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Joint Ventures
6 Months Ended
Jun. 30, 2013
Equity Method Investments and Joint Ventures [Abstract]  
Joint Ventures
Joint Ventures
We make investments in joint ventures. For each joint venture investment, we consider the facts and circumstances in order to determine whether it qualifies for cost accounting, equity accounting, fair value method accounting or whether it should be consolidated.

In 2009, Cisco and EMC formed VCE Company LLC (“VCE”), with investments from VMware and Intel. VCE, through Vblock infrastructure platforms, delivers an integrated IT offering that combines network, computing, storage, management, security and virtualization technologies for converged infrastructures and cloud based computing models. As of June 30, 2013, we have contributed $854 million in funding and $15 million in stock-based compensation to VCE since inception and own approximately 58% of VCE’s outstanding equity.
  
We consider VCE a variable interest entity. Authoritative guidance related to variable interest entities states that the primary beneficiary of a variable interest entity must have both of the following characteristics: (a) the power to direct the activities of a variable interest entity that most significantly will impact the entity’s economic performance; and (b) the obligation to absorb losses that could be potentially significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. Since the power to direct the activities of VCE which most significantly impact its economic performance are determined by its board of directors, which is comprised of equal representation of EMC and Cisco, and all significant decisions require the approval of the minority shareholders, we have determined we are not the primary beneficiary, and as such we account for the investment under the equity method.

Our portion of VCE’s gains and losses is recognized in other expense, net, in the consolidated income statements. Our consolidated share of VCE’s losses, based upon our portion of the overall funding, was approximately 63% for the three and six months ended June 30, 2013 and 2012. As of June 30, 2013, we have recorded net accumulated losses from VCE of $638 million since inception, of which $71 million and $140 million were recorded in the three and six months ending June 30, 2013, respectively, and $60 million and $115 million were recorded in the three and six months ended June 30, 2012, respectively.

We recognized $102 million and $176 million in revenue from sales of product and services to VCE during the three and six months ended June 30, 2013, respectively, and $75 million and $146 million for the three and six months ended June 30, 2012, respectively. We perform certain administrative services, pursuant to an administrative services agreement, on behalf of VCE and we pay certain operating expenses on behalf of VCE. Accordingly, we had a receivable from VCE related to the administrative services agreement of $39 million and $44 million as of June 30, 2013 and December 31, 2012, respectively, included in other current assets in the consolidated balance sheets.