FACEBOOK INC, 10-Q filed on 5/2/2013
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2013
Apr. 30, 2013
Class A Common Stock
Apr. 30, 2013
Class B Common Stock
Document Information
 
 
 
Document Type
10-Q 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Mar. 31, 2013 
 
 
Document Fiscal Year Focus
2013 
 
 
Document Fiscal Period Focus
Q1 
 
 
Trading Symbol
FB 
 
 
Entity Registrant Name
FACEBOOK INC 
 
 
Entity Central Index Key
0001326801 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Non-accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
1,749,622,219 
668,283,406 
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Current assets:
 
 
Cash and cash equivalents
$ 2,325 
$ 2,384 
Marketable securities
7,147 
7,242 
Accounts receivable, net of allowances for doubtful accounts of $21 and $22 as of March 31, 2013 and December 31, 2012, respectively
659 
719 
Income tax refundable
426 
451 
Prepaid expenses and other current assets
485 
471 
Total current assets
11,042 
11,267 
Property and equipment, net
2,533 
2,391 
Goodwill and intangible assets, net
1,501 
1,388 
Other assets
87 
57 
Total assets
15,163 
15,103 
Current liabilities:
 
 
Accounts payable
75 
65 
Platform partners payable
190 
169 
Accrued expenses and other current liabilities
430 
423 
Deferred revenue and deposits
30 
30 
Current portion of capital lease obligations
338 
365 
Total current liabilities
1,063 
1,052 
Capital lease obligations, less current portion
420 
491 
Long-term debt
1,500 
1,500 
Other liabilities
356 
305 
Total liabilities
3,339 
3,348 
Stockholders' equity:
 
 
Common stock, $0.000006 par value; 5,000 million Class A shares authorized, 1,741 million and 1,671 million shares issued and outstanding, including 7 million and 2 million outstanding shares subject to repurchase as of March 31, 2013 and December 31, 2012, respectively; 4,141 million Class B shares authorized, 670 million and 701 million shares issued and outstanding, including 10 million and 11 million outstanding shares subject to repurchase as of March 31, 2013 and December 31, 2012, respectively
0 
0 
Additional paid-in capital
9,961 
10,094 
Accumulated other comprehensive (loss) income
(15)
2 
Retained earnings
1,878 
1,659 
Total stockholders' equity
11,824 
11,755 
Total liabilities and stockholders' equity
$ 15,163 
$ 15,103 
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Current assets:
 
 
Accounts receivable, allowances for doubtful accounts
$ 21 
$ 22 
Stockholders' equity:
 
 
Common stock, par value (in dollars per share)
$ 0.000006 
$ 0.000006 
Class A Common Stock
 
 
Stockholders' equity:
 
 
Common stock, shares authorized
5,000,000,000 
5,000,000,000 
Common stock, shares issued
1,741,000,000 
1,671,000,000 
Common stock, shares outstanding
1,741,000,000 
1,671,000,000 
Common stock, outstanding shares subject to repurchase
7,000,000 
2,000,000 
Class B Common Stock
 
 
Stockholders' equity:
 
 
Common stock, shares authorized
4,141,000,000 
4,141,000,000 
Common stock, shares issued
670,000,000 
701,000,000 
Common stock, shares outstanding
670,000,000 
701,000,000 
Common stock, outstanding shares subject to repurchase
10,000,000 
11,000,000 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Revenue
$ 1,458 
$ 1,058 
Costs and expenses:
 
 
Cost of revenue
413 
277 
Research and development
293 
153 
Marketing and sales
203 
143 
General and administrative
176 
104 
Total costs and expenses
1,085 
677 
Income from operations
373 
381 
Interest and other income (expense), net:
 
 
Interest expense
(15)
(13)
Other (expense) income, net
(5)
14 
Income before provision for income taxes
353 
382 
Provision for income taxes
134 
177 
Net income
219 
205 
Less: Net income attributable to participating securities
2 
68 
Net income attributable to Class A and Class B common stockholders
217 
137 
Earnings per share attributable to Class A and Class B common stockholders:
 
 
Basic (in dollars per share)
$ 0.09 
$ 0.10 
Diluted (in dollars per share)
$ 0.09 
$ 0.09 
Weighted average shares used to compute earnings per share attributable to Class A and Class B common stockholders:
 
 
Basic (in dollars per share)
2,386 
1,347 
Diluted (in dollars per share)
2,499 
1,527 
Share-based compensation expense included in costs and expenses:
 
 
Share-based compensation expense
170 
103 
Cost of revenue
 
 
Share-based compensation expense included in costs and expenses:
 
 
Share-based compensation expense
8 
5 
Research and development
 
 
Share-based compensation expense included in costs and expenses:
 
 
Share-based compensation expense
117 
60 
Marketing and sales
 
 
Share-based compensation expense included in costs and expenses:
 
 
Share-based compensation expense
24 
19 
General and administrative
 
 
Share-based compensation expense included in costs and expenses:
 
 
Share-based compensation expense
$ 21 
$ 19 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Statement of Other Comprehensive Income [Abstract]
 
 
Net income
$ 219 
$ 205 
Other comprehensive (loss) income:
 
 
Change in foreign currency translation adjustment
(18)
(1)
Unrealized gain on derivative, net of tax
1 
0 
Comprehensive income
$ 202 
$ 204 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Cash flows from operating activities
 
 
Net income
$ 219 
$ 205 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
241 
110 
Loss on write-off of equipment
9 
1 
Share-based compensation
170 
103 
Deferred income taxes
(7)
(24)
Tax benefit from share-based award activity
59 
54 
Excess tax benefit from share-based award activity
(62)
(54)
Changes in assets and liabilities:
 
 
Accounts receivable
54 
65 
Prepaid expenses and other current assets
(1)
(33)
Other assets
(36)
(6)
Accounts payable
1 
(3)
Platform partners payable
21 
7 
Accrued expenses and other current liabilities
(33)
2 
Deferred revenue and deposits
0 
3 
Other liabilities
84 
11 
Net cash provided by operating activities
719 
441 
Cash flows from investing activities
 
 
Purchases of property and equipment
(327)
(453)
Purchases of marketable securities
(1,508)
(876)
Sales of marketable securities
699 
69 
Maturities of marketable securities
903 
567 
Investments in non-marketable equity securities
0 
(1)
Acquisitions of businesses, net of cash acquired, and purchases of intangible assets
(99)
(25)
Change in restricted cash and deposits
6 
(1)
Net cash used in investing activities
(326)
(720)
Cash flows from financing activities
 
 
Taxes paid related to net share settlement of equity awards
(405)
0 
Proceeds from exercise of stock options
8 
5 
Proceeds from sale and lease-back transactions
0 
62 
Principal payments on capital lease obligations
(109)
(71)
Excess tax benefit from share-based award activity
62 
54 
Net cash provided by financing activities
(444)
50 
Effect of exchange rate changes on cash and cash equivalents
(8)
(1)
Net decrease in cash and cash equivalents
(59)
(230)
Cash and cash equivalents at beginning of period
2,384 
1,512 
Cash and cash equivalents at end of period
2,325 
1,282 
Cash paid during the period for:
 
 
Interest
12 
9 
Income taxes
9 
174 
Non-cash investing and financing activities:
 
 
Fair value of shares issued related to acquisitions of businesses and other assets
33 
6 
Net Change in Accounts Payable Accrued Expenses And Other Current Liabilities
 
 
Non-cash investing and financing activities:
 
 
Property and equipment expenditures incurred but not yet paid
47 
110 
Capital Lease Obligations
 
 
Non-cash investing and financing activities:
 
 
Property and equipment expenditures incurred but not yet paid
$ 11 
$ 38 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
The condensed consolidated balance sheet as of December 31, 2012, included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP.
The condensed consolidated financial statements include the accounts of Facebook, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.
The accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2013.
There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 that have had a material impact on our condensed consolidated financial statements and related notes.
Use of Estimates
Conformity with GAAP requires the use of estimates and judgments that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. GAAP requires us to make estimates and judgments in several areas, including, but not limited to, those related to revenue recognition, collectability of accounts receivable, contingent liabilities, fair value of share-based awards, fair value of financial instruments, fair value of acquired intangible assets and goodwill, useful lives of intangible assets and property and equipment, and income taxes. These estimates are based on management's knowledge about current events and expectations about actions we may undertake in the future. Actual results could differ materially from those estimates.
Recently Issued and Adopted Accounting Pronouncement 

Comprehensive Income

In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02) which is effective prospectively for public companies for reporting periods beginning after December 15, 2012. This new accounting standard improves the reporting of reclassifications out of accumulated other comprehensive income (AOCI) by requiring an entity to report the effect of significant reclassifications out of AOCI on the respective line items in net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income. For other amounts that are not required under GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under GAAP that provide additional detail about those amounts. We adopted this new guidance on January 1, 2013 and the adoption did not have a material effect on our condensed consolidated financial statements.
Earnings per Share
Earnings per Share
Earnings per Share
We compute earnings per share (EPS) of Class A and Class B common stock using the two-class method required for participating securities. Prior to the date of our initial public offering (IPO) in May 2012, we considered all series of our convertible preferred stock to be participating securities due to their non-cumulative dividend rights. Immediately after the completion of our IPO, all outstanding shares of convertible preferred stock converted to Class B common stock. Additionally, we consider restricted stock awards to be participating securities, because holders of such shares have non-forfeitable dividend rights in the event of our declaration of a dividend for common shares.
Undistributed earnings allocated to these participating securities are subtracted from net income in determining net income attributable to common stockholders. Net losses, if any, are not allocated to these participating securities. Basic EPS is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of our Class A and Class B common stock outstanding, adjusted for outstanding shares that are subject to repurchase.
For the calculation of diluted EPS, net income attributable to common stockholders for basic EPS is adjusted by the effect of dilutive securities, including awards under our equity compensation plans. In addition, the computation of the diluted EPS of Class A common stock assumes the conversion from Class B common stock, while the diluted EPS of Class B common stock does not assume the conversion of those shares. Diluted EPS attributable to common stockholders is computed by dividing the resulting net income attributable to common stockholders by the weighted-average number of fully diluted common shares outstanding.
Restricted stock units (RSUs) granted prior to January 1, 2011 vest upon the satisfaction of both a service condition and a liquidity condition. The liquidity condition is satisfied upon the occurrence of a qualifying event, defined as a change of control transaction or six months following the completion of our IPO. Our IPO did not occur until May 2012. Therefore, prior to this date the holders of these RSUs had no rights in our undistributed earnings and accordingly, they are excluded from the effect of basic and dilutive securities in our EPS calculation for the three months ended March 31, 2012. However, subsequent to the completion of our IPO in May 2012, these RSUs were included in our basic and diluted EPS calculation. RSUs granted on or after January 1, 2011 (Post-2011 RSUs) are not subject to a liquidity condition in order to vest, and are thus included in the calculation of diluted EPS for the three months ended March 31, 2013 and 2012. We have excluded 18 million Post-2011 RSUs from the EPS calculation for the three months ended March 31, 2013 because the impact would be anti-dilutive. No shares were excluded from the calculation for the three months ended March 31, 2012.
Basic and diluted EPS are the same for each class of common stock because they are entitled to the same liquidation and dividend rights.
The numerators and denominators of the basic and diluted EPS computations for our common stock are calculated as follows (in millions, except per share amounts): 
 
Three Months Ended March 31,
 
2013
 
2012
 
Class A
 
Class B
 
Class A
 
Class B
Basic EPS:
 
 
 
 
 
 
 
Numerator
 
 
 
 
 
 
 
Net income
$
156

 
$
63

 
$
18

 
$
187

Less: Net income attributable to participating securities
1

 
1

 
6

 
62

Net income attributable to common stockholders
$
155

 
$
62

 
$
12

 
$
125

Denominator
 
 
 
 
 
 
 
Weighted average shares outstanding
1,709

 
691

 
117

 
1,233

Less: Shares subject to repurchase
4

 
10

 
—

 
3

Number of shares used for basic EPS computation
1,705

 
681

 
117

 
1,230

Basic EPS
$
0.09

 
$
0.09

 
$
0.10

 
$
0.10

Diluted EPS:
 
 
 
 
 
 
 
Numerator
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
155

 
$
62

 
$
12

 
$
125

Reallocation of net income attributable to participating securities
2

 
—

 
5

 
—

Reallocation of net income as a result of conversion of Class B to Class A common stock
62

 
—

 
125

 
—

Reallocation of net income to Class B common stock
—

 
7

 
—

 
6

Net income attributable to common stockholders for diluted EPS
$
219

 
$
69

 
$
142

 
$
131

Denominator
 
 
 
 
 
 
 
Number of shares used for basic EPS computation
1,705

 
681

 
117

 
1,230

Conversion of Class B to Class A common stock
681

 
—

 
1,230

 
—

Weighted average effect of dilutive securities:
 
 
 
 
 
 
 
Employee stock options
80

 
80

 
169

 
169

RSUs
29

 
29

 
9

 
9

Shares subject to repurchase
4

 
4

 
2

 
2

Number of shares used for diluted EPS computation
2,499

 
794

 
1,527

 
1,410

Diluted EPS
$
0.09

 
$
0.09

 
$
0.09

 
$
0.09

Cash and Cash Equivalents, and Marketable Securities
Cash and Cash Equivalents, and Marketable Securities
Cash, Cash Equivalents and Marketable Securities
The following table sets forth the cash, cash equivalents and marketable securities for the periods presented (in millions):
 
March 31, 2013
 
December 31, 2012
Cash and cash equivalents:
 
 
 
Cash
$
1,166

 
$
1,513

Cash equivalents:

 

Money market funds
1,159

 
871

Total cash and cash equivalents
2,325

 
2,384

Marketable securities:
 
 
 
U.S. government securities
4,793

 
5,165

U.S. government agency securities
2,354

 
2,077

Total marketable securities
7,147

 
7,242

Total cash, cash equivalents and marketable securities
$
9,472

 
$
9,626


The gross unrealized gains or losses on our marketable securities as of March 31, 2013 and December 31, 2012 were not significant. In addition, there were no securities in a continuous loss position for 12 months or longer as of March 31, 2013 and December 31, 2012.
The following table classifies our marketable securities by contractual maturities (in millions):  
 
March 31, 2013
Due in one year
$
4,389

Due in one to two years
2,758

Total
$
7,147

Fair Value Measurements
Fair Value Measurements
Fair Value Measurements
Assets and liabilities measured at fair value on a recurring basis are summarized below (in millions): 
 
 
 
Fair Value Measurement at
Reporting Date Using
Description
March 31, 2013
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
1,159

 
$
1,159

 
$
—

 
$
—

Marketable securities:
 
 
 
 
 
 
 
U.S. government securities
4,793

 
4,793

 
—

 
—

U.S. government agency securities
2,354

 
2,354

 
—

 
—

Total cash equivalents and marketable securities
$
8,306

 
$
8,306

 
$
—

 
$
—

 
 
 
 
 
 
 
 
Other current liabilities:
 
 
 
 
 
 
 
Contingent consideration liability
$
4

 
$
—

 
$
—

 
$
4

 
 
 
 
 
 
 
 
Other liabilities:
 
 
 
 
 
 
 
Derivative financial instrument
$
3

 
$
—

 
$
3

 
$
—

 
 
 
Fair Value Measurement at
Reporting Date Using
Description
December 31, 2012
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
871

 
$
871

 
$
—

 
$
—

Marketable securities:
 
 
 
 
 
 
 
U.S. government securities
5,165

 
5,165

 
—

 
—

U.S. government agency securities
2,077

 
2,077

 
—

 
—

Total cash equivalents and marketable securities
$
8,113

 
$
8,113

 
$
—

 
$
—

 
 
 
 
 
 
 
 
Other current liabilities:
 
 
 
 
 
 
 
Contingent consideration liability
$
4

 
$
—

 
$
—

 
$
4

 
 
 
 
 
 
 
 
Other liabilities:
 
 
 
 
 
 
 
Derivative financial instrument
$
4

 
$
—

 
$
4

 
$
—


Our Level 2 derivative financial instrument represents our interest rate swap agreement which is valued based on a valuation model using significant inputs derived from or corroborated by observable market data.
We estimate the fair value of our Level 3 contingent consideration liability based on the probability assessment of an earn-out criteria. In developing these estimates, we consider factors not observed in the market and thus this represents a Level 3 measurement. Level 3 instruments are valued based on unobservable inputs that are supported by little or no market activity and reflect our own assumptions in measuring fair value. Our fair value estimate of this liability was $6 million at the date of acquisition. Changes in the fair value of the contingent consideration liability subsequent to the acquisition date, such as changes in the probability assessment and our stock prices, are recognized in earnings in the period when the change in the estimated fair value occurs.
Property and Equipment
Property and Equipment
Property and Equipment
Property and equipment consisted of the following (in millions): 
 
March 31,
2013
 
December 31,
2012
Network equipment
$
2,009

 
$
1,912

Land
36

 
36

Buildings
896

 
594

Leasehold improvements
199

 
194

Computer software, office equipment and other
96

 
93

Construction in progress
299

 
444

Total
3,535

 
3,273

Less: Accumulated depreciation
(1,002
)
 
(882
)
Property and equipment, net
$
2,533

 
$
2,391


Construction in progress includes costs primarily related to the construction of data centers and equipment located in our data centers in Oregon, North Carolina and Sweden. Interest capitalized during the periods presented was not material.
Goodwill and Intangible Assets
Goodwill and Intangible Assets
Goodwill and Intangible Assets

In the three months ended March 31, 2013, we completed several patent and business acquisitions for a total consideration of $132 million, consisting of approximately $99 million in cash and 1.2 million of vested shares of our Class A common stock which are not conditioned upon continuous employment. In addition, we issued 5.4 million shares of Class A common stock in connection with such acquisitions, which shares are conditioned upon continuous employment and have been excluded from purchase consideration and will be recognized over the required service period as share-based compensation expense. These acquisitions were not material to our condensed consolidated financial statements individually or in the aggregate.
The changes in the carrying amount of goodwill for the three months ended March 31, 2013 are as follows (in millions): 
Balances at December 31, 2012
$
587

Goodwill acquired
67

Balance as of March 31, 2013
$
654

Intangible assets consisted of the following (in millions):
 
 
 
March 31, 2013
 
December 31, 2012
 
Useful lives from date of acquisitions (in years)
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Amortizable intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquired patents
3 - 18
 
$
738

 
$
(74
)
 
$
664

 
$
684

 
$
(53
)
 
$
631

Acquired technology
2 - 10
 
157

 
(38
)
 
119

 
133

 
(32
)
 
101

Tradename and other
2 - 7
 
94

 
(30
)
 
64

 
94

 
(25
)
 
69

Total
 
 
$
989

 
$
(142
)
 
$
847

 
$
911

 
$
(110
)
 
$
801


Amortization expense of intangible assets for the three months ended March 31, 2013 and 2012 was $33 million and $5 million, respectively.
As of March 31, 2013, estimated amortization expense for the unamortized acquired intangible assets for the next five years and thereafter is as follows (in millions):
The remainder of 2013
$
102

2014
129

2015
121

2016
110

2017
94

2018
66

Thereafter
225

 
$
847

Long-term Debt
Long-term Debt
Long-term Debt
We have an unsecured five-year revolving credit facility that allows us to borrow up to $5 billion at London Interbank Offered Rate (LIBOR) plus 1.0%, as well as an annual commitment fee of 0.10% on the daily undrawn balance. As of March 31, 2013, no amounts were drawn down and we were in compliance with the covenants under this credit facility.
We also have a three-year unsecured term loan facility (Amended and Restated Term Loan) expiring in October 2015, that allows us to borrow up to $1.5 billion with interest payable on the borrowed amounts set at LIBOR plus 1.0%, as well as an annual commitment fee of 0.10% on the daily undrawn balance of the facility. We fully drew down the $1.5 billion which will become due and payable on October 25, 2015. As of March 31, 2013, we were in compliance with the covenants in the Amended and Restated Term Loan.
In connection with the draw down of the Amended and Restated Term Loan, we entered into a $1.5 billion interest rate swap agreement that converts the one-month LIBOR rate on the corresponding notional amount of debt to a fixed interest rate of 1.46% to hedge our exposure to interest rate fluctuation. This interest rate swap has a maturity date of October 25, 2015. We have designated the interest rate swap agreement as a qualifying hedging instrument and accounted for it as a cash flow hedge. We periodically assess the effectiveness of our hedged transaction. The interest rate swap agreement is currently our only derivative instrument and is not used for trading purposes.
As of March 31, 2013, the change in fair value of this interest rate swap agreement, net of tax was $1 million and is recognized in AOCI with the corresponding fair value of $3 million included in other liabilities on our condensed consolidated balance sheet. For the three months ended March 31, 2013, the amount of loss in other comprehensive income reclassified to interest expense was not significant. There were no realized gains or losses on this derivative other than those related to the periodic settlement of the interest rate swap.
We estimate that $3 million of derivative losses included in AOCI will be reclassified into earnings within the next 12 months. This amount has been calculated based on the variable interest rate assumptions used in the fair value calculation of the interest rate swap agreement as of March 31, 2013.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Leases
We have entered into various capital lease arrangements to obtain property and equipment for our operations. Additionally, on occasion we have purchased property and equipment for which we have subsequently obtained capital financing under sale-leaseback transactions. These agreements are typically for three years, except for a building lease which is for 15 years, with interest rates ranging from 1% to 13%. The leases are secured by the underlying leased buildings and equipment. We have also entered into various non-cancelable operating lease agreements for certain of our offices, equipment, land and data centers with original lease periods expiring between now and 2027. We are committed to pay a portion of the related actual operating expenses under certain of these lease agreements. Certain of these arrangements have free rent periods and/or escalating rent payment provisions, and we recognize rent expense under such arrangements on a straight-line basis.
Operating lease expense was $41 million and $51 million for the three months ended March 31, 2013 and 2012, respectively.
Contingencies
Beginning on May 22, 2012, multiple putative class actions, derivative actions, and individual actions were filed in state and federal courts in the United States and in other jurisdictions against us, our directors, and/or certain of our officers alleging violation of securities laws or breach of fiduciary duties in connection with our IPO and seeking unspecified damages. We believe these lawsuits are without merit, and we intend to continue to vigorously defend them. On October 4, 2012, on our motion, the vast majority of the cases in the United States, along with multiple cases filed against The NASDAQ OMX Group, Inc. and The Nasdaq Stock Market LLC (collectively referred to herein as NASDAQ) alleging technical and other trading-related errors by NASDAQ in connection with our IPO, were ordered centralized for coordinated or consolidated pre-trial proceedings in the United States District Court for the Southern District of New York. On February 13, 2013, the court granted our motion to dismiss four derivative actions against our directors and certain of our officers. In addition, the events surrounding our IPO have become the subject of various government inquiries, and we are cooperating with those inquiries.
In the opinion of management, there was not at least a reasonable possibility we may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies relating to the matters set forth above. However, the outcome of litigation is inherently uncertain. Therefore, although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against us in the same reporting period for amounts in excess of management's expectations, our condensed consolidated financial statements of a particular reporting period could be materially adversely affected.
We are also party to various legal proceedings and claims which arise in the ordinary course of business. Among these legal matters, in two cases, Summit 6 LLC v. Research in Motion Corporation et al., and Timelines, Inc. v. Facebook, Inc., we have reached agreements to settle the matters. The cost of settlement in each case, which is included in the accompanying condensed consolidated financial statements for the three months ended March 31, 2013, was not material to our business, financial condition, or results of operations.
Stockholders' Equity
Stockholders' Equity
Stockholders' Equity
Share-based Compensation Plans
We maintain three share-based employee compensation plans: the 2012 Equity Incentive Plan (2012 Plan), the 2005 Stock Plan and the 2005 Officers' Stock Plan (collectively, Stock Plans). Our 2012 Plan serves as the successor to our 2005 Stock Plan and provides for the issuance of incentive and nonstatutory stock options, restricted stock awards, stock appreciation rights, RSUs, performance shares and stock bonuses to qualified employees, directors and consultants. The maximum term for stock options granted under the 2012 Plan may not exceed ten years from the date of grant. Our 2012 Plan will terminate ten years from the date of approval unless it is terminated earlier by our compensation committee. We have initially reserved 25,000,000 shares of our Class A common stock for issuance under our 2012 Plan, which amount increases on the first day of January of each of 2013 through 2022 based on a formula or as determined by the board of directors. We did not increase the number of shares reserved for issuance in 2013.
In November 2005, we issued a nonstatutory stock option to our CEO to purchase 120,000,000 shares of our Class B common stock under the 2005 Officers' Stock Plan. As of March 31, 2013, the option had been partially exercised in respect of 60,000,000 shares with the remainder remaining outstanding and fully vested, and no options were available for future issuance under the 2005 Officers' Stock Plan.
The following table summarizes the stock option activity under the Stock Plans during the three months ended March 31, 2013: 
 
Shares Subject to Options Outstanding
 
Number of
Shares
 
Weighted
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value(1)
 
(in thousands)
 
 
 
(in years)
 
(in millions)
Balance as of December 31, 2012
122,821

 
$
0.85

 
3.79
 
$
3,166

Stock options exercised
(11,196
)
 
0.68

 
 
 
 
Balance as of March 31, 2013
111,625

 
$
0.87

 
3.48
 
$
2,758

Stock options vested and expected to vest as of March 31, 2013
111,384

 
$
0.86

 
3.47
 
$
2,753

Stock options exercisable as of March 31, 2013
103,374

 
$
0.32

 
3.21
 
$
2,611

(1)
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing price of our Class A common stock of $25.58 on March 31, 2013.
The aggregate intrinsic value of the options exercised in the three months ended March 31, 2013 and 2012 was $311 million and $629 million, respectively.
The following table summarizes the activities for our unvested RSUs for the three months ended March 31, 2013:
 
Unvested RSUs
 
Number of Shares
 
Weighted Average Grant Date Fair Value
 
(in thousands)
 
 
Unvested at December 31, 2012
113,044

 
$
21.38

Granted
3,135

 
28.65

Vested
(16,797
)
 
16.38

Forfeited
(2,305
)
 
22.43

Unvested at March 31, 2013
97,077

 
$
22.46


As of March 31, 2013, there was $2.21 billion of unrecognized share-based compensation expense, of which $1.85 billion is related to RSUs, and $359 million is related to restricted shares and stock options. This unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately three years. Additionally, the compensation committee of our board of directors has approved annual refresher grants in the aggregate amount of approximately 35 million RSUs to be granted on May 6, 2013. These grants are not included in the table above and their fair value will be determined based on the closing price of our Class A common stock on the date of grant.
Income Taxes
Income Taxes
Income Taxes
Our tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter we update our estimate of the annual effective tax rate, and if our estimated annual tax rate changes, we make a cumulative adjustment in that quarter. Our quarterly tax provision, and our quarterly estimate of our annual effective tax rate, are subject to significant volatility due to several factors, including our ability to accurately predict our income (loss) before provision for income taxes in multiple jurisdictions, including the portions of our share-based compensation that will not generate tax benefits, and the effects of acquisitions and the integration of those acquisitions. In addition, our effective tax rate can be more or less volatile based on the amount of income before provision for income taxes. For example, the effect of non-deductible share based compensation expenses on our effective tax rate is significantly greater when our income before provision for income taxes is lower.
Our effective tax rate has exceeded the U.S. statutory rate primarily because of the effect of non-deductible share-based compensation and losses arising outside the United States in jurisdictions where we do not receive a tax benefit. These losses were primarily due to the initial start-up costs incurred by our foreign subsidiaries to operate in certain foreign markets, including the costs incurred by those subsidiaries to license, develop, and use our intellectual property. Our effective tax rate in the future will depend on the portion of our profits earned within and outside the United States, which will also be affected by our methodologies for valuing our intellectual property and intercompany transactions.
For the three months ended March 31, 2013, the effect of the non-deductible share-based compensation expense and losses arising outside the United States in jurisdictions where we do not receive a tax benefit was offset by the recognition of a non-recurring tax benefit that we recorded in the first quarter of 2013 related to the reinstatement of the federal tax credit for research and development activities applicable to the year ended December 31, 2012.
Our income tax refundable was $426 million as of March 31, 2013, which reflects the expected refund of estimated income tax payments made in 2012 and the expected refund from income tax loss carrybacks to 2010 and 2011. 
We are subject to taxation in the United States and various other state and foreign jurisdictions. The material jurisdictions in which we are subject to potential examination include the United States and Ireland. We are under examination by the Internal Revenue Service (IRS) for our 2008, 2009 and 2010 tax years. We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations and we do not anticipate a significant impact to our gross unrecognized tax benefits within the next 12 months related to these years. Our 2011 and subsequent tax years remain subject to examination by the IRS and all tax years starting in 2008 remain subject to examination in Ireland. We remain subject to possible examinations or are undergoing audits in various other jurisdictions that are not material to our financial statements.
Our balances of gross unrecognized tax benefits were $352 million and $164 million as of March 31, 2013 and December 31, 2012, respectively. If the remaining balance of gross unrecognized tax benefits as of March 31, 2013 is realized in a future period, this would result in a tax benefit of $247 million within our provision of income taxes at such time. Our existing tax positions will continue to generate an increase in liabilities in future periods for unrecognized tax benefits. 
Although the timing of the resolution, settlement, and closure of any audit is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. However, given the number of years remaining that are subject to examination, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.
Geographical Information
Geographical Information
Geographical Information
Revenue by geography is based on the billing address of the advertiser or Platform developer. The following tables set forth revenue and long-lived assets by geographic area (in millions):
 
Three Months Ended March 31,
 
2013
 
2012
Revenue:
 
 
 
United States
$
681

 
$
536

Rest of the world (1)
777

 
522

Total revenue
$
1,458

 
$
1,058

 
(1)
No individual country exceeded 10% of our total revenue for any period presented
 
March 31,
2013
 
December 31,
2012
Long-lived assets:
 
 
 
United States
$
2,150

 
$
2,110

Rest of the world (1)
383

 
281

Total long-lived assets
$
2,533

 
$
2,391

 
(1)
No individual country exceeded 10% of our total long-lived assets for any period presented
Summary of Significant Accounting Policies (Policies)
Basis of Presentation 
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
The condensed consolidated balance sheet as of December 31, 2012, included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP.
The condensed consolidated financial statements include the accounts of Facebook, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.
The accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2013.
There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 that have had a material impact on our condensed consolidated financial statements and related notes.
Use of Estimates 
Use of Estimates
Conformity with GAAP requires the use of estimates and judgments that affect the reported amounts in the condensed consolidated financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. GAAP requires us to make estimates and judgments in several areas, including, but not limited to, those related to revenue recognition, collectability of accounts receivable, contingent liabilities, fair value of share-based awards, fair value of financial instruments, fair value of acquired intangible assets and goodwill, useful lives of intangible assets and property and equipment, and income taxes. These estimates are based on management's knowledge about current events and expectations about actions we may undertake in the future. Actual results could differ materially from those estimates.
Recently Issued and Adopted Accounting Pronouncement 
Recently Issued and Adopted Accounting Pronouncement 

Comprehensive Income

In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02) which is effective prospectively for public companies for reporting periods beginning after December 15, 2012. This new accounting standard improves the reporting of reclassifications out of accumulated other comprehensive income (AOCI) by requiring an entity to report the effect of significant reclassifications out of AOCI on the respective line items in net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income. For other amounts that are not required under GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under GAAP that provide additional detail about those amounts. We adopted this new guidance on January 1, 2013 and the adoption did not have a material effect on our condensed consolidated financial statements.
Earnings per Share (Tables)
Numerators and Denominators of Basic and Diluted EPS Computations for Common Stock
The numerators and denominators of the basic and diluted EPS computations for our common stock are calculated as follows (in millions, except per share amounts): 
 
Three Months Ended March 31,
 
2013
 
2012
 
Class A
 
Class B
 
Class A
 
Class B
Basic EPS:
 
 
 
 
 
 
 
Numerator
 
 
 
 
 
 
 
Net income
$
156

 
$
63

 
$
18

 
$
187

Less: Net income attributable to participating securities
1

 
1

 
6

 
62

Net income attributable to common stockholders
$
155

 
$
62

 
$
12

 
$
125

Denominator
 
 
 
 
 
 
 
Weighted average shares outstanding
1,709

 
691

 
117

 
1,233

Less: Shares subject to repurchase
4

 
10

 
—

 
3

Number of shares used for basic EPS computation
1,705

 
681

 
117

 
1,230

Basic EPS
$
0.09

 
$
0.09

 
$
0.10

 
$
0.10

Diluted EPS:
 
 
 
 
 
 
 
Numerator
 
 
 
 
 
 
 
Net income attributable to common stockholders
$
155

 
$
62

 
$
12

 
$
125

Reallocation of net income attributable to participating securities
2

 
—

 
5

 
—

Reallocation of net income as a result of conversion of Class B to Class A common stock
62

 
—

 
125

 
—

Reallocation of net income to Class B common stock
—

 
7

 
—

 
6

Net income attributable to common stockholders for diluted EPS
$
219

 
$
69

 
$
142

 
$
131

Denominator
 
 
 
 
 
 
 
Number of shares used for basic EPS computation
1,705

 
681

 
117

 
1,230

Conversion of Class B to Class A common stock
681

 
—

 
1,230

 
—

Weighted average effect of dilutive securities:
 
 
 
 
 
 
 
Employee stock options
80

 
80

 
169

 
169

RSUs
29

 
29

 
9

 
9

Shares subject to repurchase
4

 
4

 
2

 
2

Number of shares used for diluted EPS computation
2,499

 
794

 
1,527

 
1,410

Diluted EPS
$
0.09

 
$
0.09

 
$
0.09

 
$
0.09

Cash and Cash Equivalents, and Marketable Securities (Tables)
Cash, Cash Equivalents and Marketable Securities 
The following table sets forth the cash, cash equivalents and marketable securities for the periods presented (in millions):
 
March 31, 2013
 
December 31, 2012
Cash and cash equivalents:
 
 
 
Cash
$
1,166

 
$
1,513

Cash equivalents:

 

Money market funds
1,159

 
871

Total cash and cash equivalents
2,325

 
2,384

Marketable securities:
 
 
 
U.S. government securities
4,793

 
5,165

U.S. government agency securities
2,354

 
2,077

Total marketable securities
7,147

 
7,242

Total cash, cash equivalents and marketable securities
$
9,472

 
$
9,626

Marketable Securities by Contractual Maturities 
The following table classifies our marketable securities by contractual maturities (in millions):  
 
March 31, 2013
Due in one year
$
4,389

Due in one to two years
2,758

Total
$
7,147

Fair Value Measurements (Tables)
Assets Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis are summarized below (in millions): 
 
 
 
Fair Value Measurement at
Reporting Date Using
Description
March 31, 2013
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
1,159

 
$
1,159

 
$
—

 
$
—

Marketable securities:
 
 
 
 
 
 
 
U.S. government securities
4,793

 
4,793

 
—

 
—

U.S. government agency securities
2,354

 
2,354

 
—

 
—

Total cash equivalents and marketable securities
$
8,306

 
$
8,306

 
$
—

 
$
—

 
 
 
 
 
 
 
 
Other current liabilities:
 
 
 
 
 
 
 
Contingent consideration liability
$
4

 
$
—

 
$
—

 
$
4

 
 
 
 
 
 
 
 
Other liabilities:
 
 
 
 
 
 
 
Derivative financial instrument
$
3

 
$
—

 
$
3

 
$
—

 
 
 
Fair Value Measurement at
Reporting Date Using
Description
December 31, 2012
 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
871

 
$
871

 
$
—

 
$
—

Marketable securities:
 
 
 
 
 
 
 
U.S. government securities
5,165

 
5,165

 
—

 
—

U.S. government agency securities
2,077

 
2,077

 
—

 
—

Total cash equivalents and marketable securities
$
8,113

 
$
8,113

 
$
—

 
$
—

 
 
 
 
 
 
 
 
Other current liabilities:
 
 
 
 
 
 
 
Contingent consideration liability
$
4

 
$
—

 
$
—

 
$
4

 
 
 
 
 
 
 
 
Other liabilities:
 
 
 
 
 
 
 
Derivative financial instrument
$
4

 
$
—

 
$
4

 
$
—

Property and Equipment (Tables)
Property and equipment
Property and equipment consisted of the following (in millions): 
 
March 31,
2013
 
December 31,
2012
Network equipment
$
2,009

 
$
1,912

Land
36

 
36

Buildings
896

 
594

Leasehold improvements
199

 
194

Computer software, office equipment and other
96

 
93

Construction in progress
299

 
444

Total
3,535

 
3,273

Less: Accumulated depreciation
(1,002
)
 
(882
)
Property and equipment, net
$
2,533

 
$
2,391

Goodwill and Intangible Assets (Tables)
Changes in Carrying Amount of Goodwill 
The changes in the carrying amount of goodwill for the three months ended March 31, 2013 are as follows (in millions): 
Balances at December 31, 2012
$
587

Goodwill acquired
67

Balance as of March 31, 2013
$
654

Intangible Assets 
Intangible assets consisted of the following (in millions):
 
 
 
March 31, 2013
 
December 31, 2012
 
Useful lives from date of acquisitions (in years)
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Amortizable intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquired patents
3 - 18
 
$
738

 
$
(74
)
 
$
664

 
$
684

 
$
(53
)
 
$
631

Acquired technology
2 - 10
 
157

 
(38
)
 
119

 
133

 
(32
)
 
101

Tradename and other
2 - 7
 
94

 
(30
)
 
64

 
94

 
(25
)
 
69

Total
 
 
$
989

 
$
(142
)
 
$
847

 
$
911

 
$
(110
)
 
$
801

Estimated Amortization Expense for Unamortized Acquired Intangible Assets 
As of March 31, 2013, estimated amortization expense for the unamortized acquired intangible assets for the next five years and thereafter is as follows (in millions):
The remainder of 2013
$
102

2014
129

2015
121

2016
110

2017
94

2018
66

Thereafter
225

 
$
847

Stockholders' Equity (Tables)
Stock Option Activity under Stock Plans 
The following table summarizes the stock option activity under the Stock Plans during the three months ended March 31, 2013: 
 
Shares Subject to Options Outstanding
 
Number of
Shares
 
Weighted
Average
Exercise
Price
 
Weighted-
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value(1)
 
(in thousands)
 
 
 
(in years)
 
(in millions)
Balance as of December 31, 2012
122,821

 
$
0.85

 
3.79
 
$
3,166

Stock options exercised
(11,196
)
 
0.68

 
 
 
 
Balance as of March 31, 2013
111,625

 
$
0.87

 
3.48
 
$
2,758

Stock options vested and expected to vest as of March 31, 2013
111,384

 
$
0.86

 
3.47
 
$
2,753

Stock options exercisable as of March 31, 2013
103,374

 
$
0.32

 
3.21
 
$
2,611

(1)
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing price of our Class A common stock of $25.58 on March 31, 2013.
Restricted Stock Units Award Activity 
The following table summarizes the activities for our unvested RSUs for the three months ended March 31, 2013:
 
Unvested RSUs
 
Number of Shares
 
Weighted Average Grant Date Fair Value
 
(in thousands)
 
 
Unvested at December 31, 2012
113,044

 
$
21.38

Granted
3,135

 
28.65

Vested
(16,797
)
 
16.38

Forfeited
(2,305
)
 
22.43

Unvested at March 31, 2013
97,077

 
$
22.46

Geographical Information (Tables)
Revenue by Geographic Area 
Revenue by geography is based on the billing address of the advertiser or Platform developer. The following tables set forth revenue and long-lived assets by geographic area (in millions):
 
Three Months Ended March 31,
 
2013
 
2012
Revenue:
 
 
 
United States
$
681

 
$
536

Rest of the world (1)
777

 
522

Total revenue
$
1,458

 
$
1,058

 
(1)
No individual country exceeded 10% of our total revenue for any period presented
Property and Equipment, Net by Geographic Area 
 
March 31,
2013
 
December 31,
2012
Long-lived assets:
 
 
 
United States
$
2,150

 
$
2,110

Rest of the world (1)
383

 
281

Total long-lived assets
$
2,533

 
$
2,391

 
(1)
No individual country exceeded 10% of our total long-lived assets for any period presented
Earnings per Share (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Numerator
 
 
Net income
$ 219 
$ 205 
Less: Net income attributable to participating securities
2 
68 
Net income attributable to Class A and Class B common stockholders
217 
137 
Denominator
 
 
Number of shares used for basic EPS computation (in shares)
2,386 
1,347 
Basic EPS (in dollars per share)
$ 0.09 
$ 0.10 
Numerator
 
 
Net (loss) income attributable to common stockholders
217 
137 
Denominator
 
 
Number of shares used for basic EPS computation (in shares)
2,386 
1,347 
Number of shares used for diluted EPS computation (in shares)
2,499 
1,527 
Diluted EPS (in dollars per share)
$ 0.09 
$ 0.09 
Class A Common Stock
 
 
Numerator
 
 
Net income
156 
18 
Less: Net income attributable to participating securities
1 
6 
Net income attributable to Class A and Class B common stockholders
155 
12 
Denominator
 
 
Weighted average shares outstanding (in shares)
1,709 
117 
Less: Shares subject to repurchase (in shares)
4 
0 
Number of shares used for basic EPS computation (in shares)
1,705 
117 
Basic EPS (in dollars per share)
$ 0.09 
$ 0.10 
Numerator
 
 
Net (loss) income attributable to common stockholders
155 
12 
Reallocation of net income attributable to participating securities
2 
5 
Reallocation of net (loss) income as a result of conversion of Class B to Class A common stock
62 
125 
Reallocation of net income to Class B common stock
0 
0 
Net (loss) income attributable to common stockholders for diluted EPS
219 
142 
Denominator
 
 
Number of shares used for basic EPS computation (in shares)
1,705 
117 
Conversion of Class B to Class A common stock (in shares)
681 
1,230 
Shares subject to repurchase (in shares)
4 
2 
Number of shares used for diluted EPS computation (in shares)
2,499 
1,527 
Diluted EPS (in dollars per share)
$ 0.09 
$ 0.09 
Class A Common Stock |
Employee Stock Option
 
 
Denominator
 
 
Share based payment arrangements (in shares)
80 
169 
Class A Common Stock |
Restricted Stock Units (RSUs)
 
 
Denominator
 
 
Share based payment arrangements (in shares)
29 
9 
Class B Common Stock
 
 
Numerator
 
 
Net income
63 
187 
Less: Net income attributable to participating securities
1 
62 
Net income attributable to Class A and Class B common stockholders
62 
125 
Denominator
 
 
Weighted average shares outstanding (in shares)
691 
1,233 
Less: Shares subject to repurchase (in shares)
10 
3 
Number of shares used for basic EPS computation (in shares)
681 
1,230 
Basic EPS (in dollars per share)
$ 0.09 
$ 0.10 
Numerator
 
 
Net (loss) income attributable to common stockholders
62 
125 
Reallocation of net income attributable to participating securities
0 
0 
Reallocation of net (loss) income as a result of conversion of Class B to Class A common stock
0 
0 
Reallocation of net income to Class B common stock
7 
6 
Net (loss) income attributable to common stockholders for diluted EPS
$ 69 
$ 131 
Denominator
 
 
Number of shares used for basic EPS computation (in shares)
681 
1,230 
Conversion of Class B to Class A common stock (in shares)
0 
0 
Shares subject to repurchase (in shares)
4 
2 
Number of shares used for diluted EPS computation (in shares)
794 
1,410 
Diluted EPS (in dollars per share)
$ 0.09 
$ 0.09 
Class B Common Stock |
Employee Stock Option
 
 
Denominator
 
 
Share based payment arrangements (in shares)
80 
169 
Class B Common Stock |
Restricted Stock Units (RSUs)
 
 
Denominator
 
 
Share based payment arrangements (in shares)
29 
9 
Restricted Stock Units (RSUs)
 
 
Earnings Per Share, Basic, by Common Class, Including Two Class Method
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount
18 
0 
Cash and Cash Equivalents, and Marketable Securities (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Mar. 31, 2012
Dec. 31, 2011
Cash, Cash Equivalents, and Marketable Securities
 
 
 
 
Cash
$ 1,166 
$ 1,513 
 
 
Total cash and cash equivalents
2,325 
2,384 
1,282 
1,512 
Marketable securities
7,147 
7,242 
 
 
Total cash, cash equivalents and marketable securities
9,472 
9,626 
 
 
Cash Equivalents
 
 
 
 
Cash, Cash Equivalents, and Marketable Securities
 
 
 
 
Money market funds
1,159 
871 
 
 
Marketable Securities
 
 
 
 
Cash, Cash Equivalents, and Marketable Securities
 
 
 
 
U.S. government securities
4,793 
5,165 
 
 
U.S. government agency securities
$ 2,354 
$ 2,077 
 
 
Cash, Cash Equivalents, and Marketable Securities - Contractual Maturities of Debt Securities (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Cash and Cash Equivalents, and Marketable Securities [Abstract]
 
 
Due in one year
$ 4,389 
 
Due in one to two years
2,758 
 
Marketable securities
$ 7,147 
$ 7,242 
Fair Value Measurements (Details) (Fair Value, Measurements, Recurring, USD $)
In Millions, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
May 31, 2012
Quoted Prices in Active Markets for Identical Assets (Level 1)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Total cash equivalents and marketable securities
$ 8,306 
$ 8,113 
 
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Money Market Funds
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Cash equivalents
1,159 
871 
 
Quoted Prices in Active Markets for Identical Assets (Level 1) |
US Government Securities
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
4,793 
5,165 
 
Quoted Prices in Active Markets for Identical Assets (Level 1) |
US Government Agency Securities
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
2,354 
2,077 
 
Significant Other Observable Inputs (Level 2)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Total cash equivalents and marketable securities
0 
0 
 
Derivative financial instruments
3 
4 
 
Significant Other Observable Inputs (Level 2) |
Money Market Funds
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Cash equivalents
0 
0 
 
Significant Other Observable Inputs (Level 2) |
US Government Securities
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
0 
0 
 
Significant Other Observable Inputs (Level 2) |
US Government Agency Securities
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
0 
0 
 
Significant Unobservable Inputs (Level 3)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Total cash equivalents and marketable securities
0 
0 
 
Contingent consideration liability
4 
4 
6 
Significant Unobservable Inputs (Level 3) |
Money Market Funds
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Cash equivalents
0 
0 
 
Significant Unobservable Inputs (Level 3) |
US Government Securities
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
0 
0 
 
Significant Unobservable Inputs (Level 3) |
US Government Agency Securities
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
0 
0 
 
Estimate of Fair Value, Fair Value Disclosure
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Total cash equivalents and marketable securities
8,306 
8,113 
 
Contingent consideration liability
4 
4 
 
Derivative financial instruments
3 
4 
 
Estimate of Fair Value, Fair Value Disclosure |
Money Market Funds
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Cash equivalents
1,159 
871 
 
Estimate of Fair Value, Fair Value Disclosure |
US Government Securities
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
4,793 
5,165 
 
Estimate of Fair Value, Fair Value Disclosure |
US Government Agency Securities
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
 
 
 
Marketable securities
$ 2,354 
$ 2,077 
 
Property and Equipment (Detail) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Property, Plant and Equipment
 
 
Property and equipment, gross
$ 3,535 
$ 3,273 
Less: accumulated depreciation
(1,002)
(882)
Property and equipment, net
2,533 
2,391 
Network Equipment
 
 
Property, Plant and Equipment
 
 
Property and equipment, gross
2,009 
1,912 
Land
 
 
Property, Plant and Equipment
 
 
Property and equipment, gross
36 
36 
Buildings
 
 
Property, Plant and Equipment
 
 
Property and equipment, gross
896 
594 
Leasehold Improvements
 
 
Property, Plant and Equipment
 
 
Property and equipment, gross
199 
194 
Computer software, office equipment and other
 
 
Property, Plant and Equipment
 
 
Property and equipment, gross
96 
93 
Construction in Progress
 
 
Property, Plant and Equipment
 
 
Property and equipment, gross
$ 299 
$ 444 
Goodwill and Intangible Assets (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Dec. 31, 2012
Goodwill and Intangible Assets Disclosure
 
 
 
Patents and business acquistions, amount
$ 132 
 
 
Payments to acquire businesses net of cash acquired and purchases of intangible assets
99 
25 
 
Acquisitions, number of shares issued included in purchase consideration
1.2 
 
 
Acquisitions, number of shares issued excluded from purchase consideration
5.4 
 
 
Gross Carrying Amount
989 
 
911 
Accumulated Amortization
(142)
 
(110)
Net Carrying Amount
847 
 
801 
Amortization expense
33 
5 
 
Goodwill
 
 
 
Goodwill beginning
587 
 
 
Goodwill acquired
67 
 
 
Goodwill ending
654 
 
 
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
 
 
 
The remainder of 2013
102 
 
 
2014
129 
 
 
2015
121 
 
 
2016
110 
 
 
2017
94 
 
 
2018
66 
 
 
Thereafter
225 
 
 
Net Carrying Amount
847 
 
801 
Acquired patents
 
 
 
Goodwill and Intangible Assets Disclosure
 
 
 
Gross Carrying Amount
738 
 
684 
Accumulated Amortization
(74)
 
(53)
Net Carrying Amount
664 
 
631 
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
 
 
 
Net Carrying Amount
664 
 
631 
Acquired technology
 
 
 
Goodwill and Intangible Assets Disclosure
 
 
 
Gross Carrying Amount
157 
 
133 
Accumulated Amortization
(38)
 
(32)
Net Carrying Amount
119 
 
101 
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
 
 
 
Net Carrying Amount
119 
 
101 
Tradename and other
 
 
 
Goodwill and Intangible Assets Disclosure
 
 
 
Gross Carrying Amount
94 
 
94 
Accumulated Amortization
(30)
 
(25)
Net Carrying Amount
64 
 
69 
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
 
 
 
Net Carrying Amount
$ 64 
 
$ 69 
Minimum |
Acquired patents
 
 
 
Goodwill and Intangible Assets Disclosure
 
 
 
Useful lives from date of acquisitions
3 years 
 
 
Minimum |
Acquired technology
 
 
 
Goodwill and Intangible Assets Disclosure
 
 
 
Useful lives from date of acquisitions
2 years 
 
 
Minimum |
Tradename and other
 
 
 
Goodwill and Intangible Assets Disclosure
 
 
 
Useful lives from date of acquisitions
2 years 
 
 
Maximum |
Acquired patents
 
 
 
Goodwill and Intangible Assets Disclosure
 
 
 
Useful lives from date of acquisitions
18 years 
 
 
Maximum |
Acquired technology
 
 
 
Goodwill and Intangible Assets Disclosure
 
 
 
Useful lives from date of acquisitions
10 years 
 
 
Maximum |
Tradename and other
 
 
 
Goodwill and Intangible Assets Disclosure
 
 
 
Useful lives from date of acquisitions
7 years 
 
 
Long-term Debt - Borrowings (Details) (USD $)
3 Months Ended 1 Months Ended
Mar. 31, 2013
Dec. 31, 2012
Mar. 31, 2013
Revolving Credit Facility
Unsecured Five Year Revolving Credit Facility 2012
Oct. 25, 2012
Unsecured debt
Amended and Restated Term Loan
Debt Instrument
 
 
 
 
Line Of Credit Maturity Period
 
 
5 years 
 
Line of credit facility, maximum borrowing capacity
 
 
$ 5,000,000,000 
 
Debt instrument, interest rate during period
 
 
London Interbank Offered Rate (LIBOR) 
LIBOR 
Basis spread on variable rate
 
 
1.00% 
1.00% 
Line of credit facility, unused capacity, commitment fee percentage
 
 
0.10% 
 
Line of credit facility, amount outstanding
 
 
0 
 
Term loan facility, term period
 
 
 
3 years 
Debt Instrument, Face Amount
 
 
 
1,500,000,000 
Debt Instrument, Unused Capacity, Commitment Fee Percentage
 
 
 
0.10% 
Long-term debt
$ 1,500,000,000 
$ 1,500,000,000 
 
$ 1,500,000,000 
Long-term Debt - Derivative (Details) (USD $)
3 Months Ended 1 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Oct. 25, 2012
Interest Rate Swap
Oct. 25, 2012
Amended and Restated Term Loan
Interest Rate Swap
Cash Flow Hedging
Mar. 31, 2013
Significant Other Observable Inputs (Level 2)
Fair Value, Measurements, Recurring
Dec. 31, 2012
Significant Other Observable Inputs (Level 2)
Fair Value, Measurements, Recurring
Derivative
 
 
 
 
 
 
Notional amount of interest rate derivatives
 
 
 
$ 1,500,000,000 
 
 
Derivative, description of variable rate basis
 
 
one-month LIBOR 
 
 
 
Derivative, fixed interest rate
 
 
 
1.46% 
 
 
Unrealized gain on derivative, net of tax
1,000,000 
0 
 
 
 
 
Derivative financial instruments
 
 
 
 
3,000,000 
4,000,000 
Derivative instruments, gain (loss) reclassification from accumulated OCI to income, estimated net amount to be transferred
$ 3,000,000 
 
 
 
 
 
Commitments and Contingencies (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Leases [Abstract]
 
 
Capital lease agreement period
3 years 
 
Operating lease expense
$ 41 
$ 51 
Minimum
 
 
Leases [Abstract]
 
 
Interest rate
1.00% 
 
Maximum
 
 
Leases [Abstract]
 
 
Interest rate
13.00% 
 
Expiration date of lease
2027 
 
Buildings
 
 
Leases [Abstract]
 
 
Capital lease agreement period
15 years 
 
Stockholders' Equity - Share-based Compensation Plans (Detail)
3 Months Ended 3 Months Ended 1 Months Ended
Mar. 31, 2013
2012 Plan
Dec. 31, 2012
2012 Plan
plans
Mar. 31, 2013
2012 Plan
Min
Mar. 31, 2013
2012 Plan
Max
Nov. 30, 2005
2005 Officer's Stock Plan
Mar. 31, 2013
2005 Officer's Stock Plan
Share-based Compensation Arrangement by Share-based Payment Award
 
 
 
 
 
 
Share-based employee compensation plans, number
 
3 
 
 
 
 
Share-based compensation arrangement by share-based payment award, expiration period
10 years 
 
 
 
 
 
Share-based compensation arrangement by share-based payment award, expiration period for plan
10 years 
 
 
 
 
 
2012 equity incentive plan shares authorized
25,000,000 
 
 
 
 
 
Shares reserved for issuance increase date range
 
 
Jan. 01, 2013 
Jan. 01, 2022 
 
 
Non statutory stock option issued to CEO to purchase shares of Class B common stock
 
 
 
 
120,000,000 
 
Options partially exercised and fully vested
 
 
 
 
 
60,000,000 
Stockholders' Equity - Stock Option Activity (Details) (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Mar. 31, 2013
Dec. 31, 2012
Aggregate Intrinsic Value(2)
 
 
Common stock, closing share price
$ 25.58 
 
Stock Option
 
 
Number of Shares
 
 
Beginning balance
122,821 
 
Stock options exercised
(11,196)
 
Ending balance
111,625 
122,821 
Stock options vested and expected to vest as of period end
111,384 
 
Stock options exercisable as of period end
103,374 
 
Weighted Average Exercise Price
 
 
Beginning Balance (in dollars per share)
$ 0.85 
 
Stock options exercised (in dollars per share)
$ 0.68 
 
Ending Balance (in dollars per share
$ 0.87 
$ 0.85 
Stock options vested and expected to vest as of period end (in dollars per share)
$ 0.86 
 
Stock options exercisable as of period end (in dollars per share)
$ 0.32 
 
Weighted- Average Remaining Contractual Term
 
 
Weighted- Average Remaining Contractual Term
3 years 5 months 22 days 
3 years 9 months 15 days 
Stock options vested and expected to vest as of period end
3 years 5 months 20 days 
 
Stock options exercisable as of period end
3 years 2 months 15 days 
 
Aggregate Intrinsic Value(2)
 
 
Aggregate Intrinsic Value
$ 2,758 1
$ 3,166 1
Stock options vested and expected to vest as of period end
2,753 1
 
Stock options exercisable as of period end
$ 2,611 1
 
Stockholders' Equity - Restricted Stock Units (Details) (Restricted Stock Units (RSUs), USD $)
3 Months Ended
Mar. 31, 2013
Restricted Stock Units (RSUs)
 
Outstanding RSUs
 
Non-vested at beginning of period (in shares)
113,044 
Granted (in shares)
3,135 
Vested (in shares)
(16,797)
Forfeited (in shares)
(2,305)
Non-vested at end of period (in shares)
97,077 
Weighted Average Grant Date Fair Value
 
Non-vested at beginning of period
$ 21.38 
Granted
$ 28.65 
Vested
$ 16.38 
Forfeited
$ 22.43 
Non-vested at end of period
$ 22.46 
Stockholders' Equity - Stock Options Additional Disclosures (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Equity [Abstract]
 
 
Aggregate intrinsic value of the options exercised
$ 311 
$ 629 
Stockholders' Equity - Additional Award Disclosures (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award
 
Future period share-based compensation expense
$ 2,210 
Future period share-based compensation expense period of recognition
3 years 
Restricted shares and stock options
 
Share-based Compensation Arrangement by Share-based Payment Award
 
Future period share-based compensation expense
359 
Restricted Stock Units (RSUs)
 
Share-based Compensation Arrangement by Share-based Payment Award
 
Future period share-based compensation expense
$ 1,850 
Share-based compensation arrangement, by share-based payment award, number of shares approved for annual grant
35 
Income Taxes (Detail) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
Income tax refundable
$ 426 
$ 451 
Unrecognized tax benefits
352 
164 
Unrecognized tax benefits that would impact effective tax rate
$ 247 
 
Geographical Information - Revenue (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2013
Mar. 31, 2012
Revenue by Geographical Area
 
 
Revenue
$ 1,458 
$ 1,058 
United States
 
 
Revenue by Geographical Area
 
 
Revenue
681 
536 
Rest of World
 
 
Revenue by Geographical Area
 
 
Revenue
$ 777 1
$ 522 1
Geographical Information - Long-Lived Assets (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2013
Dec. 31, 2012
Long-Lived Assets by Geographical Area
 
 
Property and equipment, net
$ 2,533 
$ 2,391 
United States
 
 
Long-Lived Assets by Geographical Area
 
 
Property and equipment, net
2,150 
2,110 
Rest of World
 
 
Long-Lived Assets by Geographical Area
 
 
Property and equipment, net
$ 383 1
$ 281 1