proceeds from sale of Veracode, partially offset by $16,800 million of debt repayments, $16,027 million paid for the CA Merger, $5,435 million of common stock repurchases, $4,235 million of dividend payments, and $972 million in payments of employee withholding taxes related to net share settled equity awards.

See the “Cash Flows” section below for further details.

• Other current assets increased to $729 million at November 3, 2019 from $366 million at November 4, 2018, primarily due to assets acquired in the CA Merger and increases in contract assets from adoption of Topic 606 and prepaid taxes.

Working capital decreased to $6,769 million at November 4, 2018 from $13,294 million at October 29, 2017.

The decrease was attributable to the following:

Cash and cash equivalents decreased to $4,292 million at November 4, 2018 from $11,204 million at October 29, 2017 largely due to $7,258 million of common stock repurchases, $4,780 million paid for the Brocade Merger and $2,998 million of dividend and distribution payments, partially offset by $8,880 million in net cash provided by operating activities.

See the “Cash Flows” section below for further details.

Inventory decreased to $1,124 million at November 4, 2018 from $1,447 million at October 29, 2017, due to the timing of a major customer's new handset ramp and our continued focus on inventory management.

Other current assets decreased to $366 million at November 4, 2018 from $724 million at October 29, 2017, primarily due to lower prepaid expenses, lower prepaid taxes as a result of the 2017 Tax Reform Act, and collection of other receivables.

Other current liabilities increased to $812 million at November 4, 2018 from $681 million at October 29, 2017, primarily due to higher deferred revenue associated with the Brocade Merger.

These decreases in working capital were offset in part by the following:

Accounts receivable increased to $3,325 million at November 4, 2018 from $2,448 million at October 29, 2017, primarily due to higher volume and revenue linearity.

Accounts payable decreased to $811 million at November 4, 2018 from $1,105 million at October 29, 2017, primarily due to timing of vendor payments.

Current portion of long-term debt decreased $117 million due to repayment of certain unsecured senior notes assumed in the acquisition of Broadcom Corporation.

Capital Returns

During fiscal year 2019 , we repurchased and retired approximately 21 million shares of our common stock at a weighted average price of $258.52 under an $18 billion stock repurchase program previously authorized by our Board of Directors.

During fiscal year 2018 , we repurchased and retired approximately 32 million shares of our common stock at a weighted average price of $227.60 under this stock repurchase program.

This authorization ended on November 3, 2019.

Fiscal Year Ended

November 3, 2019

November 4, 2018

October 29, 2017

(In millions, except per share data)

Cash dividends and distributions declared and paid per share/unit

Cash dividends and distributions declared and paid

Cash Dividends and Distributions Declared and Paid November 1, 2020 November 3, 2019 November 4, 2018

(In millions, except per share/unit data)

Dividends per share to common stockholders $ 13.00 $ 10.60 $ 7.00

Dividends to common stockholders $ 5,235 $ 4,235 $ 2,921

Dividends per share to preferred stockholders $ 80.00 $ — $ —

Dividends to preferred stockholders $ 299 $ — $ —

Distributions per unit to limited partners $ — $ — $ 3.50

Distributions to limited partners $ — $ — $ 77

Stock repurchases $ — $ 5,435 $ 7,258

In addition, during fiscal years 2019 and 2018 , we paid approximately $972 million and $56 million , respectively, in employee withholding taxes due upon the vesting of, and related to net settled equity awards.

We withheld approximately 4 million and 0.2 million shares of common stock from employees in fiscal years 2019 and 2018 , respectively, in connection with such net share settlements.

During fiscal years 2020, 2019 and 2018, we paid approximately $765 million, $972 million and $56 million, respectively, in employee withholding taxes due upon the vesting of net settled equity awards.

We withheld approximately 3 million, 4 million and 0.2 million shares of common stock from employees in connection with such net share settlements in fiscal years 2020, 2019 and 2018, respectively.

Pursuant to an $18 billion stock repurchase program previously authorized by our Board of Directors, we repurchased and retired approximately 21 million and 32 million shares of our common stock at a weighted average price of $258.52 and $227.60 during fiscal years 2019 and 2018, respectively.

This authorization ended on November 3, 2019.

Fiscal Year Ended

November 3, 2019

November 4, 2018

October 29, 2017

November 1, 2020 November 3, 2019 November 4, 2018

(In millions)

4 unchanged sentences

Operating Activities

Cash provided by operating activities consisted of net income adjusted for certain non-cash items and changes in assets and liabilities.

The $817 million increase in cash provided by operations during fiscal year 2019 compared to fiscal year 2018 was primarily due to the adjustments to net income for non-cash items and increases in working capital, partially offset by the decrease in net income.

Non-cash adjustments to net income for fiscal year 2019 as compared to fiscal year 2018 primarily included a decrease in benefits from deferred taxes and other non-cash taxes and increases in amortization of intangible assets, stock-based compensation, and non-cash restructuring, impairment and disposal charges, partially offset by a decrease in impairment of investment.

The $2,329 million increase in cash provided by operations during fiscal year 2018 compared to fiscal year 2017 was due to the impact of net income, partially offset by adjustments to net income for non-cash items.

Net income for fiscal year 2018 reflected an income tax benefit of $8,084 million principally resulting from the enactment of the 2017 Tax Reform Act and the impact from the Redomiciliation Transaction and related internal reorganizations.

This benefit was primarily non-cash, resulting in a significant adjustment to net income, and was included in the deferred taxes and other non-cash taxes line in the consolidated statement of cash flows for fiscal year 2018.

Other non-cash adjustments to net income for fiscal year 2018 as compared to fiscal year 2017 primarily included decreases in amortization of intangible assets and the non-cash portion of the debt extinguishment loss, partially offset by increases in stock-based compensation and impairment of investment.

Cash provided by operating activities consisted of net income adjusted for certain non-cash and other items and changes in assets and liabilities.

The $2,364 million increase in cash provided by operations during fiscal year 2020 compared to fiscal year 2019 was due to higher cash flows from net income adjusted for non-cash items and changes in the operating assets and liabilities.

The $817 million increase in cash provided by operations during fiscal year 2019 compared to fiscal year 2018 was primarily due to changes in operating assets and liabilities.

Cash flows from net income adjusted for non-cash items were relatively flat as higher net income in fiscal year 2018 reflected a significant non-cash income tax benefit, principally resulting from the enactment of the 2017 Tax Reform Act and the impact from our redomiciliation to the United States in fiscal year 2018.

Investing Activities

Cash used in investing activities primarily consisted of cash used for acquisitions, capital expenditures and investments, partially offset by proceeds from sales of businesses and assets.

Cash flows from investing activities primarily consisted of cash used for acquisitions, capital expenditures and investments, and proceeds from sales of businesses and assets.

The $4,313 million decrease in cash used in investing activities for fiscal year 2020 compared to fiscal year 2019 was primarily related to a $5,161 million decrease in cash paid for acquisitions, partially offset by $739 million less in proceeds received from sales of businesses.

The $10,748 million increase in cash used in investing activities for fiscal year 2019 compared to fiscal year 2018 was primarily related to $16,027 million paid for the CA Merger in fiscal year 2019, partially offset by proceeds from sales of businesses as well as lower capital expenditures.

The $4,000 million increase in cash used in investing activities for fiscal year 2018 compared to fiscal year 2017 was primarily related to $4,780 million paid for the Brocade Merger in fiscal year 2018, partially offset by proceeds from sales of businesses as well as lower capital expenditures.

Financing Activities

Cash provided by (used in) financing activities primarily consisted of net proceeds and payments related to our long-term debt, dividend and distribution payments, stock repurchases, and the issuances of common stock pursuant to our employee equity incentive plans.

The $17,606 million increase in cash related to financing activities for fiscal year 2019 compared to fiscal year 2018 was primarily due to a $14,207 million increase in net proceeds from borrowings, net proceeds of $3,679 million from issuance of preferred stock, and a $1,823 million decrease in common stock repurchases, partially offset by a $1,237 million increase in dividend and distribution payments and a $916 million increase in employee withholding taxes related to net share settled equity awards.

The $13,348 million increase in cash used in financing activities for fiscal year 2018 compared to fiscal year 2017 was primarily due to $7,258 million of stock repurchases, an increase in dividend and distribution payments and the repayment of debt.

Cash flows from financing activities primarily consisted of net proceeds and payments related to our long-term borrowings, dividend and distribution payments, stock repurchases and the issuances of stock.

The $4,877 million decrease in cash provided by financing activities for fiscal year 2020 compared to fiscal year 2019 was primarily due to a $5,531 million decrease in net proceeds from borrowings as a result of debt repayments, the absence of preferred stock issuance which generated $3,679 million net proceeds in fiscal year 2019 and a $1,299 million increase in dividend payments, partially offset by the absence of repurchases of common stock under our repurchase program, which ended in fiscal year 2019, as compared to $5,435 million of repurchases in fiscal year 2019.

The $17,606 million increase in cash related to financing activities for fiscal year 2019 compared to fiscal year 2018 was primarily due to a $14,207 million increase in net proceeds from borrowings, net proceeds of $3,679 million from issuance of preferred stock and a $1,823 million decrease in common stock repurchases under our repurchase program, partially offset by a $1,237 million increase in dividend and distribution payments and a $916 million increase in employee withholding tax payments related to net settled equity awards.

“Borrowings” included in Part II, Item 8.

of this Annual Report on Form 10-K.

Summarized Obligor Group Financial Information

Pursuant to the indentures dated May 21, 2020, May 8, 2020, April 9, 2020, and April 5, 2019 (collectively, the “2020 and 2019 Indentures”), Broadcom issued $3,917 million, $8,000 million, $4,500 million, and $11,000 million aggregate principal amount of notes, respectively (collectively, the “2020 and 2019 Senior Notes”).

Substantially all of the 2020 and 2019 Senior Notes have been registered with the SEC in connection with an exchange offer that completed on August 10, 2020.

We may redeem all or a portion of our 2020 and 2019 Senior Notes at any time prior to their maturity, subject to a specified make-whole premium as set forth in the indentures governing the respective notes.

In the event of a change of control triggering event, holders of our 2020 and 2019 Senior Notes will have the right to require us to purchase for cash, all or a portion of their respective notes at a redemption price of 101% of the aggregate principal amount plus accrued and unpaid interest.

The 2020 and 2019 Indentures also contain covenants that restrict, among other things, the ability of Broadcom and its subsidiaries to incur certain secured debt and to consummate certain sale and leaseback transactions and restrict the ability of the Obligor Group, as defined below, to merge, consolidate or sell all or substantially all of their assets.

Broadcom Corporation (“BRCM”) and Broadcom Technologies Inc.

(“BTI”), 100%-owned subsidiaries of Broadcom (Broadcom, BRCM and BTI collectively, the “Obligor Group”), fully and unconditionally guarantee, jointly and severally, on an unsecured, unsubordinated basis, the 2020 and 2019 Senior Notes.

The guarantee by BRCM and BTI will be automatically and unconditionally released upon the sale, exchange, disposition or other transfer of all or substantially all of the assets of such guarantor if any of these events occurs in compliance with the respective indentures.

The guarantee by BRCM and BTI will also be automatically and unconditionally released if at any time the aggregate principal amount of indebtedness issued, borrowed or guaranteed by BRCM and BTI constitutes no more than 20% of the aggregate principal amount of indebtedness for borrowed money of Broadcom and its subsidiaries on a consolidated basis.

Pursuant to indentures dated January 19, 2017 and October 17, 2017 (collectively, the “2017 Indentures”), Broadcom Cayman Finance Limited (subsequently merged into BTI during fiscal year 2019 with BTI remaining as the surviving entity) and BRCM (BRCM and BTI collectively, the “2017 Senior Notes Co-Issuers”) issued $13,550 million and $4,000 million aggregate principal amount of notes, respectively (collectively, the “2017 Senior Notes”).

Substantially all of the 2017 Senior Notes have been registered with the SEC.

We may redeem all or a portion of our 2017 Senior Notes at any time prior to their maturity, subject to a specified make-whole premium as set forth in the 2017 Indentures.

In the event of a change of control triggering event, holders of our 2017 Senior Notes will have the right to require us to purchase for cash, all or a portion of their 2017 Senior Notes at a redemption price of 101% of the aggregate principal amount plus accrued and unpaid interest.

The 2017 Indentures also contain covenants that restrict, among other things, the ability of Broadcom and its subsidiaries to incur certain secured debt and to consummate certain sale and leaseback transactions and restrict the ability of Broadcom and the 2017 Senior Notes Co-Issuers to merge, consolidate or sell all or substantially all of their assets.

Broadcom and BTI fully and unconditionally guarantee, jointly and severally, on an unsecured, unsubordinated basis, the 2017 Senior Notes.

Because the guarantees are not secured, they are effectively subordinated to any existing and future secured indebtedness of the guarantors to the extent of the value of the collateral securing that indebtedness.

The guarantee by Broadcom and BTI will be automatically and unconditionally released upon the sale, exchange, disposition or other transfer of all or substantially all of the assets of such guarantor if any of these events occurs in compliance with the 2017 Indentures.

The guarantee by Broadcom (1) will also be automatically and unconditionally released at such time as:

(A) the 2017 Senior

Notes Co-Issuers, in their sole discretion, determine that such guarantee is no longer required by Rule 3-10(a), as applicable, of Regulation S-X to except the 2017 Senior Notes Co-Issuers’ financial statements from being required to be filed pursuant to Rule 3-10(a) of Regulation S-X or otherwise facilitate a reduction in its financial reporting obligations or (B) either of the 2017 Senior Notes Co-Issuers becomes subject to Section 13 or 15(d) of the Exchange Act and (2) may, at the election of the 2017 Senior Notes Co-Issuers, be unconditionally released at such time as Broadcom is eligible to suspend its reporting obligation under the Exchange Act.

The following tables set forth the summarized financial information of the Obligor Group on a combined basis.

This summarized financial information excludes any subsidiaries that are not issuers or guarantors (the “Non-Obligor Group”).

Intercompany balances and transactions between members of the Obligor Group have been eliminated.

Summarized Balance Sheets November 1,

(In millions)

Current assets:

Amount due from Non-Obligor Group $ 1,889

Other current assets 4,091

Total current assets $ 5,980

Long-term assets:

Amount due from Non-Obligor Group, long-term $ 8,220

Goodwill 1,360

Other long-term assets 1,318

Total long-term assets $ 10,898

Current liabilities:

Amount due to Non-Obligor Group $ 7,147

Current portion of long-term debt 807

Other current liabilities 601

Total current liabilities $ 8,555

Long-term liabilities:

Amount due to Non-Obligor Group, long-term $ —

Long-term debt 39,311

Other long-term liabilities 2,477

Total long-term liabilities $ 41,788

Fiscal Year Ended

Summarized Statement of Operations November 1,

(In millions)

Intercompany revenue with Non-Obligor Group $ 1,683

Gross margin $ 1,524

Loss from continuing operations (a)

Net loss $ (1,985)

_________________________________

(a) Included $706 million of net income from the Non-Obligor Group related to intercompany transactions.

Contractual Commitments

Payments Due by Period

Less than 1 year

More than 5 years

Total Less than 1 year 1-3 years 3-5 years More than 5 years

(In millions)

2 unchanged sentences

Other contractual commitments 1,137 248 430 220 239

Operating lease obligations

Operating lease and finance lease obligations 845 141 212 136 356

Total $ 54,255 $ 3,569 $ 8,422 $ 13,478 $ 28,786

Debt Principal, Interest and Fees.

Represents principal, estimated interest and fees on borrowings.

Represents principal, estimated interest and fees on our borrowings.

For borrowings subject to a floating interest rate, the estimated interest was based on the rate in effect during the last month of the fiscal year ended November 1, 2020.

2 unchanged sentences

Purchase obligations exclude agreements that are cancelable without penalty.

Cancellation for outstanding purchase orders for capital expenditures in connection with the internal fabrication facility expansion and construction of our new campuses is generally allowed but requires payment of all costs incurred through the date of cancellation and, therefore, cancelable purchase orders for these capital expenditures are included in the table above.

Cancellation for outstanding purchase orders for capital expenditures in connection with construction of our new campuses is generally allowed but requires payment of all costs incurred through the date of cancellation and, therefore, cancelable purchase orders for these capital expenditures are included in the table above.

Other Contractual Commitments.

Represents amounts payable pursuant to agreements related to information technology, human resources, financial infrastructure outsourcing services and other service agreements.

Operating Lease Obligations.

Represents real property and equipment leased from third parties under non-cancelable operating leases.

Represents amounts payable pursuant to agreements related to information technology, human resources, and other service agreements.

Operating Lease and Finance Lease Obligations .

Represents real property and equipment leased from third parties under non-cancelable leasing arrangements.

Due to the inherent uncertainty with respect to the timing of future cash outflows associated with our unrecognized tax benefits at November 1, 2020, we are unable to reliably estimate the timing of cash settlement with the respective taxing authority.

3 unchanged sentences

Indemnifications

See Note 13 .

“Commitments and Contingencies” in Part II, Item 8 of this Form 10-K.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis