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Qualcomm to Return 75% of Free Cash Flow to Investors

Qualcomm Inc. (QCOM), the largest maker of chips for smartphones, plans to return about 75 percent of free cash flow to investors in the form of dividends and buybacks, said Chief Executive Officer Paul Jacobs.

The company is aiming to bolster dividend payments to shareholders at a faster pace than earnings are increasing, Jacobs said today at a company event in New York.

Jacobs and other Qualcomm executives are making presentations to investors to explain how the company can reignite revenue expansion. Earlier this month, Qualcomm forecast sales growth of about 8 percent for fiscal 2014, following average gains of 31 percent over the prior three years. Demand for smartphones remains robust, Jacobs said.

“The numbers are still staggering,” he said. “We are going to get a lot more people onto mobile broadband systems between now and 2017.”

Qualcomm’s indicated dividend yield is 1.97 percent, according to data compiled by Bloomberg. That compares with 3.66 percent at Intel Corp., the world’s largest chipmaker. In fiscal 2013, San Diego-based Qualcomm returned 86 percent of free cash flow, or $6.7 billion, to investors.

Qualcomm shares fell 1.1 percent to $71.03 at the close in New York. The stock has gained 15 percent this year, trailing the 25 percent gain for the Standard & Poor’s 500 Index.

The chipmaker, trying to extend its lead in mobile phones, introduced a new Snapdragon processor today that can handle the highest quality video and higher resolution photos.

Faster Downloads

The company also said it will begin selling a new modem for mobile phones that will be able to download data at speeds as fast as 300 megabits per second, exceeding most traditional broadband connections. The Gobi 9x35 modem will have the ability to combine data sent over different frequency ranges into one stream.

As part of its attempts to expand into new areas, Qualcomm is also offering a chip, based on its mobile phone products, that will enable home electronics to handle high-speed data and functions such as home automation, said Amir Faintuch, president of Qualcomm Atheros. Current devices are limited by their lack of computing power, he said.

Jacobs said the company isn’t currently considering a large acquisition. Instead, Qualcomm intends to use domestic cash and short-term investments, which total $8.1 billion, to fund dividends and share buybacks and may take on debt for future payouts, said Chief Financial Officer George Davis. The company has $21.3 billion in additional cash overseas.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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