Quarterly report pursuant to Section 13 or 15(d)

Cash and Investments

v3.3.0.814
Cash and Investments
 9 Months Ended
Sep. 26, 2015
Investments and Cash [Abstract]  
Cash and Investments [Text Block]
Note 4: Cash and Investments
Cash and investments at the end of each period were as follows:
(In Millions)
 
Sep 26,
2015
 
Dec 27,
2014
Available-for-sale investments
 
$
20,222

 
$
13,038

Cash
 
741

 
805

Equity method investments
 
1,577

 
1,446

Loans receivable
 
800

 
971

Non-marketable cost method investments
 
3,003

 
1,769

Reverse repurchase agreements
 
3,318

 
718

Trading assets
 
6,659

 
9,063

Total cash and investments
 
$
36,320

 
$
27,810


Available-for-Sale Investments
Available-for-sale investments at the end of each period were as follows:
 
 
September 26, 2015
 
December 27, 2014
(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
 
$
7

 
$
—

 
$
(2
)
 
$
5

 
$
8

 
$
—

 
$
(2
)
 
$
6

Corporate debt
 
7,139

 
11

 
(7
)
 
7,143

 
2,040

 
13

 
(5
)
 
2,048

Financial institution instruments
 
4,709

 
2

 
(1
)
 
4,710

 
3,146

 
2

 
(1
)
 
3,147

Government debt
 
2,747

 
—

 
(1
)
 
2,746

 
741

 
—

 
(1
)
 
740

Marketable equity securities
 
3,287

 
2,342

 
(11
)
 
5,618

 
3,318

 
3,779

 
—

 
7,097

Total available-for-sale investments
 
$
17,889

 
$
2,355

 
$
(22
)
 
$
20,222

 
$
9,253

 
$
3,794

 
$
(9
)
 
$
13,038


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 26, 2015 and December 27, 2014.
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 20: Other Comprehensive Income (Loss)."
During the third quarter of 2015, we sold available-for-sale investments for proceeds of $1.1 billion, of which $134 million related to sales of cash and cash equivalents ($373 million in the third quarter of 2014, of which $82 million related to sales of cash and cash equivalents). During the first nine months of 2015, we sold available-for-sale investments for proceeds of $1.2 billion, of which $134 million related to sales of cash and cash equivalents ($1.2 billion in the first nine months of 2014 of which $459 million related to sales of cash and cash equivalents). The gross realized gains on sales of available-for-sale investments were $12 million in the third quarter of 2015 and $97 million in the first nine months of 2015 (none in the third quarter of 2014 and $136 million in the first nine months of 2014).
The amortized cost and fair value of available-for-sale debt investments, by contractual maturity, as of September 26, 2015, were as follows:
(In Millions)
 
Cost
 
Fair Value
Due in 1 year or less
 
$
12,643

 
$
12,651

Due in 1–2 years
 
1,166

 
1,164

Due in 2–5 years
 
661

 
660

Instruments not due at a single maturity date
 
132

 
129

Total
 
$
14,602

 
$
14,604


Equity Method Investments
IM Flash Technologies, LLC
Micron Technology, Inc. (Micron) and Intel formed IM Flash Technologies, LLC (IMFT) in 2006 to manufacture NAND flash memory products for Micron and Intel. During 2012, we amended the operating agreement for IMFT and entered into agreements with Micron that modified our joint venture relationship. Additionally, we have certain supply agreements with Micron to provide us with jointly developed flash memory products.
The amended operating agreement extended the term of IMFT to 2024, unless earlier terminated under certain terms and conditions. The amended agreement provides for certain buy-sell rights. Intel has the ability to cause Micron to buy our interest in IMFT. If we exercise this put 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 2018, Micron has the right to call our interest in IMFT with the closing date to be effective within one year. The IMFT operating agreements provide that IMFT may manufacture jointly developed NAND flash memory and 3D XPoint™ technology products.
As of September 26, 2015, we own a 49% interest in IMFT. The carrying value of our investment was $872 million as of September 26, 2015 ($713 million as of December 27, 2014) and is classified within other long-term assets.
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 $115 million in the third quarter of 2015 and approximately $315 million in the first nine months of 2015 (approximately $100 million in the third quarter of 2014 and approximately $305 million in the first nine months of 2014). The amount due to IMFT for product purchases and services provided was approximately $20 million as of September 26, 2015 (approximately $60 million as of December 27, 2014).
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 $872 million as of September 26, 2015. 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 26, 2015. 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 September 26, 2015. Our investment is accounted for under the equity and cost methods of accounting based on the rights associated with different securities we own, and is classified within other long-term assets. The carrying value of our equity method investment was $263 million and of our cost method investment was $454 million as of September 26, 2015 ($280 million for our equity method investment and $454 million for our cost method investment as of December 27, 2014).
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 smartphones. We have also 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. (UniSpreadtrum), a holding company under Tsinghua Unigroup. During the third quarter of 2015, we invested $966 million to complete the first phase of the equity investment. We have determined we will not have significant influence over the company and, therefore, we will 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 September 26, 2015 and December 27, 2014, substantially all of our trading assets were marketable debt instruments. Net losses related to trading assets still held at the reporting date were $88 million in the third quarter of 2015 and net losses were $151 million in the first nine months of 2015 (net losses of $283 million in the third quarter of 2014 and $254 million in the first nine months of 2014). Net gains on the related derivatives were $72 million in the third quarter of 2015 and net gains were $138 million in the first nine months of 2015 (net gains of $278 million in the third quarter of 2014 and $252 million in the first nine months of 2014).