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Software giant Microsoft sells its products worldwide through more than 10,000 distributors or partners. For the most part, these firms are billed in U.S. dollars, although they sell in their local currencies. That difference creates a currency risk, one that can literally bankrupt a distributor. Large distributors like Dell, of course, have sophisticated foreign exchange hedging programs that limit the risk of a currency’s sharp devaluation. Smaller firms are a different story. “Last year, when there was a major dollar rally, some smaller distributors were literally selling our product at a loss,” says Microsoft treasurer George Zinn. “They were underwater on the trade. If they go under, we then have to write off the uncollectible accounts receivable.”

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