Investments
Marketable Securities
At October 31, 2018, marketable securities consisted of the following (in millions):
|
| | | | | | | | | | | | | | | |
Investments classified as Marketable Securities | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
Corporate notes and obligations | $ | 809 |
| | $ | 0 |
| | $ | (10 | ) | | $ | 799 |
|
U.S. treasury securities | 90 |
| | 0 |
| | (2 | ) | | 88 |
|
Mortgage backed obligations | 86 |
| | 0 |
| | (1 | ) | | 85 |
|
Asset backed securities | 190 |
| | 0 |
| | (2 | ) | | 188 |
|
Municipal securities | 76 |
| | 0 |
| | (1 | ) | | 75 |
|
Foreign government obligations | 51 |
| | 0 |
| | (1 | ) | | 50 |
|
U.S. agency obligations | 4 |
| | 0 |
| | 0 |
| | 4 |
|
Covered bonds | 57 |
| | 0 |
| | (1 | ) | | 56 |
|
Total marketable securities | $ | 1,363 |
| | $ | 0 |
| | $ | (18 | ) | | $ | 1,345 |
|
At January 31, 2018, marketable securities consisted of the following (in millions):
|
| | | | | | | | | | | | | | | |
Investments classified as Marketable Securities | Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Fair Value |
Corporate notes and obligations | $ | 1,223 |
| | $ | 1 |
| | $ | (7 | ) | | $ | 1,217 |
|
U.S. treasury securities | 196 |
| | 0 |
| | (2 | ) | | 194 |
|
Mortgage backed obligations | 100 |
| | 0 |
| | (1 | ) | | 99 |
|
Asset backed securities | 251 |
| | 0 |
| | (1 | ) | | 250 |
|
Municipal securities | 53 |
| | 0 |
| | (1 | ) | | 52 |
|
Foreign government obligations | 87 |
| | 0 |
| | (1 | ) | | 86 |
|
U.S. agency obligations | 19 |
| | 0 |
| | 0 |
| | 19 |
|
Commercial paper | 11 |
| | 0 |
| | 0 |
| | 11 |
|
Covered bonds | 51 |
| | 0 |
| | (1 | ) | | 50 |
|
Total marketable securities | $ | 1,991 |
|
| $ | 1 |
|
| $ | (14 | ) |
| $ | 1,978 |
|
The contractual maturities of the investments classified as marketable securities are as follows (in millions):
|
| | | | | | | |
| As of |
| October 31,
2018 | | January 31,
2018 |
Due within 1 year | $ | 286 |
| | $ | 395 |
|
Due in 1 year through 5 years | 1,057 |
| | 1,579 |
|
Due in 5 years through 10 years | 2 |
| | 4 |
|
| $ | 1,345 |
| | $ | 1,978 |
|
As of October 31, 2018, the following marketable securities were in an unrealized loss position (in millions):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Less than 12 Months | | 12 Months or Greater | | Total |
| Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses |
Corporate notes and obligations | $ | 489 |
| | $ | (6 | ) | | $ | 268 |
| | $ | (4 | ) | | $ | 757 |
| | $ | (10 | ) |
U.S. treasury securities | 36 |
| | (1 | ) | | 52 |
| | (1 | ) | | 88 |
| | (2 | ) |
Mortgage backed obligations | 0 |
| | 0 |
| | 42 |
| | (1 | ) | | 42 |
| | (1 | ) |
Asset backed securities | 114 |
| | (1 | ) | | 65 |
| | (1 | ) | | 179 |
| | (2 | ) |
Municipal securities | 0 |
| | 0 |
| | 19 |
| | (1 | ) | | 19 |
| | (1 | ) |
Foreign government obligations | 0 |
| | 0 |
| | 38 |
| | (1 | ) | | 38 |
| | (1 | ) |
Covered bonds | 48 |
| | (1 | ) | | 0 |
| | 0 |
| | 48 |
| | (1 | ) |
| $ | 687 |
| | $ | (9 | ) | | $ | 484 |
| | $ | (9 | ) | | $ | 1,171 |
| | $ | (18 | ) |
The unrealized losses for each of the fixed rate marketable securities were less than $1 million. The Company does not believe any of the unrealized losses represent an other-than-temporary impairment based on its evaluation of available evidence as of October 31, 2018, such as the Company's intent to hold and whether it is more likely than not that the Company will be required to sell the investment before recovery of the investment's amortized basis. The Company expects to receive the full principal and interest on all of these marketable securities.
Investment Income
Investment income consists of interest income, realized gains and realized losses on the Company’s cash, cash equivalents and marketable securities. The components of investment income are presented below (in millions):
|
| | | | | | | | | | | | | | | |
| Three Months Ended October 31, | | Nine Months Ended October 31, |
| 2018 | | 2017 | | 2018 | | 2017 |
Interest income | $ | 13 |
| | $ | 10 |
| | $ | 45 |
| | $ | 24 |
|
Realized gains | 0 |
| | 0 |
| | 1 |
| | 1 |
|
Realized losses | 0 |
| | 0 |
| | (5 | ) | | (1 | ) |
Investment income | $ | 13 |
| | $ | 10 |
| | $ | 41 |
| | $ | 24 |
|
Strategic Investments
Strategic investments by form and measurement category as of October 31, 2018 were as follows (in millions):
|
| | | | | | | | | | | | | | | |
| Measurement Category |
| Fair Value | | Measurement Alternative | | Other (1) | | Total |
Equity securities | $ | 480 |
| | $ | 711 |
| | $ | 36 |
| | $ | 1,227 |
|
Debt securities | 0 |
| | 0 |
| | 24 |
| | 24 |
|
Balance as of October 31, 2018 | $ | 480 |
| | $ | 711 |
| | $ | 60 |
| | $ | 1,251 |
|
(1) Other includes the Company's investments accounted for under the equity method of accounting or amortized cost.
Measurement Alternative Adjustments
Privately held equity securities accounted for under the measurement alternative as of October 31, 2018 were as follows (in millions):
|
| | | | | | | |
| Three Months Ended October 31, 2018 | | Nine Months Ended October 31, 2018 |
Carrying amount, beginning of period | $ | 667 |
| | $ | 548 |
|
Adjustments related to privately held equity securities: | | | |
Net additions | 25 |
| | 55 |
|
Impairments and downward adjustments | (1 | ) | | (24 | ) |
Upward adjustments | 20 |
| | 132 |
|
Carrying amount, end of period | $ | 711 |
| | $ | 711 |
|
Gains (losses) on strategic investments, net
Gains and losses recognized in the three and nine months ended October 31, 2018 and 2017 were as follows (in millions):
|
| | | | | | | | | | | | | | | |
3 | Three Months Ended October 31, | | Nine Months Ended October 31, |
| 2018 | | 2017 | | 2018 | | 2017 |
Net gains (losses) recognized on publicly traded securities | $ | (14 | ) | | $ | 0 |
| | $ | 262 |
| | $ | 0 |
|
Net gains (losses) recognized on privately held securities | 18 |
| | 1 |
| | 99 |
| | (4 | ) |
Net gains recognized on sales of equity securities | $ | 59 |
| | $ | 0 |
| | $ | 68 |
| | $ | 0 |
|
Net gains (losses) recognized on debt securities | $ | 0 |
| | $ | 0 |
| | $ | (12 | ) | | $ | 0 |
|
Gains (losses) on strategic investments, net | $ | 63 |
| | $ | 1 |
| | $ | 417 |
| | $ | (4 | ) |
Net gains recognized in the three and nine months ended October 31, 2018 for investments still held as of October 31, 2018 were $4 million and $348 million, respectively. This excludes recognized gains on the sale of investments for the three and nine months ended October 31, 2018 of $59 million and $69 million, respectively.