Qualcomm Announces Second Quarter Fiscal 2011 Results

(1)

Net income and diluted earnings per share throughout this news release are attributable to Qualcomm (i.e., after adjustment for noncontrolling interests), unless otherwise stated.

Research and Development

($ in millions)

Non-GAAP

Share-Based

Compensation

In-Process

R&D

QSI

GAAP

Second quarter fiscal 2011

$       633

$    98

$         6

$    3

$  740

As a % of revenues

16%

N/M

19%

Second quarter fiscal 2010

$       547

$    75

$         3

$  23

$  648

As a % of revenues

21%

N/M

24%

Year-over-year change ($)

16%

31%

N/M

(87%)

14%

N/M - Not Meaningful

Selling, General and Administrative

($ in millions)

Non-GAAP

Share-Based

Compensation

QSI

GAAP

Second quarter fiscal 2011

$         432

$    87

$    66

$    585

As a % of revenues

11%

N/M

15%

Second quarter fiscal 2010

$         305

$    69

$    56

$    430

As a % of revenues

11%

N/M

16%

Year-over-year change ($)

42%

26%

18%

36%

Qualcomm's Business Outlook Summary

THIRD FISCAL QUARTER

Q3 FY10

Current Guidance

Results

Q3 FY11 Estimates

Non-GAAP

Revenues

$2.70B

$3.35B - $3.65B

 Year-over-year change

increase 24% - 35%

Diluted earnings per share (EPS)

$0.57

$0.68 - $0.72

 Year-over-year change

increase 19% - 26%

GAAP

Revenues

$2.71B

$3.35B - $3.65B

 Year-over-year change

increase 24% - 35%

Diluted EPS

$0.47

$0.60 - $0.64

 Year-over-year change

increase 28% - 36%

Diluted EPS attributable to QSI

$0.00

$0.00

Diluted EPS attributable to share-based compensation

($0.07)

($0.08)

Diluted EPS attributable to certain tax items

($0.03)

$0.00

Metrics

MSM shipments

approx. 103M

approx. 115M - 119M

 Year-over-year change

increase 12% - 16%

Total reported device sales (1)

$25.2B*

$35.5B - $38.5B*

 Year-over-year change

increase 41% - 53%

Est. CDMA-based devices shipped (1)

approx. 134M - 138M*

not provided

Est. CDMA-based device average selling price (1)

approx. $183 - $189*

not provided

*Est. sales in March quarter, reported in June quarter

FISCAL YEAR

FY 2010

Prior Guidance

Current Guidance

Results

FY 2011 Estimates

FY 2011 Estimates

Non-GAAP

Revenues

$10.98B

$13.6B - $14.2B

$14.1B - $14.7B

 Year-over-year change

increase 24% - 29%

increase 28% - 34%

Diluted EPS

$2.46

$2.91 - $3.05

$3.05 - $3.13

 Year-over-year change

increase 18% - 24%

increase 24% - 27%

GAAP

Revenues

$10.99B

$13.6B - $14.2B

$14.1B - $14.7B

 Year-over-year change

increase 24% - 29%

increase 28% - 34%

Diluted EPS

$1.96

$2.32 - $2.46

$2.51 - $2.59

 Year-over-year change

increase 18% - 26%

increase 28% - 32%

Diluted EPS attributable to QSI

($0.13)

($0.27)

($0.22)

Diluted EPS attributable to share-based compensation

($0.27)

($0.33)

($0.33)

Diluted EPS attributable to certain tax items

($0.10)

$0.01

$0.01

Diluted EPS attributable to in-process R&D

$0.00

$0.00

$0.00

Metrics

Est. fiscal year* CDMA-based device average selling price range (1)

approx. $183 - $189

approx. $190 - $200

approx. $199 - $209

*Shipments in Sept. to June quarters, reported in Dec. to Sept. quarters

CALENDAR YEAR Device Estimates (1)

Prior Guidance
Calendar 2010
Estimates

Current Guidance
Calendar 2010
Estimates

Prior Guidance
Calendar 2011
Estimates

Current Guidance
Calendar 2011
Estimates

Est. CDMA-based device shipments

March quarter

approx. 134M - 138M

approx. 134M - 138M

not provided

not provided

June quarter

approx. 153M - 157M

approx. 153M - 157M

not provided

not provided

September quarter

approx. 165M - 169M

approx. 165M - 169M

not provided

not provided

December quarter

not provided

approx. 195M - 200M

not provided

not provided

Est. Calendar year range (2) (approx.)

640M - 660M

646M - 663M

750M - 800M

750M - 800M

Midpoint

Midpoint

Midpoint

Midpoint

Est. total CDMA-based units

approx. 650M

approx. 655M

approx. 775M

approx. 775M

Est. CDMA units

approx. 238M

approx. 238M

approx. 250M

approx. 250M

Est. WCDMA units

approx. 412M

approx. 417M

approx. 525M

approx. 525M

(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.  

(2)

Sums may not equal totals due to rounding.

SEGMENTS

QCT

QTL

QWI

Non-GAAP

Reconciling

Items (1)

Non-GAAP

Share-Based

Compensation

Tax Items

(2)

In-Process R&D

QSI (3)

GAAP

Q2 - FISCAL 2011

Revenues

$1,962

$1,746

$157

$ 5

$3,870

$  -

$  -

$  -

$ 5

$3,875

 Change from prior year

28%

79%

3%

N/M

45%

150%

46%

 Change from prior quarter

(7%)

65%

(9%)

N/M

16%

N/M

16%

Operating income (loss)

$1,652

($202)

$  -

($6)

($371)

$1,073

 Change from prior year

55%

(31%)

N/M

(181%)

38%

 Change from prior quarter

17%

(17%)

N/A

(177%)

(3%)

EBT

$417

$1,575

$(135)

$13

$1,870

($202)

$  -

($6)

($404)

$1,258

 Change from prior year

21%

92%

N/M

N/M

49%

(31%)

N/M

(197%)

30%

 Change from prior quarter

(35%)

77%

N/M

N/M

13%

(17%)

N/A

(154%)

(5%)

EBT as a % of revenues

21%

90%

N/M

N/M

48%

N/M

N/M

N/M

32%

Net income (loss)

$1,450

($146)

($3)

($6)

($296)

$999

 Change from prior year

47%

(49%)

N/M

N/M

(265%)

29%

 Change from prior quarter

8%

(26%)

N/M

N/A

(240%)

(15%)

Diluted EPS

$0.86

($0.09)

$  -

$  -

($0.18)

$0.59

 Change from prior year

46%

(50%)

N/M

N/M

(260%)

28%

 Change from prior quarter 

5%

(29%)

N/M

N/A

(260%)

(17%)

Diluted shares used

1,689

1,689

1,689

1,689

1,689

1,689

Q1 - FISCAL 2011

Revenues

$2,116

$1,057

$172

$ 3

$3,348

$  -

$  -

$  -

$  -

$3,348

Operating income (loss)

1,416

(172)

-

-

(134)

1,110

EBT

640

892

-

128

1,660

(172)

-

-

(159)

1,329

Net income (loss)

1,345

(116)

28

-

(87)

1,170

Diluted EPS

$0.82

($0.07)

$0.02

$  -

($0.05)

$0.71

Diluted shares used

1,648

1,648

1,648

1,648

1,648

1,648

Q2 - FISCAL 2010

Revenues

$1,537

$974

$152

($2)

$2,661

$  -

$  -

$  -

$2

$2,663

Operating income (loss)

1,065

(154)

-

(3)

(132)

776

EBT

344

821

(1)

94

1,258

(154)

-

(3)

(136)

965

Net income (loss)

989

(98)

(33)

(3)

(81)

774

Diluted EPS

$0.59

($0.06)

($0.02)

$  -

($0.05)

$0.46

Diluted shares used

1,678

1,678

1,678

1,678

1,678

1,678

Q3 - FISCAL 2010

Revenues

$1,691

$847

$162

$  -

$2,700

$  -

$  -

$  -

$6

$2,706

Operating income (loss)

991

(149)

-

-

(50)

792

EBT

404

673

6

78

1,161

(149)

-

-

(41)

971

Net income (loss)

936

(111)

(54)

-

(4)

767

Diluted EPS

$0.57

($0.07)

($0.03)

$  -

$  -

$0.47

Diluted shares used

1,642

1,642

1,642

1,642

1,642

1,642

6 MONTHS - FISCAL 2011

Revenues

$4,078

$2,803

$329

$ 7

$7,217

$  -

$  -

$  -

$5

$7,222

 Change from prior year

30%

48%

12%

N/M

35%

25%

35%

Operating income (loss)

$3,067

($373)

-

($6)

($506)

$2,182

 Change from prior year

40%

(23%)

N/M

N/M

(114%)

32%

EBT

$1,057

$2,467

($135)

$139

$3,528

($373)

-

($6)

($563)

$2,586

 Change from prior year

37%

55%

N/M

N/M

37%

(23%)

N/M

N/M

(132%)

28%

Net income (loss)

$2,794

($262)

$25

($6)

($383)

$2,168

 Change from prior year

38%

(24%)

N/M

N/M

(182%)

34%

Diluted EPS

$1.67

($0.16)

$0.01

$  -

($0.23)

$1.30

 Change from prior year

38%

(23%)

N/M

N/M

(188%)

35%

Diluted shares used

1,669

1,669

1,669

1,669

1,669

1,669

6 MONTHS - FISCAL 2010

Revenues

$3,144

$1,891

$294

$  -

$5,329

$  -

$  -

$  -

$4

$5,333

Operating income (loss)

2,198

(304)

-

(3)

(236)

1,655

EBT

769

1,594

8

195

2,566

(304)

-

(3)

(243)

2,016

Net income (loss)

2,030

(211)

(65)

(3)

(136)

1,615

Diluted EPS

$1.21

($0.13)

($0.04)

$  -

($0.08)

$0.96

Diluted shares used

1,685

1,685

1,685

1,685

1,685

1,685

12 MONTHS - FISCAL 2010

Revenues

$6,695

$3,659

$628

$  -

$10,982

$  -

$  -

$  -

$9

$10,991

Operating income (loss)

4,316

(614)

-

(3)

(416)

3,283

EBT

1,693

3,020

12

361

5,086

(614)

-

(3)

(435)

4,034

Net income (loss)

4,071

(442)

(159)

(3)

(220)

3,247

Diluted EPS

$2.46

($0.27)

($0.10)

$  -

($0.13)

$1.96

Diluted shares used

1,658

1,658

1,658

1,658

1,658

1,658

   (1)

Non-GAAP reconciling items related to revenues consist primarily of other nonreportable segment revenues less intersegment eliminations.  Non-GAAP reconciling items related to earnings before taxes consist primarily of certain investment income or losses, interest expense, research and development expenses, sales and marketing expenses and other operating expenses that are not allocated to the segments for management reporting purposes, nonreportable segment results and the elimination of intersegment profit.

   (2)

During the first quarter of fiscal 2011, we recorded a tax benefit of $32 million, or $0.02 diluted earnings per share, related to fiscal 2010 due to the retroactive reenactment of the federal R&D tax credit. Also, during each of the first and second quarters of fiscal 2011, we recorded $3 million in state tax expense because deferred revenue related to the license agreement signed in the first quarter of fiscal 2010 with Samsung is taxable in fiscal 2011 but the resulting deferred tax asset will reverse in future years when our state tax rate will be lower. Our first and second quarter fiscal 2011 Non-GAAP results exclude these items.

   (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 Non-GAAP tax provision, the tax items column and the tax provision related to share-based compensation from the GAAP tax provision.

N/M – Not Meaningful

N/A – Not Applicable

Sums may not equal totals due to rounding.

Qualcomm Incorporated

Supplemental Information for the Three Months Ended March 27, 2011

(Unaudited)

Non-GAAP

Share-Based

Tax

In-process

GAAP

Results

Compensation

Items

R&D

QSI

Results

($ in millions except per share data)

R&D

$             633

$                    98

$                    -

$              6

$           3

$        740

SG&A

432

87

-

-

66

585

Operating income (loss)

1,652(a)

(202)

-

(6)

(371)

1,073

Investment income (loss), net

217(b)

-

-

-

(32)(c)

185

Tax rate

22%

N/M

N/M

N/M

N/M

21%

Net income (loss)

$          1,450

$                (146)

$                 (3)(d)

$            (6)

$      (296)

$        999

Diluted earnings (loss) per share (EPS)

$            0.86

$               (0.09)

$                    -

$               -

$     (0.18)

$       0.59

Operating cash flow

$          1,926

$                  (87)

$                    -

$               -

$        (71)

$     1,768

Operating cash flow as % of revenues

50%

N/A

N/A

N/M

46%

Free cash flow (e)

$          1,851

$                  (87)

$                    -

$               -

$        (75)

$     1,689

Free cash flow as a % of revenues

48%

N/A

N/A

N/M

44%

(a)

During the second quarter of fiscal 2011, we recorded impairment charges of $120 million related to our Firethorn division, including $114 million in goodwill impairment.

(b)

Included $122 million in interest and dividend income related to cash, cash equivalents and marketable securities, which were not part of the Company's strategic investments, and $102 million in net realized gains on investments, partially offset by $4 million in other-than-temporary losses on investments and $3 million in interest expense.

(c)

Included $31 million in interest expense, $4 million in equity in losses of investees and $1 million in other-than-temporary losses on investments, partially offset by $4 million in interest and dividend income related to cash, cash equivalents and marketable securities.

(d)

During the second quarter of fiscal 2011, we recorded $3 million in state tax expense because deferred revenue related to the license agreement signed in the first quarter of fiscal 2010 with Samsung is taxable in fiscal 2011 but the resulting deferred tax asset will reverse in future years when our state tax rate will be lower. Our second quarter fiscal 2011 Non-GAAP results exclude this item.

(e)

Free cash flow is calculated as net cash provided by operating activities less capital expenditures.  Reconciliation of these amounts is included in the "Reconciliation of Non-GAAP Free Cash Flows to Net Cash Provided by Operating Activities (GAAP) and Other Supplemental Disclosures" for the three months ended March 27, 2011, included herein.

N/M – Not Meaningful

N/A – Not Applicable

Sums may not equal totals due to rounding.

Qualcomm Incorporated

Supplemental Information for the Six Months Ended March 27, 2011

(Unaudited)

Non-GAAP

Share-Based

Tax

In-process

GAAP

Results

Compensation

Items

R&D

QSI

Results

($ in millions except per share data)

R&D

$          1,193

$                  184

$                -

$               6

$             28

$        1,411

SG&A

774

159

-

-

89

1,022

Operating income (loss)

3,067(a)

(373)

-

(6)

(506)

2,182

Investment income (loss), net

462(b)

-

-

-

(58)(c)

404

Tax rate

21%

N/M

N/M

N/M

N/M

16%

Net income (loss)

$          2,794

$                (262)

$            25(d)

$              (6)

$          (383)

$        2,168

Diluted earnings (loss) per share (EPS)

$            1.67

$               (0.16)

$          0.01

$                -

$         (0.23)

$          1.30

Operating cash flow

$          2,153

$                (132)

$                -

$                -

$          (205)

$        1,816

Operating cash flow as % of revenues

30%

N/A

N/A

N/M

25%

Free cash flow (e)

$          1,978

$                (132)

$                -

$                -

$          (211)

$        1,635

Free cash flow as a % of revenues

27%

N/A

N/A

N/M

23%

(a)

During the first six months of fiscal 2011, we recorded impairment charges of $120 million related to our Firethorn division, including $114 million in goodwill impairment.

(b)

Included $251 million in interest and dividend income related to cash, cash equivalents and marketable securities, which were not part of our strategic investments, and $230 million in net realized gains on investments, partially offset by $11 million in other-than-temporary losses on investments and $8 million in interest expense.

(c)

Included $54 million in interest expense, $5 million in other-than-temporary losses on investments and $5 million in equity in losses of investees, partially offset by $5 million in interest and dividend income related to cash, cash equivalents and marketable securities and $1 million in net realized gains on investments.

(d)

During the first six months of fiscal 2011, we recorded a tax benefit of $32 million, or $0.02 diluted earnings per share, related to fiscal 2010 due to the retroactive reenactment of the federal R&D tax credit. Also, during the first six months of fiscal 2011, we recorded $6 million in state tax expense because deferred revenue related to the license agreement signed in the first quarter of fiscal 2010 with Samsung is taxable in fiscal 2011 but the resulting deferred tax asset will reverse in future years when our state tax rate will be lower. Our Non-GAAP results for the first six months of fiscal 2011 excluded these items.

(e)

Free cash flow is calculated as net cash provided by operating activities less capital expenditures.  Reconciliation of these amounts is included in the "Reconciliation of Non-GAAP Free Cash Flows to Net Cash Provided by Operating Activities (GAAP) and Other Supplemental Disclosures" for the six months ended March 27, 2011, included herein.

N/M – Not Meaningful

N/A – Not Applicable

Sums may not equal totals due to rounding.

Qualcomm Incorporated

Reconciliation of Non-GAAP Free Cash Flows to

Net Cash Provided by Operating Activities (GAAP)

and Other Supplemental Disclosures

(In millions)

(Unaudited)

Three Months Ended March 27, 2011

Share-Based

Non-GAAP

Compensation

QSI

GAAP

Net cash provided (used) by operating activities

$       1,926

$               (87)

(a)

$       (71)

$       1,768

Less:  capital expenditures

(75)

-

(4)

(79)

Free cash flow

$       1,851

$               (87)

$       (75)

$       1,689

Revenues

$       3,870

$                 -

$           5

$       3,875

Free cash flow as a % of revenues

48%

N/A

N/M

44%

Other supplemental cash disclosures:

  Cash transfers from QSI (1)

$            63

$                 -

$       (63)

$            -

  Cash transfers to QSI (2)

(87)

-

87

-

  Net cash transfers

$           (24)

$                 -

$         24

$            -

Six Months Ended March 27, 2011

Share-Based

Non-GAAP

Compensation

QSI

GAAP

Net cash provided (used) by operating activities

$       2,153

$             (132)

(a)

$     (205)

$       1,816

Less:  capital expenditures

(175)

-

(6)

(181)

Free cash flow

$       1,978

$             (132)

$     (211)

$       1,635

Revenues

$       7,217

$                 -

$           5

$       7,222

Free cash flow as a % of revenues

27%

N/A

N/M

23%

Other supplemental cash disclosures:

  Cash transfers from QSI (1)

$            71

$                 -

$       (71)

$            -

  Cash transfers to QSI (2)

(241)

-

241

-

  Net cash transfers

$         (170)

$                 -

$       170

$            -

Three Months Ended March 28, 2010

Share-Based

Non-GAAP

Compensation

QSI

GAAP

Net cash provided (used) by operating activities

$          908

$               (18)

(a)

$       (97)

$          793

Less:  capital expenditures

(85)

-

(23)

(108)

Free cash flow

$          823

$               (18)

$     (120)

$          685

Six Months Ended March 28, 2010

Share-Based

Non-GAAP

Compensation

QSI

GAAP

Net cash provided (used) by operating activities

$       2,246

$               (31)

(a)

$     (183)

$       2,032

Less:  capital expenditures

(152)

-

(44)

(196)

Free cash flow

$       2,094

$               (31)

$     (227)

$       1,836

(a) Incremental tax benefits from stock options exercised during the period.

(1) Cash primarily from the issuance of subsidiary shares to noncontrolling interests.

(2) Primarily funding for strategic debt and equity investments and QSI operating expenses.

N/M - Not Meaningful

N/A - Not Applicable

Qualcomm Incorporated

Reconciliation of Non-GAAP Tax Rate to GAAP Tax Rate

(in millions)

(Unaudited)

Three Months Ended March 27, 2011

Non-GAAP

Share-Based

In-Process

GAAP

Results

Compensation

Tax Items (a)

R&D

QSI (b)

Results

Income (loss) before income taxes

$       1,870

$              (202)

$                -

$             (6)

$  (404)

$   1,258

Income tax (expense) benefit

(420)

56

(3)

-

104

(263)

Net income (loss)

1,450

(146)

(3)

(6)

(300)

995

   Net loss attributable to noncontrolling interests

-

-

-

-

4

4

Net income attributable to Qualcomm

$       1,450

$              (146)

$              (3)

$             (6)

$  (296)

$      999

Tax rate

22%

28%

N/A

N/M

N/M

21%

Six Months Ended March 27, 2011

Non-GAAP

Share-Based

In-Process

GAAP

Results

Compensation

Tax Items (a)

R&D

QSI (b)

Results

Income (loss) before income taxes

$       3,528