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Table of Contents VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
VMware evaluated its fixed income investments as of December 31, 2013 and 2012 to determine whether or not any security had experienced an other-
than-temporary decline in fair value. As of December 31, 2013 and 2012 , VMware did not consider any of its fixed income investments to be other-than-
temporarily impaired. Both the realized gains and realized losses on fixed income investments in the years ended December 31, 2013 and 2012 were not
material.
Unrealized losses on investments as of December 31, 2013 and 2012 , which have been in a net loss position for less than twelve months, were classified
by investment category as follows (table in millions):
As of December 31, 2013, unrealized losses on investments in other investment categories, which have been in a net loss position for less than twelve
months, were not material. Additionally, unrealized losses on investments, which have been in a net loss position for twelve months or greater, were not
material as of December 31, 2013. As of December 31, 2012, VMware did not have investments in a continuous unrealized loss position for twelve months or
greater.
Strategic Investments
VMware evaluated the strategic investments in its portfolio that are accounted under the cost method, to assess whether any of its strategic investments
were other-than-temporarily impaired. VMware uses Level 3 inputs as part of its impairment analysis, including, pre- and post-money valuations of recent
financing events and the impact of those on its fully diluted ownership percentages, as well as other available information regarding the issuer’
s historical and
forecasted performance. The estimated fair value of these investments is considered in VMware's impairment review if any events or changes in
circumstances occur that might have a significant adverse effect on their value. During the year ended December 31, 2013 , VMware recognized an other-
than-temporary impairment charge of approximately $13 million in connection with one of its strategic investments.
During the year ended December 31, 2011 , a realized gain of $56 million was recorded in other income (expense), net for the sale of VMware’s
investment in Terremark Worldwide, Inc. During the years ended December 31, 2013 and 2012 , VMware did not have realized gains or realized losses on
strategic investments.
Contractual Maturities
The contractual maturities of investments held at December 31, 2013 consisted of the following (table in millions):
F. Fair Value Measurements
Certain financial assets and liabilities are measured at fair value on a recurring basis.
VMware’s Level 1 classification of the fair value hierarchy includes money market funds and certain available-for-sale fixed income securities because
these securities are valued using quoted prices in active markets for identical assets. Fixed income available-for-sale securities consist of high quality,
investment-grade securities from diverse issuers.
VMware’s Level 2 classification includes the remainder of the available-for-sale fixed income securities because these securities are priced using inputs
other than quoted prices that are observable either directly or indirectly. The valuation techniques used to measure the fair value of financial instruments
having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for
similar instruments, or pricing models such as discounted cash flow techniques. VMware’s procedures include controls to ensure that appropriate fair values
75
December 31, 2013
December 31, 2012
Fair Value
Unrealized Losses
Fair Value
Unrealized Losses
U.S. and foreign corporate debt securities
$
750
$
(3
)
$
316
$
(1
)
Mortgage-backed securities
91
(1
)
28
—
Total
$
841
$
(4
)
$
344
$
(1
)
Amortized
Cost Basis
Aggregate
Fair Value
Due within one year
$
807
$
808
Due after 1 year through 5 years
2,864
2,869
Due after 5 years
194
193
Total investments
$
3,865
$
3,870