Quarterly report pursuant to Section 13 or 15(d)

Segment Information (Notes)

v3.7.0.1
Segment Information (Notes)
 9 Months Ended
Jun. 25, 2017
Segment Reporting [Abstract]  
Segment Information
Segment Information
The Company is organized on the basis of products and services. The Company conducts business primarily through two reportable segments, QCT (Qualcomm CDMA Technologies) and QTL (Qualcomm Technology Licensing), and its QSI (Qualcomm Strategic Initiatives) reportable segment makes strategic investments and includes revenues and related costs associated with development contracts with an equity method investee. QCT develops and supplies integrated circuits and system software for use in mobile devices, wireless networks, broadband gateway equipment and consumer electronic devices. QTL grants licenses to use portions of its intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products. The Company also has nonreportable segments, including its mobile health, data center, small cell and other wireless technology and service initiatives.
The Company evaluates the performance of its segments based on earnings (loss) before income taxes (EBT). Segment EBT includes the allocation of certain corporate expenses to the segments, including depreciation and amortization expense related to unallocated corporate assets. Certain income and charges are not allocated to segments in the Company’s management reports because they are not considered in evaluating the segments’ operating performance. Unallocated income and charges include certain interest expense; certain net investment income; certain share-based compensation; and certain research and development expenses, selling, general and administrative expenses and other expenses or income that were deemed to be not directly related to the businesses of the segments. Additionally, unallocated charges include recognition of the step-up of inventories to fair value, amortization of certain intangible assets and certain other acquisition-related charges, third-party acquisition and integration services costs and certain other items, which may include major restructuring and restructuring-related costs, goodwill and long-lived asset impairment charges and litigation settlements and/or damages. Additionally, starting with acquisitions in the second quarter of fiscal 2017, unallocated charges include recognition of the depreciation related to the step-up of property, plant and equipment to fair value. Such charges related to acquisitions that were completed prior to the second quarter of fiscal 2017 continue to be allocated to the respective segment, and such amounts are not material. All of the costs related to the initial research of 5G (fifth generation) technology are included in unallocated corporate research and development expenses, whereas initial costs related to the research of 3G (third generation) and 4G (fourth generation) technology were recorded in both the QCT segment and unallocated corporate research and development expenses based on the nature of the activity. Fiscal 2016 results have not been revised as such costs were incurred prior to fiscal 2014.
Segment assets are comprised of accounts receivable and inventories for all reportable segments other than QSI. QSI segment assets are comprised primarily of certain non-marketable equity instruments and other investments and a receivable from the sale of wireless spectrum in fiscal 2016 (Note 2). The increase in QCT segment assets resulted primarily from the Company’s recently formed RF360 Holdings joint venture in the second quarter of fiscal 2017 (Note 8). The increase in QTL segment assets was due to an increase in accounts receivable (Note 2). Total segment assets differ from total assets on a consolidated basis as a result of unallocated corporate assets primarily comprised of certain cash, cash equivalents, marketable securities, property, plant and equipment, deferred tax assets, intangible assets and assets of nonreportable segments.
The table below presents revenues, EBT and total assets for reportable segments (in millions):
 
QCT
 
QTL
 
QSI
 
Reconciling
Items
 
Total
For the three months ended
 
 
 
 
 
 
 
 
 
June 25, 2017
 
 
 
 
 
 
 
 
 
Revenues
$
4,052

 
$
1,172

 
$
56

 
$
91

 
$
5,371

EBT
575

 
854

 
55

 
(626
)
 
858

June 26, 2016
 
 
 
 
 
 
 
 
 
Revenues
$
3,853

 
$
2,038

 
$
12

 
$
141

 
$
6,044

EBT
365

 
1,749

 
(5
)
 
(416
)
 
1,693

 
 
 
 
 
 
 
 
 
 
For the nine months ended
 
 
 
 
 
 
 
 
 
June 25, 2017
 
 
 
 
 
 
 
 
 
Revenues
$
11,829

 
$
5,232

 
$
70

 
$
(744
)
 
$
16,387

EBT
1,774

 
4,346

 
38

 
(3,572
)
 
2,586

June 26, 2016
 
 
 
 
 
 
 
 
 
Revenues
$
11,285

 
$
5,780

 
$
33

 
$
272

 
$
17,370

EBT
1,125

 
4,945

 
400

 
(1,597
)
 
4,873

 
 
 
 
 
 
 
 
 
 
Total assets
 
 
 
 
 
 
 
 
 
June 25, 2017
$
3,656

 
$
1,814

 
$
975

 
$
57,934

 
$
64,379

September 25, 2016
2,995

 
644

 
910

 
47,810

 
52,359


Reconciling items in the previous table were as follows (in millions):
 
Three Months Ended
 
Nine Months Ended
 
June 25,
2017
 
June 26,
2016
 
June 25,
2017
 
June 26,
2016
Revenues
 
 
 
 
 
 
 
Nonreportable segments
$
79

 
$
142

 
$
218

 
$
274

BlackBerry arbitration (Note 6)
12

 
—

 
(962
)
 
—

Intersegment eliminations
—

 
(1
)
 
—

 
(2
)
 
$
91

 
$
141

 
$
(744
)
 
$
272

EBT
 
 
 
 
 
 
 
BlackBerry arbitration (Note 6)
$
12

 
$
—

 
$
(962
)
 
$
—

Unallocated cost of revenues
(188
)
 
(130
)
 
(402
)
 
(397
)
Unallocated research and development expenses
(257
)
 
(199
)
 
(803
)
 
(602
)
Unallocated selling, general and administrative expenses
(197
)
 
(121
)
 
(481
)
 
(373
)
Unallocated other expenses, net
(9
)
 
(30
)
 
(962
)
 
(110
)
Unallocated interest expense
(130
)
 
(74
)
 
(325
)
 
(217
)
Unallocated investment and other income, net
239

 
185

 
646

 
388

Nonreportable segments
(96
)
 
(47
)
 
(283
)
 
(286
)
 
$
(626
)
 
$
(416
)

$
(3,572
)

$
(1,597
)

The impact to revenues related to the BlackBerry arbitration decision (Note 6) was not allocated to QTL in the Company’s management reports because it will not be considered in evaluating segment results. Unallocated other expenses in the nine months ended June 25, 2017 were comprised of the fine imposed by the KFTC (Note 6) and restructuring and restructuring-related charges related to the Company’s Strategic Realignment Plan, which was substantially implemented in fiscal 2016 (Note 2). Unallocated other expenses in the nine months ended June 26, 2016 were comprised of net restructuring and restructuring-related charges associated with the Company’s Strategic Realignment Plan.
Unallocated acquisition-related expenses were comprised as follows (in millions):
 
Three Months Ended
 
Nine Months Ended
 
June 25,
2017
 
June 26,
2016
 
June 25,
2017
 
June 26,
2016
Cost of revenues
$
139

 
$
99

 
$
330

 
$
345

Research and development expenses
3

 
2

 
18

 
7

Selling, general and administrative expenses
77

 
23

 
195

 
79