
8.	Investments


(a)	Summary of Available-for-Sale Investments

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



January 24, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Fixed income securities:
U.S. government securities	$	30,302	$	53	$	(1	)	$	30,354
U.S. government agency securities	2,324		3		(1		)	2,326
Non-U.S. government and agency securities	1,108		1		—			1,109
Corporate debt securities	11,180		61		(28		)	11,213
U.S. agency mortgage-backed securities	1,360		15		—			1,375
Total fixed income securities	46,274		133		(30		)	46,377
Publicly traded equity securities	1,296		562		(10		)	1,848
Total	$	47,570	$	695	$	(40	)	$	48,225



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						Six Months Ended
	January 24, 2015			January 25, 2014			January 24, 2015			January 25, 2014
Gross realized gains	$	92		$	97		$	113		$	192
Gross realized losses	(23		)	(15		)	(37		)	(27		)
Total	$	69		$	82		$	76		$	165

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				Six Months Ended
	January 24, 2015		January 25, 2014		January 24, 2015		January 25, 2014
Net gains (losses) on investments in publicly traded equity securities	$	60	$	69	$	56	$	144
Net gains on investments in fixed income securities	9		13		20		21
Total	$	69	$	82	$	76	$	165

There were no impairment charges on available-for-sale investments for the three and six months ended January 24, 2015. For the three and six months ended January 25, 2014, the realized gains related to the Company's available-for-sale investments included impairment charges of $11 million for publicly traded equity securities, which were due to a decline in the fair value of those securities below their cost basis that were determined to be other than temporary.

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 January 24, 2015 and July 26, 2014 (in millions):



	UNREALIZED LOSSES LESS THAN 12 MONTHS					UNREALIZED LOSSES 12 MONTHS OR GREATER					TOTAL
January 24, 2015	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Fixed income securities:
U.S. government securities	$	4,558	$	(1	)	$	—	$	—		$	4,558	$	(1	)
U.S. government agency securities	854		(1		)	—		—			854		(1		)
Corporate debt securities	3,952		(25		)	363		(3		)	4,315		(28		)
Total fixed income securities	9,364		(27		)	363		(3		)	9,727		(30		)
Publicly traded equity securities	119		(10		)	1		—			120		(10		)
Total	$	9,483	$	(37	)	$	364	$	(3	)	$	9,847	$	(40	)



	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 January 24, 2015, 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 January 24, 2015, 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 six months ended January 24, 2015.

The Company has evaluated its publicly traded equity securities as of January 24, 2015 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 January 24, 2015 (in millions):



	Amortized Cost		Fair Value
Less than 1 year	$	15,355	$	15,362
Due in 1 to 2 years	14,963		14,995
Due in 2 to 5 years	14,383		14,431
Due after 5 years	1,573		1,589
Total	$	46,274	$	46,377

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 six months ended January 24, 2015 and January 25, 2014 was $0.6 billion and $0.9 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 January 24, 2015 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 January 24, 2015 and July 26, 2014, the amounts are summarized in the following table (in millions):



	January 24, 2015		July 26, 2014
Equity method investments	$	541	$	630
Cost method investments	316		269
Total	$	857	$	899

Variable Interest Entities

VCE Joint Venture VCE is a joint venture formed in fiscal 2010 between the Company and EMC Corporation (“EMC”), with investments from VMware, Inc. (“VMware”) and Intel Capital Corporation ("Intel"). In October 2014, the Company, EMC, VMware, and Intel agreed to restructure VCE, and this transaction was completed in the second quarter of fiscal 2015. Prior to the restructuring, the Company’s cumulative gross investment in VCE was approximately $716 million inclusive of convertible notes and accrued interest on convertible notes. The Company recorded cumulative losses from VCE under the equity method of $691 million since inception. The Company ceased accounting for the VCE investment under the equity method in October 2014 and recorded no losses during the three months ended January 24, 2015, compared with losses of $58 million recorded for the three months ended January 25, 2014, and losses of $47 million and $111 million were recorded for the six months ended January 24, 2015 and January 25, 2014, respectively. Under the terms of the restructuring, VCE paid $152 million to the Company for a portion of the outstanding principal balance of the convertible notes held by it and accrued interest on such notes, and the remaining principal balance of other such notes, and the accrued interest thereon, was cancelled. Pursuant to the restructuring, VCE also redeemed a portion of the Company’s equity interest in VCE, reducing the Company’s ownership interest in VCE from 35% prior to the restructuring to 10%. In connection with this transaction, the Company has written this investment down to a book value of zero and has recognized a gain of $126 million for the three and six months ended January 24, 2015.

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 January 24, 2015 there were no other variable interest entities required to be consolidated in the Company’s Consolidated Financial Statements.