|12 Months Ended|
Sep. 30, 2018
|Segment Reporting [Abstract]|
We are organized on the basis of products and services and have three reportable segments. We conduct business primarily through our QCT (Qualcomm CDMA Technologies) semiconductor business and our QTL (Qualcomm Technology Licensing) licensing business. QCT develops and supplies integrated circuits and system software based on CDMA, OFDMA and other technologies for use in mobile devices, wireless networks, devices used in the Internet of Things (IoT), broadband gateway equipment, consumer electronic devices and automotive telematics and infotainment systems. QTL grants licenses to use portions of our intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products. Our QSI (Qualcomm Strategic Initiatives) reportable segment makes strategic investments and includes revenues and related costs associated with development contracts with an equity method investee. We also have nonreportable segments, including our cyber security solutions (formerly Qualcomm Government Technologies or QGOV), mobile health, small cells and other wireless technology and service initiatives.
We evaluate the performance of our 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 our 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.
In fiscal 2018, all of the costs ($474 million) related to pre-commercial research and development of 5G (fifth generation) technologies were included in unallocated corporate research and development expenses, whereas similar costs related to the research and development of other technologies, including 3G (third generation) and 4G (fourth generation) technologies, were recorded in the QCT and QTL segments. Beginning in the first quarter of fiscal 2019, all research and development costs associated with 5G technologies will be included in QCT and QTL segment results. Additionally, beginning in the first quarter of fiscal 2019, certain research and development costs associated with early research and development that have historically been included in our QCT segment will be allocated to our QTL segment. The net effect of these changes is expected to negatively impact QTL’s EBT in fiscal 2019 by approximately $500 million and to not have a significant impact on QCT EBT in fiscal 2019.
The table below presents revenues, EBT and total assets for reportable segments (in millions):
Segment assets are comprised of accounts receivable and inventories for all reportable segments other than QSI. QSI segment assets include certain non-marketable equity instruments and other investments and a receivable from the sale of wireless spectrum in fiscal 2016 (Note 2). QSI assets at September 30, 2018, September 24, 2017 and September 25, 2016 included $283 million, $254 million and $162 million, respectively, related to investments in equity method investees. The decrease in fiscal 2018 QCT segment assets resulted from a decrease in accounts receivable related to the timing of integrated circuit shipments and to a decrease in inventory due to a reduction in the overall quantity of units on hand. The decrease in fiscal 2018 QTL segment assets was due to a decrease in accounts receivable resulting from the collection of receivables from certain licensees. The increase in fiscal 2017 QCT segment assets resulted primarily from our RF360 Holdings joint venture in the second quarter of fiscal 2017 (Note 9). The increase in fiscal 2017 QTL segment assets was due to an increase in accounts receivable. 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 net book values of long-lived tangible assets located outside of the United States were $1.4 billion at September 30, 2018 and September 24, 2017, and $404 million at September 25, 2016. The increase in fiscal 2017 was primarily from our RF360 Holdings joint venture, which has substantially all of its operations outside the United States. The net book values of long-lived tangible assets located in the United States were $1.6 billion, $1.8 billion and $1.9 billion at September 30, 2018, September 24, 2017 and September 25, 2016, respectively.
We report revenues from external customers by country based on the location to which our products or services are delivered, which for QCT is generally the country in which our customers manufacture their products, and for licensing revenues, the invoiced addresses of our licensees. As a result, the revenues by country presented herein are not necessarily indicative of either the country in which the devices containing our products and/or intellectual property are ultimately sold to consumers or the country in which the companies that sell the devices are headquartered. For example, China revenues could include revenues related to shipments of integrated circuits for a company that is headquartered in South Korea but that manufactures devices in China, which devices are then sold to consumers in Europe and/or the United States. Revenues by country were as follows (in millions):
Reconciling items for revenues and EBT in a previous table were as follows (in millions):
Other unallocated revenues in fiscal 2018 and 2017 were comprised of reductions to licensing revenues related to the portions of business arrangements that resolved legal disputes and were not allocated to a reportable segment in our management reports because they were not considered in evaluating segment results. In May 2017, in connection with the arbitration decision, we entered into a Joint Stipulation Regarding Final Award Agreement with BlackBerry Limited (BlackBerry) agreeing that we would pay BlackBerry $940 million to cover the award amount, pre-judgment interest and attorneys’ fees. This amount, which was paid in the third quarter of fiscal 2017, also reflected $22 million that was owed to us by BlackBerry, which was recorded as revenues in the QTL segment. The remaining amount was recorded as an adjustment to revenues related to the arbitration decision and was not allocated to QTL. Unallocated other expenses in fiscal 2018 were comprised of charges related to the termination of our purchase agreement to acquire NXP (Note 9), the EC fine (Note 7), and our Cost Plan (Note 10), partially offset by a benefit related to the settlement of the TFTC investigation (Note 7). Unallocated other expenses in fiscal 2017 were comprised of charges related to the fines imposed by the KFTC and the TFTC, which was settled in fiscal 2018 (Note 7), as well as restructuring and restructuring-related charges related to our Strategic Realignment Plan, which was substantially implemented in fiscal 2016 (Note 10). Unallocated other expenses for fiscal 2016 were comprised of net restructuring and restructuring-related charges related to our Strategic Realignment Plan.
Unallocated acquisition-related expenses were comprised as follows (in millions):
The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef