Annual report pursuant to Section 13 and 15(d)

Segment Information

v2.3.0.15
Segment Information
 12 Months Ended
Sep. 25, 2011
Notes to Financial Statements [Abstract]  
Note 10 - Segment Information
Note 10. Segment Information
The Company is organized on the basis of products and services. The Company aggregates four of its divisions into the Qualcomm Wireless & Internet segment and three of its divisions into the Qualcomm Strategic Initiatives (QSI) segment. Reportable segments are as follows:
•
Qualcomm CDMA Technologies (QCT) — develops and supplies integrated circuits and system software based on CDMA, OFDMA and other technologies for use in voice and data communications, networking, application processing, multimedia and global positioning system products;
•
Qualcomm Technology Licensing (QTL) — grants licenses or otherwise provides rights to use portions of the Company’s intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products, including, without limitation, products implementing cdmaOne, CDMA2000, WCDMA, CDMA TDD (including TD-SCDMA), GSM/GPRS/EDGE and/or OFDMA standards, and collects fixed license fees and royalties in partial consideration for such licenses;
•
Qualcomm Wireless & Internet (QWI) — comprised of:
◦
Qualcomm Internet Services (QIS) — provides content enablement services for the wireless industry and push-to-talk and other products and services for wireless network operators;
◦
Qualcomm Government Technologies (QGOV) — provides development, hardware, analytical expertise and services to United States government agencies involving wireless communications technologies;
◦
Qualcomm Enterprise Services (QES) — provides satellite- and terrestrial-based two-way wireless information and position reporting services to transportation and logistics companies and other enterprise companies with fleet vehicles; and
◦
Firethorn — builds and manages software applications that enable certain mobile commerce services.
•
Qualcomm Strategic Initiatives (QSI) — comprised of the Company’s Qualcomm Ventures, Structured Finance & Strategic Investments and FLO TV divisions. QSI makes strategic investments that the Company believes will open new opportunities for its technologies, support the design and introduction of new products or services for voice and data communications or possess unique capabilities or technology. Many of these strategic investments are in early-stage companies. QSI also holds spectrum licenses. The results of QSI’s FLO TV business is presented as discontinued operations (Note 11).
The Company evaluates the performance of its segments based on earnings (loss) before income taxes (EBT) from continuing operations. 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 investment income (loss); certain share-based compensation; and certain research and development expenses and other selling and marketing expenses that were deemed to be not directly related to the businesses of the segments. Additionally, starting with acquisitions in the third quarter of fiscal 2011, unallocated charges include recognition of the step-up of inventories to fair value and amortization of certain intangible assets. Such charges related to acquisitions that were completed prior to the third quarter of fiscal 2011 are allocated to the respective segments. The table below presents revenues, EBT and total assets for reportable segments (in millions):
 
QCT
 
QTL
 
QWI
 
QSI*
 
Reconciling
Items*
 
Total*
2011
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
8,859

 
$
5,422

 
$
656

 
$
—

 
$
20

 
$
14,957

EBT
2,056

 
4,753

 
(152
)
 
(132
)
 
(838
)
 
5,687

Total assets
1,569

 
36

 
136

 
2,386

 
32,295

 
36,422

2010
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
6,695

 
$
3,659

 
$
628

 
$
—

 
$
—

 
$
10,982

EBT
1,693

 
3,020

 
12

 
7

 
(239
)
 
4,493

Total assets
1,085

 
28

 
129

 
2,745

 
26,585

 
30,572

2009
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
6,135

 
$
3,605

 
$
641

 
$
—

 
$
6

 
$
10,387

EBT
1,441

 
3,068

 
20

 
(54
)
 
(2,072
)
 
2,403

Total assets
892

 
89

 
142

 
1,614

 
24,708

 
27,445


*Revenues and EBT for fiscal 2010 and 2009 were adjusted to present discontinued operations (Note 11). Share-based payments that had been included in reconciling items and QSI revenues and EBT have been adjusted to conform for all periods presented.
Segment assets are comprised of accounts receivable and inventories for all reportable segments other than QSI. QSI segment assets include certain marketable securities, notes receivable, spectrum licenses, other investments and all assets of QSI’s consolidated subsidiaries. QSI segment assets related to the discontinued FLO TV business totaled $913 million at September 25, 2011 and $1.3 billion at both September 26, 2010 and September 27, 2009. QSI assets at September 25, 2011, September 26, 2010 and September 27, 2009 also included $20 million, $20 million and $10 million, respectively, related to investments in equity method investees. Reconciling items for total assets included $806 million, $384 million and $389 million at September 25, 2011, September 26, 2010 and September 27, 2009, respectively, of goodwill and other assets related to the Company’s QMT division, a nonreportable segment developing display technology for mobile devices and other applications. Total segment assets also 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, goodwill, other intangible assets and assets of nonreportable segments. The net book values of long-lived assets located outside of the United States were $629 million, $221 million and $256 million at September 25, 2011, September 26, 2010 and September 27, 2009, respectively. The net book values of long-lived assets located in the United States were $1.8 billion, $2.2 billion and $2.1 billion at September 25, 2011, September 26, 2010 and September 27, 2009, respectively.
Revenues from each of the Company’s divisions aggregated into the QWI reportable segment were as follows (in millions):
 
2011
 
2010
 
2009
QES
$
395

 
$
376

 
$
344

QIS
150

 
173

 
229

QGOV
100

 
74

 
66

Firethorn
11

 
7

 
3

Eliminations
—

 
(2
)
 
(1
)
 
$
656

 
$
628

 
$
641


Other reconciling items were comprised as follows (in millions):
 
2011
 
2010*
 
2009*
Revenues
 
 
 
 
 
Elimination of intersegment revenues
$
(3
)
 
$
(10
)
 
$
(15
)
Other nonreportable segments
23

 
10

 
21

 
$
20

 
$
—

 
$
6

EBT
 
 
 
 
 
Unallocated cost of equipment and services revenues
$
(210
)
 
$
(42
)
 
$
(40
)
Unallocated research and development expenses
(553
)
 
(401
)
 
(372
)
Unallocated selling, general and administrative expenses
(506
)
 
(336
)
 
(293
)
Unallocated other operating expenses
—

 
—

 
(1,013
)
Unallocated investment income (loss), net
756

 
767

 
(141
)
Other nonreportable segments
(324
)
 
(224
)
 
(206
)
Intersegment eliminations
(1
)
 
(3
)
 
(7
)
 
$
(838
)
 
$
(239
)
 
$
(2,072
)

*As adjusted for discontinued operations (Note 11)
Reconciling items for fiscal 2011 included $143 million, $59 million and $6 million of unallocated cost of equipment and services revenue, unallocated selling, general and administrative expenses and unallocated research and development expenses, respectively, related to the step-up of inventories to fair value and amortization of intangible assets resulting from acquisitions. Other nonreportable segments’ losses before taxes during fiscal 2011, 2010 and 2009 were primarily attributable to the Company’s QMT division.
Specified items included in segment EBT were as follows (in millions):
 
QCT
 
QTL
 
QWI
 
QSI*
2011
 
 
 
 
 
 
 
Revenues from external customers
$
8,856

 
$
5,422

 
$
656

 
$
—

Intersegment revenues
3

 
—

 
—

 
—

Interest income
1

 
1

 
—

 
20

Interest expense
1

 
—

 
—

 
99

2010
 
 
 
 
 
 
 
Revenues from external customers
$
6,686

 
$
3,659

 
$
628

 
$
—

Intersegment revenues
9

 
—

 
—

 
—

Interest income
1

 
2

 
2

 
8

Interest expense
1

 
—

 
(4
)
 
27

2009
 
 
 
 
 
 
 
Revenues from external customers
$
6,125

 
$
3,603

 
$
638

 
$
—

Intersegment revenues
10

 
2

 
3

 
—

Interest income
4

 
12

 
1

 
3

Interest expense
—

 
1

 
1

 
—


*As adjusted for discontinued operations (Note 11)
Intersegment revenues are based on prevailing market rates for substantially similar products and services or an approximation thereof, but the purchasing segment may record the cost of revenues at the selling segment’s original cost. In that event, the elimination of the selling segment’s gross margin is included with other intersegment eliminations in reconciling items. Effectively all equity in earnings (losses) of investees was recorded in QSI in fiscal 2011, 2010 and 2009.
The Company distinguishes revenues from external customers by geographic areas based on the location to which its products, software or services are delivered and, for QTL licensing revenues, the invoiced addresses of its licensees. Sales information by geographic area was as follows (in millions):
 
2011
 
2010*
 
2009*
China
$
4,744

 
$
3,194

 
$
2,378

South Korea
2,887

 
2,913

 
3,655

Taiwan
2,550

 
1,360

 
831

Japan
1,165

 
1,018

 
1,098

United States
897

 
555

 
603

Other foreign
2,714

 
1,942

 
1,822

 
$
14,957

 
$
10,982

 
$
10,387


*As adjusted for discontinued operations (Note 11)