Quarterly report pursuant to Section 13 or 15(d)

Investments

v3.8.0.1
Investments
 3 Months Ended
Mar. 31, 2018
Investments and Cash [Abstract]  
Investments [Text Block]
NOTE 8: INVESTMENTS
DEBT SECURITIES
Trading Assets
Net gains related to trading assets still held at the reporting date were $175 million in the first three months of 2018 ($217 million of net gains in the first three months of 2017). Net losses on the related derivatives were $149 million in the first three months of 2018 ($186 million of net losses in the first three months of 2017).
Available-for-Sale Debt Investments
 
 
March 31, 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
 
$
2,440

 
$
2

 
$
(27
)
 
$
2,415

 
$
2,294

 
$
4

 
$
(13
)
 
$
2,285

Financial institution instruments
 
3,303

 
3

 
(17
)
 
3,289

 
3,387

 
3

 
(9
)
 
3,381

Government debt
 
956

 
—

 
(12
)
 
944

 
961

 
—

 
(6
)
 
955

Total available-for-sale debt investments
 
$
6,699

 
$
5

 
$
(56
)
 
$
6,648

 
$
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 March 31, 2018 and as of December 30, 2017.
The fair value of available-for-sale debt investments, by contractual maturity, as of March 31, 2018, were as follows:
(In Millions)
 
Fair Value
Due in 1 year or less
 
$
2,823

Due in 1–2 years
 
1,715

Due in 2–5 years
 
1,651

Due after 5 years
 
69

Instruments not due at a single maturity date
 
390

Total
 
$
6,648


EQUITY INVESTMENTS
(In Millions)
 
Mar 31,
2018
 
Dec 30,
2017
Marketable equity securities
 
$
4,653

 
$
4,192

Non-marketable equity securities
 
2,823

 
2,613

Equity method investments
 
2,005

 
1,774

Total
 
$
9,481


$
8,579



The components of gains (losses) on equity investments, net for each period were as follows:
 
 
Three Months Ended
(In Millions)
 
Mar 31,
2018
 
Apr 1,
2017
Mark to market adjustments on marketable equity securities1
 
$
606

 
$
—

Gains (losses) on sales1
 
10

 
274

Observable price adjustments on non-marketable equity securities1
 
124

 
—

Impairments
 
(17
)
 
(48
)
Share of equity method investee gains (losses)
 
(82
)
 
(11
)
Other
 
2

 
37

Total gains (losses) on equity investments, net
 
$
643

 
$
252


1 
Mark to market 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 mark to market adjustments on marketable equity securities.
(In Millions)
 
Mar 31,
2018
Net gains (losses) recognized during the period on equity securities
 
$
724

Less: Net gains and losses recognized during the period on equity securities sold during the period
 
(11
)
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date
 
$
713


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 other-than-temporary impairment charge of $308 million.
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 3D XPoint™ technology products. Intel also purchases jointly developed products directly from Micron under certain supply agreements.
As of March 31, 2018, we own a 49% interest in IMFT. The carrying value of our investment was $1.8 billion as of March 31, 2018 ($1.5 billion as of December 30, 2017) which is classified as an equity method investment.
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 with the closing date to be effective within one year.
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. Our portion of IMFT costs was approximately $83 million in the first three months of 2018 (approximately $130 million in the first three months of 2017). In the event that IMFT has excess cash, IMFT will make payments to Micron and Intel in the form of dividends.
IMFT depends on Micron and Intel for any additional cash needs. During the first quarter of 2018, we extended $319 million in member debt financing (MDF) to IMFT to fund the ramp of 3D XPoint technology. The MDF balance may be converted to a capital contribution at our request, or may be repaid upon availability of funds. Our known maximum exposure to loss approximated the carrying value of our investment balance in IMFT. 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 and future cash calls. 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.