Fair Value of Financial Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2013



	December 31, 2012
	Amortized Cost		Unrealized Gains		Unrealized (Losses)			Aggregate Fair Value
U.S. government and agency obligations	$	2,191	$	10	$	(1	)	$	2,200
U.S. corporate debt securities	1,480		10		—			1,490
High yield corporate debt securities	486		34		(1		)	519
Asset-backed securities	2		—		—			2
Municipal obligations	1,032		3		—			1,035
Auction rate securities	74		—		(4		)	70
Foreign debt securities	1,270		9		—			1,279
Total fixed income securities	6,535		66		(6		)	6,595
Publicly traded equity securities	47		41		(1		)	87
Total	$	6,582	$	107	$	(7	)	$	6,682

The following tables summarize the composition of our short- and long-term investments at June 30, 2013 and December 31, 2012 (tables in millions):



	June 30, 2013
	Amortized Cost		Unrealized Gains		Unrealized (Losses)			Aggregate Fair Value
U.S. government and agency obligations	$	4,570	$	5	$	(5	)	$	4,570
U.S. corporate debt securities	1,991		5		(7		)	1,989
High yield corporate debt securities	499		15		(8		)	506
Asset-backed securities	5		—		—			5
Municipal obligations	957		2		(2		)	957
Auction rate securities	72		—		(4		)	68
Foreign debt securities	1,842		5		(6		)	1,841
Total fixed income securities	9,936		32		(32		)	9,936
Publicly traded equity securities	70		44		—			114
Total	$	10,006	$	76	$	(32	)	$	10,050

Fair Value Hierarchy For Financial Assets And Liabilities Measured At Fair Value

The following tables represent our fair value hierarchy for our financial assets and liabilities measured at fair value as of June 30, 2013 and December 31, 2012 (tables in millions):



	June 30, 2013
	Level 1		Level 2			Level 3		Total
Cash	$	1,687	$	—		$	—	$	1,687
Cash equivalents	4,633		1,206			—		5,839
U.S. government and agency obligations	2,358		2,212			—		4,570
U.S. corporate debt securities	—		1,989			—		1,989
High yield corporate debt securities	—		506			—		506
Asset-backed securities	—		5			—		5
Municipal obligations	—		957			—		957
Auction rate securities	—		—			68		68
Foreign debt securities	—		1,841			—		1,841
Publicly traded equity securities	114		—			—		114
Total cash and investments	$	8,792	$	8,716		$	68	$	17,576
Other items:
Strategic investments held at cost	$	—	$	—		$	313	$	313
Investment in joint venture	—		—			34		34
Convertible debt	—		(2,519		)	—		(2,519		)
Long-term debt	—		(5,440		)	—		(5,440		)
Foreign exchange derivative assets	—		40			—		40
Foreign exchange derivative liabilities	—		(32		)	—		(32		)
Commodity derivative liabilities	—		(1		)	—		(1		)



	December 31, 2012
	Level 1		Level 2			Level 3		Total
Cash	$	1,454	$	—		$	—	$	1,454
Cash equivalents	2,898		362			—		3,260
U.S. government and agency obligations	1,327		873			—		2,200
U.S. corporate debt securities	—		1,490			—		1,490
High yield corporate debt securities	—		519			—		519
Asset-backed securities	—		2			—		2
Municipal obligations	—		1,035			—		1,035
Auction rate securities	—		—			70		70
Foreign debt securities	—		1,279			—		1,279
Publicly traded equity securities	87		—			—		87
Total cash and investments	$	5,766	$	5,560		$	70	$	11,396
Other items:
Strategic investments held at cost	$	—	$	—		$	352	$	352
Investment in joint venture	—		—			33		33
Convertible debt	—		(2,666		)	—		(2,666		)
Foreign exchange derivative assets	—		30			—		30
Foreign exchange derivative liabilities	—		(35		)	—		(35		)
Commodity derivative liabilities	—		(1		)	—		(1		)



	December 31, 2012
	Level 1		Level 2			Level 3		Total
Cash	$	1,454	$	—		$	—	$	1,454
Cash equivalents	2,898		362			—		3,260
U.S. government and agency obligations	1,327		873			—		2,200
U.S. corporate debt securities	—		1,490			—		1,490
High yield corporate debt securities	—		519			—		519
Asset-backed securities	—		2			—		2
Municipal obligations	—		1,035			—		1,035
Auction rate securities	—		—			70		70
Foreign debt securities	—		1,279			—		1,279
Publicly traded equity securities	87		—			—		87
Total cash and investments	$	5,766	$	5,560		$	70	$	11,396
Other items:
Strategic investments held at cost	$	—	$	—		$	352	$	352
Investment in joint venture	—		—			33		33
Convertible debt	—		(2,666		)	—		(2,666		)
Foreign exchange derivative assets	—		30			—		30
Foreign exchange derivative liabilities	—		(35		)	—		(35		)
Commodity derivative liabilities	—		(1		)	—		(1		)

Changes in Fair Value of Level 3 Financial Assets

The following table provides a summary of changes in fair value of our Level 3 auction rate securities for the three and six months ended June 30, 2013 and 2012 (table in millions):



	For the Three Months Ended					For the Six Months Ended
	June 30, 2013		June 30, 2012			June 30, 2013			June 30, 2012
Balance, beginning of the period	$	68	$	79		$	70		$	75
Calls at par value	—		—			(1		)	—
Other-than-temporary impairment loss	—		(2		)	(1		)	(2		)
(Increase) decrease in previously recognized unrealized losses included in other comprehensive income	—		(3		)	—			1
Balance, end of the period	$	68	$	74		$	68		$	74

The following table provides a summary of changes in fair value of our LenovoEMC joint venture for the three and six months ended June 30, 2013 (table in millions):



	June 30, 2013
	Three Months Ended		Six Months Ended
Balance, beginning of the period	$	33	$	33
Realized gain included in other income (expense)	1		1
Balance, end of period	$	34	$	34

Unrealized Losses on Investments by Investment Category and Length of Time in Continuous Unrealized Loss Position

Unrealized losses on investments at June 30, 2013 by investment category and length of time the investment has been in a continuous unrealized loss position are as follows (table in millions):



	Less Than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
U.S. government and agency obligations	$	2,181	$	(5	)	$	8	$	—		$	2,189	$	(5	)
U.S. corporate debt securities	1,100		(7		)	—		—			1,100		(7		)
High yield corporate debt securities	200		(8		)	—		—			200		(8		)
Asset-backed securities	4		—			—		—			4		—
Municipal obligations	342		(2		)	10		—			352		(2		)
Auction rate securities	—		—			68		(4		)	68		(4		)
Foreign debt securities	879		(6		)	—		—			879		(6		)
Total	$	4,706	$	(28	)	$	86	$	(4	)	$	4,792	$	(32	)

Contractual Maturities of Investments

The contractual maturities of fixed income securities held at June 30, 2013 are as follows (table in millions):



	June 30, 2013
	Amortized Cost Basis		Aggregate Fair Value
Due within one year	$	3,617	$	3,620
Due after 1 year through 5 years	5,341		5,339
Due after 5 years through 10 years	490		494
Due after 10 years	488		483
Total	$	9,936	$	9,936

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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