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Qualcomm to Start $4 Billion Stock Buyback, Boost Dividend

Photographer: Kevork Djansezian/Getty Images

JabbaWockeez with the Qualcomm Snapdrogan processor at the 2012 International Consumer Electronics Show on Jan. 10, 2012 in Las Vegas. Close

JabbaWockeez with the Qualcomm Snapdrogan processor at the 2012 International Consumer... Read More

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Photographer: Kevork Djansezian/Getty Images

JabbaWockeez with the Qualcomm Snapdrogan processor at the 2012 International Consumer Electronics Show on Jan. 10, 2012 in Las Vegas.

Qualcomm Inc. (QCOM), the world’s biggest maker of mobile-phone chips, said it plans to buy back as much as $4 billion of shares and raise its dividend by 16 percent to return cash to shareholders as earnings increase.

The quarterly cash dividend will expand to 25 cents from 21.5 cents, San Diego-based Qualcomm said today in a statement. The buyback authorization replaces a $3 billion program, which had $948 million of repurchase authority remaining.

Last month, Qualcomm increased sales and profit targets for this year on rising demand for smartphones, led by strength in India and China. Qualcomm said Feb. 1 that smartphone demand is boosting chip sales and licensing income. The company owns code division multiple access, or CDMA, technology and can levy royalties on all so-called third-generation phones and networks, providing most of its profit. It is also the largest seller of chips that connect phones to mobile networks.

“They’ve been a little more hesitant to return large amounts of cash to shareholders, primarily because lots of it is offshore,” Stacy Rasgon, a Sanford C. Bernstein & Co. analyst in New York with an “outperform” rating on the stock, said in a phone interview. “It’s a high-quality problem -- they generate so much cash that they don’t know what to do with it.”

Qualcomm was unchanged at $62.11 at 9:32 a.m. New York time. Before today, the stock had risen 14 percent this year.

IPhone Demand

Qualcomm had about $22 billion of cash at the end of last quarter, with about $6 billion held in the U.S., Chief Financial Officer William Keitel said Feb. 1. The company prefers to retain $5 billion domestically as an “appropriate level of liquidity,” Keitel said then.

By the end of 2011, one out of every three mobile phones shipped worldwide was a smartphone, and global shipments of the devices surged 55 percent to 158 million units in the fourth quarter, led by demand for Apple Inc. (AAPL)’s iPhone 4S, according to research firm IDC.

Smartphone demand is increasing as the devices become more affordable, encouraging users to upgrade to handsets on which they can browse the Web and send e-mail. Existing users are also trading up to more powerful smartphones such as the iPhone 4S, which went on sale in October. Apple sold 37 million iPhones last quarter, helping the Cupertino, California-based company to double its profit in the period.

To contact the reporter on this story: Beth Jinks in New York at bjinks1@bloomberg.net

To contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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