Qualcomm Announces Record Third Quarter Fiscal 2014 Results

         Qualcomm Announces Record Third Quarter Fiscal 2014 Results    PR Newswire    SAN DIEGO, July 23, 2014  - Revenues $6.8 billion  - GAAP EPS $1.31, Non-GAAP EPS $1.44  - Raising Fiscal 2014 EPS Guidance -  SAN DIEGO, July 23, 2014 /PRNewswire/ -- Qualcomm Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced results for the third quarter of fiscal 2014 ended June 29, 2014.  "We are pleased to report another record quarter with revenues, earnings per share and chip shipments reaching all-time highs, driven by broad-based demand for our industry-leading 3G/4G chipset solutions," said Steve Mollenkopf, CEO of Qualcomm Incorporated. "Looking forward, although we have lowered our near-term financial outlook for the licensing business, we are pleased to be raising our fiscal year earnings per share guidance on better than expected performance in our semiconductor business."  Third Quarter Results (GAAP)*    *Revenues: ^1 $6.81 billion, up 9 percent year-over-year (y-o-y) and 7     percent sequentially.   *Operating income: ^1 $2.08 billion, up 24 percent y-o-y and 4 percent     sequentially.   *Net income: ^2 $2.24 billion, up 42 percent y-o-y and 14 percent     sequentially.   *Diluted earnings per share: ^2 $1.31, up 46 percent y-o-y and 15 percent     sequentially.   *Effective tax rate: ^1 10 percent.   *Operating cash flow: $2.67 billion, up 29 percent y-o-y; 39 percent of     revenues.   *Return of capital to stockholders: $2.06 billion, including $1.35 billion     through repurchases of 17.0 million shares of common stock and $706     million, or $0.42 per share, of cash dividends paid.  ^1 Throughout this news release, revenues, operating expenses, operating income, earnings before tax (EBT) and effective tax rates are from continuing operations (i.e., before adjustments for noncontrolling interests and discontinued operations), unless otherwise stated. ^2 Throughout this news release, net income and diluted earnings per share are attributable to Qualcomm (i.e., after adjustments for noncontrolling interests and discontinued operations), unless otherwise stated.  Non-GAAP Third Quarter Results*  Non-GAAP results exclude the QSI (Qualcomm Strategic Initiatives) segment and certain share-based compensation, acquisition-related items and tax items.    *Revenues: $6.81 billion, up 9 percent y-o-y and 7 percent sequentially.   *Operating income: $2.43 billion, up 19 percent y-o-y and 4 percent     sequentially.   *Net income: $2.47 billion, up 35 percent y-o-y and 10 percent     sequentially.   *Diluted earnings per share: $1.44, up 40 percent y-o-y and 10 percent     sequentially.   *Effective tax rate: 13 percent.  Detailed reconciliations between GAAP and Non-GAAP results are included within this news release.  * The following should be considered in regards to the year-over-year and sequential comparisons:    *The third quarter of fiscal 2014 results included:         *$208 million of income, or $0.12 per share, of which $184 million was          recorded in other income, due to the reversal of accruals related to          our litigation with ParkerVision; and        *$164 million of charges, or $0.08 per share, that resulted from an          impairment on goodwill and long-lived assets related to our QMT          (Qualcomm MEMS Technologies) division.    *The third quarter of fiscal 2013 results included:         *$158 million charge, or $0.06 per share, that resulted from an          impairment on long-lived assets related to our QMT division.  Third Quarter Key Business Metrics    *MSM™ chip shipments: 225 million units, up 31 percent y-o-y and 20 percent     sequentially.   *March quarter total reported device sales: approximately $58.1 billion, up     3 percent y-o-y and down 13 percent sequentially.         *March quarter estimated 3G/4G device shipments: approximately 250 to          254 million units, at an estimated average selling price of          approximately $228 to $234 per unit.  Cash and Marketable Securities  Our cash, cash equivalents and marketable securities totaled $32.7 billion at the end of the third quarter of fiscal 2014, compared to $30.4 billion a year ago and $32.1 billion at the end of the second quarter of fiscal 2014. On July 18, 2014, we announced a cash dividend of $0.42 per share payable on September 24, 2014 to stockholders of record as of the close of business on September 3, 2014.  Research and Development  ($ in millions)    Non-GAAP  QSI  Share-Based        Acquisition-      GAAP                                   Compensation       Related Items Third quarter      $  1,251  $ 1  $        174       $        3        $ 1,429 fiscal 2014 As % of revenues   18%                                                 21% Third quarter      $  1,130  $ 1  $        166       $        1        $ 1,298 fiscal 2013 As % of revenues   18%                                                 21% Year-over-year     11%       N/M  5%                 N/M               10% change ($) N/M - Not Meaningful  Non-GAAP research and development (R&D) expenses increased 11 percent y-o-y primarily due to an increase in costs to develop CDMA-based 3G, OFDMA-based 4G LTE and other technologies for integrated circuit and related software products and to expand our intellectual property portfolio.  Selling, General and Administrative  ($ in millions)    Non-GAAP  QSI    Share-Based        Acquisition-      GAAP                                     Compensation       Related Items Third quarter      $   484   $  4   $        88        $        6        $ 582 fiscal 2014 As % of revenues   7%                                                    9% Third quarter      $   505   $  6   $        96        $        6        $ 613 fiscal 2013 As % of revenues   8%                                                    10% Year-over-year     (4%)      (33%)  (8%)               N/M               (5%) change ($) N/M - Not Meaningful  Non-GAAP selling, general and administrative (SG&A) expenses decreased 4 percent y-o-y primarily due to a decrease in selling and marketing expenses.  Effective Income Tax Rates  Our fiscal 2014 annual effective income tax rates are estimated to be 14 percent for GAAP and 15 percent for Non-GAAP, both of which include the United States federal R&D tax credit generated through December 31, 2013, the date on which the credit expired. During the third quarter of fiscal 2014, we recorded a $66 million tax benefit as a result of an agreement reached with the Internal Revenue Service related to transfer pricing on our fiscal 2013 tax return, which was excluded from Non-GAAP results.  Business Outlook  The following statements are forward looking, and actual results may differ materially. The "Note Regarding Forward-Looking Statements" in this news release provides a description of certain risks that we face, and our most recent quarterly report 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 for pending legal matters, other than future legal amounts that are probable and estimable. Further, due to their nature, certain income and expense items, such as realized investment and certain derivative gains or losses, cannot be accurately forecast. Accordingly, we only include such items in our financial outlook to the extent they are reasonably certain; however, actual results may differ materially from the outlook.  During the fourth quarter of fiscal 2014, we expect to complete a minimum of $1 billion in stock repurchases under our current stock repurchase program. Our outlook for fiscal 2014 diluted earnings per share includes an estimate of the benefit related to stock repurchases.  China continues to present significant opportunities for us, particularly with the rollout of 4G LTE, but also presents significant challenges, as our business practices continue to be the subject of an investigation by the China National Development and Reform Commission (NDRC). Please refer to our Quarterly Report on Form 10-Q for the third quarter ended June 29, 2014 filed with the SEC for our most recent disclosures regarding the NDRC investigation.  We also believe that certain licensees in China currently are not fully complying with their contractual obligations to report their sales of licensed products to us (which includes certain licensees underreporting a portion of their 3G/4G device sales and a dispute with a licensee) and that unlicensed companies may seek to delay execution of new licenses while the NDRC investigation is ongoing. We expect calendar year 2014 3G/4G device shipments to be approximately 1.3 billion globally. However, our estimate of calendar year 2014 3G/4G device shipments that we currently expect to be reported to us is approximately 1.04 billion to 1.13 billion, which is adjusted for units that we believe may not be reported to us, are in dispute or are currently unlicensed. We are taking steps to address these issues, although the timing of any resolution is uncertain.  The following table summarizes GAAP and Non-GAAP guidance based on the current outlook. The Non-GAAP outlook presented below is consistent with the presentation of Non-GAAP results included elsewhere herein.  Qualcomm's Business Outlook Summary FOURTH FISCAL QUARTER                                          Q4 FY13              Current Guidance                                           Results              Q4 FY14                                                               Estimates  Revenues                                  $6.48B             $6.5B - $7.4B  Year-over-year change                                        even -                                                               increase 14%  Non-GAAP diluted earnings per share       $1.05              $1.20 - $1.35  (EPS)  Year-over-year change                                        increase 14% -                                                               29%  Diluted EPS attributable to QSI           ($0.01)            $0.00  Diluted EPS attributable to share-based   ($0.13)              ($0.13)  compensation  Diluted EPS attributable to               ($0.04)              ($0.04)  acquisition-related items  GAAP diluted EPS                          $0.86              $1.03 - $1.18  Year-over-year change                                        increase 20% -                                                               37%  Metrics  MSM chip shipments                      190M                 230M - 245M  Year-over-year change                                        increase 21% -                                                               29%  Total reported device sales (1)         approx.              approx. $53.0B                                          $60.2B*              - $59.0B*  Year-over-year change                                        decrease 2% -                                                               12%  *Est. sales in June quarter, reported  in September quarter FISCAL YEAR                             FY 2013        Prior Guidance       Current                                                                 Guidance FY                             Results        FY 2014 Estimates    2014 Estimates                                            (2)  Revenues                      $24.87B     $26.0B - $27.5B      $26.3B -                                                                 $27.2B  Year-over-year change                     increase 5% - 11%    increase 6%                                                                 - 9%  Non-GAAP diluted EPS          $4.51       $5.05 - $5.25        $5.21 -                                                                 $5.36  Year-over-year change                     increase 12% - 16%   increase 16%                                                                 - 19%  Diluted EPS attributable      $0.02                 ($0.01)        ($0.01)  to QSI  Diluted EPS attributable  to share-based                ($0.51)               ($0.51)        ($0.51)  compensation  Diluted EPS attributable  to acquisition-related        ($0.16)               ($0.16)        ($0.16)  items  Diluted EPS attributable      $0.04       N/A                      $0.04  to tax items  GAAP diluted EPS              $3.91       $4.37 - $4.57        $4.57 -                                                                 $4.72  Year-over-year change                     increase 12% - 17%   increase 17%                                                                 - 21%  Metrics  Est. fiscal year* 3G/4G    approx. $223   approx. $218 -       approx. $222  device average selling     - $229         $228                 - $228  price range (1)  *Shipments in Sept. to  June quarters, reported in  Dec. to Sept. quarters CALENDAR YEAR Device Estimates (1)                                     Prior        Current Guidance                        Calendar     Guidance                        2013         Calendar     Calendar 2014                                     2014                        Estimates                 Estimates                                     Estimates  Est. 3G/4G device  shipments  March quarter         approx. 244M not provided approx. 250M -                        - 248M                    254M  June quarter          approx. 260M not provided not provided                        - 264M  September quarter     approx. 276M not provided not provided                        - 280M  December quarter      approx. 295M not provided not provided                        - 299M  Est. calendar year    1,075M -     1,220M -     1,040M - 1,130M  range (approx.)       1,091M       1,300M       (3)        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,     OFDMA-based and CDMA/OFDMA multimode subscriber devices (including     handsets, modules, modem cards and other subscriber devices) by our     licensees during a particular period (collectively, 3G/4G devices). The     reported quarterly estimated ranges of average selling prices (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 (1) shipments the same way (e.g., some licensees report sales net of permitted     deductions, including transportation, insurance, packing costs and other     items, while other licensees report sales 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. In addition, certain     licensees may not report (in the quarter in which they are contractually     obligated to report) their sales of certain types of subscriber units,     which (as a result of audits, legal actions or for other reasons) may be     reported in a subsequent quarter. Accordingly, total reported device     sales, estimated unit shipments and estimated ASPs for a particular period     may include prior period activity that was not reported by the licensee     until such particular period.     Our prior guidance for fiscal 2014 GAAP diluted EPS excluded a $66 million (2) tax benefit that we recorded in the third quarter of fiscal 2014 as a     result of an agreement reached with the Internal Revenue Service, which     was excluded from our Non-GAAP results.     We expect calendar year 2014 3G/4G device shipments to be approximately     1.3 billion globally. However, our estimate of calendar year 2014 3G/4G     device shipments that we currently expect to be reported to us is (3) approximately 1.04 billion to 1.13 billion, which is adjusted for units     that we believe may not be reported to us, are in dispute or are currently     unlicensed. We are taking steps to address these issues, although the     timing of any resolution is uncertain. N/A - Not Applicable Sums may not equal totals due to rounding.  Results of Business Segments  The following table reconciles our Non-GAAP results to our GAAP results ($ in millions, except per share data):                                 Non-GAAP         Non-GAAP               Share-Based    Acquisition-    Tax SEGMENTS    QCT       QTL       Reconciling      (3)         QSI (3)    Compensation   Related Items   Items  GAAP                                 Items (1) (2)                           (3)            (3) Q3 - FISCAL 2014 Revenues    $4,957    $1,803    $46              $6,806            $—          $—              $—         $—  $6,806 Change from 17%       (3%)      (70%)            9%                                                           9% prior year Change from prior       17%       (13%)     (13%)            7%                                                           7% quarter Operating income                                           $2,425      ($5)       ($274)         ($71)              $—  $2,075 (loss) Change from                                      19%         29%        2%             —%                     24% prior year Change from prior                                            4%          17%        (9%)           21%                    4% quarter EBT         $1,116    $1,550    $177             $2,843      ($1)       ($274)         ($71)              $—  $2,497 Change from 51%       (5%)      N/M              29%         N/M        2%             —%                     31% prior year Change from prior       51%       (15%)     N/M              7%          97%        (9%)           21%                    10% quarter EBT as % of 23%       86%       N/M              42%                                                          37% revenues Net income                                       $2,470            $—   ($232)         ($66)           $66    $2,238 (loss) Change from                                      35%         N/M        (5%)           (3%)            N/M    42% prior year Change from prior                                            10%         N/M        (17%)          19%             N/M    14% quarter Diluted EPS                                      $1.44       $0.00      ($0.14)        ($0.04)         $0.04  $1.31 Change from                                      40%         N/M        (8%)           —%              N/M    46% prior year Change from prior                                            10%         N/M        (27%)          20%             N/M    15% quarter Diluted                                          1,714       1,714      1,714          1,714           1,714  1,714 shares used Q2 - FISCAL 2014 Revenues    $4,243    $2,071    $53              $6,367            $—          $—              $—         $—  $6,367 Operating income                                           2,337       (6)        (251)          (90)            —      1,990 (loss) EBT         $740      $1,834    $78              2,652       (39)       (251)          (90)            —      2,272 Net income                                       2,255       (17)       (198)          (81)            —      1,959 (loss) Diluted EPS                                      $1.31       ($0.01)    ($0.11)        ($0.05)            $—  $1.14 Diluted                                          1,719       1,719      1,719          1,719           1,719  1,719 shares used Q3 - FISCAL 2013 Revenues    $4,222    $1,867    $154             $6,243            $—          $—              $—         $—  $6,243 Operating income                                           2,035       (7)        (280)          (71)            —      1,677 (loss) EBT         $738      $1,633    ($161)           2,210       51         (280)          (71)            —      1,910 Net income                                       1,823       43         (222)          (64)            —      1,580 (loss) Diluted EPS                                      $1.03       $0.02      ($0.13)        ($0.04)            $—  $0.90 Diluted                                          1,765       1,765      1,765          1,765           1,765  1,765 shares used Q4 - FISCAL 2013 Revenues    $4,457    $1,874    $149             $6,480            $—          $—              $—         $—  $6,480 Operating income                                           1,940       (11)       (274)          (67)            —      1,588 (loss) EBT         $702      $1,622    ($151)           2,173       (11)       (274)          (67)            —      1,821 Net income                                       1,818       (24)       (226)          (67)            —      1,501 (loss) Diluted EPS                                      $1.05       ($0.01)    ($0.13)        ($0.04)            $—  $0.86 Diluted                                          1,738       1,738      1,738          1,738           1,738  1,738 shares used                                        Non-GAAP         Non-GAAP           Share-Based     Acquisition- Tax SEGMENTS          QCT      QTL         Reconciling      (3)      QSI (3)   Compensation    Related      Items GAAP                                        Items (1) (2)                       (3)             Items (3) 9 MONTHS - FISCAL 2014 Revenues          $13,816  $5,774      $205             $19,795       $—            $—             $—      $— $19,795 Change from prior 13%      2%          (54%)            8%                                                    8% year Operating income                                        $6,611   ($16)     ($806)          ($231)          $— $5,558 (loss) Change from prior                                       (2%)     20%       3%              (3%)               (1%) year EBT               $2,762   $5,054      ($217)           $7,599   ($36)     ($806)          ($231)          $— $6,526 Change from prior 11%      2%          N/M              3%       N/M       3%              (3%)               2% year EBT as % of       20%      88%         N/M              38%                                                   33% revenues Discontinued operations, net                                         $430          $—            $—             $—      $— $430 of tax (4) Net income (loss)                                       $6,888   ($13)     ($655)          ($213)       $66   $6,073 Change from prior                                       13%      N/M       1%              —%           3%    13% year Diluted EPS                                             $4.01    ($0.01)   ($0.38)         ($0.12)      $0.04 $3.53 Change from prior                                       16%      N/M       —%              —%           —%    16% year Diluted shares                                          1,718    1,718     1,718           1,718        1,718 1,718 used 9 MONTHS - FISCAL 2013 Revenues          $12,258  $5,680      $447             $18,385       $—            $—             $—      $— $18,385 Operating income                                        6,716    (20)      (829)           (225)        —     5,642 (loss) EBT               $2,487   $4,968      ($95)            7,360    66        (829)           (225)        —     6,372 Net income (loss)                                       6,094    67        (661)           (212)        64    5,352 Diluted EPS                                             $3.46    $0.04     ($0.38)         ($0.12)      $0.04 $3.04 Diluted shares                                          1,760    1,760     1,760           1,760        1,760 1,760 used 12 MONTHS - FISCAL 2013 Revenues          $16,715  $7,554      $597             $24,866       $—            $—             $—      $— $24,866 Operating income                                        8,657    (31)      (1,103)         (293)        —     7,230 (loss) EBT               $3,189   $6,590      ($245)           9,534    56        (1,103)         (293)        —     8,194 Net income (loss)                                       7,911    43        (886)           (279)        64    6,853 Diluted EPS                                             $4.51    $0.02     ($0.51)         ($0.16)      $0.04 $3.91 Diluted shares                                          1,754    1,754     1,754           1,754        1,754 1,754 used        Non-GAAP reconciling items related to revenues consisted primarily of     nonreportable segment revenues less intersegment eliminations. Non-GAAP     reconciling items related to earnings before taxes consisted primarily of (1) certain research and development expenses, selling, general and     administrative expenses, other expenses or income and certain investment     income that are not allocated to the segments for management reporting     purposes; nonreportable segment results; and the elimination of     intersegment profit.     During the first quarter of fiscal 2014, as a result of the reassessment     of management reporting, the former Qualcomm Wireless & Internet (QWI) (2) segment was eliminated. Revenues and operating results for the divisions     that comprised the QWI segment are included in Non-GAAP reconciling items.     Prior period information has been adjusted to conform to the current     presentation.     At fiscal year end, the sum of the quarterly tax provision (benefit) for     each column equals the annual tax provision (benefit) for each column (3) computed in accordance with GAAP. In interim quarters, the sum of these     provisions (benefits) may not equal the total GAAP tax provision, and this     difference is allocated to tax provisions (benefits) among the columns.     During the first quarter of fiscal 2014, a gain of $665 million was (4) recorded associated with the sale of substantially all of the operations     of our Omnitracs division. N/M - Not Meaningful N/A - Not Applicable Sums may not equal totals due to rounding.  Conference Call  Qualcomm's third quarter fiscal 2014 earnings conference call will be broadcast live on July 23, 2014, beginning at 2:45 p.m. Pacific Time (PT) at http://investor.qualcomm.com/events.cfm . This conference call will include a discussion of "Non-GAAP financial measures" as defined in Regulation G. The most directly comparable GAAP financial measures and information reconciling these Non-GAAP financial measures to the Company's financial results prepared in accordance with GAAP, as well as other financial and statistical information to be discussed on the conference call, will be posted at www.qualcomm.com/investor immediately prior to commencement of the call. An audio replay will be available at http://investor.qualcomm.com/events.cfm and via telephone following the live call for 30 days thereafter. To listen to the replay via telephone, U.S. callers may dial (855) 859-2056 and international callers may dial (404) 537-3406. Callers should use reservation number 63935250.  Note Regarding Use of Non-GAAP Financial Measures  The Non-GAAP financial information presented herein should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. In addition, "Non-GAAP" is not a term defined by GAAP, and as a result, the Company's measure of Non-GAAP results might be different than similarly titled measures used by other companies. Reconciliations between GAAP and Non-GAAP results are presented herein.  The Company uses Non-GAAP financial information (i) to evaluate, assess and benchmark the Company's operating results on a consistent and comparable basis; (ii) to measure the performance and efficiency of the Company's ongoing core operating businesses, including the QCT (Qualcomm CDMA Technologies) and QTL (Qualcomm Technology Licensing) segments; and (iii) to compare the performance and efficiency of these segments against each other and against competitors. Non-GAAP measurements used by the Company include revenues, cost of equipment and services revenues, R&D expenses, SG&A expenses, operating income, net investment income, income or earnings before income taxes, effective tax rate, net income and diluted earnings per share. The Company is able to assess what it believes is a more meaningful and comparable set of financial performance measures for the Company and its business segments by using Non-GAAP information. As a result, management compensation decisions and the review of executive compensation by the Compensation Committee of the Board of Directors focus primarily on Non-GAAP financial measures applicable to the Company and its business segments. The Company presents Non-GAAP financial information to provide greater transparency to investors with respect to its use of such information in financial and operational decision-making.  Non-GAAP information used by management excludes QSI and certain share-based compensation, acquisition-related items and tax items.    *QSI is excluded because the Company expects to exit its strategic     investments at various times, and the effects of fluctuations in the value     of such investments and realized gains or losses are viewed by management     as unrelated to the Company's operational performance.   *Share-based compensation expense primarily relates to restricted stock     units. Non-cash share-based compensation is excluded because management     views such expenses as unrelated to the operating activities of the     Company's ongoing core businesses.   *Acquisition-related items include amortization and impairment of certain     intangible assets, recognition of the step-up of inventories to fair value     and the related tax effects of these items starting with acquisitions     completed in the third quarter of fiscal 2011, as well as any tax effects     from restructuring the ownership of such acquired assets. Additionally,     the Company excludes expenses related to the termination of contracts that     limit the use of the acquired intellectual property. These     acquisition-related items are excluded and are not allocated to the     Company's segments because management views such expenses as unrelated to     the operating activities of the Company's ongoing core businesses. In     addition, these charges are impacted by the size and timing of     acquisitions, potentially obscuring period-to-period comparisons of the     Company's operating businesses.   *Certain tax items that are unrelated to the fiscal year in which they are     recorded are excluded in order to provide a clearer understanding of the     Company's ongoing Non-GAAP tax rate and after tax earnings.  About Qualcomm  Qualcomm Incorporated (Nasdaq: QCOM) is a world leader in 3G, 4G and next-generation wireless technologies. Qualcomm Incorporated includes Qualcomm's licensing business, QTL, and the vast majority of its patent portfolio. Qualcomm Technologies, Inc., a wholly - owned subsidiary of Qualcomm Incorporated, operates, along with its subsidiaries, substantially all of Qualcomm's engineering, research and development functions, and substantially all of its products and services businesses, including its semiconductor business, QCT. For more than 25 years, Qualcomm ideas and inventions have driven the evolution of digital communications, linking people everywhere more closely to information, entertainment and each other. For more information, visit www.qualcomm.com .  Note Regarding Forward-Looking Statements  In addition to the historical information contained herein, this news release contains forward-looking statements that are inherently subject to risks and uncertainties, including but not limited to: statements regarding our near-term financial outlook for the licensing business; better than expected performance in our semiconductor business; stock repurchases that we plan to complete during the fourth quarter of fiscal 2014 under our current stock repurchase program; challenges to our business in China; our business outlook; and our estimates and guidance related to revenues, our fiscal 2014 annual effective tax rates, GAAP and Non-GAAP diluted earnings per share, MSM chip shipments, total reported device sales, 3G/4G device average selling price ranges and 3G/4G device shipments and ranges. Forward-looking statements are generally identified by words such as "estimates," "guidance," "expects," "anticipates," "intends," "plans," "believes," "seeks" and similar expressions. Actual results may differ materially from those referred to in the forward-looking statements due to a number of important factors, including but not limited to: risks associated with the commercial deployment of CDMA, OFDMA and other communications technologies; continuing growth in our customers' and licensees' sales of products and services based on these technologies and our ability to continue to drive customer demand for our products and services based on these technologies; competition; our dependence on a small number of customers and licensees; the continued and future success of our licensing programs; attacks on our licensing business model, including current and future legal proceedings or actions of governmental or quasi-governmental bodies or standards or industry organizations; the enforcement and protection of our intellectual property rights; the commercial success of our new technologies, products and services; claims by third parties that we infringe their intellectual property; our dependence on a limited number of third-party suppliers; our stock price and earnings volatility; government regulations and policies; acquisitions, strategic transactions and investments; global economic conditions that impact the mobile communications industry; foreign currency fluctuations; and failures in our products or services or in the products of our customers, including those resulting from security vulnerabilities, defects or errors. These and other risks are set forth in the Company's Quarterly Report on Form 10-Q for the third quarter ended June 29, 2014 filed with the SEC. Our reports filed with the SEC are available on our website at www.qualcomm.com . We undertake no obligation to update, or continue to provide information with respect to, any forward-looking statement or risk factor, whether as a result of new information, future events or otherwise.  Qualcomm and MSM are trademarks of Qualcomm Incorporated, registered in the United States and other countries. All other trademarks are the property of their respective owners.  Qualcomm Contact: Warren KneeshawVice President, Investor Relations Phone: 1-858-658-4813 e-mail: ir@qualcomm.com  Supplemental Information (Unaudited) Three Months Ended June 29, 2014              Non-GAAP                 Share-Based   Acquisition- Tax      GAAP              Results      QSI         Compensation  Related      Items                                                     Items        (a)      Results ($ in millions, except per share data)   Cost of   equipment   and         $ 2,666      $ —          $  12         $  62       $ —      $ 2,740   services   revenues   R&D         1,251        1            174           3           —        1,429   expenses   SG&A        484          4            88            6           —        582   expenses   Other   income,     20      (b)  —            —             —           —        20   net   Operating   income      2,425        (5)          (274)         (71)        —        2,075   (loss)   Investment   income,     $ 418   (c)  $ 4    (d)   $  —          $  —        $ —      $ 422   net   Tax rate    13%          —%           15%           7%          N/A      10%   Net income  $ 2,470      $ —          $  (232)      $  (66)     $ 66     $ 2,238   (loss)   Diluted     $ 1.44       $ 0.00       $  (0.14)     $  (0.04)   $ 0.04   $ 1.31   EPS          Included a $66 million tax benefit related to an agreement reached with (a)      the Internal Revenue Service related to transfer pricing on our fiscal          2013 tax return.          Included $184 million of other income from the reversal of accruals (b)      related to our litigation with ParkerVision, partially offset by $164          million of impairment charges on goodwill and long-lived assets related to          our QMT division.          Included $288 million in net realized gains on investments, $139 million (c)      in interest and dividend income and $4 million in gains on deconsolidation          of subsidiaries, partially offset by $8 million in other-than-temporary          losses on investments and $5 million in net losses on derivatives.          Included $10 million in net realized gains on investments, partially (d)      offset by $3 million in other-than-temporary losses on investments, $2          million in equity in losses of investees and $1 million in net losses on          derivatives.    Nine Months Ended June 29, 2014              Non-GAAP                   Share-Based  Acquisition- Tax      GAAP              Results      QSI           Compensation Related      Items                                                      Items        (a)      Results ($ in millions, except per share data)   Cost of   equipment   and         $ 7,706      $ —            $  37        $  186      $ —      $ 7,929   services   revenues   R&D         3,573        4              510          26          —        4,113   expenses   SG&A        1,455        12             259          19          —        1,745   expenses   Other   expenses,   450     (e)  —              —            —           —        450   net   Operating   income      6,611        (16)           (806)        (231)       —        5,558   (loss)   Investment   income,     $ 988   (f)  $ (20)   (g)   $  —         $  —        $ —      $ 968   net   Tax rate    15%          56%            19%          8%          N/A      14%   Net income  $ 6,888      $ (13)         $  (655)     $  (213)    $ 66     $ 6,073   (loss)   Diluted     $ 4.01       $ (0.01)       $  (0.38)    $  (0.12)   $ 0.04   $ 3.53   EPS          Included $607 million of impairment charges on long-lived assets and          goodwill related to our QMT division and a $16 million goodwill impairment (e)      charge related to our former QRS (Qualcomm Retail Solutions) division,          partially offset by the reversal of the $173 million accrual recorded in          fiscal 2013 related to our litigation with ParkerVision.          Included $650 million in net realized gains on investments, $459 million in          interest and dividend income, $5 million in gains on deconsolidation of (f)      subsidiaries and $1 million in net gains on derivatives, partially offset          by $124 million in other-than-temporary losses on investments and $3          million in interest expense.          Included $46 million in other-than-temporary losses on investments, $7          million in equity in losses of investees, $2 million in net losses on (g)      derivatives and $1 million in interest expense, partially offset by $35          million in net realized gains on investments and $1 million in interest and          dividend income. N/A - Not Applicable Sums may not equal totals due to rounding.    Reconciliation of Non-GAAP Tax Rates to GAAP Tax Rates (a) (Unaudited) Three Months Ended June 29, 2014 ($ in      Non-GAAP                     Share-Based       Acquisition-     Tax     GAAP millions)  Results         QSI          Compensation      Related          Items   Results                                                           Items            (b) Income (loss) from continuing  $    2,843     $   (1)      $     (274)       $      (71)      $  —    $ 2,497 operations before income taxes Income tax (expense)   (373)          —            42                5                66      (260) benefit Income (loss) from        $    2,470     $   (1)      $     (232)       $      (66)      $  66   $ 2,237 continuing operations Tax rate   13%             —%           15%               7%               N/A     10% Nine Months Ended June 29, 2014 ($ in       Non-GAAP                  Share-Based       Acquisition-      Tax      GAAP millions)   Results       QSI         Compensation      Related Items     Items    Results                                                                           (b) Income (loss) from continuing  $ 7,599       $ (36)      $   (806)         $    (231)        $  —     $ 6,526 operations before income taxes Income tax (expense)   (1,141)       20          151               18                66       (886) benefit Income (loss) from        $ 6,458       $ (16)      $   (655)         $    (213)        $  66    $ 5,640 continuing operations Tax rate    15%           56%         19%               8%                N/A      14%        At fiscal year end, the sum of the quarterly tax provision (benefit) for     each column equals the annual tax provision (benefit) for each column (a) computed in accordance with GAAP. In interim quarters, the sum of these     provisions (benefits) may not equal the total GAAP tax provision, and     this difference is allocated to tax provisions (benefits) among the     columns.     During the third quarter of fiscal 2014, we recorded a $66 million tax (b) benefit as a result of an agreement reached with the Internal Revenue     Service related to transfer pricing on our fiscal 2013 tax return. N/A - Not Applicable  Qualcomm Incorporated CONDENSED CONSOLIDATED BALANCE SHEETS (In millions, except per share data) (Unaudited)                                              June 29, 2014  September 29, 2013 ASSETS Current assets: Cash and cash equivalents                    $   7,944      $   6,142 Marketable securities                        10,209         8,824 Accounts receivable, net                     2,084          2,142 Inventories                                  1,185          1,302 Deferred tax assets                          451            573 Other current assets                         535            572 Total current assets                         22,408         19,555 Marketable securities                        14,563         14,440 Deferred tax assets                          1,195          1,059 Property, plant and equipment, net           2,555          2,995 Goodwill                                     4,183          3,976 Other intangible assets, net                 2,608          2,553 Other assets                                 843            938 Total assets                                 $   48,355     $   45,516 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable                       $   1,900      $   1,554 Payroll and other benefits related           740            839 liabilities Unearned revenues                            705            501 Other current liabilities                    2,676          2,319 Total current liabilities                    6,021          5,213 Unearned revenues                            3,168          3,666 Other liabilities                            379            550 Total liabilities                            9,568          9,429 Stockholders' equity: Qualcomm stockholders' equity: Preferred stock, $0.0001 par value; 8 shares —              — authorized; none outstanding Common stock and paid-in capital, $0.0001 par value; 6,000 shares authorized; 1,678    8,346          9,874 and 1,685 shares issued and outstanding, respectively Retained earnings                            29,618         25,461 Accumulated other comprehensive income       825            753 Total Qualcomm stockholders' equity          38,789         36,088 Noncontrolling interests                     (2)            (1) Total stockholders' equity                   38,787         36,087 Total liabilities and stockholders' equity   $   48,355     $   45,516    Qualcomm Incorporated CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) (Unaudited)                    Three Months Ended                Nine Months Ended                    June 29, 2014     June 30, 2013   June 29, 2014   June 30,                                                                      2013 Revenues: Equipment and      $    4,922        $   4,286       $  13,803       $ 12,474 services Licensing          1,884             1,957           5,992           5,911 Total revenues     6,806             6,243           19,795          18,385 Costs and expenses: Cost of equipment and services       2,740             2,497           7,929           7,106 revenues Research and       1,429             1,298           4,113           3,618 development Selling, general   582               613             1,745           1,861 and administrative Other              (20)              158             450             158 Total costs and    4,731             4,566           14,237          12,743 expenses Operating income   2,075             1,677           5,558           5,642 Investment income, 422               233             968             730 net Income from continuing         2,497             1,910           6,526           6,372 operations before income taxes Income tax expense (260)             (332)           (886)           (1,028) Income from continuing         2,237             1,578           5,640           5,344 operations Discontinued operations, net of —                 —               430             — income taxes Net income         2,237             1,578           6,070           5,344 Net loss attributable to    1                 2               3               8 noncontrolling interests Net income attributable to    $    2,238        $   1,580       $  6,073        $ 5,352 Qualcomm Basic earnings per share attributable to Qualcomm: Continuing         $    1.33         $   0.91        $  3.35         $ 3.11 operations Discontinued       —                 —               0.25            — operations Net income         $    1.33         $   0.91        $  3.60         $ 3.11 Diluted earnings per share attributable to Qualcomm: Continuing         $    1.31         $   0.90        $  3.28         $ 3.04 operations Discontinued       —                 —               0.25            — operations Net income         $    1.31         $   0.90        $  3.53         $ 3.04 Shares used in per share calculations: Basic              1,683             1,727           1,686           1,720 Diluted            1,714             1,765           1,718           1,760 Dividends per      $    0.42         $   0.35        $  1.12         $ 0.85 share announced Qualcomm Incorporated CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited)                       Three Months Ended              Nine Months Ended                       June 29, 2014    June 30,       June 29, 2014  June 30,                                        2013                          2013 Operating Activities: Net income            $     2,237      $    1,578     $      6,070   $ 5,344 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and      292              255            853            744 amortization expense Gain on sale of discontinued          —                —              (665)          — operations Revenues related to non-monetary          (31)             (31)           (93)           (93) exchanges Long-lived asset and goodwill impairment   164              163            642            191 charges Income tax provision (less than) in excess (24)             59             244            220 of income tax payments Non-cash portion of share-based           274              281            806            831 compensation expense Incremental tax benefits from         (70)             (75)           (239)          (178) share-based compensation Net realized gains on marketable securities (298)            (60)           (685)          (239) and other investments Impairment losses on marketable securities 11               27             170            49 and other investments Other items, net      46               5              88             34 Changes in assets and liabilities: Accounts receivable,  139              (21)           43             (445) net Inventories           (37)             (245)          116            (699) Other assets          9                90             136            (111) Trade accounts        286              221            321            598 payable Payroll, benefits and (235)            (151)          (337)          52 other liabilities Unearned revenues     (90)             (19)           (202)          (30) Net cash provided by  2,673            2,077          7,268          6,268 operating activities Investing Activities: Capital expenditures  (158)            (314)          (955)          (808) Purchases of available-for-sale    (2,488)          (4,663)        (10,315)       (12,112) securities Proceeds from sales and maturities of     4,060            2,805          9,744          7,337 available-for-sale securities Purchases of trading  (1,054)          (862)          (2,868)        (2,658) securities Proceeds from sales and maturities of     826              767            2,619          2,365 trading securities Purchases of other    (220)            —              (220)          — marketable securities Proceeds from sale of discontinued          —                —              788            — operations, net of cash sold Acquisitions and other investments,    (100)            (47)           (447)          (179) net of cash acquired Other items, net      40               (2)            102            68 Net cash provided (used) by investing   906              (2,316)        (1,552)        (5,987) activities Financing Activities: Borrowing under loans —                534            —              534 and debentures Repayment of loans    —                (492)          —              (492) and debentures Proceeds from issuance of common    194              217            1,147          964 stock Incremental tax benefits from         70               75             239            178 share-based compensation Repurchases and retirements of common (1,350)          (1,039)        (3,354)        (1,289) stock Dividends paid        (706)            (604)          (1,884)        (1,463) Other items, net      (184)            37             (65)           35 Net cash used by      (1,976)          (1,272)        (3,917)        (1,533) financing activities Changes in cash and cash equivalents held —                (46)           —              (15) for sale Effect of exchange rate changes on cash  4                (3)            3              (7) and cash equivalents Net increase (decrease) in cash    1,607            (1,560)        1,802          (1,274) and cash equivalents Cash and cash equivalents at        6,337            4,093          6,142          3,807 beginning of period Cash and cash equivalents at end of $     7,944      $    2,533     $      7,944   $ 2,533 period    Website: http://www.qualcomm.com  
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