Quarterly report pursuant to Section 13 or 15(d)

Investments

v3.10.0.1
Investments
 9 Months Ended
Sep. 29, 2018
Investments and Cash [Abstract]  
Investments [Text Block]
NOTE 8: INVESTMENTS
DEBT INVESTMENTS
Trading Assets
Trading assets still held at the reporting date incurred net losses of $4 million in the third quarter of 2018 and net losses of $169 million in the first nine months of 2018 (net gains of $81 million in the third quarter of 2017 and net gains of $433 million in the first nine months of 2017). Related derivatives incurred net losses of $11 million in the third quarter of 2018 and net gains of $159 million in the first nine months of 2018 (net losses of $75 million in the third quarter of 2017 and net losses of $402 million in the first nine months of 2017).
Available-for-Sale Debt Investments
 
 
September 29, 2018
 
December 30, 2017
(In Millions)
 
Adjusted Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Adjusted Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Corporate debt
 
$
2,647

 
$
2

 
$
(29
)
 
$
2,620

 
$
2,294

 
$
4

 
$
(13
)
 
$
2,285

Financial institution instruments
 
3,647

 
3

 
(18
)
 
3,632

 
3,387

 
3

 
(9
)
 
3,381

Government debt
 
940

 
—

 
(14
)
 
926

 
961

 
—

 
(6
)
 
955

Total available-for-sale debt investments
 
$
7,234

 
$
5

 
$
(61
)
 
$
7,178

 
$
6,642

 
$
7

 
$
(28
)
 
$
6,621


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 September 29, 2018 and December 30, 2017.
The fair value of available-for-sale debt investments, by contractual maturity, as of September 29, 2018, was as follows:
(In Millions)
 
Fair Value
Due in 1 year or less
 
$
3,138

Due in 1–2 years
 
782

Due in 2–5 years
 
2,662

Due after 5 years
 
118

Instruments not due at a single maturity date
 
478

Total
 
$
7,178


EQUITY INVESTMENTS
(In Millions)
 
Sep 29,
2018
 
Dec 30,
2017
Marketable equity securities
 
$
3,039

 
$
4,192

Non-marketable equity securities
 
2,878

 
2,613

Equity method investments
 
1,634

 
1,774

Total
 
$
7,551


$
8,579


The components of gains (losses) on equity investments, net for each period were as follows:
 
 
Three Months Ended
 
Nine Months Ended
(In Millions)
 
Sep 29,
2018
 
Sep 30,
2017
 
Sep 29,
2018
 
Sep 30,
2017
Initial mark to market adjustments on marketable equity securities1 2
 
$
—

 
$
—

 
$
46

 
$
—

Ongoing mark to market adjustments on marketable equity securities1 2
 
8

 
—

 
379

 
—

Gains (losses) on sales2
 
57

 
944

 
68

 
2,020

Observable price adjustments on non-marketable equity securities2
 
43

 
—

 
191

 
—

Impairments
 
(328
)
 
(10
)
 
(372
)
 
(613
)
Share of equity method investee gains (losses)
 
—

 
(110
)
 
(152
)
 
(129
)
Dividends
 
1

 
—

 
39

 
68

Other
 
144

 
22

 
166

 
94

Total gains (losses) on equity investments, net
 
$
(75
)
 
$
846

 
$
365

 
$
1,440


1 
Initial mark to market adjustments refers to the fair value adjustment recorded upon a security becoming marketable, generally as a result of an initial public offering (IPO), whereas ongoing mark to market adjustments refers to all post-IPO mark to market adjustments.
2 Both initial and ongoing mark to market adjustments and observable price adjustments relate to the new financial instruments standard adopted in the first quarter of 2018, and are not applicable in prior periods. Gains (losses) on sales includes realized gains (losses) on sales of non-marketable equity securities and equity method investments, and in 2017 also includes realized gains (losses) on sales of available-for-sale equity securities which are now reflected in ongoing mark to market adjustments on marketable equity securities.
 
 
Three Months Ended
 
Nine Months Ended
(In Millions)
 
Sep 29,
2018
 
Sep 29,
2018
Net gains (losses) recognized during the period on equity securities
 
$
(75
)
 
$
518

Less: Net (gains) losses recognized during the period on equity securities sold during the period
 
(225
)
 
(463
)
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date
 
$
(300
)
 
$
55


Cloudera, Inc.
On April 28, 2017, Cloudera, Inc. (Cloudera) completed its initial public offering and we designated our previous equity and cost method investments in Cloudera as available-for-sale. During the second quarter of 2017, we determined we had an other-than-temporary decline in the fair value of our investment and recognized an impairment charge of $278 million.
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 and accounted for our interest using the cost method of accounting. During 2017, we reduced our expectation of the company's future operating performance due to competitive pressures, which resulted in an impairment charge of $308 million.
IM Flash Technologies, LLC
Intel-Micron Flash Technologies (IMFT) was formed in 2006 by Micron Technology, Inc. (Micron) and Intel to jointly develop NAND flash memory and 3D XPoint™ technology products. IMFT is an unconsolidated 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. As of September 29, 2018, we own a 49% interest in IMFT. Our portion of IMFT costs was approximately $97 million in the third quarter of 2018 and approximately $324 million in the first nine months of 2018 (approximately $115 million in the third quarter of 2017 and approximately $350 million in the first nine months of 2017).
IMFT depends on Micron and Intel for any additional cash needs to be provided in the form of cash calls or member debt financing (MDF). The MDF balance may be converted to a capital contribution at our request, or may be repaid upon availability of funds. The IMFT operating agreement continues through 2024 unless terminated earlier, and provides for certain buy-sell rights of the joint venture. Intel has the right to cause Micron to buy our interest in IMFT and, if exercised, Micron could elect to receive financing from us for one to two years. Commencing in January 2019, Micron has the right to call our interest in IMFT.
On July 16, 2018, Intel and Micron announced that they agreed to complete joint development for the second generation of 3D XPoint technology, which is expected to occur in the first half of 2019. Technology development beyond the second generation of 3D XPoint technology will be pursued independently by the two companies in order to optimize the technology for their respective product and business needs. Intel continues to purchase jointly developed products from Micron under certain supply agreements.
On October 18, 2018, Micron publicly announced their intent to exercise the right to call our interest in IMFT. The timeline to close the transaction is between six and twelve months after the date Micron exercises the call. Following the closing date, we will continue to receive supply for a period of one year. We recognized an impairment charge of $290 million during the third quarter of 2018. This reduced the carrying value of our equity method investment in IMFT to $1.6 billion in line with our expectation of future cash flows and Micron exercising the call in January.