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Qualcomm Announces Fourth Quarter and Fiscal 2010 Results

Wednesday, November 3, 2010 4:01 PM


- Fiscal 2010 Revenues $11 Billion, EPS $1.96

- Non-GAAP EPS $2.46

- Reports Record MSM Shipments and Record EPS

SAN DIEGO, Nov. 3, 2010 (PR Newswire Europe) --

/PRNewswire/ -- Qualcomm Incorporated , a leading developer and innovator of advanced wireless technologies, products and services, today announced results for the fourth fiscal quarter and year ended September 26, 2010.

"I am very pleased with our performance this year as we delivered record earnings per share and record MSM chipset volumes," said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm. "Our outlook includes strong revenue and earnings growth in fiscal 2011. In the coming year, we expect continued strong growth in CDMA-based device shipments, including smartphones and other data-centric devices, driven by the global adoption of 3G and accelerating consumer demand for wireless data. With our industry-leading chipset roadmap, broad licensing program and increasing number of global partners, we are well positioned to take advantage of these industry trends."

GAAP Results

Qualcomm results are reported in accordance with generally accepted accounting principles (GAAP).

Fourth Quarter Fiscal 2010 - Revenues: $2.95 billion, up 10 percent year-over-year (y-o-y) and 9 percent sequentially. - Operating income: $837 million, up 40 percent y-o-y and 6 percent sequentially. - Net income: $865 million, up 8 percent y-o-y and 13 percent sequentially. - Diluted earnings per share: $0.53, up 10 percent y-o-y and 13 percent sequentially. - Effective tax rate: 17 percent. - Operating cash flow: $1.09 billion, down 17 percent y-o-y; 37 percent of revenues. - Return of capital to stockholders: $427 million, including $305 million, or $0.19 per share, of cash dividends paid, and $122 million to repurchase 3.5 million shares of our common stock. Fiscal 2010 - Revenues: $10.99 billion, up 6 percent y-o-y. - Operating income: $3.28 billion, up 47 percent y-o-y. - Net income: $3.25 billion, up 104 percent y-o-y. - Diluted earnings per share: $1.96, up 106 percent y-o-y. - Effective tax rate: 20 percent. - Operating cash flow: $4.08 billion, down 43 percent y-o-y; 37 percent of revenues. - Return of capital to stockholders: $4.19 billion, including $1.18 billion, or $0.72 per share, of cash dividends paid, and $3.02 billion to repurchase 79.8 million shares of our common stock.

Non-GAAP Results

Non-GAAP results exclude the Qualcomm Strategic Initiatives (QSI) segment, certain share-based compensation, certain tax items that are not related to the current year and acquired in-process research and development (R&D) expense.

Fourth Quarter Fiscal 2010 - Revenues: $2.95 billion, up 10 percent y-o-y and 9 percent sequentially. - Operating income: $1.13 billion, up 36 percent y-o-y and 14 percent sequentially. - Net income: $1.11 billion, up 36 percent y-o-y and 18 percent sequentially. - Diluted earnings per share: $0.68, up 42 percent y-o-y and 19 percent sequentially. The current quarter excludes $0.05 loss per share attributable to the QSI segment, $0.07 loss per share attributable to certain share-based compensation and $0.02 loss per share attributable to certain tax items (the sum of Non-GAAP earnings per share and items excluded do not equal GAAP earnings per share due to rounding). - Effective tax rate: 19 percent. - Free cash flow: $1.11 billion, down 14 percent y-o-y; 38 percent of revenues (defined as net cash from operating activities less capital expenditures). Fiscal 2010 - Revenues: $10.98 billion, up 6 percent y-o-y. - Operating income: $4.32 billion, up 37 percent y-o-y. - Net income: $4.07 billion, up 86 percent y-o-y. - Diluted earnings per share: $2.46, up 88 percent y-o-y. The current fiscal year excludes $0.13 loss per share attributable to the QSI segment, $0.27 loss per share attributable to certain share-based compensation and $0.10 loss per share attributable to certain tax items. - Effective tax rate: 20 percent. - Free cash flow: $4.16 billion, down 40 percent y-o-y; 38 percent of revenues.

Detailed reconciliations between results reported in accordance with GAAP and Non-GAAP results are included at the end of this news release.

In the year-over-year comparisons summarized above, the following should be noted: fiscal 2009 results (GAAP and Non-GAAP) included a $783 million charge related to a litigation settlement and patent agreement with Broadcom Corporation, including $35 million recorded in the fourth quarter of 2009; both the fourth quarter and fiscal 2009 results (GAAP and Non-GAAP) also included a $230 million charge related to the Korea Fair Trade Commission fine; GAAP results in fiscal 2009 included a $155 million tax benefit related to prior years as a result of tax audits; net income was favorably impacted in fiscal 2010 (GAAP and Non-GAAP) due to a significant increase in net investment income; and fiscal 2009 operating and free cash flow included the receipt of a $2.5 billion payment related to the license and settlement agreements with Nokia.

Key Business Metrics Fourth Quarter Fiscal 2010 - CDMA-based Mobile Station Modem(TM) (MSM(TM)) shipments: approximately 111 million units, up 22 percent y-o-y and 8 percent sequentially. - Total reported device sales*: approximately $28.3 billion, up 14 percent y-o-y and 12 percent sequentially. - Estimated CDMA-based device shipments*: approximately 153 to 157 million units at an estimated average selling price of approximately $179 to $185 per unit. Fiscal 2010 - CDMA-based MSM shipments: approximately 399 million units, up 26 percent y-o-y. - Total reported device sales*: approximately $105.7 billion, up 7 percent y-o-y. - Estimated CDMA-based device shipments*: approximately 561 to 577 million units at an estimated average selling price of approximately $183 to $189 per unit.

*Royalties are recognized when reported, generally one quarter following shipment.

Cash and Marketable Securities

Our cash, cash equivalents and marketable securities totaled approximately $18.4 billion at the end of the fourth quarter of fiscal 2010, compared to $17.6 billion at the end of the third quarter of fiscal 2010 and $17.7 billion a year ago. On October 13, 2010, we announced a cash dividend of $0.19 per share payable on December 22, 2010 to stockholders of record as of November 24, 2010.

Research and Development Share-Based ($ in millions) Non-GAAP Compensation QSI GAAP -------- ------------ --- ---- Fourth quarter fiscal 2010 $547 $79 $30 $656 As a % of revenues 19% N/M 22% Fourth quarter fiscal 2009 $518 $71 $25 $614 As a % of revenues 19% N/M 23% Year-over-year change ($) 6% 11% 20% 7% N/M -Not Meaningful

Non-GAAP R&D expenses increased 6 percent y-o-y primarily due to an increase in costs related to the development of integrated circuit products, next-generation CDMA and OFDMA technologies and other initiatives to support the acceleration of advanced wireless products and services. QSI R&D expenses were primarily related to our FLO TV(TM) subsidiary.

Selling, General and Administrative Share-Based ($ in millions) Non-GAAP Compensation QSI GAAP -------- ------------ --- ---- Fourth quarter fiscal 2010 $364 $70 $37 $471 As a % of revenues 12% N/M 16% Fourth quarter fiscal 2009 $300 $66 $24 $390 As a % of revenues 11% N/M 14% Year-over-year change ($) 21% 6% 54% 21%

Non-GAAP selling, general and administrative (SG&A) expenses increased 21 percent y-o-y primarily due to an increase in legal and patent-related costs. QSI SG&A expenses were primarily related to FLO TV.

Effective Income Tax Rate

Our fiscal 2010 effective income tax rates were 20 percent for both GAAP and Non-GAAP. The fiscal 2010 GAAP effective tax rate included tax expense of $137 million because deferred revenue related to the 2008 license and settlement agreements with Nokia was taxable in fiscal 2010, but the resulting deferred tax asset will reverse in future years when our state tax rate, based on the legislation in effect during fiscal 2010, will be lower. The fiscal 2010 GAAP effective tax rate also included $20 million of tax expense as a result of prior year tax audits completed during the fiscal year. The tax expense related to these items was excluded from our Non-GAAP results to provide a clearer understanding of our ongoing tax rate and after tax earnings.

Qualcomm Strategic Initiatives

The QSI segment manages our strategic investment activities, including FLO TV, and makes strategic investments in early-stage companies and in wireless spectrum, such as the Broadband Wireless Access (BWA) spectrum recently won in the auction in India. GAAP results for the fourth quarter fiscal 2010 included a $0.05 loss per share for the QSI segment. The fourth quarter fiscal 2010 QSI results included $132 million in operating expenses primarily related to FLO TV. In June 2010, in connection with the India BWA spectrum purchase, we entered into a bank loan agreement that is payable in full in Indian rupees in December 2010. At the end of the fourth quarter fiscal 2010, the carrying value of the loan was $1.09 billion.

Business Outlook

The following statements are forward looking and actual results may differ materially. The "Note Regarding Forward-Looking Statements" at the end of this news release provides a description of certain risks that we face, and our annual and quarterly reports on file with the Securities and Exchange Commission (SEC) provide a more complete description of risks.

Our outlook does not include provisions for future asset impairments or the consequences of injunctions, damages or fines related to any pending legal matters unless awarded or imposed by a court, governmental entity or other regulatory body. Further, due to their nature, certain income and expense items, such as realized investment gains or losses, or gains and losses on certain derivative instruments, cannot be accurately forecast. Accordingly, we only include such items in our business outlook to the extent they are reasonably certain; however, actual results may vary materially from the business outlook.

We have commenced a restructuring plan under which we expect to exit the current FLO TV service business. In addition to our ongoing operating costs, we expect to incur restructuring charges related to this plan in the range of $125 million to $175 million in fiscal 2011, which are primarily related to certain contractual obligations and are included in our fiscal 2011 outlook included herein. Additionally, we continue to evaluate strategic options for the FLO TV business, which include, but are not limited to, operating the FLO TV network under a new wholesale service; sale to, or joint venture with, a third party; and/or the sale of the spectrum licenses and the discontinuance of the operation of the network. Additional charges, including impairment of assets, may be incurred as we continue to evaluate or implement these strategic options or if we are unable to generate adequate future cash flows associated with this business.

The following table summarizes GAAP and Non-GAAP guidance based on the current business outlook. The Non-GAAP business outlook presented below is consistent with the presentation of Non-GAAP results elsewhere herein.

The following estimates are approximations and are based on the current business outlook:

Qualcomm's Business Outlook Summary ------------------------------------------------------------------------- FIRST FISCAL QUARTER ------------------------------------------------------------------------- Q1 FY10 Current Guidance Results Q1 FY11 Estimates ------------------------------------------------------------------------- Non-GAAP Revenues $2.67B $3.05B - $3.35B Year-over-year change increase 14% - 26% Diluted earnings per share (EPS) $0.62 $0.70 - $0.74 Year-over-year change increase 13% - 19% ------------------------------------------------------------------------- GAAP Revenues $2.67B $3.05B - $3.35B Year-over-year change increase 14% - 25% Diluted EPS $0.50 $0.58 - $0.62 Year-over-year change increase 16% - 24% Diluted EPS attributable to QSI ($0.03) ($0.05) Diluted EPS attributable to share-based compensation ($0.07) ($0.07) Diluted EPS attributable to certain tax items ($0.02) $0.00 ------------------------------------------------------------------------- Metrics MSM shipments approx. 92M approx. 115M - 119M Year-over-year change increase 25% - 29% Total reported device sales (1) $24.5B* $31.5B - $33.5B* Year-over-year change increase 29% - 37% Est. CDMA-based devices shipped (1) approx. 126M - 130M* not provided Est. CDMA-based device average selling price (1) approx. $189-$195* not provided *Est. sales in September quarter, reported in December quarter ------------------------------------------------------------------------- FISCAL YEAR ------------------------------------------------------------------------- FY 2010 Current Guidance Results FY 2011 Estimates ------------------------------------------------------------------------- Non-GAAP Revenues $10.98B $12.4B - $13.0B Year-over-year change increase 13% - 18% Operating Income $4.32B $4.8B - $5.3B Year-over-year change increase 11% - 23% Diluted EPS $2.46 $2.63 - $2.77 Year-over-year change increase 7% - 13% ------------------------------------------------------------------------- GAAP Revenues $10.99B $12.4B - $13.0B Year-over-year change increase 13% - 18% Operating Income $3.28B $3.6B - $4.1B Year-over-year change increase 10% - 25% Diluted EPS $1.96 $2.08 - $2.22 Year-over-year change increase 6% - 13% Diluted EPS attributable to QSI ($0.13) ($0.22) Diluted EPS attributable to share-based compensation ($0.27) ($0.32) Diluted EPS attributable to certain tax items ($0.10) ($0.01) ------------------------------------------------------------------------- CALENDAR YEAR Device Estimates (1) ------------------------------------------------------------------------- Prior Guidance Current Guidance Current Guidance Calendar 2010 Calendar 2010 Calendar 2011 Estimates Estimates Estimates ------------------------------------------------------------------------- Est. CDMA-based device shipments March quarter approx. 134M-138M approx. 134M-138M not provided June quarter not provided approx. 153M-157M not provided September quarter not provided not provided not provided December quarter not provided not provided not provided ------------------------------------------------------------------------- Est. Calendar Year range (approx.) 600M - 650M 625M - 650M 740M - 790M ------------------------------------------------------------------------- Midpoint Midpoint Midpoint Est. total CDMA-based units approx. 625M approx. 638M approx. 765M Est. CDMA units approx. 236M approx. 241M approx. 250M Est. WCDMA units approx. 389M approx. 397M approx. 515M ------------------------------------------------------------------------- (1) Total reported device sales is the sum of all reported sales in U.S. dollars (as reported to us by our licensees) of all licensed CDMA-based subscriber devices (including handsets, modules, modem cards and other subscriber devices) by our licensees during a particular period. The reported quarterly estimated ranges of ASPs and unit shipments are determined based on the information as reported to us by our licensees during the relevant period and our own estimates of the selling prices and unit shipments for licensees that do not provide such information. Not all licensees report sales, selling prices and/or unit shipments the same way (e.g., some licensees report selling prices net of permitted deductions, such as transportation, insurance and packing costs, while other licensees report selling prices and then identify the amount of permitted deductions in their reports), and the way in which licensees report such information may change from time to time. Total reported device sales, estimated unit shipments and estimated ASPs for a particular period may include prior period activity that is reported with the activity for the particular period.


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