Qualcomm Announces Financial Guidance for the Fourth Fiscal Quarter and Fiscal Year Ending September 28, 2008
Raises Fiscal 2008 Revenue and Earnings Guidance
SAN DIEGO, July 24 /PRNewswire-FirstCall/ -- Qualcomm Incorporated (Nasdaq: QCOM) today announced its financial guidance for the fourth fiscal quarter and fiscal year ending September 28, 2008.
The following statements are forward looking and actual results may differ materially. Please see "Note Regarding Forward-Looking Statements" at the end of this news release for a description of certain risk factors and Qualcomm's annual and quarterly reports on file with the Securities and Exchange Commission (SEC) for a more complete description of risks that may affect the forward-looking statements.
Pro Forma Defined
Pro forma results and guidance exclude the Qualcomm Strategic Initiatives (QSI) segment, certain estimated share-based compensation, certain tax items related to prior years and acquired in-process research and development (R&D) expense.
Business Outlook
Based on the current business outlook, and prior to accounting for the recently announced Nokia settlement agreement, we anticipate fourth fiscal quarter Qualcomm pro forma revenues to be approximately $2.5 to $2.7 billion and Qualcomm pro forma diluted earnings per share (EPS) to be approximately $0.49 to $0.51. Our current estimate is based on the shipment of approximately 84 to 87 million Mobile Station Modem(TM) (MSM(TM)) chips during the quarter, compared to approximately 68 million MSM chips shipped during the year ago quarter. We estimate June quarter shipments of approximately 114 to 118 million CDMA devices (CDMA2000(R) and WCDMA) at an estimated average selling price of approximately $215 per unit. Approximately 89 million CDMA devices were shipped in the year ago quarter.
We anticipate fiscal 2008 Qualcomm pro forma revenues to be approximately $10.3 to $10.5 billion and Qualcomm pro forma diluted EPS to be approximately $2.11 to $2.13. We are at an early stage of working through the mechanics of the Nokia settlement agreement. At this early stage, our preliminary estimate of incremental diluted EPS is approximately $0.07 to $0.13.
"Global demand for 3G continues at a rapid pace as consumers, operators and manufacturers benefit from a wide variety of competitively priced, feature-rich devices," said Dr. Paul E. Jacobs, chief executive officer of Qualcomm. "In calendar year 2008, we continue to see approximately 30 percent year-over-year growth for CDMA-based device shipments. The fundamental drivers of our business remain strong, and we are raising our fiscal 2008 revenue and earnings per share estimates."
Due to their nature, certain income and expense items, such as realized investment gains or losses, gains and losses on certain derivative instruments or asset impairments, cannot be accurately forecast. Accordingly, we exclude forecasts of such items from our business outlook, and actual results may vary materially from the business outlook if we incur any such income or expense items. In addition, our outlook does not include provisions for the consequences of injunctions or significant possible damages or costs related to litigation matters, unless damages have been awarded by a court.
As previously announced, we have entered into a new agreement with Nokia enabling both companies to make and sell products implementing the major wireless cellular standards, including 3G and 4G standards, as well as settling all litigation between the companies. In addition, Nokia is withdrawing its complaint to the European Commission.
We continue to be engaged in litigation with Broadcom Corporation in various forms. As previously disclosed, we have included our estimate of the impact of the ruling by the Federal District Court in Santa Ana, Calif. in our outlook for fiscal 2008.
The following table summarizes total Qualcomm (GAAP) and Qualcomm pro forma guidance for the fourth fiscal quarter and fiscal 2008 based on the current business outlook. The pro forma business outlook provided below is presented consistent with the presentation of pro forma results elsewhere herein.
The following estimates are approximations and are based on the current
business outlook:
Business Outlook Summary
FOURTH FISCAL QUARTER
Current Guidance Estimated
Q4'07 Q4'08 Nokia Q4'08
Results(2) Estimates(3)(5) EPS Impact (5)
Qualcomm Pro Forma
Revenues $2.31B $2.5B - $2.7B
Year-over-year
change increase 8% - 17%
Diluted earnings per
share (EPS) $0.54 $0.49 - $0.51 $0.07 - $0.13
Year-over-year change decrease 6% - 9%
Total Qualcomm (GAAP)
Revenues $2.31B $2.5B - $2.7B
Year-over-year
change increase 8% - 17%
Diluted earnings per
share (EPS) $0.67 $0.39 - $0.41 $0.07 - $0.13
Year-over-year
change decrease 39% - 42%
Diluted EPS attributable
to QSI ($0.02) ($0.04)
Diluted EPS attributable
to estimated share-
based compensation ($0.05) ($0.06)
Diluted EPS attributable
to certain tax items
related to prior years $0.20 n/a
Metrics
MSM shipments approx. 68M approx. 84M - 87M approx. 84M - 87M
CDMA/WCDMA devices
shipped (1) approx. 89M* approx. 114M - 118M* approx. 114M - 118M*
CDMA/WCDMA device
wholesale average
selling
price (1) approx. $218* approx. $215* approx. $215*
* Shipments in June quarter, reported in September quarter
FISCAL YEAR
Prior Guidance Current Guidance Estimated
FY 2007 FY 2008 FY 2008 Nokia FY 2008
Results(2) Estimates(3)(4) Estimates(3)(5) EPS Impact(5)
Qualcomm Pro
Forma
Revenues $8.87B $10.0B - $10.4B $10.3B - $10.5B
Year-over-year
change increase 13% - 17% increase 16% - 18%
Diluted earnings
per share
(EPS) $2.01 $2.04 - $2.09 $2.11 - $2.13 $0.07 - $0.13
Year-over-year
change increase 1% - 4% increase 5% - 6%
Total Qualcomm
(GAAP)
Revenues $8.87B $10.0B - $10.4B $10.3B - $10.5B
Year-over-
year change increase 13% - 17% increase 16% - 18%
Diluted earnings
per
share (EPS) $1.95 $1.71 - $1.76 $1.77 - $1.79 $0.07 - $0.13
Year-over-year
change decrease 10% - 12% decrease 8% - 9%
Diluted EPS
attributable
to QSI ($0.08) ($0.11) ($0.11)
Diluted EPS
attributable to
estimated share-
based
compensation ($0.19) ($0.22) ($0.22)
Diluted EPS
attributable to
in-process
R&D ($0.01) $0.00 ($0.01)
Diluted EPS
attributable
to tax items
related to
prior years $0.22 n/a n/a
Metrics
Fiscal year*
CDMA/WCDMA
device wholesale
average
selling
price(1) approx. $214 approx. $217 approx. $219 approx. $219
* Shipments in Sept. to June quarters, reported in Dec. to Sept. quarters
CALENDAR YEAR Device Estimates (1)
Prior Guidance Current Guidance
CDMA/WCDMA device Calendar 2007 Calendar 2008 Calendar 2008
shipments Estimates Estimates Estimates
March quarter approx. 86M approx. 105M - 109M approx. 107M
June quarter approx. 89M not provided approx. 114M - 118M
September
quarter approx. 95M not provided not provided
December
quarter approx. 112M not provided not provided
Calendar
year
range(approx.) 382M 488M - 518M 488M - 518M
Midpoint Midpoint Midpoint
CDMA/WCDMA units approx. 382M approx. 503M approx. 503M
CDMA units approx. 209M approx. 223M approx. 229M
WCDMA units approx. 173M approx. 280M approx. 274M
(1) CDMA/WCDMA device shipments and average selling prices are for
estimated worldwide device shipments, including shipments not
reported to Qualcomm.
(2) Our Q4'07 and fiscal 2007 results do not include royalty revenues
attributable to Nokia's sales after April 9, 2007.
(3) We have excluded from our fiscal 2008 revenue and earnings guidance
our estimate of royalties related to Nokia's sales.
(4) Prior guidance for fiscal 2008 presented above is as of April 23,
2008. On June 12, 2008, we updated fiscal year 2008 diluted EPS
guidance to approx. $2.09 - $2.13 for Qualcomm pro forma and approx.
$1.75 - $1.79 for total Qualcomm (GAAP).
(5) Our fourth fiscal quarter and fiscal 2008 guidance excludes the
incremental benefit of approximately $0.07 to $0.13 diluted EPS
related to our agreement with Nokia as we are still working through
some of the terms of the agreement before we can make a final
determination regarding the amount and timing of revenue recognition.
Sums may not equal totals due to rounding.
Qualcomm Incorporated (www.qualcomm.com) is a leader in developing and delivering innovative digital wireless communications products and services based on CDMA and other advanced technologies. Headquartered in San Diego, Calif., Qualcomm is included in the S&P 500 Index and is a 2008 FORTUNE 500(R) company traded on The Nasdaq Stock Market(R) under the ticker symbol QCOM.
Note Regarding Use of Non-GAAP Financial Measures
The Company presents pro forma financial information that is used by management (i) to evaluate, assess and benchmark the Company's operating results on a consistent and comparable basis, (ii) to measure the performance and efficiency of the Company's ongoing core operating businesses, including the Qualcomm CDMA Technologies, Qualcomm Technology Licensing and Qualcomm Wireless & Internet segments and (iii) to compare the performance and efficiency of these segments against each other and against competitors outside the Company. Pro forma measurements of the following financial data are used by the Company's management: revenues, R&D expenses, SG&A expenses, total operating expenses, operating income, net investment income, income before income taxes, effective tax rate, net income, diluted earnings per share, operating cash flow and free cash flow. Management is able to assess what it believes is a more meaningful and comparable set of financial performance measures for the Company and its business segments by using pro forma information. As a result, management compensation decisions and the review of executive compensation by the Compensation Committee of the Board of Directors focus primarily on pro forma financial measures applicable to the Company and its business segments.
Pro forma information used by management excludes the QSI segment, certain estimated share-based compensation, certain tax items related to prior years and acquired in-process R&D. The QSI segment is excluded because the Company expects to exit its strategic investments at various times, and the effects of fluctuations in the value of such investments are viewed by management as unrelated to the Company's operational performance. Estimated share-based compensation, other than amounts related to share-based awards granted under a bonus program that may result in the issuance of unrestricted shares of the Company's common stock, is excluded because management views the valuation of options and other share-based compensation as theoretical and unrelated to the Company's operational performance. Further, share-based compensation is affected by factors that are subject to change, including the Company's stock price, stock market volatility, expected option life, risk-free interest rates and expected dividend payouts in future years. Moreover, it is generally not an expense that requires or will require cash payment by the Company. Certain tax items related to prior years are excluded in order to provide a clearer understanding of the Company's ongoing tax rate and after tax earnings. Acquired in-process R&D is excluded because such expense is viewed by management as unrelated to the operating activities of the Company's ongoing core businesses.
The non-GAAP pro forma financial information presented herein should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. In addition, "pro forma" is not a term defined by GAAP, and, as a result, the Company's measure of pro forma results might be different than similarly titled measures used by other companies. Reconciliations between total Qualcomm (GAAP) results and Qualcomm pro forma results are presented herein.
Note Regarding Forward-Looking Statements
In addition to the historical information contained herein, this news release contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks associated with: the rate of deployment of our technologies in wireless networks and of 3G wireless communications, equipment and services, including CDMA2000 1X, 1xEV-DO, WCDMA, HSPA and OFDMA both domestically and internationally; attacks on our business model, including results of current and future litigation and arbitration proceedings, as well as actions of governmental or quasi-governmental bodies, and the costs we incur in connection therewith, including potentially damaged relationships with customers and operators who may be impacted by the results of these proceedings; fluctuations in the demand for products, services or applications based on our technologies; our dependence on major customers and licensees; foreign currency fluctuations; strategic loans, investments and transactions the Company has or may pursue; our dependence on third-party manufacturers and suppliers; our ability to maintain and improve operational efficiencies and profitability; the development, deployment and commercial acceptance of the MediaFLO USA network and FLO(TM) technology; as well as the other risks detailed from time-to-time in the Company's SEC reports.
(C) 2008 Qualcomm Incorporated. All rights reserved. Qualcomm is a registered trademark of Qualcomm Incorporated. MediaFLO, FLO, Mobile Station Modem and MSM are trademarks of Qualcomm Incorporated. CDMA2000 is a registered trademark of the Telecommunications Industry Association. All other trademarks are the property of their respective owners.
Reconciliation of Non-GAAP Financial Measures Related to Prior Periods
(In millions, except per share data)
Fourth Quarter - Fiscal Year 2007
Estimated
Qualcomm Share- Total
Pro Based Tax Items QSI Qualcomm
Segments Forma Compensation(1) (2) (3) (GAAP)
Revenues $2,305 $- $- $1 $2,306
EBT 1,129 (117) - (64) 948
Net income(loss) 911 (77) 331 (34) 1,131
Diluted EPS $0.54 $(0.05) $0.20 $(0.02) $0.67
Diluted shares
used 1,689 1,689 1,689 1,689 1,689
Twelve Months - Fiscal Year 2007
Estimated
Qualcomm Share- Tax In- Total
Pro Based Items Process Qualcomm
Segments Forma Compensation(2) (2) R&D QSI (GAAP)
Revenues $8,870 $- $- $- $1 $8,871
EBT 4,363 (487) - (10) (240) 3,626
Net income
(loss) 3,406 (321) 364 (9) (137) 3,303
Diluted
EPS $2.01 $(0.19) $0.22 $(0.01) $(0.08) $1.95
Diluted
shares
used 1,693 1,693 1,693 1,693 1,693 1,693
(1) Certain share-based compensation is included in operating expenses as
part of employee-related costs but is not allocated to the Company's
segments as such costs are not considered relevant by management in
evaluating segment performance.
(2) During the fourth quarter of fiscal 2007, the Company recorded a $331
million tax benefit, or $0.20 diluted earnings per share, related to
tax expense recorded in prior years resulting from the completion of
tax audits during the fourth fiscal quarter. The fiscal 2007 Qualcomm
pro forma results excluded this tax benefit attributable to prior
years.
(3) At fiscal year-end, the sum of the quarterly tax provisions for each
column, including QSI, equals the annual tax provisions for each
column computed in accordance with GAAP. In interim quarters, the
tax provision for the QSI operating segment is computed by
subtracting the tax provision for Qualcomm pro forma, the tax items
column and the tax provisions related to estimated share-based
compensation and in-process R&D from the tax provision for total
Qualcomm (GAAP).
Sums may not equal totals due to rounding.
Qualcomm Contact:
John Gilbert, Investor Relations
Phone: 1-858-658-4813
Email: ir@qualcomm.com
SOURCE Qualcomm Incorporated
Released July 24, 2008