Quarterly report pursuant to Section 13 or 15(d)

Cash and Investments

v3.5.0.2
Cash and Investments
 6 Months Ended
Jul. 02, 2016
Investments and Cash [Abstract]  
Cash and Investments [Text Block]
Note 5: Cash and Investments
Cash and investments at the end of each period were as follows:
(In Millions)
 
Jul 2,
2016
 
Dec 26,
2015
Available-for-sale investments
 
$
15,121

 
$
22,007

Cash
 
1,058

 
1,466

Equity method investments
 
1,700

 
1,590

Loans receivable
 
1,025

 
794

Non-marketable cost method investments
 
3,092

 
2,933

Reverse repurchase agreements
 
1,318

 
3,368

Trading assets
 
9,503

 
7,323

Total cash and investments
 
$
32,817

 
$
39,481


Available-for-Sale Investments
Available-for-sale investments at the end of each period were as follows:
 
 
July 2, 2016
 
December 26, 2015
(In Millions)
 
Adjusted Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Adjusted Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Asset-backed securities
 
$
—

 
$
—

 
$
—

 
$
—

 
$
5

 
$
—

 
$
(1
)
 
$
4

Corporate debt
 
4,212

 
9

 
(12
)
 
4,209

 
4,164

 
3

 
(10
)
 
4,157

Financial institution instruments
 
4,126

 
5

 
(1
)
 
4,130

 
11,140

 
1

 
(2
)
 
11,139

Government debt
 
1,385

 
3

 
—

 
1,388

 
748

 
—

 
(1
)
 
747

Marketable equity securities
 
2,795

 
2,599

 
—

 
5,394

 
3,254

 
2,706

 
—

 
5,960

Total available-for-sale investments
 
$
12,518

 
$
2,616

 
$
(13
)
 
$
15,121

 
$
19,311

 
$
2,710

 
$
(14
)
 
$
22,007


Government debt includes instruments such as non-U.S. government bonds and U.S. agency securities. Financial institution instruments include instruments issued or managed by financial institutions in various forms such as commercial paper, fixed and floating rate bonds, money market fund deposits, and time deposits. Substantially all time deposits were issued by institutions outside the U.S. as of July 2, 2016 and December 26, 2015.
For information on the unrealized holding gains (losses) on available-for-sale investments reclassified out of accumulated other comprehensive income (loss) into the consolidated condensed statements of income, see "Note 21: Other Comprehensive Income (Loss)."
During the second quarter of 2016, we sold available-for-sale investments for proceeds of $875 million, none of which related to sales of cash and cash equivalents ($66 million in the second quarter of 2015, none of which was related to sales of cash and cash equivalents). During the first six months of 2016, we sold available-for-sale investments for proceeds of $3.8 billion, of which $129 million related to sales of cash and cash equivalents ($109 million in the first six months of 2015, none of which was related to sales of cash and cash equivalents). The gross realized gains on sales of available-for-sale investments were $403 million in the second quarter of 2016 and $497 million in the first six months of 2016 ($43 million in the second quarter of 2015 and $85 million in the first six months of 2015).
The amortized cost and fair value of available-for-sale debt investments, by contractual maturity, as of July 2, 2016, were as follows:
(In Millions)
 
Cost
 
Fair Value
Due in 1 year or less
 
$
5,960

 
$
5,954

Due in 1–2 years
 
2,069

 
2,073

Due in 2–5 years
 
1,487

 
1,493

Instruments not due at a single maturity date
 
207

 
207

Total
 
$
9,723

 
$
9,727


Equity Method Investments
IM Flash Technologies, LLC
Since the inception of IM Flash Technologies, LLC (IMFT) in 2006, Micron Technology, Inc. (Micron) and Intel have jointly developed NAND flash memory and, most recently, 3D XPoint™ technology products. Intel also purchases jointly developed products directly from Micron under certain supply agreements.
The IMFT operating agreement, most recently amended in January 2016, continues through 2024 unless earlier terminated under certain terms and conditions and provides for certain buy-sell rights of the joint venture. Intel has the right to cause Micron to buy our interest in IMFT. If we exercise this right, Micron would set the closing date of the transaction within two years following such election and could elect to receive financing from us for one to two years. Subsequent to our put right, and commencing in January 2019, Micron has the right to call our interest in IMFT with the closing date to be effective within one year.
As of July 2, 2016, we own a 49% interest in IMFT. The carrying value of our investment was $870 million as of July 2, 2016 ($872 million as of December 26, 2015) and is classified within other long-term assets.
IMFT is a variable interest entity and all costs of IMFT are passed on to Micron and Intel through sale of products or services in proportional share of ownership. Intel's portion of IMFT costs, primarily related to product purchases and production-related services, was approximately $100 million in the second quarter of 2016 and approximately $200 million in the first six months of 2016 (approximately $105 million in the second quarter of 2015 and approximately $200 million in the first six months of 2015). The amount due to IMFT for product purchases and services provided was approximately $45 million as of July 2, 2016 (approximately $20 million as of December 26, 2015).
IMFT depends on Micron and Intel for any additional cash needs. Our known maximum exposure to loss approximated the carrying value of our investment balance in IMFT, which was $870 million as of July 2, 2016. Except for the amount due to IMFT for product purchases and production-related services, we did not have any additional liabilities recognized on our consolidated condensed balance sheets in connection with our interests in this joint venture as of July 2, 2016. Our potential future losses could be higher than the carrying amount of our investment, as Intel and Micron are liable for other future operating costs or obligations of IMFT. Future cash calls could also increase our investment balance and the related exposure to loss. In addition, because we are currently committed to purchasing 49% of IMFT’s production output and production-related services, we may be required to purchase products at a cost in excess of realizable value.
We have determined that we do not have the characteristics of a consolidating investor in the variable interest entity and, therefore, we account for our interest in IMFT using the equity method of accounting.
Cloudera, Inc.
During 2014, we invested in Cloudera, Inc. (Cloudera). Our fully diluted ownership interest in Cloudera is 17% as of July 2, 2016. Our investment is accounted for under the equity and cost methods of accounting based on the rights associated with different instruments we own, and is classified within other long-term assets. The carrying value of our equity method investment was $241 million and of our cost method investment was $454 million as of July 2, 2016 ($256 million for our equity method investment and $454 million for our cost method investment as of December 26, 2015).
Intel-GE Care Innovations, LLC
During the first quarter of 2016, we gained control of Care Innovations LLC (Care Innovations), formerly our joint venture with General Electric Company. Care Innovations has been included in our consolidated condensed financial statements beginning in the first quarter of 2016.
Non-marketable Cost Method Investments
Investment in Beijing UniSpreadtrum Technology Ltd.
During 2014, we entered into a series of agreements with Tsinghua Unigroup Ltd. (Tsinghua Unigroup), an operating subsidiary of Tsinghua Holdings Co. Ltd., to, among other things, jointly develop Intel® architecture- and communications-based solutions for phones. We agreed to invest up to 9.0 billion Chinese yuan (approximately $1.5 billion as of the date of the agreement) for a minority stake of approximately 20% of Beijing UniSpreadtrum Technology Ltd., a holding company under Tsinghua Unigroup. During 2015, we invested $966 million to complete the first phase of the equity investment. We have determined we do not have significant influence over the company and, therefore, we account for our interest using the cost method of accounting. Subject to regulatory approvals and other closing conditions, the second phase of the investment will require additional funding of approximately $500 million.
Trading Assets
As of July 2, 2016 and December 26, 2015, substantially all of our trading assets were marketable debt instruments. There were no net gains or losses related to trading assets still held at the reporting date in the second quarter of 2016 and $190 million net gains in the first six months of 2016 (net gains of $48 million in the second quarter of 2015 and net losses of $85 million in the first six months of 2015). Net gains on the related derivatives were $3 million in the second quarter of 2016 and $184 million net losses in the first six months of 2016 (net losses of $45 million in the second quarter of 2015 and net gains of $81 million in the first six months of 2015).