Qualcomm Announces First Quarter Fiscal 2008 Results Revenues $2.44 Billion, Diluted EPS $0.46 Pro Forma Diluted EPS $0.52, up 2
SAN DIEGO, Jan. 23 /PRNewswire-FirstCall/ -- Qualcomm Incorporated (Nasdaq: QCOM) today announced results for the first fiscal quarter of 2008 ended December 30, 2007.
Total Qualcomm (GAAP) First Quarter Results
Total Qualcomm results are reported in accordance with generally accepted accounting principles (GAAP).
* The sequential decrease in net income and diluted earnings per share for total Qualcomm (GAAP) is due to a $331 million tax benefit recorded in the fourth fiscal quarter of 2007 as a result of completing audits of prior years' tax returns.
Qualcomm Pro Forma First Quarter Results
Pro forma results exclude the Qualcomm Strategic Initiatives (QSI) segment, certain estimated share-based compensation, certain tax items related to prior years and acquired in-process research and development (R&D) expense.
Detailed reconciliations between total Qualcomm (GAAP) results and cash flow and Qualcomm pro forma results and cash flow are included at the end of this news release. Prior period reconciliations are presented on our Investor Relations web page at www.qualcomm.com.
"We are pleased to report another strong quarter as the demand for CDMA-based devices, applications and services continues to accelerate around the world," said Dr. Paul E. Jacobs, chief executive officer of Qualcomm. "We continue to work closely with our partners to successfully provide the innovative wireless products and services consumers demand. Our results reflect another record quarter of chipset shipments and a 21 percent year-over-year growth in both revenues and pro forma earnings per share."
"Our continued focus on execution allows us to deliver excellent financial results despite the impact of defending our business model. The fundamental drivers of our business remain strong, and based on our current business outlook, we are pleased to reaffirm our fiscal 2008 pro forma earnings per share guidance."
Cash and Marketable Securities
Qualcomm's cash, cash equivalents and marketable securities totaled approximately $11.3 billion at the end of the first quarter of fiscal 2008, compared to $11.8 billion at the end of the fourth quarter of fiscal 2007 and $10.5 billion a year ago. As of December 30, 2007, $670 million remained authorized for repurchases under our stock repurchase program, net of a put option outstanding which could require us to repurchase 2.5 million shares of our common stock for approximately $94 million. Since December 30, 2007, we have repurchased and retired more than 17.7 million shares of our common stock for approximately $668 million. On January 16, 2008, we announced a cash dividend of $0.14 per share payable on March 28, 2008 to stockholders of record at the close of business on February 29, 2008.
Estimated Share-Based Compensation
Total Qualcomm (GAAP) net income for the first quarter of fiscal 2008 included estimated share-based compensation, net of tax, of $85 million or $0.05 per diluted share. This compares to $87 million, or $0.05 per diluted share, in the prior year quarter.
Pro forma R&D expenses increased 18 percent year-over-year, primarily due to additional engineering resources for the development of integrated circuit products, next generation CDMA and OFDMA technologies, the expansion of our intellectual property portfolio and other initiatives to support the acceleration of advanced wireless products and services, including lower cost devices, the integration of wireless with consumer electronics and computing, the convergence of multiband, multimode, multinetwork products and technologies, third party operating systems and services platforms. QSI R&D expenses were related to MediaFLO USA.
Pro forma selling, general and administrative (SG&A) expenses increased 9 percent year-over-year, primarily attributable to an increase in employee related expenses, partially offset by a decrease in bad debt expense. QSI SG&A expenses were primarily related to MediaFLO USA.
Effective Income Tax Rate
Our fiscal 2008 effective income tax rates are estimated to be 17 percent for total Qualcomm (GAAP) and 21 percent for Qualcomm pro forma, consistent with our prior guidance. The first quarter Qualcomm (GAAP) and pro forma effective tax rates of 18 percent and 22 percent, respectively, are higher than the expected annual effective tax rates primarily due to the revaluation of deferred tax assets.
Qualcomm Strategic Initiatives
The QSI segment includes our strategic investments, including our MediaFLO USA subsidiary, and related income and expenses. Total Qualcomm (GAAP) results for the first quarter of fiscal 2008 included $0.01 loss per share for the QSI segment. The first quarter of fiscal 2008 QSI results included $66 million in operating expenses, primarily related to MediaFLO USA.
Business Outlook
The following statements are forward looking and actual results may differ materially. The "Note Regarding Forward-Looking Statements" at the end of this news release provides a description of certain risks that we face, and our annual and quarterly reports on file with the Securities and Exchange Commission (SEC) provide a more complete description of risks. Due to their nature, certain income and expense items, such as realized investment gains or losses, gains and losses on certain derivative instruments or asset impairments, cannot be accurately forecast. Accordingly, we exclude forecasts of such items from our business outlook, and actual results may vary materially from the business outlook if we incur any such income or expense items. In addition, our outlook does not include provisions for the consequences of injunctions or significant possible damages or costs related to litigation matters unless damages have been awarded by a court.
We are engaged in multiple disputes with Nokia Corp., including arbitration over Nokia's obligation to pay royalties for the use of certain of our patents. As a result, under generally accepted accounting principles, we are not recording royalty revenue attributable to Nokia's sales after April 9, 2007 until an arbitrator (or court) awards damages or the disputes are otherwise resolved by agreement with Nokia. We have excluded from our fiscal 2008 revenue and earnings guidance our estimate of royalties which we believe Nokia is required to report and pay to us under our existing license agreement in fiscal 2008.
We continue to be engaged in litigation with Broadcom Corporation in various forums. On December 31, 2007, the Federal District Court in Santa Ana, California issued an injunction as to certain of our products, while enjoining but mandating a limited license with respect to other products. We continue the effort to design products to avoid the claims of the patents found by the jury to infringe Broadcom's patents. We have already announced that we expect devices to be available before the end of the first calendar quarter of 2008 that incorporate our chipsets which do not include the accused function of the 6,847,686 patent. We have filed a motion for stay and a motion asking that the judge clarify certain portions of his ruling, and we intend to appeal the adverse findings in this case. We have included our estimate of the impact of this ruling in our outlook for fiscal 2008.
The following table summarizes total Qualcomm (GAAP) and Qualcomm pro forma guidance for the second fiscal quarter and fiscal year 2008 based on the current business outlook. The pro forma business outlook provided below is presented in a manner that is consistent with the presentation of pro forma results provided elsewhere herein.
Conference Call
Qualcomm's first quarter fiscal 2008 earnings conference call will be broadcast live on January 23, 2008 beginning at 1:45 p.m. Pacific Standard Time (PST) on the Company's web site at: www.qualcomm.com. This conference call may contain forward-looking financial information. The conference call will include a discussion of "non-GAAP financial measures" as that term is 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 the other material financial and statistical information to be discussed in the conference call, will be posted on the Company's Investor Relations web site at www.qualcomm.com immediately prior to commencement of the call. A taped audio replay will be available via telephone on January 23, 2008 beginning at approximately 5:30 p.m. (PST) through February 23, 2008 at 9:00 p.m. (PST). To listen to the replay, U.S. callers may dial (800) 642-1687 and international callers may dial (706) 645-9291. U.S. and international callers should use reservation number 28814084. An audio replay of the conference call will be available on the Company's web site at www.qualcomm.com for two weeks following the live call.
Editor's Note: To view the web slides that accompany this earnings release and conference call, please go to the Qualcomm Investor Relations website at http://investor.qualcomm.com/results.cfm.
Qualcomm Incorporated (www.qualcomm.com) is a leader in developing and delivering innovative digital wireless communications products and services based on CDMA and other advanced technologies. Headquartered in San Diego, Calif., Qualcomm is included in the S&P 500 Index and is a 2007 FORTUNE 500(R) company traded on The Nasdaq Stock Market(R) under the ticker symbol QCOM.
Note Regarding Use of Non-GAAP Financial Measures
The Company presents pro forma financial information that is used by management (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 Qualcomm CDMA Technologies, Qualcomm Technology Licensing and Qualcomm Wireless & Internet segments, and (iii) to compare the performance and efficiency of these segments against each other and against competitors outside the Company. Pro forma measurements of the following financial data are used by the Company's management: revenues, R&D expenses, SG&A expenses, total operating expenses, operating income, net investment income, income before income taxes, effective tax rate, net income, diluted earnings per share, operating cash flow and free cash flow. Management 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 pro forma 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 pro forma financial measures applicable to the Company and its business segments.
Pro forma information used by management excludes the Qualcomm Strategic Initiatives (QSI) segment, certain estimated share-based compensation, certain tax items related to prior years and acquired in-process R&D. The QSI segment 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 are viewed by management as unrelated to the Company's operational performance. Estimated share-based compensation, other than amounts related to share-based awards granted under a bonus program that may result in the issuance of unrestricted shares of the Company's common stock, is excluded because management views the valuation of options and other share-based compensation as theoretical and unrelated to the Company's operational performance. Further, share-based compensation is affected by factors that are subject to change, including the Company's stock price, stock market volatility, expected option life, risk-free interest rates and expected dividend payouts in future years. Moreover, it is generally not an expense that requires or will require cash payment by the Company. Certain tax items related to prior years are excluded in order to provide a clearer understanding of the Company's ongoing tax rate and after tax earnings. Acquired in-process R&D is excluded because such expense is viewed by management as unrelated to the operating activities of the Company's ongoing core businesses.
The Company presents free cash flow, defined as net cash provided by operating activities less capital expenditures, to facilitate an understanding of the amount of cash flow generated that is available to grow its business and to create long-term shareholder value. The Company believes that this presentation is useful in evaluating its operating performance and financial strength. In addition, management uses this measure to evaluate the Company's performance, to value the Company and to compare its operating performance with other companies in the industry.
The non-GAAP pro forma 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, "pro forma" is not a term defined by GAAP, and, as a result, the Company's measure of pro forma results might be different than similarly titled measures used by other companies. Reconciliations between total Qualcomm (GAAP) results and Qualcomm pro forma results and between total Qualcomm (GAAP) cash flow and Qualcomm pro forma cash flow are presented herein.
Note Regarding Forward-Looking Statements
In addition to the historical information contained herein, this news release contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks associated with: the rate of deployment of our technologies in wireless networks and of 3G wireless communications, equipment and services, including CDMA2000 1X, 1xEV-DO, WCDMA, HSPA and OFDMA both domestically and internationally; attacks on our business model, including results of current and future litigation and arbitration proceedings as well as actions of governmental or quasi-governmental bodies, and the costs we incur in connection therewith, including potentially damaged relationships with customers and operators who may be impacted by the results of these proceedings; fluctuations in the demand for products, services or applications based on our technologies; our dependence on major customers and licensees; foreign currency fluctuations; strategic loans, investments and transactions the Company has or may pursue; our dependence on third party manufacturers and suppliers; our ability to maintain and improve operational efficiencies and profitability; the development, deployment and commercial acceptance of the MediaFLO USA network and FLO(TM) technology; as well as the other risks detailed from time-to-time in the Company's SEC reports.
(C) 2008 Qualcomm Incorporated. All rights reserved. Qualcomm is a registered trademark of Qualcomm Incorporated. MediaFLO and FLO are trademarks of Qualcomm Incorporated. CDMA2000 is a registered trademark of the Telecommunications Industry Association. All other trademarks are the property of their respective owners.
SOURCE Qualcomm Incorporated
