Annual report pursuant to Section 13 and 15(d)

Marketable Securities

v2.3.0.15
Marketable Securities
 12 Months Ended
Sep. 25, 2011
Notes to Financial Statements [Abstract]  
Note 3 - Marketable Securities
Note 3. Marketable Securities
Marketable securities were comprised as follows (in millions):
 
Current
 
Noncurrent
 
September 25, 2011
 
September 26, 2010
 
September 25, 2011
 
September 26, 2010
Available-for-sale:
 
 
 
 
 
 
 
U.S. Treasury securities and government-related securities
$
516

 
$
650

 
$
6

 
$
4

Corporate bonds and notes
3,665

 
3,504

 
2,353

 
1,495

Mortgage- and asset-backed securities
587

 
629

 
91

 
38

Auction rate securities
—

 
—

 
124

 
126

Non-investment-grade debt securities
19

 
21

 
3,653

 
3,344

Common and preferred stock
76

 
52

 
1,713

 
1,670

Equity mutual and exchange-traded funds
—

 
—

 
845

 
979

Debt mutual funds
1,327

 
1,476

 
—

 
—

Total available-for-sale
6,190

 
6,332

 
8,785

 
7,656

Fair value option:
 
 
 
 
 
 
 
Debt mutual fund
—

 
—

 
476

 
467

Time deposits
—

 
400

 
—

 
—

Total marketable securities
$
6,190

 
$
6,732

 
$
9,261

 
$
8,123


The Company holds an investment in a debt mutual fund for which the Company elected the fair value option. The investment would have otherwise been recorded using the equity method. The debt mutual fund has no single maturity date. At September 25, 2011, the Company had an effective ownership interest in the debt mutual fund of 21%. Increases in fair value associated with this investment of $9 million and $17 million were recognized in net investment income in fiscal 2011 and 2010, respectively. The Company believes that recording the investment at fair value and reporting the investment as a marketable security is preferable to applying the equity method because the Company is able to redeem its shares at net asset value, which is determined daily. At September 26, 2010, marketable securities also included $400 million of time deposits that matured in December 2010.
At September 25, 2011, the contractual maturities of available-for-sale debt securities were as follows (in millions):
Years to Maturity
 
No Single
 
 
Less Than
 
One to
 
Five to
 
Greater Than
 
Maturity
 
 
One Year
 
Five Years
 
Ten Years
 
Ten Years
 
Date
 
Total
$
1,084

 
$
4,600

 
$
2,450

 
$
952

 
$
3,255

 
$
12,341

Securities with no single maturity date included debt mutual funds, non-investment-grade debt securities, mortgage- and asset-backed securities and auction rate securities.
The Company recorded realized gains and losses on sales of available-for-sale marketable securities as follows (in millions):
 
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gains
Fiscal Year
 
 
 
 
 
2011
$
356

 
$
(30
)
 
$
326

2010
415

 
(31
)
 
384

2009
215

 
(79
)
 
136

Available-for-sale securities were comprised as follows (in millions):
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
September 25, 2011
 
 
 
 
 
 
 
Equity securities
$
2,426

 
$
278

 
$
(70
)
 
$
2,634

Debt securities
12,179

 
294

 
(132
)
 
12,341

 
$
14,605

 
$
572

 
$
(202
)
 
$
14,975

September 26, 2010
 
 
 
 
 
 
 
Equity securities
$
2,309

 
$
403

 
$
(11
)
 
$
2,701

Debt securities
10,795

 
512

 
(20
)
 
11,287

 
$
13,104

 
$
915

 
$
(31
)
 
$
13,988


The following table shows the gross unrealized losses and fair values of the Company’s investments in individual securities that have been in a continuous unrealized loss position deemed to be temporary for less than 12 months and for more than 12 months, aggregated by investment category (in millions):
 
September 25, 2011
 
Less than 12 months
 
More than 12 months
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
Corporate bonds and notes
$
1,862

 
$
(41
)
 
$
41

 
$
—

Auction rate securities
3

 
—

 
121

 
(2
)
Non-investment-grade debt securities
1,867

 
(86
)
 
19

 
(3
)
Common and preferred stock
750

 
(70
)
 
4

 
—

 
$
4,482

 
$
(197
)
 
$
185

 
$
(5
)
 
September 26, 2010
 
Less than 12 months
 
More than 12 months
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
Corporate bonds and notes
$
425

 
$
(1
)
 
$
23

 
$
—

Auction rate securities
—

 
—

 
126

 
(4
)
Non-investment-grade debt securities
296

 
(7
)
 
90

 
(8
)
Common and preferred stock
133

 
(10
)
 
3

 
—

Equity mutual and exchange-traded funds
277

 
(1
)
 
—

 
—

 
$
1,131

 
$
(19
)
 
$
242

 
$
(12
)

At September 25, 2011, the Company concluded that the unrealized losses were temporary. Further, for common and preferred stock with unrealized losses, the Company has the ability and the intent to hold such securities until they recover, which is expected to be within a reasonable period of time. For debt securities with unrealized losses, the Company does not have the intent to sell, nor is it more likely than not that the Company will be required to sell, such securities before recovery or maturity.
The following table shows the activity for the credit loss portion of other-than-temporary impairments on debt securities held by the Company (in millions):
 
2011
 
2010
 
2009
Beginning balance of credit losses
$
109

 
$
170

 
$
—

Credit losses remaining in retained earnings upon adoption
—

 
—

 
186

Reductions in credit losses related to securities the Company intends to sell
(40
)
 
—

 
(14
)
Credit losses recognized on securities previously not impaired
2

 
1

 
17

Additional credit losses recognized on securities previously impaired
—

 
1

 
2

Reductions in credit losses related to securities sold
(20
)
 
(39
)
 
(21
)
Accretion of credit losses due to an increase in cash flows expected to be collected
(5
)
 
(24
)
 
—

Ending balance of credit losses
$
46

 
$
109

 
$
170