10-QPeriod: Q3 FY2011

QUALCOMM INC/DE Quarterly Report for Q3 Ended Jun 26, 2011

Filed July 20, 2011For Securities:QCOM

Summary

Qualcomm Inc. (QCOM) reported strong financial results for the third quarter and first nine months of fiscal year 2011. The company saw significant year-over-year revenue growth driven by increases in both its equipment and services segment (QCT) and its licensing and royalty fees segment (QTL). Net income also saw a substantial increase across both periods. A key strategic development was the acquisition of Atheros Communications, Inc. for $3.1 billion, aimed at accelerating Qualcomm's expansion into new businesses beyond cellular, such as home and enterprise networking. The company also continued to demonstrate a commitment to returning capital to shareholders through increased dividends, although share repurchases were paused during the reported periods. Qualcomm is navigating a dynamic industry with ongoing technological advancements and competitive pressures, while managing various legal and regulatory matters. The company maintains a strong liquidity position and expresses confidence in its ability to meet future capital requirements.

Financial Highlights

50 data points
Beta

Revenue

$3.62B

64.7% Gross Margin

Net Income

$1.03B

28.6% Net Margin

EPS (Diluted)

$0.61

Total Assets

$35.10B

Cash & Equivalents

$5.75B

Free Cash Flow

$1.26B

Financial Statements
Beta
Revenue$3.62B
Cost of Revenue$1.28B
Gross Profit$2.35B
R&D Expenses$757.00M
SG&A Expenses$475.00M
Operating Income$1.11B
Interest Expense$29.00M
Net Income$1.03B
EPS (Basic)$0.62
EPS (Diluted)$0.61
Shares Outstanding (Basic)1.67B
Shares Outstanding (Diluted)1.71B

Key Highlights

  • 1Total revenues grew significantly year-over-year, reaching $3.62 billion for the third quarter and $10.84 billion for the first nine months of fiscal 2011.
  • 2Net income increased substantially, with $1.03 billion reported for the third quarter and $3.19 billion for the first nine months of fiscal 2011.
  • 3Qualcomm completed the acquisition of Atheros Communications, Inc. for $3.1 billion on May 24, 2011, integrating it into the QCT segment to expand into networking and consumer electronics markets.
  • 4The company announced an increase in its quarterly cash dividend per share to $0.215, demonstrating a commitment to shareholder returns.
  • 5MSM integrated circuit shipments increased by 17% year-over-year in the third quarter of fiscal 2011, indicating strong demand for Qualcomm's core products.
  • 6Licensing and royalty fee revenues (QTL) saw a robust increase of 48% year-over-year, driven by higher device sales and royalty rates.
  • 7The company reported a goodwill impairment charge of $114 million related to its Firethorn division due to lower-than-expected product adoption.

Frequently Asked Questions

Qualcomm's revenue growth was driven by increases in both its equipment and services segment (QCT), primarily due to higher unit shipments and the addition of connectivity products from the Atheros acquisition, and its licensing and royalty fees segment (QTL), benefiting from increased CDMA-based device sales by licensees and higher royalty rates.

The acquisition of Atheros Communications, Inc. for $3.1 billion is strategically important as it aims to accelerate Qualcomm's expansion into new business areas beyond cellular, specifically targeting the home, enterprise, and carrier networking markets. Atheros' expertise in communication chipsets for networking and consumer electronics is expected to complement Qualcomm's existing technology portfolio.

Qualcomm has increased its quarterly cash dividend to $0.215 per share and continues to evaluate its stock repurchase program, although no shares were repurchased in the first nine months of fiscal 2011. The company's strong liquidity position, with $20.2 billion in cash, cash equivalents, and marketable securities at the end of June 2011, provides flexibility for investments, acquisitions, and shareholder returns.

Qualcomm faces risks including intense competition, rapid technological change, potential delays in 3G/4G network deployments, reliance on a few key customers and licensees, intellectual property disputes, and global economic conditions. The company also noted a goodwill impairment charge for its Firethorn division, highlighting challenges in new product adoption.