Note 5: Available-for-Sale Investments

top

Available-for-sale investments as of December 27, 2008 and December 29, 2007 were as follows:

		2008												2007
(In Millions)		Adjusted Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value			Adjusted Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
Floating-rate notes		$	6,321		$	3		$	(127)		$	6,197		$	6,254		$	3		$	(31)		$	6,226
Commercial paper			2,329			3			—			2,332			4,981			—			—			4,981
Non-U.S. government securities			816			1			—			817			118			—			—			118
Bank time deposits(1)			606			2			—			608			1,891			1			—			1,892
Corporate bonds			488			4			(12)			480			610			2			(8)			604
Money market fund deposits			419			—			—			419			1,824			1			—			1,825
Marketable equity securities			393			2			(43)			352			421			616			(50)			987
Asset-backed securities			374			—			(43)			331			937			—			(23)			914
Domestic government securities			159			—			—			159			121			—			—			121
Repurchase agreements			—			—			—			—			150			—			—			150
Total available-for-sale investments		$	11,905		$	15		$	(225)		$	11,695		$	17,307		$	623		$	(112)		$	17,818

(In Millions)		2008 Carrying Amount			2007 Carrying Amount
Available-for-sale investments		$	11,695		$	17,818
Investments in loan participation notes (cost basis)			20			111
Cash on hand			242			253
Total		$	11,957		$	18,182

Reported as (In Millions)		2008			2007
Cash and cash equivalents		$	3,350		$	7,307
Short-term investments			5,331			5,490
Marketable equity securities			352			987
Other long-term investments			2,924			4,398
Total		$	11,957		$	18,182

(1)	Bank time deposits were primarily issued by institutions outside the U.S. in 2008 and 2007.

During the fourth quarter of 2008, Clearwire Corporation and Sprint Nextel Corporation combined their respective WiMAX businesses in conjunction with additional capital contributions from Intel and other investors to form a new company that retained the name Clearwire Corporation. The additional capital contributions included our cash investment of $1.0 billion. Our pre-existing investment in Clearwire Corporation (old Clearwire Corporation) was converted into shares of the new company (new Clearwire Corporation) and the additional capital contribution of $1.0 billion was invested in Clearwire Communications, LLC (Clearwire LLC), a wholly owned subsidiary of the new Clearwire Corporation. Our investment in the new Clearwire Corporation is accounted for as an available-for-sale investment and included in marketable equity securities. Our investment in Clearwire LLC is accounted for under the equity method and included within other long-term assets. As a result of the formation of the new Clearwire Corporation, our total ownership percentage decreased from 22% to 13%, resulting in a loss upon dilution of $34 million, which we recorded to gains (losses) on equity method investments, net. For further discussion of our equity method investment in Clearwire LLC, see "Note 6: Equity Method and Cost Method Investments."

We sold available-for-sale investments, primarily marketable debt instruments, for proceeds of approximately $1.2 billion in 2008. The gross realized gains on sales of available-for-sale investments totaled $38 million and were primarily related to our sales of marketable equity securities. Impairment charges recognized on available-for-sale investments were $354 million in 2008. The impairment charges in 2008 were primarily related to a $176 million impairment charge on our investment in the new Clearwire Corporation and $97 million of impairment charges on our investment in Micron Technology, Inc. Gross realized losses on sales were insignificant during 2008.

We sold available-for-sale investments for proceeds of approximately $1.7 billion in 2007 and $2.0 billion in 2006. The gross realized gains on our sales totaled $138 million in 2007 and $135 million in 2006. The gain in 2006 included a gain of $103 million from the sale of a portion of our investment in Micron. We realized gains on third-party merger transactions that were insignificant during 2007 and $79 million during 2006. Our recognized impairment charges on available-for-sale investments as well as gross realized losses on sales were insignificant during 2007 and 2006.

The available-for-sale investments that were in a continuous unrealized loss position as of December 27, 2008, aggregated by length of time that individual securities have been in a continuous loss position, were as follows:

		Less than 12 Months						12 Months or Greater						Total
(In Millions)		Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value
Floating-rate notes		$	(67)		$	2,771		$	(60)		$	1,651		$	(127)		$	4,422
Marketable equity securities		$	(43)		$	322		$	—		$	—		$	(43)		$	322
Asset-backed securities			—			—			(43)			312			(43)			312
Corporate bonds			(4)			168			(8)			127			(12)			295
Total		$	(114)		$	3,261		$	(111)		$	2,090		$	(225)		$	5,351

The available-for-sale investments in a continuous unrealized loss position as of December 29, 2007 were as follows:

		Less than 12 Months(1)
(In Millions)		Gross Unrealized Losses			Fair Value
Floating-rate notes		$	(31)		$	4,626
Asset-backed securities			(23)			914
Corporate bonds			(8)			157
Marketable equity securities			(50)			129
Total		$	(112)		$	5,826

(1)	Investments that were in a continuous unrealized loss position for 12 months or greater were not significant as of December 29, 2007.

As of December 27, 2008, the unrealized losses on our available-for-sale investments represented an insignificant amount in relation to our total available-for-sale portfolio. Substantially all of our unrealized losses on our available-for-sale marketable debt instruments can be attributed to fair value fluctuations in an unstable credit environment that resulted in a decrease in the market liquidity for debt instruments. As of December 27, 2008, a substantial majority of our available-for-sale investments in asset-backed securities in an unrealized loss position were rated AA-/Aa2 or better, and the majority of our available-for-sale investments in floating-rate notes and corporate bonds in an unrealized loss position were rated AA-/Aa2 or better. With the exception of a limited amount of investments for which we have recognized other-than-temporary impairments, we have not seen significant liquidation delays, and for those that have matured we have received the full par value of our original debt investments. We have the intent and ability to hold our debt investments that have unrealized losses in accumulated other comprehensive income for a sufficient period of time to allow for recovery of the principal amounts invested, which may occur at or near the maturity of those investments. The substantial majority of the $43 million of unrealized losses for marketable equity securities was attributed to the fair value decline of our investment in Micron. We believe that the unrealized losses in all of the above investments are temporary and that these losses do not represent a need for an other- than-temporary impairment, based on our evaluation of available evidence as of December 27, 2008.

The amortized cost and fair value of available-for-sale investments as of December 27, 2008, by contractual maturity, were as follows:

(In Millions)		Cost			Fair Value
Due in 1 year or less		$	8,024		$	7,999
Due in 1–2 years			1,542			1,513
Due in 2–5 years			1,162			1,094
Due after 5 years			11			10
Instruments not due at a single maturity date			793			750
Total		$	11,532		$	11,366

Instruments not due at a single maturity date include asset-backed securities and money market fund deposits.