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Variable Interest Entities
VCE Joint Venture VCE is a joint venture that the Company formed in fiscal 2010 with EMC Corporation (“EMC”), with
investments from VMware, Inc. (“VMware”) and Intel Corporation. VCE helps organizations leverage best-in-class
technologies and disciplines from Cisco, EMC, and VMware to enable the transformation to cloud computing.
As of July 26, 2014, the Company’s cumulative gross investment in VCE was approximately $716 million, inclusive of
accrued interest, and its ownership percentage was approximately 35%. The Company invested $185 million in VCE during
fiscal 2014, $93 million during fiscal 2013, and $276 million during fiscal 2012.
For the period presented, the Company accounted for its investment in VCE under the equity method, and its portion of VCE’s
net loss is recognized in other income (loss), net. The Company’s share of VCE’s losses, based upon its portion of the overall
funding, was approximately 36.8% for each of the fiscal years ended July 26, 2014, July 27, 2013, and July 28, 2012. As of
July 26, 2014, the Company had recorded cumulative losses from VCE of $644 million since inception, of which losses of
$223 million, $183 million, and $160 million were recorded for the fiscal years ended July 26, 2014, July 27, 2013, and
July 28, 2012, respectively. The Company’s carrying value in VCE as of July 26, 2014 was $72 million.
Over the next 12 months, as VCE scales its operations, the Company may make additional investments in VCE and may incur
additional losses proportionate with the Company’s share ownership.
From time to time, EMC and Cisco may enter into guarantee agreements on behalf of VCE to indemnify third parties, such as
customers, for monetary damages. Such guarantees were not material as of July 26, 2014.
Other Variable Interest Entities In the ordinary course of business, the Company has investments in other privately held
companies and provides financing to certain customers. These other privately held companies and customers may be
considered to be variable interest entities. The Company evaluates on an ongoing basis its investments in these other privately
held companies and its customer financings, and has determined that as of July 26, 2014 there were no other variable interest
entities required to be consolidated in the Company’s Consolidated Financial Statements.
9. Fair Value
(a) Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis as of July 26, 2014 and July 27, 2013 were as follows (in
millions):
JULY 26, 2014
FAIR VALUE MEASUREMENTS
JULY 27, 2013
FAIR VALUE MEASUREMENTS
Level 1 Level 2 Level 3
Total
Balance Level 1 Level 2
Total
Balance
Assets:
Cash equivalents:
Money market funds ........................ $4,935 $ — $ — $ 4,935 $6,045 $ — $ 6,045
Available-for-sale investments:
U.S. government securities ................... — 31,734 — 31,734 — 27,823 27,823
U.S. government agency securities ............ — 1,063 — 1,063 — 3,089 3,089
Non-U.S. government and agency securities ..... — 861 — 861 — 1,095 1,095
Corporate debt securities .................... — 9,159 — 9,159 — 7,881 7,881
U.S. agency mortgage-backed securities ........ — 579 — 579 ———
Publicly traded equity securities ............... 1,952 — — 1,952 2,797 — 2,797
Derivative assets ............................... — 158 2 160 — 182 182
Total ................................ $6,887 $43,554 $ 2 $50,443 $8,842 $40,070 $48,912
Liabilities:
Derivative liabilities ........................ $— $ 67 $— $ 67 $ — $ 171 $ 171
Total ................................ $— $ 67 $— $ 67 $ — $ 171 $ 171
Level 1 publicly traded equity securities are determined by using quoted prices in active markets for identical assets. Level 2
fixed income securities are priced using quoted market prices for similar instruments or nonbinding market prices that are
corroborated by observable market data. The Company uses inputs such as actual trade data, benchmark yields, broker/dealer
quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to
determine the ultimate fair value of these assets and liabilities. The Company uses such pricing data as the primary input to
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