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QUALCOMM INC/DE Annual Report, Year Ended Sep 25, 2005

Filing Date
Filed November 2, 2005
Period End
September 25, 2005
Security
QCOM
In the record · 2016–202610-K1010-Q338-K138

QCOM filed 10 annual reports (10-K), 33 quarterly reports (10-Q) and 138 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Aug ’17Aug ’17
  2. Leadership change8-K · Aug ’19Aug ’19
  3. Material agreement8-K · Oct ’21Oct ’21
  4. FY2025 annual report10-K · Nov ’25Nov ’25

01—Abstract

Summary

Summary of the 10-K filed November 2, 2005. Cited figures are marked; the original filing is the authoritative source.

QUALCOMM's fiscal 2005 10-K (fiscal year ended September 25, 2005) reports record results: revenues of $5.67 billiona (up 16% from $4.88 billion) and net income of $2.14 billion (up 25%), with diluted EPS of $1.26.

Growth was driven mainly by licensing and royalty revenue, which rose to $1.93 billionb from $1.37 billion as royalties reported by external licensees reached $1.64 billion, boosted by WCDMA sales growth. QCT (chips) revenue grew to $3.29 billion on roughly 151 million MSM shipments, but its operating margin fell to 26% from 34% as R&D rose 40% to $1.01 billion. QTL, the high-margin licensing segment, earned about 90% operating margins and accounted for much of the profit.

The balance sheet is strong, with $8.7 billionc in cash and marketable securities, no long-term debt, and $11.1 billion in stockholders' equity. The company repurchased $953 million of stock under a new $2 billion authorization, paid $524 million in dividends (raised to $0.09 per quarter), and announced the roughly $545 million Flarion OFDMA acquisition. Investors should weigh the concentration of revenue in a few customers (LG, Samsung, Motorola at 39% of revenue combined) and in South Korea and Japan (58% of revenue), plus a growing docket of litigation, including suits from Broadcom and a European Commission complaint over WCDMA licensing practices.

Management also flagged that adopting FAS 123R in fiscal 2006 is expected to add roughly $394 milliond in unamortized option expense. The main forward-looking question is whether 3G CDMA2000 and WCDMA deployments keep growing fast enough to sustain royalty growth, given competition from GSM/GPRS/EDGE, intensifying chip-market pricing pressure, and rising R&D spending that compresses chip margins.

02—Key points

Key Highlights

  1. Revenue rose 16% to $5.67B and net income rose 25% to $2.14B (diluted EPS $1.26), a record year.
  2. Licensing and royalty revenue grew 41% to $1.93B, with external licensee royalties of $1.64B driven by WCDMA and higher-priced CDMA handsets.
  3. QCT chip margin fell to 26% from 34% as R&D expenses rose to $1.01B (18% of revenue, up from 15%).
  4. Balance sheet is strong: $8.7B in cash and marketable securities, no long-term debt, and $11.1B stockholders' equity.
  5. Capital return: $953M in buybacks under a new $2B program ($636M remaining) and $524M in dividends, with the quarterly dividend raised to $0.09.
  6. Customer and geographic concentration is high: LG, Samsung and Motorola account for 39% of revenue, and South Korea and Japan for 58%.
  7. Pending Flarion acquisition (~$545M, OFDMA technology) and ongoing litigation with Broadcom and Maxim, plus a European Commission complaint over WCDMA licensing, add risk.

03—Questions

Frequently Asked Questions

  1. What drove QUALCOMM's revenue growth in fiscal 2005?

    Most of the $795M increase came from licensing and royalty fees, which rose $563M to $1.93B. External licensee royalties grew to $1.64B on higher CDMA product sales, especially WCDMA. Equipment and services revenue also grew to $3.74B, led by higher MSM chip unit shipments (about 151M, up from 137M), partly offset by lower average selling prices.

  2. Why did QCT's operating margin decline?

    QCT's operating margin fell to 26% from 34%, mainly because R&D costs rose about 45% at the segment level. The spending supports multimedia chips, 1xEV-DO, WCDMA/HSDPA, and GSM/GPRS/EDGE products. Product support and excess inventory reserves also weighed on gross margin, and management expects R&D to keep rising in fiscal 2006.

  3. How concentrated is QUALCOMM's business?

    Concentration is high. Three customers (LG Electronics, Samsung and Motorola) account for about 39% of consolidated revenue, and South Korea and Japan generated 37% and 21% of revenue. International customers made up 82% of revenue. The company's own risk factors say losing any one of these major customers could harm results.

  4. What are the main legal and strategic risks disclosed?

    The filing discloses patent and antitrust litigation with Broadcom (including an ITC complaint and an antitrust suit in New Jersey), a suit against Maxim, and a Whale Telecom fraud claim. Six telecom companies also filed complaints with the European Commission over WCDMA licensing practices. No litigation accrual was recorded. Strategically, the Flarion acquisition's returns depend on OFDMA adoption, which has not been widely deployed, and the MediaFLO USA and Inquam investments carry execution risk.

04—Continue

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