Qualcomm Announces Third Quarter Fiscal 2011 Results

($ in millions)

Non-GAAP

Share-Based
Compensation

QSI

GAAP

Third quarter fiscal 2011

$         661

$             95

$        1

$     757

As a % of revenues

18%

21%

Third quarter fiscal 2010*

$         546

$             72

$        5

$     623

As a % of revenues

20%

23%

Year-over-year change ($)

21%

32%

N/M

22%

*As adjusted for discontinued operations

N/M - Not Meaningful

($ in millions)

Non-GAAP

Share-Based
Compensation

Acquisition-
Related
Items

QSI

GAAP

Third quarter fiscal 2011

$         365

$             84

$        18

$        8

$     475

As a % of revenues

10%

13%

Third quarter fiscal 2010*

$         321

$             63

$          -

$     (52)

$     332

As a % of revenues

12%

12%

Year-over-year change ($)

14%

33%

N/M

N/M

43%

*As adjusted for discontinued operations

Qualcomm's Business Outlook Summary

FOURTH FISCAL QUARTER

Q4 FY10
Results

Current Guidance
Q4 FY11 Estimates

Revenues 

$2.95B

$3.86B - $4.16B

 Year-over-year change 

increase 31% - 41%

Non-GAAP Diluted earnings per share (EPS) 

$0.68

$0.75 - $0.80

 Year-over-year change  

increase 10% - 18%

        Diluted EPS attributable to QSI 

($0.05)

$0.00

        Diluted EPS attributable to share-based compensation 

($0.07)

($0.10)

        Diluted EPS attributable to acquisition-related items 

$0.00

($0.07)

        Diluted EPS attributable to certain tax items (1)

($0.02)

$0.02

GAAP Diluted EPS 

$0.53

$0.60 - $0.65

 Year-over-year change 

increase 13% - 23%

Metrics 

MSM shipments 

approx. 111M

approx. 120M - 125M

 Year-over-year change 

increase 8% - 13%

Total reported device sales (2) 

$28.3B*

$38.0B - $41.0B*

 Year-over-year change

increase 34% - 45%

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

FISCAL YEAR  

FY 2010
Results (3)

Prior Guidance
FY 2011 Estimates

Current Guidance
FY 2011 Estimates

Revenues 

$10.98B

$14.1B - $14.7B

$14.7B - $15.0B

 Year-over-year change

increase 28% - 34%

increase 34% - 37%

Non-GAAP Diluted EPS

$2.46

$3.05 - $3.13

$3.15 - $3.20

 Year-over-year change

increase 24% - 27%

increase 28% - 30%

       Diluted EPS attributable to QSI

($0.13)

($0.22)

($0.22)

       Diluted EPS attributable to share-based compensation

($0.27)

($0.33)

($0.35)

       Diluted EPS attributable to acquisition-related items

$0.00

$0.00

($0.12)

       Diluted EPS attributable to certain tax items (1)

($0.10)

$0.01

$0.04

GAAP Diluted EPS

$1.96

$2.51 - $2.59

$2.50 - $2.55

 Year-over-year change

increase 28% - 32%

increase 28% - 30%

Metrics

Est. fiscal year* CDMA-based device average selling price range (2)

approx $183 - $189

approx $199 - $209

approx $204 - $210

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

CALENDAR YEAR Device Estimates (2) 

Calendar 2010
Estimates

Prior Guidance
Calendar 2011
Estimates

Current Guidance
Calendar 2011
Estimates

Est. CDMA-based device shipments

March quarter

approx. 134M - 138M

not provided

approx. 170M - 174M

June quarter

approx. 153M - 157M

not provided

not provided

September quarter

approx. 165M - 169M

not provided

not provided

December quarter

approx. 195M - 200M

not provided

not provided

Est. Calendar year range (approx.)

646M - 663M

750M - 800M

750M - 800M

Midpoint

Midpoint

Midpoint

Est. total CDMA-based units

approx. 655M

approx. 775M

approx. 775M

Est. CDMA units

approx. 238M

approx. 250M

approx. 245M

Est. WCDMA units

approx. 417M

approx. 525M

approx. 530M

(1)

During the fourth quarter of fiscal 2011, we reached agreement with the California Franchise Tax Board on a component of our fiscal 2006 through 2010 tax returns.  As a result of this agreement, we expect to record a $44 million tax benefit that will be excluded from our fourth quarter fiscal 2011 Non-GAAP results.

(2)

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.

(3)

As adjusted to reflect the reclassification of revenues related to FLO TV to discontinued operations.

Sums may not equal totals due to rounding.

Results of Business Segments

The following tables have been adjusted to reflect discontinued operations (Note 5) (in millions, except per share data):

SEGMENTS

QCT

QTL

QWI

Non-GAAP
Reconciling
Items (1)

Non-GAAP

Share-Based
Compensation*

Tax Items
(2)

Acquisition-
Related Items
(3)

QSI (4)*

GAAP

Q3 - FISCAL 2011  

Revenues

$2,194

$1,257

$164

$8

$3,623

$  -

$  -

$  -

$  -

$3,623

 Change from prior year

30%

48%

1%

N/M

34%

34%

 Change from prior quarter

12%

(28%)

4%

N/M

(6%)

(6%)

Operating income (loss)

$1,393

($193)

-

($77)

($10)

$1,113

 Change from prior year

41%

(33%)

N/A

N/M

25%

 Change from prior quarter

(16%)

3%

N/M

41%

(22%)

EBT

$430

$1,092

($13)

$65

$1,574

($193)

-

($77)

($30)

$1,274

 Change from prior year

6%

62%

N/M

N/M

36%

(33%)

N/A

N/M

18%

 Change from prior quarter

3%

(31%)

N/M

N/M

(16%)

3%

N/M

35%

(21%)

EBT as a % of revenues

20%

87%

N/M

N/M

43%

N/M

N/M

N/M

35%

Discontinued operations, net of tax (5)

$  -

$  -

$  -

$  -

$44

$44

Net income (loss)

1,240

(147)

(4)

(73)

19

1,035

 Change from prior year

32%

(32%)

N/M

N/A

N/M

35%

 Change from prior quarter

(14%)

(1%)

N/M

N/M

N/M

4%

Diluted EPS

$0.73

($0.09)

$-

($0.04)

$0.01

$0.61

 Change from prior year

28%

(29%)

N/M

N/A

N/M

30%

 Change from prior quarter

(15%)

-

N/M

N/M

N/M

3%

Diluted shares used

1,709

1,709

1,709

1,709

1,709

1,709

Q2 - FISCAL 2011

Revenues

$1,962

$1,746

$157

$5

$3,870

$  -

$  -

$  -

$  -

$3,870

Operating income (loss)

1,652

(199)

-

(6)

(17)

1,430

EBT

417

1,575

(135)

13

1,870

(199)

-

(6)

(46)

1,619

Discontinued operations, net of tax (5)

-

(2)

-

-

(267)

(269)

Net income (loss)

1,450

(146)

(3)

(6)

(296)

999

Diluted EPS

$0.86

($0.09)

$  -

$  -

($0.18)

$0.59

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

(169)

-

-

-

1,247

EBT

640

892

-

128

1,660

(169)

-

-

(21)

1,470

Discontinued operations, net of tax (5)

-

(2)

-

-

(80)

(82)

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

Q4 - FISCAL 2010

Revenues

$1,860

$921

$171

$  -

$2,952

$  -

$  -

$  -

$  -

$2,952

Operating income (loss)

1,130

(157)

-

-

(15)

958

EBT

519

754

(2)

90

1,361

(157)

-

-

(32)

1,172

Discontinued operations, net of tax (5)

-

(3)

-

-

(70)

(73)

Net income (loss)

1,105

(120)

(40)

-

(80)

865

Diluted EPS

$0.68

($0.07)

($0.02)

$  -

($0.05)

$0.53

Diluted shares used

1,621

1,621

1,621

1,621

1,621

1,621

Q3 - FISCAL 2010

Revenues

$1,691

$847

$162

$  -

$2,700

$  -

$  -

$  -

$  -

$2,700

Operating income (loss)

991

(145)

-

-

47

893

EBT

404

673

6

78

1,161

(145)

-

-

60

1,076

Discontinued operations, net of tax (5)

-

(3)

-

-

(62)

(65)

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

SEGMENTS

QCT

QTL

QWI

Non-GAAP
Reconciling
Items (1)

Non-GAAP

Share-Based
Compensation*

Tax Items (2)

Acquisition-
Related Items
(3)

QSI (4)*

GAAP

Q2 - FISCAL 2010

Revenues

$1,537

$974

$152

($2)

$2,661

$  -

$  -

$  -

$  -

$2,661

Operating income (loss)

1,065

(150)

-

(3)

(16)

896

EBT

344

821

(1)

94

1,258

(150)

-

(3)

(16)

1,089

Discontinued operations, net of tax (5)

-

(3)

-

-

(75)

(78)

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

Q1 - FISCAL 2010

Revenues

$1,608

$917

$142

$1

$2,668

$  -

$  -

$  -

$  -

$2,668

Operating income (loss)

1,134

(147)

-

-

(7)

980

EBT

425

772

9

104

1,310

(147)

-

-

(7)

1,156

Discontinued operations, net of tax (5)

-

(3)

-

-

(54)

(57)

Net income (loss)

1,041

(114)

(32)

-

(54)

841

Diluted EPS

$0.62

($0.07)

($0.02)

$  -

($0.03)

$0.50

Diluted shares used

1,691

1,691

1,691

1,691

1,691

1,691

9 MONTHS - FISCAL 2011

Revenues

$6,272

$4,061

$493

$ 14

$10,840

$  -

$  -

$  -

$  -

$10,840

 Change from prior year

30%

48%

8%

N/M

35%

35%

Operating income (loss)

$4,461

($561)

-

($83)

($28)

$3,789

 Change from prior year

40%

(27%)

N/M

N/M

37%

EBT

$1,487

$3,559

($147)

$205

$5,104

($561)

-

($83)

($97)

$4,363

 Change from prior year

27%

57%

N/M

N/M

37%

(27%)

N/M

N/M

31%

Discontinued operations, net of tax (5)

$  -

($4)

-

-

($303)

($307)

Net income (loss)

4,036

(410)

21

(79)

(364)

3,204

 Change from prior year

36%

(27%)

N/M

N/M

N/M

35%

Diluted EPS

$2.40

($0.24)

$0.01

($0.05)

($0.22)

$1.90

 Change from prior year

35%

(26%)

N/M

N/M

N/M

33%

Diluted shares used

1,682

1,682

1,682

1,682

1,682

1,682

9 MONTHS - FISCAL 2010

Revenues

$4,835

$2,738

$456

$ 1

$8,030

$  -

$  -

$  -

$  -

$8,030

Operating income (loss)

3,189

(441)

-

(3)

25

2,770

EBT

1,173

2,266

14

274

3,727

(441)

-

(3)

39

3,322

Discontinued operations, net of tax (5)

-

(8)

-

-

(192)

(200)

Net income (loss)

2,967

(322)

(119)

(3)

(141)

2,382

Diluted EPS

$1.78

($0.19)

($0.07)

$  -

($0.08)

$1.43

Diluted shares used

1,670

1,670

1,670

1,670

1,670

1,670

12 MONTHS - FISCAL 2010

Revenues

$6,695

$3,659

$628

$  -

$10,982

$  -

$  -

$  -

$  -

$10,982

Operating income (loss)

4,316

(597)

-

(3)

11

3,727

EBT

1,693

3,020

12

361

5,086

(597)

-

(3)

7

4,493

Discontinued operations, net of tax (5)

-

(11)

-

-

(262)

(273)

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 related to fiscal 2010 due to the retroactive reenactment of the federal R&D tax credit. Also, during the first, second and third quarter of fiscal 2011, we recorded $3 million, $3 million and $4 million, respectively, 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, second and third quarter fiscal 2011 Non-GAAP results exclude these items.

(3)

Beginning in the third quarter of fiscal 2011, Non-GAAP results exclude certain items related to acquisitions. During the third quarter of fiscal 2011, Non-GAAP results excluded $45 million related to the step-up of inventories to fair value and $32 million in amortization of intangible assets that resulted from the acquisition of Atheros.

(4)

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.

(5)

During fiscal 2011, we shut down the FLO TV business and network. The results of FLO TV are presented as discontinued operations, and prior period amounts have been adjusted accordingly.

* As adjusted for discontinued operations

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 June 26, 2011

(Unaudited)

Acquisition-

Non-GAAP

Share-Based

Tax

Related

GAAP

Results

Compensation

Items

Items (a)

QSI

Results

($ in millions except per share data)

Cost of Sales

$         1,204

$              14

$                 -

$              59

$                1

$         1,278

R&D

661

95

-

-

1

757

SG&A

365

84

-

18

8

475

Operating income (loss)

1,393

(193)

-

(77)

(10)

1,113

Investment income (loss), net

181

(b)

                               -

                               -

                               -

(20)

(c)

161

Tax rate

21%

24%

N/A

N/M

N/M

23%

Net income (loss)

$         1,240

$          (147)

$              (4)

(d)

$            (73)

$              19

$         1,035

Diluted earnings (loss) per share (EPS)

$           0.73

$         (0.09)

$                 -

$         (0.04)

$           0.01

$           0.61

Operating cash flow

$         1,379

$            (35)

$                 -

$                 -

$            (80)

$         1,264

Operating cash flow as % of revenues

38%

N/A

N/A

N/A

N/A

35%

Free cash flow (e)

$         1,160

$            (35)

$                 -

$                 -

$            (80)

$         1,045

Free cash flow as a % of revenues

32%

N/A

N/A

N/A

N/A

29%

(a)

Beginning in the third quarter of fiscal 2011, Non-GAAP results exclude certain items related to acquisitions. During the third quarter of fiscal 2011, Non-GAAP results excluded $45 million related to the step-up of inventories to fair value and $32 million in amortization of intangible assets that resulted from the acquisition of Atheros.

(b)

Included $117 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 $72 million in net realized gains on investments, partially offset by $5 million in other-than-temporary losses on investments and $3 million in interest expense.

(c)

Included $25 million in interest expense and $5 million in other-than-temporary losses on investments, partially offset by $10 million in interest and dividend income related to cash, cash equivalents and marketable securities.

(d)

Included $4 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.  

(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 June 26, 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 Nine Months Ended June 26, 2011

(Unaudited)

Acquisition-

Non-GAAP

Share-Based

Tax

Related

GAAP

Results

Compensation (a)

Items

Items (b)

QSI (a)

Results

($ in millions except per share data)

Cost of Sales

$        3,272

$                           44

$               -

$                59

$             5

$        3,380

R&D

          1,855

                           277

                 -

                    6

               6

          2,144

SG&A

          1,138

                           240

                 -

                  18

             17

          1,413

Operating income (loss)

          4,461

(c)

                          (561)

                 -

                (83)

            (28)

          3,789

Investment income (loss), net

             643

(d)

                                -

                 -

                     -

            (69)

(e)

             574

Tax rate

21%

28%

N/A

N/M

N/M

20%

Net income (loss)

$        4,036

$                        (410)

$            21

(f)

$              (79)

$        (364)

$        3,204

Diluted earnings (loss) per share (EPS)

$          2.40

$                       (0.24)

$         0.01

$           (0.05)

$       (0.22)

$          1.90

Operating cash flow

$        3,532

$                        (167)

$               -

$                   -

$        (285)

$        3,080

Operating cash flow as % of revenues

33%

N/A

N/A

N/A

N/A

28%

Free cash flow (g)

$        3,138

$                        (167)

$               -

$                   -

$        (291)

$        2,680

Free cash flow as a % of revenues

29%

N/A

N/A

N/A

N/A

25%

(a)

During fiscal 2011, the Company shut down the FLO TV business and network. The results of FLO TV are presented as discontinued operations, and prior period amounts have been adjusted accordingly.

(b)

Beginning in the third quarter of fiscal 2011, Non-GAAP results exclude certain items related to acquisitions. During the third quarter of fiscal 2011, Non-GAAP results excluded $45 million related to the step-up of inventories to fair value and $32 million in amortization of intangible assets that resulted from the acquisition of Atheros. In addition, during the first nine months of fiscal 2011, Non-GAAP results excluded $6 million in acquired in-process research and development expense.

(c)

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

(d)

Included $369 million in interest and dividend income related to cash, cash equivalents and marketable securities, which were not part of our strategic investments, and $302 million in net realized gains on investments, partially offset by $16 million in other-than-temporary losses on investments and $11 million in interest expense.

(e)

Included $72 million in interest expense, $10 million in other-than-temporary losses on investments and $5 million in equity in losses of investees, partially offset by $15 million in interest and dividend income related to cash, cash equivalents and marketable securities and $1 million in net realized gains on investments.

(f)

Included a tax benefit of $32 million related to fiscal 2010 due to the retroactive reenactment of the federal R&D tax credit and $10 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.

(g)

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 nine months ended June 26, 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 June 26, 2011

Share-Based

Non-GAAP

Compensation

QSI

GAAP

Net cash provided (used) by operating activities

$           1,379

$                  (35)

(a)

$          (80)

$          1,264

Less:  capital expenditures

(219)

-

-

(219)

Free cash flow

$           1,160

$                  (35)

$          (80)

$          1,045

Revenues

$           3,623

$                     -

$            -

$          3,623

Free cash flow as a % of revenues

32%

N/A

N/M

29%

Other supplemental cash disclosures:

  Cash transfers from QSI

$                (4)

$                     -

$             4

$               -

  Cash transfers to QSI (b)

(89)

-

89

-

  Net cash transfers

$              (93)

$                     -

$           93

$               -

Nine Months Ended June 26, 2011

Share-Based

Non-GAAP

Compensation

QSI

GAAP

Net cash provided (used) by operating activities

$           3,532

$                (167)

(a)

$        (285)

$          3,080

Less:  capital expenditures

(394)

-

(6)

(400)

Free cash flow

$           3,138

$                (167)

$        (291)

$          2,680