
8.	Investments


(a)	Summary of Available-for-Sale Investments

The following tables summarize the Company’s available-for-sale investments (in millions):



October 25, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed income securities:
U.S. government securities	$	32,343	$	71	$	—		$	32,414
U.S. government agency securities	1,338		3		—			1,341
Non-U.S. government and agency securities	1,049		2		—			1,051
Corporate debt securities	10,170		73		(10		)	10,233
U.S. agency mortgage-backed securities	875		9		—			884
Total fixed income securities	45,775		158		(10		)	45,923
Publicly traded equity securities	1,263		545		(11		)	1,797
Total	$	47,038	$	703	$	(21	)	$	47,720

July 26, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed income securities:
U.S. government securities	$	31,717	$	29	$	(12	)	$	31,734
U.S. government agency securities	1,062		1		—			1,063
Non-U.S. government and agency securities	860		2		(1		)	861
Corporate debt securities	9,092		74		(7		)	9,159
U.S. agency mortgage-backed securities	574		5		—			579
Total fixed income securities	43,305		111		(20		)	43,396
Publicly traded equity securities	1,314		648		(10		)	1,952
Total	$	44,619	$	759	$	(30	)	$	45,348

Non-U.S. government and agency securities include agency and corporate debt securities that are guaranteed by non-U.S. governments.


(b)	Gains and Losses on Available-for-Sale Investments

The following table presents the gross realized gains and gross realized losses related to the Company’s available-for-sale investments (in millions):



	Three Months Ended
	October 25, 2014			October 26, 2013
Gross realized gains	$	21		$	95
Gross realized losses	(14		)	(12		)
Total	$	7		$	83

The following table presents the realized net gains (losses) related to the Company’s available-for-sale investments by security type (in millions):



	Three Months Ended
	October 25, 2014			October 26, 2013
Net gains (losses) on investments in publicly traded equity securities	$	(4	)	$	75
Net gains on investments in fixed income securities	11			8
Total	$	7		$	83

There were no impairment charges on available-for-sale investments for the periods presented.

The following tables present the breakdown of the available-for-sale investments with gross unrealized losses and the duration that those losses had been unrealized at October 25, 2014 and July 26, 2014 (in millions):



	UNREALIZED LOSSES LESS THAN 12 MONTHS					UNREALIZED LOSSES 12 MONTHS OR GREATER					TOTAL
October 25, 2014	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed income securities:
Corporate debt securities	$	2,491	$	(8	)	$	383	$	(2	)	$	2,874	$	(10	)
Total fixed income securities	2,491		(8		)	383		(2		)	2,874		(10		)
Publicly traded equity securities	131		(11		)	1		—			132		(11		)
Total	$	2,622	$	(19	)	$	384	$	(2	)	$	3,006	$	(21	)



	UNREALIZED LOSSES LESS THAN 12 MONTHS					UNREALIZED LOSSES 12 MONTHS OR GREATER					TOTAL
July 26, 2014	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed income securities:
U.S. government securities	$	7,676	$	(12	)	$	45	$	—		$	7,721	$	(12	)
Non-U.S. government and agency securities	361		(1		)	22		—			383		(1		)
Corporate debt securities	1,875		(3		)	491		(4		)	2,366		(7		)
Total fixed income securities	9,912		(16		)	558		(4		)	10,470		(20		)
Publicly traded equity securities	132		(10		)	—		—			132		(10		)
Total	$	10,044	$	(26	)	$	558	$	(4	)	$	10,602	$	(30	)

As of October 25, 2014, for fixed income securities that were in unrealized loss positions, the Company has determined that (i) it does not have the intent to sell any of these investments, and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. In addition, as of October 25, 2014, the Company anticipates that it will recover the entire amortized cost basis of such fixed income securities and has determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the three months ended October 25, 2014.

The Company has evaluated its publicly traded equity securities as of October 25, 2014 and has determined that there was no indication of other-than-temporary impairments in the respective categories of unrealized losses. This determination was based on several factors, which include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the issuer, and the Company’s intent and ability to hold the publicly traded equity securities for a period of time sufficient to allow for any anticipated recovery in market value.


(c)	Maturities of Fixed Income Securities

The following table summarizes the maturities of the Company’s fixed income securities at October 25, 2014 (in millions):



	Amortized Cost		Fair Value
Less than 1 year	$	16,643	$	16,656
Due in 1 to 2 years	14,222		14,270
Due in 2 to 5 years	13,884		13,957
Due after 5 years	1,026		1,040
Total	$	45,775	$	45,923

Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations. The remaining contractual principal maturities for mortgage-backed securities were allocated assuming no prepayments.


(d)	Securities Lending

The Company periodically engages in securities lending activities with certain of its available-for-sale investments. These transactions are accounted for as a secured lending of the securities, and the securities are typically loaned only on an overnight basis. The average daily balance of securities lending for the three months ended October 25, 2014 and October 26, 2013 was $1.0 billion and $0.6 billion, respectively. The Company requires collateral equal to at least 102% of the fair market value of the loaned security and that the collateral be in the form of cash or liquid, high-quality assets. The Company engages in these secured lending transactions only with highly creditworthy counterparties, and the associated portfolio custodian has agreed to indemnify the Company against collateral losses. The Company did not experience any losses in connection with the secured lending of securities during the periods presented. As of October 25, 2014 and July 26, 2014, the Company had no outstanding securities lending transactions.


(e)	Investments in Privately Held Companies

The carrying value of the Company’s investments in privately held companies was included in other assets. For such investments that were accounted for under the equity and cost method as of October 25, 2014 and July 26, 2014, the amounts are summarized in the following table (in millions):



	October 25, 2014		July 26, 2014
Equity method investments	$	559	$	630
Cost method investments	327		269
Total	$	886	$	899

Variable Interest Entities

VCE Joint Venture VCE is a joint venture that the Company formed in fiscal 2010 with EMC Corporation (“EMC”), with investments from VMware, Inc. (“VMware”) and Intel Capital Corporation ("Intel"). VCE helps organizations leverage best-in-class technologies and disciplines from Cisco, EMC, and VMware to enable the transformation to cloud computing.

As of October 25, 2014, the Company’s cumulative gross investment in VCE was approximately $716 million, inclusive of accrued interest on convertible notes, and its ownership percentage was approximately 35%. The Company did not make any investments in VCE during the three months ended October 25, 2014. As of October 25, 2014, the Company had recorded cumulative losses from VCE under the equity method of $691 million since inception, of which losses of $47 million and $53 million were recorded for the three months ended October 25, 2014 and October 26, 2013, respectively. The Company’s carrying value in VCE as of October 25, 2014 was $25 million.

EMC and the Company have entered into guarantee agreements on behalf of VCE to indemnify certain customers (the "Guarantees") for monetary damages. Such Guarantees were not material as of October 25, 2014.

In October 2014, the Company, EMC, VMware, and Intel agreed to restructure the VCE joint venture. Under the terms of the agreement, VCE will undergo a reorganization and recapitalization whereby VCE will pay approximately $150 million to the Company for a portion of the outstanding principal balance of the convertible notes and accrued interest on such notes. The Company also agreed to cancel the remaining principal balance of the convertible notes held by it and the accrued interest on such notes, and to have VCE redeem a portion of the Company’s equity interest in VCE. EMC also agreed to indemnify the Company for any liabilities incurred by the Company under the Guarantees. Following this reorganization and recapitalization, the Company’s ownership interest in VCE will be approximately 10%. The transaction is expected to close in the second quarter of the Company's fiscal year 2015, subject to customary regulatory approvals.

Other Variable Interest Entities In the ordinary course of business, the Company has investments in other privately held companies and provides financing to certain customers. These other privately held companies and customers may be considered to be variable interest entities. The Company evaluates on an ongoing basis its investments in these other privately held companies and its customer financings, and has determined that as of October 25, 2014 there were no other variable interest entities required to be consolidated in the Company’s Consolidated Financial Statements.