Note 5. Investment Securities

Our marketable investment securities, restricted cash and cash equivalents, and other investment securities consisted of the following:

	As of
	March 31,		December 31,
	2013		2012
	(In thousands)
Marketable investment securities—current:
Corporate bonds	$	642,309	$	654,096
VRDNs	65,010		66,145
Strategic	46,231		56,288
Other	36,014		39,422
Total marketable investment securities—current	789,564		815,951
Restricted marketable investment securities (1)	9,253		7,529
Total	798,817		823,480

Restricted cash and cash equivalents (1)	12,215		21,516

Other investment securities—noncurrent:
Cost method	26,073		27,711
Equity method	153,498		155,500
Total other investment securities—noncurrent	179,571		183,211
Total marketable investment securities, restricted cash and cash equivalents, and other investment securities	$	990,603	$	1,028,207

(1) Restricted marketable investment securities and restricted cash and cash equivalents are included in “Restricted cash and marketable investment securities” on our Condensed Consolidated Balance Sheets.

Marketable Investment Securities

Our marketable investment securities portfolio consists of various debt and equity instruments, all of which are classified as available-for-sale.

Corporate bonds

Our corporate bond portfolio includes debt instruments issued by individual corporations, primarily in the industrial and financial services industries.

Variable rate demand notes (“VRDNs”)

VRDNs are long-term floating rate municipal bonds with embedded put options that allow the bondholder to sell the security at par plus accrued interest. All of the put options are secured by a pledged liquidity source. Our VRDN portfolio is comprised of investments in municipalities and corporations, which are backed by financial institutions or other highly rated companies that serve as the pledged liquidity source. While they are classified as marketable investment securities, the put option allows VRDNs to be liquidated generally on a same day or on a five business day settlement basis.

Strategic

Our strategic investment portfolio consists of investments in shares of common stock of public companies, which are highly speculative and have experienced and continue to experience volatility. The value of our investment portfolio depends on the value of such shares of common stock.

Other

Our other current marketable investment securities portfolio includes investments in various debt instruments, including government bonds.

Restricted Cash and Marketable Investment Securities

As of March 31, 2013 and December 31, 2012, our restricted marketable investment securities, together with our restricted cash, included amounts required as collateral for our letters of credit or surety bonds.

Other Investment Securities - Noncurrent

We have several strategic investments in certain equity securities that are accounted for using either the equity or the cost method of accounting. Our ability to realize value from our strategic investments in companies that are not publicly traded depends on the success of those companies’ businesses and their ability to obtain sufficient capital to execute their business plans. Because private markets are not as liquid as public markets, there is also increased risk that we will not be able to sell these investments, or that when we desire to sell them we will not be able to obtain fair value for them.

Unrealized Gains (Losses) on Marketable Investment Securities

The components of our available-for-sale investments are summarized in the table below.

	Amortized		Unrealized					Estimated
	Cost		Gains		Losses			Fair Value
	(In thousands)
As of March 31, 2013
Debt securities:
Corporate bonds	$	641,886	$	530	$	(107	)	$	642,309
VRDNs	65,010		—		—			65,010
Other (including restricted)	45,263		5		(1		)	45,267
Equity securities - strategic	20,314		26,033		(116		)	46,231
Total marketable investment securities	$	772,473	$	26,568	$	(224	)	$	798,817
As of December 31, 2012
Debt securities:
Corporate bonds	$	653,812	$	591	$	(307	)	$	654,096
VRDNs	66,145		—		—			66,145
Other (including restricted)	46,946		5		—			46,951
Equity securities - strategic	21,214		35,074		—			56,288
Total marketable investment securities	$	788,117	$	35,670	$	(307	)	$	823,480

As of March 31, 2013, our restricted and non-restricted marketable investment securities included debt securities of $663 million with contractual maturities of one year or less and $90 million with contractual maturities greater than one year. We may realize proceeds from certain investments prior to their contractual maturity as a result of our ability to sell these securities prior to their contractual maturity.

Marketable Investment Securities in a Loss Position

The following table reflects the length of time that our available-for-sale securities have been in an unrealized loss position. We do not intend to sell these securities before they recover or mature, and it is more likely than not that we will hold these securities until they recover or mature. In addition, we are not aware of any specific factors indicating that the underlying issuers of these securities would not be able to pay interest as it becomes due or repay the principal at maturity. Therefore, we believe that these changes in the estimated fair values of these securities are primarily related to temporary market fluctuations.

	As of
	March 31, 2013					December 31, 2012
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
Less than 12 months	$	225,002	$	(186	)	$	275,587	$	(288	)
12 months or more	52,829		(38		)	12,963		(19		)
Total	$	277,831	$	(224	)	$	288,550	$	(307	)

Realized Gains on Marketable Investment Securities and Other Investments

For the three months ended March 31, 2013 and 2012, we recognized $19 million and $128 million, respectively, of gains from the sales of our marketable investment securities and other investments.

Fair Value Measurements

Our current marketable investment securities are measured at fair value on a recurring basis as summarized in the table below. As of March 31, 2013 and December 31, 2012, we did not have investments that were categorized within Level 3 of the fair value hierarchy.

	As of
	March 31, 2013						December 31, 2012
	Total		Level 1		Level 2		Total		Level 1		Level 2
	(In thousands)
Cash equivalents (including restricted)	$	446,361	$	9,730	$	436,631	$	533,943	$	23,621	$	510,322
Debt securities:
Corporate bonds	$	642,309	$	—	$	642,309	$	654,096	$	—	$	654,096
VRDNs	65,010		—		65,010		66,145		—		66,145
Other (including restricted)	45,267		—		45,267		46,951		—		46,951
Equity securities - strategic	46,231		46,231		—		56,288		56,288		—
Total marketable investment securities	$	798,817	$	46,231	$	752,586	$	823,480	$	56,288	$	767,192

Investments in TerreStar

In February 2008, we completed several transactions under a Master Investment Agreement between us, TerreStar Corporation and TerreStar Networks Inc. (“TerreStar”). Under the Master Investment Agreement, we acquired, among other things, $50 million in aggregate principal amount of TerreStar’s 6 1/2% Senior Exchangeable Paid-in-Kind Notes due June 15, 2014 (“Exchangeable Notes”). TerreStar and certain of its affiliates filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code on October 19, 2010. The United States Bankruptcy Court for the Southern District of New York confirmed TerreStar’s Chapter 11 plan of reorganization (the “TerreStar Plan”) on February 15, 2012. Effective March 29, 2012, the Exchangeable Notes were cancelled pursuant to the TerreStar Plan. As of March 31, 2013, we had no investment in TerreStar.