Exhibit 99.1
FOR IMMEDIATE RELEASE
Qualcomm Contact:
Warren Kneeshaw
Phone: 1-858-658-4813
e-mail: ir@qualcomm.com
Qualcomm Announces Fourth Quarter and Fiscal 2010 Results
Fiscal 2010 Revenues $11 Billion, EPS $1.96
Non-GAAP EPS $2.46
Reports Record MSM Shipments and Record EPS
SAN DIEGO — November 3, 2010 — Qualcomm Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced results for the fourth fiscal quarter and year ended September 26, 2010.
“I am very pleased with our performance this year as we delivered record earnings per share and record MSM chipset volumes,” said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm. “Our outlook includes strong revenue and earnings growth in fiscal 2011. In the coming year, we expect continued strong growth in CDMA-based device shipments, including smartphones and other data-centric devices, driven by the global adoption of 3G and accelerating consumer demand for wireless data. With our industry-leading chipset roadmap, broad licensing program and increasing number of global partners, we are well positioned to take advantage of these industry trends.”
GAAP Results
Qualcomm results are reported in accordance with generally accepted accounting principles (GAAP).
       Fourth Quarter Fiscal 2010
  •   Revenues: $2.95 billion, up 10 percent year-over-year (y-o-y) and 9 percent sequentially.
  •   Operating income: $837 million, up 40 percent y-o-y and 6 percent sequentially.
  •   Net income: $865 million, up 8 percent y-o-y and 13 percent sequentially.
  •   Diluted earnings per share: $0.53, up 10 percent y-o-y and 13 percent sequentially.
  •   Effective tax rate: 17 percent.
  •   Operating cash flow: $1.09 billion, down 17 percent y-o-y; 37 percent of revenues.

 

 

Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 2 of 19
  •   Return of capital to stockholders: $427 million, including $305 million, or $0.19 per share, of cash dividends paid, and $122 million to repurchase 3.5 million shares of our common stock.
       Fiscal 2010
  •   Revenues: $10.99 billion, up 6 percent y-o-y.
  •   Operating income: $3.28 billion, up 47 percent y-o-y.
  •   Net income: $3.25 billion, up 104 percent y-o-y.
  •   Diluted earnings per share: $1.96, up 106 percent y-o-y.
  •   Effective tax rate: 20 percent.
  •   Operating cash flow: $4.08 billion, down 43 percent y-o-y; 37 percent of revenues.
  •   Return of capital to stockholders: $4.19 billion, including $1.18 billion, or $0.72 per share, of cash dividends paid, and $3.02 billion to repurchase 79.8 million shares of our common stock.
Non-GAAP Results
Non-GAAP results exclude the Qualcomm Strategic Initiatives (QSI) segment, certain share-based compensation, certain tax items that are not related to the current year and acquired in-process research and development (R&D) expense.
       Fourth Quarter Fiscal 2010
  •   Revenues: $2.95 billion, up 10 percent y-o-y and 9 percent sequentially.
  •   Operating income: $1.13 billion, up 36 percent y-o-y and 14 percent sequentially.
  •   Net income: $1.11 billion, up 36 percent y-o-y and 18 percent sequentially.
  •   Diluted earnings per share: $0.68, up 42 percent y-o-y and 19 percent sequentially. The current quarter excludes $0.05 loss per share attributable to the QSI segment, $0.07 loss per share attributable to certain share-based compensation and $0.02 loss per share attributable to certain tax items (the sum of Non-GAAP earnings per share and items excluded do not equal GAAP earnings per share due to rounding).
  •   Effective tax rate: 19 percent.
  •   Free cash flow: $1.11 billion, down 14 percent y-o-y; 38 percent of revenues (defined as net cash from operating activities less capital expenditures).

 

 

Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 3 of 19
 
       Fiscal 2010
  •   Revenues: $10.98 billion, up 6 percent y-o-y.
 
  •   Operating income: $4.32 billion, up 37 percent y-o-y.
 
  •   Net income: $4.07 billion, up 86 percent y-o-y.
  •   Diluted earnings per share: $2.46, up 88 percent y-o-y. The current fiscal year excludes $0.13 loss per share attributable to the QSI segment, $0.27 loss per share attributable to certain share-based compensation and $0.10 loss per share attributable to certain tax items.
  •   Effective tax rate: 20 percent.
  •   Free cash flow: $4.16 billion, down 40 percent y-o-y; 38 percent of revenues.
Detailed reconciliations between results reported in accordance with GAAP and Non-GAAP results are included at the end of this news release.
In the year-over-year comparisons summarized above, the following should be noted: fiscal 2009 results (GAAP and Non-GAAP) included a $783 million charge related to a litigation settlement and patent agreement with Broadcom Corporation, including $35 million recorded in the fourth quarter of 2009; both the fourth quarter and fiscal 2009 results (GAAP and Non-GAAP) also included a $230 million charge related to the Korea Fair Trade Commission fine; GAAP results in fiscal 2009 included a $155 million tax benefit related to prior years as a result of tax audits; net income was favorably impacted in fiscal 2010 (GAAP and Non-GAAP) due to a significant increase in net investment income; and fiscal 2009 operating and free cash flow included the receipt of a $2.5 billion payment related to the license and settlement agreements with Nokia.
Key Business Metrics
       Fourth Quarter Fiscal 2010
  •   CDMA-based Mobile Station ModemTM (MSMTM) shipments: approximately 111 million units, up 22 percent y-o-y and 8 percent sequentially.
  •   Total reported device sales*: approximately $28.3 billion, up 14 percent y-o-y and 12 percent sequentially.

 

 

Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 4 of 19
  o   Estimated CDMA-based device shipments*: approximately 153 to 157 million units at an estimated average selling price of approximately $179 to $185 per unit.
       Fiscal 2010
  •   CDMA-based MSM shipments: approximately 399 million units, up 26 percent y-o-y.
  •   Total reported device sales*: approximately $105.7 billion, up 7 percent y-o-y.
  o   Estimated CDMA-based device shipments*: approximately 561 to 577 million units at an estimated average selling price of approximately $183 to $189 per unit.
 
*   Royalties are recognized when reported, generally one quarter following shipment.
Cash and Marketable Securities
Our cash, cash equivalents and marketable securities totaled approximately $18.4 billion at the end of the fourth quarter of fiscal 2010, compared to $17.6 billion at the end of the third quarter of fiscal 2010 and $17.7 billion a year ago. On October 13, 2010, we announced a cash dividend of $0.19 per share payable on December 22, 2010 to stockholders of record as of November 24, 2010.
Research and Development
                                 
            Share-Based              
($ in millions)   Non-GAAP     Compensation     QSI     GAAP  
Fourth quarter fiscal 2010
   $ 547     $ 79     $ 30     $ 656  
As a % of revenues
     19 %             N/M       22 %
Fourth quarter fiscal 2009
   $ 518     $ 71     $ 25     $ 614  
As a % of revenues
     19 %             N/M       23 %
Year-over-year change ($)
     6 %     11 %     20 %     7 %
 
N/M —   Not Meaningful
Non-GAAP R&D expenses increased 6 percent y-o-y primarily due to an increase in costs related to the development of integrated circuit products, next-generation CDMA and OFDMA technologies and other initiatives to support the acceleration of advanced wireless products and services. QSI R&D expenses were primarily related to our FLO TV™ subsidiary.

 

 

Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 5 of 19
Selling, General and Administrative
                                 
            Share-Based              
($ in millions)   Non-GAAP     Compensation     QSI     GAAP  
Fourth quarter fiscal 2010
   $ 364     $ 70     $ 37     $ 471  
As a % of revenues
     12 %             N/M       16 %
Fourth quarter fiscal 2009
   $ 300     $ 66     $ 24     $ 390  
As a % of revenues
     11 %             N/M       14 %
Year-over-year change ($)
     21 %     6 %     54 %     21 %
Non-GAAP selling, general and administrative (SG&A) expenses increased 21 percent y-o-y primarily due to an increase in legal and patent-related costs. QSI SG&A expenses were primarily related to FLO TV.
Effective Income Tax Rate
Our fiscal 2010 effective income tax rates were 20 percent for both GAAP and Non-GAAP. The fiscal 2010 GAAP effective tax rate included tax expense of $137 million because deferred revenue related to the 2008 license and settlement agreements with Nokia was taxable in fiscal 2010, but the resulting deferred tax asset will reverse in future years when our state tax rate, based on the legislation in effect during fiscal 2010, will be lower. The fiscal 2010 GAAP effective tax rate also included $20 million of tax expense as a result of prior year tax audits completed during the fiscal year. The tax expense related to these items was excluded from our Non-GAAP results to provide a clearer understanding of our ongoing tax rate and after tax earnings.
Qualcomm Strategic Initiatives
The QSI segment manages our strategic investment activities, including FLO TV, and makes strategic investments in early-stage companies and in wireless spectrum, such as the Broadband Wireless Access (BWA) spectrum recently won in the auction in India. GAAP results for the fourth quarter fiscal 2010 included a $0.05 loss per share for the QSI segment.
The fourth quarter fiscal 2010 QSI results included $132 million in operating expenses primarily related to FLO TV. In June 2010, in connection with the India BWA spectrum purchase, we entered into a bank loan agreement that is payable in full in Indian rupees in December 2010. At the end of the fourth quarter fiscal 2010, the carrying value of the loan was $1.09 billion.

 

 

Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 6 of 19
Business Outlook
The following statements are forward looking and actual results may differ materially. The “Note Regarding Forward-Looking Statements” at the end of this news release provides a description of certain risks that we face, and our annual and quarterly reports on file with the Securities and Exchange Commission (SEC) provide a more complete description of risks.
Our outlook does not include provisions for future asset impairments or the consequences of injunctions, damages or fines related to any pending legal matters unless awarded or imposed by a court, governmental entity or other regulatory body. Further, due to their nature, certain income and expense items, such as realized investment gains or losses, or gains and losses on certain derivative instruments, cannot be accurately forecast. Accordingly, we only include such items in our business outlook to the extent they are reasonably certain; however, actual results may vary materially from the business outlook.
We have commenced a restructuring plan under which we expect to exit the current FLO TV service business. In addition to our ongoing operating costs, we expect to incur restructuring charges related to this plan in the range of $125 million to $175 million in fiscal 2011, which are primarily related to certain contractual obligations and are included in our fiscal 2011 outlook included herein. Additionally, we continue to evaluate strategic options for the FLO TV business, which include, but are not limited to, operating the FLO TV network under a new wholesale service; sale to, or joint venture with, a third party; and/or the sale of the spectrum licenses and the discontinuance of the operation of the network. Additional charges, including impairment of assets, may be incurred as we continue to evaluate or implement these strategic options or if we are unable to generate adequate future cash flows associated with this business.
The following table summarizes GAAP and Non-GAAP guidance based on the current business outlook. The Non-GAAP business outlook presented below is consistent with the presentation of Non-GAAP results elsewhere herein.

 

 

 Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 7 of 19
The following estimates are approximations and are based on the current business outlook:
Qualcomm’s Business Outlook Summary
FIRST FISCAL QUARTER
             
        Q1 FY10   Current Guidance
        Results   Q1 FY11 Estimates
Non-GAAP
            
Revenues
       $2.67B   $3.05B — $3.35B
Year-over-year change
           increase 14% — 26%
Diluted earnings per share (EPS)
       $0.62   $0.70 — $0.74
Year-over-year change
           increase 13% — 19%
             
 
            
GAAP
            
Revenues
       $2.67B   $3.05B — $3.35B
Year-over-year change
           increase 14% — 25%
Diluted EPS
       $0.50   $0.58 — $0.62
Year-over-year change
           increase 16% — 24%
Diluted EPS attributable to QSI
       ($0.03)   ($0.05)
Diluted EPS attributable to share-based compensation
       ($0.07)   ($0.07)
Diluted EPS attributable to certain tax items
      ($0.02)   $0.00
             
 
            
Metrics
            
MSM shipments
       approx. 92M   approx. 115M — 119M
Year-over-year change
           increase 25% — 29%
Total reported device sales (1)
       $24.5B*   $31.5B — $33.5B*
Year-over-year change
           increase 29% — 37%
Est. CDMA-based devices shipped (1)
       approx. 126M — 130M*   not provided
Est. CDMA-based device average selling price (1)
       approx. $189—$195*   not provided
 
*   Est. sales in September quarter, reported in December quarter
FISCAL YEAR
             
        FY 2010   Current Guidance
        Results   FY 2011 Estimates
Non-GAAP
            
Revenues
       $10.98B   $12.4B — $13.0B
Year-over-year change
           increase 13% — 18%
Operating Income
       $4.32B   $4.8B — $5.3B
Year-over-year change
           increase 11% — 23%
Diluted EPS
       $2.46   $2.63 — $2.77
Year-over-year change
           increase 7% — 13%
             
 
            
GAAP
            
Revenues
       $10.99B   $12.4B — $13.0B
Year-over-year change
           increase 13% — 18%
Operating Income
       $3.28B   $3.6B — $4.1B
Year-over-year change
           increase 10% — 25%
Diluted EPS
       $1.96   $2.08 — $2.22
Year-over-year change
           increase 6% — 13%
Diluted EPS attributable to QSI
       ($0.13)   ($0.22)
Diluted EPS attributable to share-based compensation
       ($0.27)   ($0.32)
Diluted EPS attributable to certain tax items
      ($0.10)   ($0.01)
             
CALENDAR YEAR Device Estimates (1)
             
    Prior Guidance   Current Guidance   Current Guidance
    Calendar 2010   Calendar 2010   Calendar 2011
    Estimates   Estimates   Estimates
Est. CDMA-based device shipments
            
March quarter
   approx. 134M — 138M   approx. 134M — 138M   not provided
June quarter
   not provided   approx. 153M — 157M   not provided
September quarter
   not provided   not provided   not provided
December quarter
   not provided   not provided   not provided
             
Est. Calendar year range (approx.)
   600M — 650M   625M — 650M   740M — 790M
             
 
   Midpoint   Midpoint   Midpoint
Est. total CDMA-based units
   approx. 625M   approx. 638M   approx. 765M
Est. CDMA units
   approx. 236M   approx. 241M   approx. 250M
Est. WCDMA units
   approx. 389M   approx. 397M   approx. 515M
             
 
(1)   Total reported device sales is the sum of all reported sales in U.S. dollars (as reported to us by our licensees) of all licensed CDMA-based subscriber devices (including handsets, modules, modem cards and other subscriber devices) by our licensees during a particular period. The reported quarterly estimated ranges of ASPs and unit shipments are determined based on the information as reported to us by our licensees during the relevant period and our own estimates of the selling prices and unit shipments for licensees that do not provide such information. Not all licensees report sales, selling prices and/or unit shipments the same way (e.g., some licensees report selling prices net of permitted deductions, such as transportation, insurance and packing costs, while other licensees report selling prices and then identify the amount of permitted deductions in their reports), and the way in which licensees report such information may change from time to time. Total reported device sales, estimated unit shipments and estimated ASPs for a particular period may include prior period activity that is reported with the activity for the particular period. For results using assumptions in effect for quarters prior to the second quarter of fiscal 2010, please refer to the “Changes to QTL Metrics” table of our April 21, 2010 earnings release that was furnished to the Securities and Exchange Commission on Form 8-K.

 

 

 Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 8 of 19
Results of Business Segments (in millions, except per share data):
                                                                                 
                            Non-GAAP   Non-   Share-Based           In-            
                            Reconciling   GAAP   Compensation   Tax   Process           GAAP
SEGMENTS   QCT   QTL   QWI   Items (1)(5)   (5)   (2)   Items (3)   R&D   QSI (4)   (5)
Q4 - FISCAL 2010
                                                                                
Revenues
   $ 1,860     $ 921     $ 171     $ —     $ 2,952     $ —     $ —     $ —     $ —     $ 2,952  
Change from prior year
     9 %     10 %     17 %     N/M       10 %                             (100 )%     10 %
Change from prior quarter
     10 %     9 %     6 %     N/M       9 %                             (100 )%     9 %
Operating income (loss)
                                   $ 1,130     $ (161 )   $ —     $ —     $ (132 )   $ 837  
Change from prior year
                                     36 %     (9 )%             N/A       (53 )%     40 %
Change from prior quarter
                                     14 %     (8 )%             N/A       N/M       6 %
EBT
   $ 519     $ 754     $ (2 )   $ 90     $ 1,361     $ (161 )   $ —     $ —     $ (153 )   $ 1,047  
Change from prior year
     2 %     9 %     N/M       N/M       38 %     (9 )%             N/A       (61 )%     41 %
Change from prior quarter
     28 %     12 %     N/M       N/M       17 %     (8 )%             N/A       N/M       8 %
EBT as a % of revenues
     28 %     82 %     (1 %)     N/M       46 %     N/M               N/A       N/M       35 %
Net income (loss)
                                   $ 1,105     $ (120 )   $ (40 )   $ —     $ (80 )   $ 865  
Change from prior year
                                     36 %     (41 )%     N/M       N/A       (3 )%     8 %
Change from prior quarter
                                     18 %     (8 )%     N/M       N/A       N/M       13 %
Diluted EPS
                                   $ 0.68     $ (0.07 )   $ (0.02 )   $ —     $ (0.05 )   $ 0.53  
Change from prior year
                                     42 %     (40 )%     N/M       N/A       0 %     10 %
Change from prior quarter
                                     19 %     0 %     N/M       N/A       N/M       13 %
Diluted shares used
                                     1,621       1,621       1,621       1,621       1,621       1,621  
 
                                                                                
Q3 - FISCAL 2010
                                                                                
Revenues
   $ 1,691     $ 847     $ 162     $ —     $ 2,700     $ —     $ —     $ —     $ 6     $ 2,706  
Operating income (loss)
                                     991       (149 )     —       —       (50 )     792  
EBT
     404       673       6       78       1,161       (149 )     —       —       (41 )     971  
Net income (loss)
                                     936       (111 )     (54 )     —       (4 )     767  
Diluted EPS
                                   $ 0.57     $ (0.07 )   $ (0.03 )   $ —     $ —     $ 0.47  
Diluted shares used
                                     1,642       1,642       1,642       1,642       1,642       1,642  
 
                                                                                
Q1 - FISCAL 2010
                                                                                
Revenues
   $ 1,608     $ 917     $ 142     $ 1     $ 2,668     $ —     $ —     $ —     $ 2     $ 2,670  
Operating income (loss)
                                     1,134       (151 )     —       —       (104 )     879  
EBT
     425       772       9       104       1,310       (151 )     —       —       (107 )     1,052  
Net income (loss)
                                     1,041       (114 )     (32 )     —       (54 )     841  
Diluted EPS
                                   $ 0.62     $ (0.07 )   $ (0.02 )   $ —     $ (0.03 )   $ 0.50  
Diluted shares used
                                     1,691       1,691       1,691       1,691       1,691       1,691  
 
                                                                                
Q4 - FISCAL 2009
                                                                                
Revenues
   $ 1,699     $ 837     $ 146     $ 1     $ 2,683     $ —     $ —     $ —     $ 7     $ 2,690  
Operating income (loss)
                                     831       (148 )     —       —       (86 )     597  
EBT
     508       693       (5 )     (211 )     985       (148 )     —       —       (95 )     742  
Net income (loss)
                                     811       (85 )     155       —       (78 )     803  
Diluted EPS
                                   $ 0.48     $ (0.05 )   $ 0.09     $ —     $ (0.05 )   $ 0.48  
Diluted shares used
                                     1,688       1,688       1,688       1,688       1,688       1,688  
 
                                                                                
12 MONTHS - FISCAL 2010
                                                                                
Revenues
   $ 6,695     $ 3,659     $ 628     $ —     $ 10,982     $ —     $ —     $ —     $ 9     $ 10,991  
Change from prior year
     9 %     1 %     (2 )%     N/M       6 %                             (69 )%     6 %
Operating income (loss)
                                   $ 4,316     $ (614 )   $ —     $ (3 )   $ (416 )   $ 3,283  
Change from prior year
                                     37 %     (5 )%             N/M       (23 )%     47 %
EBT
   $ 1,693     $ 3,020     $ 12     $ 361     $ 5,086     $ (614 )   $ —     $ (3 )   $ (435 )   $ 4,034  
Change from prior year
     17 %     (2 )%     (40 )%     N/M       68 %     (5 )%             N/M       (20 )%     94 %
Net income (loss)
                                   $ 4,071     $ (442 )   $ (159 )   $ (3 )   $ (220 )   $ 3,247  
Change from prior year
                                     86 %     3 %     N/M       N/M       13 %     104 %
Diluted EPS
                                   $ 2.46     $ (0.27 )   $ (0.10 )   $ —     $ (0.13 )   $ 1.96  
Change from prior year
                                     88 %     0 %     N/M       N/M       13 %     106 %
Diluted shares used
                                     1,658       1,658       1,658       1,658       1,658       1,658  
 
                                                                                
12 MONTHS - FISCAL 2009
                                                                                
Revenues
   $ 6,135     $ 3,605     $ 641     $ 6     $ 10,387     $ —     $ —     $ —     $ 29     $ 10,416  
Operating income (loss)
                                     3,153       (584 )     —       (6 )     (337 )     2,226  
EBT
     1,441       3,068       20       (1,502 )     3,027       (584 )     —       (6 )     (361 )     2,076  
Net income (loss)
                                     2,187       (455 )     118       (6 )     (252 )     1,592  
Diluted EPS
                                   $ 1.31     $ (0.27 )   $ 0.07     $ —     $ (0.15 )   $ 0.95  
Diluted shares used
                                     1,673       1,673       1,673       1,673       1,673       1,673  
 
(1)   Non-GAAP reconciling items related to revenues consist primarily of other nonreportable segment revenues less intersegment eliminations. Non-GAAP reconciling items related to earnings before taxes consist primarily of certain investment income or losses, interest expense, research and development expenses, sales and marketing expenses and other operating expenses that are not allocated to the segments for management reporting purposes, nonreportable segment results and the elimination of intersegment profit.

 

 

 Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 9 of 19
 
(2)   Certain share-based compensation is included in operating expenses as part of employee-related costs but is not allocated to the Company’s segments as such costs are not considered relevant by management in evaluating segment performance.
 
(3)   During the first, second, third and fourth quarters of fiscal 2010, the Company recorded $32 million, $33 million, $32 million and $40 million in state tax expense, respectively, or $0.02 diluted loss per share for each quarter, because deferred revenue related to the license and settlement agreements with Nokia was taxable in fiscal 2010 but the resulting deferred tax asset will reverse in future years when the Company’s state tax rate, based on the legislation in effect during fiscal 2010, will be lower. During the third quarter of fiscal 2010, the Company recorded $22 million of tax expense, or $0.01 diluted loss per share, as a result of prior year tax audits completed during the third quarter.
 
(4)   At fiscal year-end, the sum of the quarterly tax provisions for each column, including QSI, equals the annual tax provisions for each column computed in accordance with GAAP. In interim quarters, the tax provision for the QSI operating segment is computed by subtracting the Non-GAAP tax provision, the tax items column and the tax provision related to share-based compensation from the GAAP tax provision.
 
(5)   Fiscal 2009 results included a $783 million charge related to a litigation settlement and patent agreement with Broadcom Corporation, including $748 million recorded in the second quarter of fiscal 2009 and $35 million recorded in the fourth quarter of 2009. The fourth quarter of fiscal 2009 results also included a $230 million charge related to the Korea Fair Trade Commission fine.
N/M — Not Meaningful
N/A — Not Applicable
Sums may not equal totals due to rounding.
Conference Call
Qualcomm’s fourth quarter fiscal 2010 earnings conference call will be broadcast live on November 3, 2010 beginning at 1:45 p.m. Pacific Time (PT) on the Company’s web site at: www.qualcomm.com. This conference call may contain forward-looking financial information and will include a discussion of “Non-GAAP financial measures” as that term is defined in Regulation G. The most directly comparable GAAP financial measures and information reconciling these Non-GAAP financial measures to the Company’s financial results prepared in accordance with GAAP, as well as the other material financial and statistical information to be discussed in the conference call, will be posted on the Company’s Investor Relations web site at www.qualcomm.com immediately prior to commencement of the call. A taped audio replay will be available via telephone on November 3, 2010, beginning at approximately 5:30 p.m. PT through December 3, 2010 at 9:00 p.m. PT. To listen to the replay, U.S. callers may dial (800) 642-1687 and international callers may dial (706) 645-9291. U.S. and international callers should use reservation number 17283098. An audio replay of the conference call will be available on the Company’s web site at www.qualcomm.com following the live call.
Editor’s Note: To view the web slides that accompany this earnings release and conference call, please go to the Qualcomm Investor Relations website at: http://investor.qualcomm.com/results.cfm
Qualcomm Incorporated (Nasdaq: QCOM) is a world leader in next-generation mobile technologies. For 25 years, Qualcomm ideas and inventions have driven the evolution of wireless communications, connecting people more closely to information, entertainment and

 

 

 Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 10 of 19
each other. Today, Qualcomm technologies are powering the convergence of mobile communications and consumer electronics, making wireless devices and services more personal, affordable and accessible to people everywhere. For more information, please visit www.qualcomm.com
Note Regarding Use of Non-GAAP Financial Measures
The Company presents Non-GAAP financial information that is used by management (i) to evaluate, assess and benchmark the Company’s operating results on a consistent and comparable basis; (ii) to measure the performance and efficiency of the Company’s ongoing core operating businesses, including the Qualcomm CDMA Technologies, Qualcomm Technology Licensing and Qualcomm Wireless & Internet segments; and (iii) to compare the performance and efficiency of these segments against each other and against competitors outside the Company. Non-GAAP measurements of the following financial data are used by the Company’s management: revenues, R&D expenses, SG&A expenses, total operating expenses, operating income (loss), net investment income (loss), income (loss) before income taxes, effective tax rate, net income (loss), diluted earnings (loss) per share, operating cash flow and free cash flow. Management is able to assess what it believes is a more meaningful and comparable set of financial performance measures for the Company and its business segments by using Non-GAAP information. As a result, management compensation decisions and the review of executive compensation by the Compensation Committee of the Board of Directors focus primarily on Non-GAAP financial measures applicable to the Company and its business segments.
Non-GAAP information used by management excludes the QSI segment, certain share-based compensation, certain tax items and acquired in-process R&D. The QSI segment is excluded because the Company expects to exit its strategic investments at various times, and the effects of fluctuations in the value of such investments are viewed by management as unrelated to the Company’s operational performance. Share-based compensation, other than amounts related to share-based awards granted under a bonus program that may result in the issuance of unrestricted shares of the Company’s common stock, is excluded because management views such share-based compensation as unrelated to the Company’s operational performance. Further, share-based compensation related to stock options is affected by factors that are subject to change, including the Company’s stock price, stock market volatility, expected option life, risk-free interest rates and expected dividend payouts

 

 

 Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 11 of 19
in future years. Certain tax items that were recorded in reported earnings in each fiscal year presented, but were unrelated to the fiscal year in which they were recorded, are excluded in order to provide a clearer understanding of the Company’s ongoing Non-GAAP tax rate and after tax earnings. Acquired in-process R&D is excluded because such expense is viewed by management as unrelated to the operating activities of the Company’s ongoing core businesses.
The Company presents free cash flow, defined as net cash provided by operating activities less capital expenditures, to facilitate an understanding of the amount of cash flow generated that is available to grow its business and to create long-term shareholder value. The Company believes that this presentation is useful in evaluating its operating performance and financial strength. In addition, management uses this measure to evaluate the Company’s performance, to value the Company and to compare its operating performance with other companies in the industry.
The Non-GAAP financial information presented herein should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. In addition, “Non-GAAP” is not a term defined by GAAP, and, as a result, the Company’s measure of Non-GAAP results might be different than similarly titled measures used by other companies. Reconciliations between GAAP results and Non-GAAP results are presented herein.
Note Regarding Forward-Looking Statements
In addition to the historical information contained herein, this news release contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks associated with: the rate of deployment and adoption of, and demand for, our technologies in wireless networks and of wireless communications, equipment and services, including CDMA2000 1X, 1xEV-DO, WCDMA, HSPA, TD-SCDMA and OFDMA, both domestically and internationally; the uncertainty of global economic conditions and its potential impact on demand for our products, services or applications and the value of our marketable securities; competition; our dependence on major customers and licensees; attacks on our licensing business model, including results of current and future litigation and arbitration proceedings, as well as actions of governmental or quasi-governmental bodies,

 

 

 Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 12 of 19
and the costs we incur in connection therewith, including potentially damaged relationships with customers and operators who may be impacted by the results of these proceedings; our dependence on third-party manufacturers and suppliers; foreign currency fluctuations; strategic investments and transactions we have or may pursue; defects or errors in our products and services; the success of the FLO TV service business and MediaFLO™ technology; the development and commercial success of the mirasol® display technology; as well as the other risks detailed from time-to-time in our SEC reports, including the report on Form 10-K for the year ended September 26, 2010. The Company undertakes no obligation to update, or continue to provide information with respect to, any forward-looking statement or risk factor, whether as a result of new information, future events or otherwise.
###
Qualcomm is a registered trademark of Qualcomm Incorporated. FLO TV and MediaFLO are trademarks of Qualcomm Incorporated. mirasol is a registered trademark of Qualcomm MEMS Technologies, Inc. CDMA2000 is a registered trademark of the Telecommunications Industry Association (TIA USA). All other trademarks are the property of their respective owners.

 

 

Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 13 of 19
Qualcomm Incorporated
Supplemental Information for the Three Months Ended September 26, 2010
(Unaudited)
                                         
    Non-GAAP     Share-Based     Tax             GAAP  
    Results     Compensation     Items     QSI     Results  
($ in millions except per share data)
                                        
R&D
   $ 547     $ 79     $ —     $ 30     $ 656  
 
                                        
SG&A
     364       70       —       37       471  
 
                                        
Operating income (loss)
     1,130       (161 )     —       (132 )     837  
 
                                        
Investment income (loss), net
     231       —       —       (21 ) (a)     210  
 
                                        
Tax rate
     19 %     N/M       N/M       N/M       17 %
 
                                        
Net income (loss)
   $ 1,105     $ ( 120 )   $ ( 40 )(b)   $ ( 80 )   $ 865  
 
                                        
Diluted earnings (loss) per share (EPS)
   $ 0.68     $ ( 0.07 )   $ ( 0.02 )   $ ( 0.05 )   $ 0.53  
 
                                        
Operating Cash Flow
   $ 1,214     $ ( 11 ) (c)   $ —     $ ( 110 )   $ 1,093  
Operating Cash Flow as % of Revenues
     41 %     N/A       N/A       N/M       37 %
 
                                        
Free Cash Flow (d)
   $ 1,113     $ ( 11 ) (c)   $ —     $ (122 )   $ 980  
Free Cash Flow as a % of Revenues
     38 %     N/A       N/A       N/M       33 %
 
(a)   The Company’s strategic investment activities included $25 million in interest expense and $7 million in other-than-temporary losses on investments, partially offset by $7 million in gains on derivative instruments, $3 million in interest and dividend income related to cash, cash equivalents and marketable securities and $1 million in net realized gains on investments.
 
(b)   During the fourth quarter of fiscal 2010, the Company recorded a $40 million state tax expense, or $0.02 diluted loss per share, because deferred revenue related to the license and settlement agreements with Nokia was taxable in fiscal 2010 but the resulting deferred tax asset will reverse in future years when the Company’s state tax rate, based on the legislation in effect during fiscal 2010, will be lower.
 
(c)   Incremental tax benefits from stock options exercised during the period.
 
(d)   Free Cash Flow is calculated as net cash provided by operating activities less capital expenditures. Reconciliation of these amounts is included in the “Reconciliation of Non-GAAP Free Cash Flows to Net Cash Provided by Operating Activities (GAAP) and Other Supplemental Disclosures” for the three months ended September 26, 2010, included herein.
N/M – Not Meaningful
N/A – Not Applicable
Sums may not equal totals due to rounding.

 

 

Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 14 of 19
Qualcomm Incorporated
Supplemental Information for the Twelve Months Ended September 26, 2010
(Unaudited)
                                                 
    Non-GAAP     Share-Based     Tax     In-Process             GAAP  
    Results     Compensation     Items     R&D     QSI     Results  
($ in millions except per share data)
                                                
R&D
   $ 2,142     $ 300     $ —     $ 3     $ 104     $ 2,549  
 
                                                
SG&A
     1,268       272       —       —       102       1,642  
 
                                                
Operating income (loss)
     4,316       (614 )     —       (3 )     (416 )     3,283  
 
                                                
Investment income (loss), net
     770       —       —       —       (19 )(a)     751  
 
                                                
Tax rate
     20 %     28 %     N/M       N/A       45 %     20 %
 
                                                
Net income (loss)
   $ 4,071     $ ( 442 )   $ ( 159 )(b)   $ ( 3 )   $ ( 220 )   $ 3,247  
 
                                                
Diluted earnings (loss) per share (EPS)
   $ 2.46     $ ( 0.27 )   $ ( 0.10 )   $ —     $ ( 0.13 )   $ 1.96  
 
                                                
Operating Cash Flow
   $ 4,511     $ ( 45 )(c)   $ —     $ —     $ ( 390 )   $ 4,076  
Operating Cash Flow as % of Revenues
     41 %     N/A       N/A       N/A       N/M       37 %
 
                                                
Free Cash Flow (d)
           $ ( 45 )(c)                                
 
   $ 4,161             $ —     $ —     $ ( 466 )   $ 3,650  
Free Cash Flow as a % of Revenues
     38 %     N/A       N/A       N/A       N/M       33 %
 
(a)   The Company’s strategic investment activities included $42 million in interest expense, $15 million in other-than-temporary losses on investments and $3 million in equity in losses of investees, partially offset by $26 million in net realized gains on investments, $8 million in interest and dividend income related to cash, cash equivalents and marketable securities and $7 million in gains on derivative instruments.
 
(b)   During fiscal 2010, the Company recorded (i) a $137 million state tax expense, or $0.08 diluted loss per share, because deferred revenue related to the license and settlement agreements with Nokia was taxable in fiscal 2010 but the resulting deferred tax asset will reverse in future years when the Company’s state tax rate, based on the legislation in effect during fiscal 2010, will be lower, and (ii) a $22 million tax expense, or $0.01 diluted loss per share, as a result of prior year tax audits completed during fiscal 2010.
 
(c)   Incremental tax benefits from stock options exercised during the period.
 
(d)   Free Cash Flow is calculated as net cash provided by operating activities less capital expenditures. Reconciliation of these amounts is included in the “Reconciliation of Non-GAAP Free Cash Flows to Net Cash Provided by Operating Activities (GAAP) and Other Supplemental Disclosures” for the twelve months ended September 26, 2010, included herein.
N/M – Not Meaningful
N/A – Not Applicable

 

 

Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 15 of 19
Qualcomm Incorporated
Reconciliation of Non-GAAP Free Cash Flows to
Net Cash Provided by Operating Activities (GAAP)
and Other Supplemental Disclosures
(In millions)
(Unaudited)
                                                 
    Three Months Ended September 26, 2010
            Share-Based     Tax     In-Process              
    Non-GAAP     Compensation     Items     R&D     QSI     GAAP  
     
Net cash provided (used) by operating activities
   $ 1,214     $ (11 ) (a)   $ —     $ —     $ (110 )   $ 1,093  
Less: capital expenditures
     (101 )     —       —       —       (12 )     (113 )
 
                                    
Free cash flow
   $ 1,113     $ (11 )   $ —     $ —     $ (122 )   $ 980  
 
                                    
 
                                                
Revenues
     2,952       —       —       —       —       2,952  
Free Cash Flow as a % of Revenues
     38 %     N/A       N/A       N/A       N/M       33 %
 
                                                
Other supplemental cash disclosures:
                                                
Cash transfers from QSI (1)
   $ 2     $ —     $ —     $ —     $ (2 )   $ —  
Cash transfers to QSI (2)
     (144 )     —       —       —       144       —  
 
                                    
Net cash transfers
   $ (142 )   $ —     $ —     $ —     $ 142     $ —  
 
                                    
                                                 
    Twelve Months Ended September 26, 2010
            Share-Based     Tax     In-Process              
    Non-GAAP     Compensation     Items     R&D     QSI     GAAP  
     
Net cash provided (used) by operating activities
   $ 4,511     $ (45 ) (a)   $ —     $ —     $ (390 )   $ 4,076  
Less: capital expenditures
     (350 )     —       —       —       (76 )     (426 )
 
                                    
Free cash flow
   $ 4,161     $ (45 )   $ —     $ —     $ (466 )   $ 3,650  
 
                                    
 
                                                
Revenues
     10,982       —       —       —       9       10,991  
Free Cash Flow as a % of Revenues
     38 %     N/A       N/A       N/A       N/M       33 %
 
                                                
Other supplemental cash disclosures:
                                                
Cash transfers from QSI (3)
   $ 119     $ —     $ —     $ —     $ (119 )   $ —  
Cash transfers to QSI (2)
     (520 )     —       —       —       520       —  
 
                                    
Net cash transfers
   $ (401 )   $ —     $ —     $ —     $ 401     $ —  
 
                                    
                                                 
    Three Months Ended September 27, 2009
            Share-Based     Tax     In-Process              
    Non-GAAP     Compensation     Items     R&D     QSI     GAAP  
     
Net cash provided (used) by operating activities
   $ 1,411     $ (25 ) (a)   $ —     $ —     $ (65 )   $ 1,321  
Less: capital expenditures
     (117 )     —       —       —       (27 )     (144 )
 
                                    
Free cash flow
   $ 1,294     $ (25 )   $ —     $ —     $ (92 )   $ 1,177  
 
                                    
                                                 
    Twelve Months Ended September 27, 2009
            Share-Based     Tax     In-Process              
    Non-GAAP     Compensation     Items     R&D     QSI     GAAP  
     
Net cash provided (used) by operating activities
   $ 7,556     $ (79 ) (a)   $ —     $ —     $ (305 )   $ 7,172  
Less: capital expenditures
     (649 )     —       —       —       (112 )     (761 )
 
                                    
Free cash flow
   $ 6,907     $ (79 )   $ —     $ —     $ (417 )   $ 6,411  
 
                                    
 
                                                
 
(a)   Incremental tax benefits from stock options exercised during the period.
 
(1)   Cash from sale of equity investments.
 
(2)   Primarily funding for strategic debt and equity investments, capital expenditures and other QSI operating expenses.
 
(3)   Cash from sale of equity investments and Australia spectrum license.
 
N/M —   Not Meaningful
 
N/A —   Not Applicable

 

 

Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 16 of 19
Qualcomm Incorporated
Reconciliation of Non-GAAP Tax Rate to GAAP Tax Rate
(in millions)
(Unaudited)
                                                 
    Three Months Ended September 26, 2010  
    Non-GAAP     Share-Based             In-Process             GAAP  
    Results     Compensation     Tax Items     R&D     QSI (a)     Results  
Income (loss) before income taxes
   $ 1,361     $ ( 161 )   $ —     $ —     $ ( 153 )   $ 1,047  
Income tax (expense) benefit
     (256 )     41       (40 )     —       73       (182 )
 
                                    
Net income (loss)
   $ 1,105     $ ( 120 )   $ ( 40 )   $ —     $ ( 80 )   $ 865  
 
                                    
 
                                                
Tax rate
     19 %     25 %     N/M       N/M       N/M       17 %
                                                 
    Twelve Months Ended September 26, 2010  
    Non-GAAP     Share-Based             In-Process             GAAP  
    Results     Compensation     Tax Items     R&D     QSI     Results  
Income (loss) before income taxes
   $ 5,086     $ ( 614 )   $ —     $ ( 3 )   $ ( 435 )   $ 4,034  
Income tax (expense) benefit
     (1,015 )     172       (159 )     —       215       (787 )
 
                                    
Net income (loss)
   $ 4,071     $ ( 442 )   $ (159 )   $ ( 3 )   $ ( 220 )   $ 3,247  
 
                                    
 
                                                
Tax rate
     20 %     28 %     N/M       N/M       49 %     20 %
 
   
(a)   At fiscal year-end, the sum of the quarterly tax provisions for each column, including QSI, equals the annual tax provisions for each column computed in accordance with GAAP. In interim quarters, the tax provision for the QSI operating segment is computed by subtracting the Non-GAAP tax provision, the tax items column and the tax provision related to share-based compensation from the GAAP tax provision.
N/M — Not Meaningful

 

 

Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 17 of 19
Qualcomm Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
                 
    September 26,     September 27,  
    2010     2009  
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 3,547     $ 2,717  
Marketable securities
     6,732       8,352  
Accounts receivable, net
     730       700  
Inventories
     528       453  
Deferred tax assets
     321       149  
Other current assets
     275       199  
 
            
Total current assets
     12,133       12,570  
Marketable securities
     8,123       6,673  
Deferred tax assets
     1,922       843  
Property, plant and equipment, net
     2,373       2,387  
Goodwill
     1,488       1,492  
Other intangible assets, net
     3,022       3,065  
Other assets
     1,511       415  
 
            
Total assets
   $ 30,572     $ 27,445  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
 
                
Current liabilities:
                
Trade accounts payable
   $ 764     $ 636  
Payroll and other benefits related liabilities
     467       480  
Unearned revenues
     623       441  
Loan payable to banks
     1,086       —  
Income taxes payable
     1,443       29  
Other current liabilities
     1,085       1,227  
 
            
Total current liabilities
     5,468       2,813  
Unearned revenues
     3,485       3,464  
Other liabilities
     761       852  
 
            
Total liabilities
     9,714       7,129  
 
            
 
                
Stockholders’ equity:
                
Preferred stock, $0.0001 par value; issuable in series; 8 shares authorized; none outstanding at September 26, 2010 and September 27, 2009
     —       —  
Common stock, $0.0001 par value; 6,000 shares authorized; 1,612 and 1,669 shares issued and outstanding at September 26, 2010 and September 27, 2009, respectively
     —       —  
Paid-in capital
     6,856       8,493  
Retained earnings
     13,305       11,235  
Accumulated other comprehensive income
     697       588  
 
            
Total stockholders’ equity
     20,858       20,316  
 
            
Total liabilities and stockholders’ equity
   $ 30,572     $ 27,445  
 
            

 

 

Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 18 of 19
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
                                 
    Three Months Ended     Twelve Months Ended  
    September 26,     September 27,     September 26,     September 27,  
    2010     2009     2010     2009  
Revenues:
                                
Equipment and services
   $ 1,950     $ 1,769     $ 6,980     $ 6,466  
Licensing and royalty fees
     1,002       921       4,011       3,950  
 
                        
Total revenues
     2,952       2,690       10,991       10,416  
 
                        
 
                                
Operating expenses:
                                
Cost of equipment and services revenues
     988       824       3,517       3,181  
Research and development
     656       614       2,549       2,440  
Selling, general and administrative
     471       390       1,642       1,556  
Litigation settlement, patent license and other related items
     —       35       —       783  
KFTC fine
     —       230       —       230  
 
                        
Total operating expenses
     2,115       2,093       7,708       8,190  
 
                        
 
                                
Operating income
     837       597       3,283       2,226  
 
                                
Investment income (loss), net
     210       145       751       (150 )
 
                        
Income before income taxes
     1,047       742       4,034       2,076  
Income tax (expense) benefit
     (182 )     61       (787 )     (484 )
 
                        
Net income
   $ 865     $ 803     $ 3,247     $ 1,592  
 
                        
 
                                
Basic earnings per common share
   $ 0.54     $ 0.48     $ 1.98     $ 0.96  
 
                        
Diluted earnings per common share
   $ 0.53     $ 0.48     $ 1.96     $ 0.95  
 
                        
 
                                
Shares used in per share calculations:
                                
Basic
     1,608       1,666       1,643       1,656  
 
                        
Diluted
     1,621       1,688       1,658       1,673  
 
                        
 
                                
Dividends per share paid
   $ 0.19     $ 0.17     $ 0.72     $ 0.66  
 
                        
Dividends per share announced
   $ 0.19     $ 0.17     $ 0.72     $ 0.66  
 
                        

 

 

Qualcomm Announces Fourth Quarter and Fiscal 2010 Results   Page 19 of 19
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
                                 
    Three Months Ended     Twelve Months Ended  
    September 26,     September 27,     September 26,     September 27,  
    2010     2009     2010     2009  
Operating Activities:
                                
Net income
   $ 865     $ 803     $ 3,247     $ 1,592  
Adjustments to reconcile net income to net cash provided by operating activities:
                                
Depreciation and amortization
     171       175       666       635  
Revenues related to non-monetary exchanges
     (31 )     (29 )     (130 )     (114 )
Income tax provision in excess of income tax payments
     36       (255 )     116       (33 )
Non-cash portion of share-based compensation expense
     159       148       612       584  
Non-cash portion of interest and dividend income
     (7 )     (24 )     (24 )     (68 )
Incremental tax benefit from stock options exercised
     (11 )     (25 )     (45 )     (79 )
Net realized gains on marketable securities and other investments
     (131 )     (80 )     (405 )     (137 )
Impairment losses on marketable securities and other investments
     23       46       125       763  
Other items, net
     13       14       (40 )     36  
Changes in assets and liabilities, net of effects of acquisitions:
                                
Accounts receivable, net
     73       366       (18 )     3,083  
Inventories
     (87 )     (74 )     (80 )     69  
Other assets
     11       (41 )     (60 )     (58 )
Trade accounts payable
     125       65       148       57  
Payroll, benefits and other liabilities
     (68 )     273       (229 )     984  
Unearned revenues
     (48 )     (41 )     193       (142 )
 
                        
Net cash provided by operating activities
     1,093       1,321       4,076       7,172  
 
                        
Investing Activities:
                                
Capital expenditures
     (113 )     (144 )     (426 )     (761 )
Advance payment on spectrum
     —       —       (1,064 )     —  
Purchases of available-for-sale securities
     (1,924 )     (3,946 )     (8,973 )     (10,443 )
Proceeds from sale of available-for-sale securities
     3,086       1,668       10,440       5,274  
Purchases of other marketable securities
     (850 )     —       (850 )     —  
Cash received for partial settlement of investment receivables
     1       —       34       349  
Other investments and acquisitions, net of cash acquired
     (49 )     (7 )     (94 )     (54 )
Change in collateral held under securities lending
     —       —       —       173  
Other items, net
     6       (1 )     94       5  
 
                        
Net cash provided (used) by investing activities
     157       (2,430 )     (839 )     (5,457 )
 
                        
Financing Activities:
                                
Borrowing under loan payable to banks
     —       —       1,064       —  
Proceeds from issuance of common stock
     170       366       689       642  
Incremental tax benefit from stock options exercised
     11       25       45       79  
Repurchase and retirement of common stock
     (122 )     —       (3,016 )     (285 )
Dividends paid
     (305 )     (283 )     (1,177 )     (1,093 )
Change in obligations under securities lending
     —       —       —       (173 )
Other items, net
     (9 )     (3 )     (10 )     (3 )
 
                        
Net cash (used) provided by financing activities
     (255 )     105       (2,405 )     (833 )
 
                        
Effect of exchange rate changes on cash
     11       —       (2 )     (5 )
 
                        
Net increase (decrease) in cash and cash equivalents
     1,006       (1,004 )     830       877  
Cash and cash equivalents at beginning of period
     2,541       3,721       2,717       1,840  
 
                        
Cash and cash equivalents at end of period
   $ 3,547     $ 2,717     $ 3,547     $ 2,717