QUALCOMM (QCOM)

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See all 4 Bulls Reasons Bulls: Reasons To Buy Owner of CDMA wireless technology with substantial patent protection 100% agree Owner of CDMA wireless technology with substantial patent protection Substantial Patent Protection: Qualcomm is the owner of CDMA (Code Division Multiple Access) Technology; although, in addition, a chip designer that sells proprietary chips incorporating CDMA technology, though it contracts the actual manufacture of those chips. In fact, the... read more View or Edit Reason 4 votes 100% agree Growth stock at a cheap valuation 100% agree Growth stock at a cheap valuation Qualcomm remains to this day a growth company whose stock is available today at an inexpensive price and cheap valuation; its current earnings peg its PE at a startlingly low 20! Factor in a growth rate of ~20% in revenues and net income, and investors find a company whose... read more View or Edit Reason 2 votes 100% agree Reaching possible inflection point 100% agree Reaching possible inflection point A lot of carriers in US and Europe are now beginning to roll out 3G Wireless services. This bodes well for Qualcomm which sees gains from either 3G standard be it CDMA2000/EVDO in US or WCDMA in Europe. Stock prices move, and (only) then do journalists seek explanations and... read more View or Edit Reason 1 votes 100% agree See all Bears Reasons Bears: Reasons To Sell Relationships with key customers have often been choppy 0% agree Relationships with key customers have often been choppy Relationships with key customers have often been choppy[1]. A significant portion of the Company’s revenues is concentrated with a limited number of customers as the worldwide market for wireless telecommunications products is dominated by a small number of large... read more View or Edit Reason 0 votes 0% agree Ill-will against QCOM has led potential partners to engineer around patents instead of partner 0% agree Ill-will against QCOM has led potential partners to engineer around patents instead of partner Qualcomm is an extremely controversial company, perceived as a newcomer and interloper by older, more established, and primarily European, companies. For years, they stubbornly refused to adopt CDMA while spending hundreds of millions trying to find ways to engineer around... read more View or Edit Reason 0 votes 0% agree Send the authors a comment or suggestion This article serves as a good primer and intro into the business. However, financials and charts... more [Dismiss] [Done] See All Suggestions

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[edit] Business Financials

Qualcomm operates in four segments:

[edit] Qualcomm CDMA Technologies (QCT)

[edit] QCT Segment Overview

QCT is a leading developer and supplier of CDMA-based integrated circuits and system software for wireless voice and data communications, multimedia functions and global positioning system products. QCT’s integrated circuit products and system software are used in wireless devices, particularly mobile phones, data cards and infrastructure equipment.

QCT revenues comprised 59%, 58% and 58% of total consolidated revenues in fiscal 2008, 2007 and 2006, respectively.

[edit] QCT 2008 Financials

QCT revenues for fiscal 2008 were $5.28 billion, compared to $4.33 billion for fiscal 2007. Equipment and services revenues, mostly consisting of Mobile Station Modem and accompanying radio frequency and power management integrated circuits, were $5.12 billion for fiscal 2008, compared to $4.20 billion for fiscal 2007. The increase in equipment and services revenue resulted primarily from an increase of $761 million related to higher unit shipments and an increase of $144 million related to the net effects of changes in product mix and the average sales prices of such products.

Approximately 253 million Mobile Station Modem integrated circuits were sold during fiscal 2008, compared to approximately 207 million for fiscal 2007.

QCT’s earnings before taxes for fiscal 2008 were $1.55 billion, compared to $1.30 billion for fiscal 2007. QCT’s operating income as a percentage of its revenues (operating margin percentage) was 29% in fiscal 2008, compared to 30% in fiscal 2007. The decrease in operating margin percentage was primarily due to increases in research and development and selling, general and administrative expenses, partially offset by an increase in the gross margin percentage.

[edit] Qualcomm Technology Licensing (QTL)

[edit] QTL Segment Overview

QTL grants licenses to use portions of Qualcomm's intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products, including, without limitation, products implementing cdmaOne, CDMA2000, WCDMA, CDMA TDD, GPRS/EDGE and/or OFDMA standards and their derivatives. QTL receives revenue from license fees as well as ongoing royalties based on worldwide sales by licensees of products incorporating or using Qualcomm owned intellectual property. License fees are fixed amounts paid in one or more installments. Ongoing royalties are generally based upon a percentage of the wholesale selling price of licensed products, net of certain permissible deductions (e.g. certain shipping costs, packing costs, VAT, etc.). Qualcomm reports that the vast majority of this segment's revenues are generated primarily through licensees’ sales of cdmaOne, CDMA2000 and WCDMA products.

QTL revenues comprised 31%, 33% and 30% of total consolidated revenues in fiscal 2008, 2007 and 2006, respectively.

[edit] QTL 2008 Financials

QTL revenues for fiscal 2008 were $2.77 billion, compared to $2.47 billion for fiscal 2007. QTL’s earnings before taxes for fiscal 2008 were $2.34 billion, compared to $2.23 billion for fiscal 2007. QTL’s operating margin percentage was 84% in fiscal 2008, compared to 90% in fiscal 2007. The increase in revenues primarily resulted from a $306 million increase in royalties reported to us by external licensees, which were $2.72 billion in fiscal 2008, compared to $2.42 billion in fiscal 2007. Revenues from amortized license fees were $49 million in fiscal 2008, compared to $50 million in fiscal 2007. The increase in earnings before taxes was primarily attributable to the increase in revenues, partially offset by increases in legal and bad debt expenses, which resulted in a corresponding decline in operating margin percentage.

[edit] Qualcomm Wireless & Internet (QWI)

[edit] QWI Segment Overview

QWI, which includes Qualcomm Enterprise Services (QES) (formerly Qualcomm Wireless Business Solutions, or QWBS), Qualcomm Internet Services (QIS) and Qualcomm Government Technologies (QGOV), generates revenues primarily through mobile communication products and services, software and software development aimed at support and delivery of wireless applications.

QWI revenues comprised 9%, 10% and 12% of total consolidated revenues in fiscal 2008, 2007 and 2006, respectively.

[edit] QWI 2008 Financials

QWI revenues for fiscal 2008 were $828 million, compared to $731 million for fiscal 2007. Revenues increased primarily due to increases of $78 million and $11 million in QIS and QES revenues, respectively. The increase in QIS revenues is primarily attributable to a $61 million increase in QChat revenues resulting from increased development efforts under a licensing agreement with Sprint and an $18 million increase in fees related to the expanded BREW customer base and products. The increase in QES revenues is primarily attributable to a $26 million increase in equipment and messaging revenues, partially offset by a $15 million decrease in amortization of deferred revenues related to historical equipment sales. QES shipped approximately 190,300 terrestrial-based and satellite-based systems during fiscal 2008, compared to approximately 140,300 terrestrial-based and satellite-based systems in fiscal 2007.

QWI’s earnings before taxes for fiscal 2008 were $88 million, compared to $78 million for fiscal 2007. QWI’s operating margin percentage was 11% in fiscal 2008, compared to 10% in fiscal 2007. The increase in QWI’s earnings before taxes was primarily due to a $54 million increase in QIS gross margin, largely resulting from the expanded BREW customer base and products and QChat development efforts, partially offset by a $29 million increase in QWI selling, general and administrative expenses and an $18 million decrease in QES gross margin. The increase in QWI’s operating margin percentage was primarily attributable to the increase in QIS gross margin, partially offset by the decrease in QES gross margin.

[edit] Qualcomm Strategic Initiatives (QSI)

[edit] QSI Segment Overview

QSI manages the Company’s strategic investment activities, including MediaFLO USA, Inc. (MediaFLO USA), the Company’s wholly-owned wireless multimedia operator subsidiary. QSI also makes strategic investments to promote the worldwide adoption of CDMA-based products and services. Qualcomm's current strategy is to invest in CDMA-based operators, licensed device manufacturers and start-up companies that are believed open new markets for CDMA technology, support the design and introduction of new CDMA-based products or possess unique capabilities or technology.

[edit] QSI 2008 Financials

QSI’s loss before taxes for fiscal 2008 was $240 million, compared to $133 million for fiscal 2007. QSI’s loss before taxes included a $118 million increase in their MediaFLO USA subsidiary’s loss before taxes comprised primarily of $70 million in cost of services revenues related to the commencement of their MediaFLO services in March 2008 and a $42 million increase in selling, general and administrative expenses, including $20 million related to cooperative marketing expenses. During fiscal 2007, QSI recorded $30 million in equity in losses of investees resulting primarily from the effect of investment losses recognized by Inquam and a venture fund investee in fiscal 2007, of which Qualcomm’s share was $20 million and $11 million, respectively. Equity in losses of investees was nominal during fiscal 2008.

[edit] Nonreportable Segments

Nonreportable segments include: the Qualcomm MEMS Technologies division, which is developing an IMOD display technology based on micro-electro-mechanical-system (MEMS) structure combined with thin film optics; the Qualcomm Flarion Technologies division, which is developing OFDM/OFDMA technologies; the MediaFLO Technologies division, which is developing our MediaFLO MDS and FLO technology and markets MediaFLO for deployment outside of the United States; and other product initiatives.

[edit] Trends and Forces

[edit] Qualcomm Benefits from 3G Adoption

The company may reap great benefits if WCDMA, a 3G technology, starts to take off."

[edit] Competition

[edit] Telecommunications

• QUALCOMM (QCOM)
• Motorola (MOT)
• Nokia (NOK)
• Cisco Systems (CSCO)
• Corning (GLW)
• Alcatel (ALU)

References:

• Qualcomm Global Site
• Qualcomm CDMA Technologies