Quarterly report pursuant to Section 13 or 15(d)

Cash and Investments

v2.4.0.8
Cash and Investments
9 Months Ended
Sep. 28, 2013
Cash and Investments [Abstract]  
Cash And Investments [Text Block]
Note 3: Cash and Investments
Cash and investments at the end of each period were as follows:
(In Millions)
 
Sep 28,
2013
 
Dec 29,
2012
Available-for-sale investments
 
$
18,207

 
$
14,001

Cash
 
513

 
593

Equity method investments
 
985

 
992

Loans receivable
 
974

 
979

Non-marketable cost method investments
 
1,203

 
1,202

Reverse repurchase agreements
 
900

 
2,850

Trading assets
 
7,773

 
5,685

Total cash and investments
 
$
30,555

 
$
26,302


In July 2013, we sold our shares in Clearwire Corporation, which had been accounted for as available-for-sale marketable equity securities, and our interest in Clearwire Communications, LLC (Clearwire LLC), which had been accounted for as an equity method investment. We received proceeds of $142 million on the sale of our shares in Clearwire Corporation and $328 million on the sale of our interest in Clearwire LLC. The proceeds received on the sale of our shares in Clearwire Corporation and our interest in Clearwire LLC are included in "sales of available-for-sale investments" and "other investing", respectively, within investing activities on the consolidated condensed statements of cash flows. During the third quarter of 2013, we recognized gains of $111 million on the sale of our shares in Clearwire Corporation and $328 million on the sale of our interest in Clearwire LLC. The total gain of $439 million on these transactions is included in "gains (losses) on equity investments, net" on the consolidated condensed statements of income.
Available-for-Sale Investments
Available-for-sale investments at the end of each period were as follows:
 
 
 
September 28, 2013
 
December 29, 2012
(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
 
$
11

 
$

 
$
(2
)
 
$
9

 
$
14

 
$

 
$
(3
)
 
$
11

Bank deposits
 
2,634

 
4

 
(1
)
 
2,637

 
1,417

 
1

 

 
1,418

Commercial paper
 
4,658

 

 

 
4,658

 
4,184

 
1

 

 
4,185

Corporate bonds
 
2,300

 
15

 
(3
)
 
2,312

 
635

 
8

 
(1
)
 
642

Government bonds
 
1,524

 

 
(1
)
 
1,523

 
2,235

 

 

 
2,235

Marketable equity securities
 
3,329

 
3,186

 
(1
)
 
6,514

 
3,356

 
1,069

 
(1
)
 
4,424

Money market fund deposits
 
555

 

 
(1
)
 
554

 
1,086

 

 

 
1,086

Total available-for-sale investments
 
$
15,011

 
$
3,205

 
$
(9
)
 
$
18,207

 
$
12,927

 
$
1,079

 
$
(5
)
 
$
14,001


In the preceding table, government bonds include bonds issued or deemed to be guaranteed by government entities. Government bonds include instruments such as non-U.S. government bonds, U.S. agency securities, and U.S. Treasury securities. Bank deposits were primarily held by institutions outside the U.S. as of September 28, 2013 and December 29, 2012.
We sold available-for-sale investments for proceeds of $266 million in the third quarter of 2013 and $864 million in the first nine months of 2013 ($1.5 billion in the third quarter of 2012 and $2.1 billion in the first nine months of 2012). The gross realized gains on sales of available-for-sale investments were $134 million in the third quarter of 2013 and $143 million in the first nine months of 2013 ($66 million in the third quarter of 2012 and $110 million in the first nine months of 2012). Gross realized gains on the sale of available-for-sale investments in the third quarter of 2013 were primarily related to the sale of our shares in Clearwire Corporation, previously included as marketable equity securities in the preceding table.
For information on the unrealized holding gains (losses) on available-for-sale investments reclassified out of accumulated other comprehensive income into the consolidated condensed statements of income, see "Note 18: Comprehensive Income".
The amortized cost and fair value of available-for-sale debt investments as of September 28, 2013, by contractual maturity, were as follows:
 
(In Millions)
 
Cost     
 
Fair Value
Due in 1 year or less
 
$
9,130

 
$
9,137

Due in 1–2 years
 
1,129

 
1,137

Due in 2–5 years
 
373

 
372

Instruments not due at a single maturity date
 
1,050

 
1,047

Total
 
$
11,682

 
$
11,693


Instruments not due at a single maturity date in the preceding table include all asset-backed securities, most callable government bonds, and all money market fund deposits.
Equity Method Investments
IM Flash Technologies, LLC and IM Flash Singapore, LLP
Micron Technology, Inc. and Intel formed IM Flash Technologies, LLC (IMFT) and IM Flash Singapore, LLP (IMFS) to manufacture NAND flash memory products for Micron and Intel. During the second quarter of 2012, we entered into agreements with Micron that modified our joint venture relationship including an agreement to sell our ownership interest in IMFS. We received $605 million in the second quarter of 2012 from the sale of assets of IMFS and certain assets of IMFT to Micron. As of September 28, 2013, we own a 49% interest in the remaining assets held by IMFT. The carrying value of our investment in IMFT was $656 million as of September 28, 2013 ($642 million as of December 29, 2012) and is classified within other long-term assets.
As part of the agreements to modify our joint venture relationship, we also entered into an amended operating agreement for IMFT. This amended operating agreement extends the term of IMFT to 2024, unless earlier terminated under certain terms and conditions, and provides that IMFT may manufacture certain emerging memory technologies in addition to NAND flash memory. These agreements include a supply agreement for Micron to supply us with NAND flash memory products. We provided approximately $365 million to Micron in the second quarter of 2012, primarily for subsequent product purchases under the supply agreement with Micron. The agreements also extend and expand our NAND joint development program with Micron to include emerging memory technologies. Additionally, the amended agreement provides for certain rights that, beginning in 2015, will enable us to sell to Micron, or enable Micron to purchase from us, our interest in IMFT. If Intel exercises this right, Micron would set the closing date of the transaction within two years following such election and could elect to receive financing from Intel for one to two years.
IMFT is a variable interest entity. All costs of the IMFT joint venture will be passed on to Micron and Intel pursuant to our purchase agreements. Intel's portion of IMFT costs, primarily related to product purchases and production-related services, was approximately $80 million during the third quarter of 2013 and approximately $280 million during the first nine months of 2013 (approximately $120 million during the third quarter of 2012 for IMFT and approximately $620 million during the first nine months of 2012 for IMFT and IMFS). Subsequent to the sale of our ownership interest in IMFS in the second quarter of 2012, we no longer incur costs related to IMFS. The amount due to IMFT for product purchases and services provided was approximately $90 million as of September 28, 2013 (approximately $90 million as of December 29, 2012). During the first nine months of 2013, $35 million was returned to Intel by IMFT, which is reflected as a return of equity method investment within investing activities on the consolidated condensed statements of cash flows ($137 million during the first nine months of 2012).
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 $656 million as of September 28, 2013. Except for the amount due to IMFT for product purchases and 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 September 28, 2013. In addition, 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.
Under the accounting standards for consolidating variable interest entities, the consolidating investor is the entity with the power to direct the activities of the venture that most significantly impact the venture’s economic performance and with the obligation to absorb losses or the right to receive benefits from the venture that could potentially be significant to the venture. We have determined that we do not have both of these characteristics and, therefore, we account for our interest in IMFT (and accounted for our prior interest in IMFS) using the equity method of accounting.
Trading Assets
As of September 28, 2013 and December 29, 2012, all of our trading assets were marketable debt instruments. Net gains related to trading assets still held at the reporting date were $96 million in the third quarter of 2013 and $43 million in the first nine months of 2013 (net gains of $50 million in the third quarter of 2012 and $35 million in the first nine months of 2012). Net losses on the related derivatives were $97 million in the third quarter of 2013 and $40 million in the first nine months of 2013 (net losses of $39 million in the third quarter of 2012 and $11 million in the first nine months of 2012).