$367 million, and recognized related income tax of approximately $94 million. During 1999, the Company sold a total of 163 million shares of ARM stock for net proceeds of approximately $245 million, recorded a gain before taxes of approximately $230 million, and recognized related income tax of approximately $25 million.

During 1998, ARM completed an initial public offering of its stock on the London Stock Exchange and the NASDAQ National Market. The Company sold 18.9% of the shares it held in ARM at that time for a gain before foreign taxes of approximately $24 million. The Company also recognized during 1998 other income of approximately $16 million to reflect its remaining 25.9% ownership interest in the increased net book value of ARM following its initial public offering.

Further information related to the Company's investment in ARM and gains recognized related to that investment may be found in Part II, Item 8 of this Form 10-K at Note 2 of Notes to Consolidated Financial Statements, which information is hereby incorporated by reference.

PROVISION FOR INCOME TAXES

As of September 30, 2000, the Company had deferred tax assets arising from deductible temporary differences, tax losses, and tax credits of $466 million before being offset against certain deferred tax liabilities for presentation on the Company's balance sheet. This asset is generally realizable based on the ability to offset existing deferred tax liabilities. As of September 30, 2000, a valuation allowance of $33 million was recorded against the deferred tax asset for the benefits of tax losses that may not be realized. The valuation allowance relates principally to the operating loss carryforwards acquired from NeXT, the utilization of which is subject to certain limitations imposed by the Internal Revenue Code. The Company will continue to evaluate the realizability of the deferred tax assets quarterly by assessing the need for and amount of the valuation allowance. The Company's effective tax rate for 2000 was 28% compared to the higher statutory rate due primarily to the reversal of a portion of the previously established valuation allowance and certain undistributed foreign earnings for which no U.S. taxes were provided.

The Internal Revenue Service (IRS) has proposed federal income tax deficiencies for the years 1984 through 1991, and the Company has made certain prepayments thereon. The Company contested the proposed deficiencies by filing petitions with the United States Tax Court, and most of the issues in dispute have now been resolved. On June 30, 1997, the IRS proposed income tax adjustments for the years 1992 through 1994. Although most of the issues for these years have been resolved, certain issues still remain in dispute and are being contested by the Company. Management believes adequate provision has been made for any adjustments that may result from tax examinations.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, Statement of Financial Accounting 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