Annual report pursuant to Section 13 and 15(d)

Segment Information

v2.4.0.6
Segment Information
 12 Months Ended
Sep. 30, 2012
Notes to Financial Statements [Abstract]  
Note 8 - Segment Information
Note 8. Segment Information
The Company is organized on the basis of products and services. The Company aggregates four of its divisions into the QWI segment and three of its divisions into the QSI segment. Reportable segments are as follows:
•
QCT Segment — 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.
•
QTL Segment — grants licenses or otherwise provides rights to use portions of the Company’s intellectual property portfolio, which, among other rights, includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products, including, without limitation, products implementing CDMA2000, WCDMA, CDMA TDD (including TD-SCDMA), GSM/GPRS/EDGE and/or OFDMA standards and their derivatives, and QTL collects license fees as well as royalties based on sales by licensees of products incorporating or using the Company’s intellectual property.
•
QWI Segment — comprised of:
◦
QES Division — provides fleet management, satellite- and terrestrial-based two-way wireless information and position reporting and other services, software and hardware to transportation and logistics companies;
◦
QIS Division — provides content enablement services for the wireless industry and push-to-talk and other software products and services for wireless network operators;
◦
QGOV Division — provides development and other services and related products involving wireless communications technologies to government agencies and their contractors; and
◦
Firethorn Division — builds and manages software applications that enable certain mobile commerce services.
•
QSI Segment — 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 wireless spectrum. The results of QSI’s FLO TV business are presented as discontinued operations (Note 9) and are therefore not included in QSI’s revenues or loss before income taxes.
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 net investment income; 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, amortization of certain intangible assets and certain other acquisition-related charges. 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 and EBT for reportable segments (in millions):
 
QCT
 
QTL
 
QWI
 
QSI
 
Reconciling
Items
 
Total
2012
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
12,141

 
$
6,327

 
$
633

 
$
—

 
$
20

 
$
19,121

EBT
2,296

 
5,585

 
(15
)
 
(170
)
 
(1,134
)
 
6,562

Total assets
2,278

 
63

 
129

 
1,424

 
39,118

 
43,012

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


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, wireless spectrum, other investments and all assets of QSI’s consolidated subsidiaries. QSI segment assets included $1.1 billion in assets held for sale (Note 2) at September 30, 2012. QSI segment assets related to the discontinued FLO TV business totaled $59 million, $913 million and $1.3 billion at September 30, 2012, September 25, 2011 and September 26, 2010, respectively. QSI assets at September 30, 2012, September 25, 2011 and September 26, 2010 also included $11 million, $20 million and $20 million, respectively, related to investments in equity method investees. Reconciling items for total assets included $1.2 billion, $806 million and $384 million at September 30, 2012, September 25, 2011 and September 26, 2010, 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, other intangible assets and assets of nonreportable segments. The net book values of long-lived assets located outside of the United States were $1.1 billion, $629 million and $221 million at September 30, 2012, September 25, 2011 and September 26, 2010, respectively. The net book values of long-lived assets located in the United States were $1.8 billion, $1.8 billion and $2.2 billion at September 30, 2012, September 25, 2011 and September 26, 2010, respectively.
Revenues from each of the Company’s divisions aggregated into the QWI reportable segment were as follows (in millions):
 
2012
 
2011
 
2010
QES
$
371

 
$
395

 
$
376

QIS
151

 
150

 
173

QGOV
109

 
100

 
74

Firethorn
2

 
11

 
7

Eliminations
—

 
—

 
(2
)
 
$
633

 
$
656

 
$
628


Other reconciling items were comprised as follows (in millions):
 
2012
 
2011
 
2010
Revenues
 
 
 
 
 
Nonreportable segments
$
24

 
$
23

 
$
10

Intersegment eliminations
(4
)
 
(3
)
 
(10
)
 
$
20

 
$
20

 
$
—

EBT
 
 
 
 
 
Unallocated cost of equipment and services revenues
$
(300
)
 
$
(210
)
 
$
(42
)
Unallocated research and development expenses
(702
)
 
(553
)
 
(401
)
Unallocated selling, general and administrative expenses
(549
)
 
(506
)
 
(336
)
Unallocated investment income, net
928

 
756

 
767

Nonreportable segments
(511
)
 
(324
)
 
(224
)
Intersegment eliminations
—

 
(1
)
 
(3
)
 
$
(1,134
)
 
$
(838
)
 
$
(239
)

Reconciling items for fiscal 2012 included $225 million and $43 million of unallocated cost of equipment and services revenue and unallocated selling, general and administrative expenses, respectively, related to the step-up of inventories to fair value, the amortization of intangible assets and other charges resulting from acquisitions. 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 2012, 2011 and 2010 were primarily attributable to the Company’s QMT division.
Specified items included in segment EBT were as follows (in millions):
 
QCT
 
QTL
 
QWI
 
QSI
2012
 
 
 
 
 
 
 
Revenues from external customers
$
12,137

 
$
6,327

 
$
633

 
$
—

Intersegment revenues
4

 
—

 
—

 
—

Interest income
2

 
5

 
—

 
19

Interest expense
2

 
—

 
—

 
79

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


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 2012, 2011 and 2010.
The Company distinguishes revenues from external customers by geographic areas based on the location to which its products, software or services are delivered or, for QTL licensing revenues, the invoiced addresses of its licensees. Sales information by geographic area was as follows (in millions):
 
2012
 
2011
 
2010
China
$
7,971

 
$
4,744

 
$
3,194

South Korea
4,203

 
2,887

 
2,913

Taiwan
2,648

 
2,550

 
1,360

United States
967

 
897

 
555

Other foreign
3,332

 
3,879

 
2,960

 
$
19,121

 
$
14,957

 
$
10,982