Related Parties and Strategic Investments

6 Months Ended

Jul. 03, 2011

Related Party Transactions [Abstract]

Related Parties and Strategic Investments

13. Related Parties and Strategic Investments

     Flash Ventures with Toshiba. The Company owns 49.9% of each of the flash ventures with Toshiba and accounts for its ownership position under the equity method of accounting. The Company’s obligations with respect to the Flash Ventures master lease agreements, take-or-pay supply arrangements and research and development cost sharing are described in Note 12, “Commitments, Contingencies and Guarantees.” The financial and other support provided by the Company in all periods presented was either contractually required or the result of a joint decision to expand wafer capacity, transition to new technologies or refinance existing equipment lease commitments. Flash Ventures are variable interest entities. The Company evaluated whether it is the primary beneficiary of any of the entities within Flash Ventures for all periods presented and determined that it is not the primary beneficiary of any of the entities within Flash Ventures because it does not have a controlling financial interest in any of those entities. In determining whether the Company is the primary beneficiary, the Company analyzed the primary purpose and design of Flash Ventures, the activities that most significantly impact Flash Ventures’ economic performance, and whether the Company had the power to direct those activities. The Company concluded based upon its 49.9% ownership in Flash Ventures, the voting structure of Flash Ventures and the manner in which the day-to-day operations of Flash Ventures are conducted that the Company lacked the power to direct most of the activities that most significantly impact Flash Ventures’ economic performance.

     The Company purchased NAND flash memory wafers from Flash Ventures and made prepayments, investments and loans to Flash Ventures totaling approximately $746.8 million, $1.56 billion, $417.8 million and $931.2 million in the three and six months ended July 3, 2011 and July 4, 2010, respectively. The Company received loan repayments from Flash Ventures of $85.1 million in the six months ended July 3, 2011. At July 3, 2011 and January 2, 2011, the Company had accounts receivable from Flash Ventures of $9.2 million and zero, respectively. At July 3, 2011 and January 2, 2011, the Company had accounts payable balances due to Flash Ventures of $274.6 million and $240.5 million, respectively.

     The Company’s maximum reasonably estimable loss exposure (excluding lost profits) as of July 3, 2011 and January 2, 2011, based upon the exchange rate at each respective balance sheet date, as a result of its involvement with Flash Ventures is presented below.

	July 3,		January 2,
	2011		2011
	(In millions)
Notes receivable	$	1,521	$	1,232
Equity investments		541		501
Operating lease guarantees		738		879
Prepayments		117		48
Maximum loss exposure	$	2,917	$	2,660

     Solid State Storage Solutions LLC. During the second quarter of fiscal year 2007, the Company formed Solid State Storage Solutions LLC (“S4”), a venture with third parties to license intellectual property. S4 qualifies as a variable interest entity. The Company is considered the primary beneficiary of S4 and the Company consolidates S4 in its Condensed Consolidated Financial Statements for all periods presented. The Company considered multiple factors in determining it was the primary beneficiary, including its overall involvement with the venture, contributions and participation in operating activities. S4’s assets and liabilities were not material to the Company’s Condensed Consolidated Balance Sheets as of July 3, 2011 and January 2, 2011.

     Sale of SIM Business Net Assets. In February 2010, the Company sold its SIM business net assets for $17.8 million, which resulted in a gain of $13.2 million recorded in other income (expense). The sale proceeds are included in “Proceeds from sale of assets” in investing activities on the Condensed Consolidated Statements of Cash Flows. The operating results of the SIM business assets were immaterial for all periods presented.