Annual report pursuant to Section 13 and 15(d)

Segment Information

v2.4.0.8
Segment Information
 12 Months Ended
Sep. 29, 2013
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 two of its divisions into the QSI segment. Reportable segments are as follows:
•
QCT (Qualcomm CDMA Technologies) 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 (Qualcomm Technology Licensing) 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 (including LTE) 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 (Qualcomm Wireless & Internet) segment — comprised of:
•
Omnitracs 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. On August 21, 2013, the Company entered into a definitive agreement to sell the North and Latin American operations of Omnitracs (which comprise substantially all of the Omnitracs division) to a third party, subject to closing conditions (Note 2);
•
QIS (Qualcomm Internet Services) division — provides content enablement services for the wireless industry and push-to-talk and other software products and services for wireless network operators;
•
QGOV (Qualcomm Government Technologies) division — provides development and other services and related products involving wireless communications technologies to government agencies and their contractors; and
•
QRS (Qualcomm Retail Solutions) division — builds and manages software applications that enable certain mobile location-awareness and commerce services.
•
QSI (Qualcomm Strategic Initiatives) segment — comprised of the Company’s Qualcomm Ventures and Structured Finance & Strategic Investments divisions. QSI makes strategic investments that the Company believes may open new or expand 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. Prior to fiscal 2013, QSI’s FLO TV division was presented as discontinued operations. All discontinued operations were attributable to Qualcomm.
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; certain share-based compensation; and certain research and development expenses and 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 and impairment 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
2013
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
16,715

 
$
7,554

 
$
613

 
$
—

 
$
(16
)
 
$
24,866

EBT
3,189

 
6,590

 
(8
)
 
56

 
(1,633
)
 
8,194

Total assets
3,305

 
28

 
53

 
511

 
41,619

 
45,516

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


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 consolidated subsidiaries included in QSI. QSI segment assets related to the discontinued FLO TV business totaled $59 million and $913 million at September 30, 2012 and September 25, 2011, respectively. QSI assets at September 29, 2013, September 30, 2012 and September 25, 2011 included $17 million, $11 million and $20 million, respectively, related to investments in equity method investees. Reconciling items for total assets included $892 million, $1.2 billion and $806 million at September 29, 2013, September 30, 2012 and September 25, 2011, 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 tangible assets located outside of the United States were $896 million, $1.1 billion and $629 million at September 29, 2013, September 30, 2012 and September 25, 2011, respectively. The net book values of long-lived tangible assets located in the United States were $2.1 billion, $1.8 billion and $1.8 billion at September 29, 2013, September 30, 2012 and September 25, 2011, respectively.
Revenues from each of the Company’s divisions aggregated into the QWI reportable segment were as follows (in millions):
 
2013
 
2012
 
2011
Omnitracs
$
372

 
$
371

 
$
395

QIS
138

 
151

 
150

QGOV
102

 
109

 
100

QRS
1

 
2

 
11

 
$
613

 
$
633

 
$
656


Other reconciling items were comprised as follows (in millions):
 
2013
 
2012
 
2011
Revenues
 
 
 
 
 
Nonreportable segments
$
(12
)
 
$
24

 
$
23

Intersegment eliminations
(4
)
 
(4
)
 
(3
)
 
$
(16
)
 
$
20

 
$
20

EBT
 
 
 
 
 
Unallocated cost of equipment and services revenues
$
(335
)
 
$
(300
)
 
$
(210
)
Unallocated research and development expenses
(789
)
 
(702
)
 
(553
)
Unallocated selling, general and administrative expenses
(502
)
 
(549
)
 
(506
)
Unallocated other expense
(173
)
 
—

 
—

Unallocated investment income, net
877

 
928

 
756

Nonreportable segments
(711
)
 
(511
)
 
(324
)
Intersegment eliminations
—

 
—

 
(1
)
 
$
(1,633
)
 
$
(1,134
)
 
$
(838
)

Nonreportable segments’ losses before taxes during fiscal 2013, 2012 and 2011 were primarily attributable to the Company’s QMT division. Effectively all equity in earnings (losses) of investees was recorded in QSI in fiscal 2013, 2012 and 2011. Amounts included in unallocated expenses related to the amortization and impairment of certain intangible assets, contract terminations and the recognition of the step-up of inventories to fair value that resulted from acquisitions were as follows (in millions):
 
2013
 
2012
 
2011
Unallocated cost of equipment and services revenues
$
264

 
$
225

 
$
143

Unallocated research and development expenses
3

 
—

 
6

Unallocated selling, general and administrative expenses
26

 
43

 
59


In fiscal 2013, 2012 and 2011, interest income included in QSI EBT was $8 million, $19 million and $20 million, respectively, and interest expense included in QSI EBT was $18 million, $79 million and $99 million, respectively. Interest income and interest expense recorded by other segments were negligible in all periods presented.
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. QCT revenues for fiscal 2013, 2012 and 2011 included $3 million, $4 million and $3 million of intersegment revenues, respectively. All other revenues for reportable segments were from external customers for all periods presented.
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):
 
2013
 
2012
 
2011
China
$
12,288

 
$
7,971

 
$
4,744

South Korea
4,983

 
4,203

 
2,887

Taiwan
2,683

 
2,648

 
2,550

United States
805

 
967

 
897

Other foreign
4,107

 
3,332

 
3,879

 
$
24,866

 
$
19,121

 
$
14,957