Qualcomm raises its financial outlook

SAN DIEGO, Dec. 20 /PRNewswire-FirstCall/ -- Qualcomm Incorporated(Nasdaq: QCOM [1]) today updated its financial guidance for the first fiscalquarter ending December 30, 2007. The following statements are forward looking and actual results maydiffer materially. Please see "Note Regarding Forward-Looking Statements"at the end of this news release for a description of certain risk factorsand Qualcomm's annual and quarterly reports on file with the Securities andExchange Commission (SEC) for a more complete description of risks that mayaffect the forward looking statements. Pro Forma Defined Pro forma results and guidance exclude the Qualcomm StrategicInitiatives (QSI) segment, certain estimated share-based compensation,certain tax adjustments related to prior years and acquired in-processresearch and development (R&D) expense. Business Outlook Based on the current business outlook, we now anticipate first fiscalquarter Qualcomm pro forma revenues to be at the high end of the priorguidance of approximately $2.3 to $2.4 billion compared to $2.02 billion inthe year ago quarter. We now anticipate first fiscal quarter Qualcomm proforma diluted earnings per share to be approximately $0.52 to $0.53compared to $0.43 in the year ago quarter. This estimate is based on theshipment of approximately 78 million Mobile Station Modem(TM) (MSM(TM))chips during the quarter as compared to our prior estimate of 74 to 78million units. We previously anticipated first fiscal quarter Qualcomm proforma diluted earnings per share of approximately $0.50 to $0.52. The majority of our licensees have reported royalties in the firstfiscal quarter for products shipped in the September quarter. Based onthese reports and our own estimate of unreported activity, we anticipateSeptember quarter estimated shipments of approximately 95 million CDMAunits (CDMA2000(R) and WCDMA) for the total market at an estimated averageselling price of approximately $211, compared to our prior estimate ofapproximately 95 to 98 million units at an average selling price ofapproximately $212. Approximately 74 million CDMA units were shipped in theyear ago quarter. "Demand for CDMA-based devices and services continues to accelerate ata rapid pace," said Dr. Paul E. Jacobs, chief executive officer ofQualcomm. "Our updated guidance reflects stronger than anticipated demandacross all tiers of CDMA2000 chipsets with particular strength in the lowend as we continue to bridge the digital divide in emerging markets.September quarter handset shipment estimates indicate strong year-over-yeargrowth across all major regions as well as sequential growth in NorthAmerica, Europe and emerging markets. Even with this continued marketgrowth, we believe the worldwide CDMA inventory channel remains at lessthan 20 weeks." "Together with our partners we continue to innovate and bring many newand exciting products and services to the global wireless marketplace. Wewill continue to execute and drive growth in 3G convergence and nextgeneration wireless technologies." The following table summarizes total Qualcomm (GAAP) and Qualcomm proforma guidance for the first fiscal quarter of 2008 based on the currentbusiness outlook. The pro forma business outlook provided below ispresented consistent with the presentation of pro forma results elsewhereherein. Due to their nature, certain income and expense items, such as realizedinvestment gains or losses gains and losses on certain derivativeinstruments 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 weincur any such income or expense items. In addition, our outlook does notinclude provisions for the consequences of injunctions or significantpossible damages related to litigation matters unless damages have beenawarded by a court. The variability of our estimated quarterly CDMA devicevolumes and ASPs may widen due to the increased use of our own estimates ofunreported activity. Royalty revenue is recognized based on royaltiesreported by our licensees; therefore, such estimates of unreported activitydo not impact our ability to accurately report revenues. Despite recent credit market volatility, our diversified cashinvestment portfolio returns are not expected to change our earningsguidance for the first fiscal quarter of 2008. We are engaged in multiple disputes with Nokia Corp., includingarbitration over Nokia's obligation to pay royalties for the use of certainof our patents. As a result, under generally accepted accountingprinciples, we are not recording royalty revenue attributable to Nokia'ssales after April 9, 2007 until an arbitrator (or court) awards damages orthe disputes are otherwise resolved by agreement with Nokia. We haveexcluded from our fiscal 2008 revenue and earnings guidance our estimate ofroyalties which we believe Nokia is required to report and pay to us underour existing license agreement in fiscal 2008 of approximately $0.25-$0.30diluted earnings per share.
The following estimates are approximations and are based on the currentbusiness outlook: Business Outlook Summary FIRST FISCAL QUARTER Prior Prior Current Year Guidance Guidance Q1'07 Q1'08 Q1'08 Results Estimates Estimates Qualcomm Pro Forma At the high end Revenues $2.02B $2.3B - $2.4B of prior guidance Year-over-year change increase 14% - 19% Diluted earnings per share (EPS) $0.43 $0.50 - $0.52 $0.52 - $0.53 Year-over-year change increase 16% - 21% increase 21% - 23% Total Qualcomm (GAAP) At the high end Revenues $2.02B $2.3B - $2.4B of prior guidance Year-over-year change increase 14% - 19% Diluted earnings per share (EPS) $0.38 $0.42 - $0.44 $0.45 - $0.46 Year-over-year change increase 11% - 16% increase 18% - 21% Diluted EPS attributable to QSI ($0.01) ($0.03) ($0.02) Diluted EPS attributable to estimated share-based compensation ($0.05) ($0.05) ($0.05) Diluted EPS attributable to tax items related to prior years $0.02 n/a n/a Metrics MSM Shipments approx. 59M approx. 74M - 78M approx. 78M CDMA/WCDMA handset units shipped (1) approx. 74M* (2) approx. 95M - 98M* approx. 95M* CDMA/WCDMA handset unit wholesale average selling price (1) approx. $208* (2) approx. $212* approx. $211* * Shipments in Sept. quarter, reported in Dec. quarter (1) CDMA/WCDMA handset unit shipments and average selling prices are provided for the total market. (2) We perform periodic audits of the royalties payable by our licensees. As a result of our audit process, we determined during the fourth quarter of fiscal 2007 that total CDMA-based handset unit shipments and average selling prices (ASPs) should be adjusted for certain periods. The adjustments related only to handset shipments and ASPs and did not impact the amount or timing of our revenue. Historical units presented herein for Q1'07 have been revised to reflect these adjustments. Sums may not equal totals due to rounding. Qualcomm Incorporated (http://www.qualcomm.com [2]) is a leader indeveloping and delivering innovative digital wireless communicationsproducts and services based on CDMA and other advanced technologies.Headquartered in San Diego, Calif., Qualcomm is included in the S&P 500Index and is a 2007 FORTUNE 500(R) company traded on The Nasdaq StockMarket(R) under the ticker symbol QCOM. Note Regarding Use of Non-GAAP Financial Measures The Company presents pro forma financial information that is used bymanagement (i) to evaluate, assess and benchmark the Company's operatingresults on a consistent and comparable basis, (ii) to measure theperformance and efficiency of the Company's ongoing core operatingbusinesses, including the Qualcomm CDMA Technologies, Qualcomm TechnologyLicensing and Qualcomm Wireless & Internet segments, and (iii) to comparethe performance and efficiency of these segments against each other andagainst competitors outside the Company. Pro forma measurements of thefollowing 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, netincome, diluted earnings per share, operating cash flow and free cash flow.Management is able to assess what it believes is a more meaningful andcomparable set of financial performance measures for the Company and itsbusiness segments by using pro forma information. As a result, managementcompensation decisions and the review of executive compensation by theCompensation Committee of the Board of Directors focus primarily on proforma financial measures applicable to the Company and its businesssegments. Pro forma information used by management excludes the QualcommStrategic Initiatives (QSI) segment, certain estimated share-basedcompensation, certain tax items related to prior years and acquiredin-process R&D. The QSI segment is excluded because the Company expects toexit its strategic investments at various times and the effects offluctuations in the value of such investments are viewed by management asunrelated to the Company's operational performance. Estimated share-basedcompensation, other than amounts related to share-based awards grantedunder the executive bonus program, is excluded because management views thevaluation of options and other share-based compensation as theoretical andunrelated to the Company's operational performance. Further, share-basedcompensation is affected by factors that are subject to change, includingthe 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 cashpayment by the Company. Certain tax items related to prior years areexcluded in order to provide a clearer understanding of the Company'songoing tax rate and after tax earnings. Acquired in-process R&D isexcluded because such expense is viewed by management as unrelated to theoperating activities of the Company's ongoing core businesses. The non-GAAP pro forma financial information presented herein should beconsidered in addition to, not as a substitute for, or superior to,financial measures calculated in accordance with GAAP. In addition, "proforma" is not a term defined by GAAP, and, as a result, the Company'smeasure of pro forma results might be different than similarly titledmeasures 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 newsrelease contains forward-looking statements that are subject to risks anduncertainties. Actual results may differ substantially from those referredto herein due to a number of factors, including but not limited to risksassociated with: the rate of deployment of our technologies in wirelessnetworks and of 3G wireless communications, equipment and services,including CDMA2000 1X, 1xEV-DO, WCDMA, HSPA and OFDMA both domestically andinternationally; our dependence on major customers and licensees; attackson our business model, including results of current and future litigationand arbitration proceedings as well as actions of governmental orquasi-governmental bodies, and the costs we incur in connection therewith,including potentially damaged relationships with customers and operatorswho may be impacted by the results of these proceedings; fluctuations inthe demand for products, services or applications based on ourtechnologies; foreign currency fluctuations; strategic loans, investmentsand transactions the Company has or may pursue; our dependence on thirdparty manufacturers and suppliers; our ability to maintain and improveoperational efficiencies and profitability; the development, deployment andcommercial acceptance of the MediaFLO(TM) USA network and FLO(TM)technology; as well as the other risks detailed from time-to-time in theCompany's SEC reports. (C) 2007 Qualcomm Incorporated. All rights reserved. Qualcomm is aregistered trademark of Qualcomm Incorporated. CDMA2000(R) is a registeredtrademark of the Telecommunications Industry Association. All othertrademarks are the property of their respective owners.
Reconciliation of Non-GAAP Financial Measure Related to Prior Periods (In millions, except per share data) First Quarter - Fiscal Year 2007 Qualcomm Estimated Total Pro Share-Based Tax Qualcomm Segments Forma Compensation (1) Items QSI (2) (GAAP) Revenues $2,019 $- $- $- $2,019 EBT 952 (130) - (43) 779 Net income (loss) 722 (86) 33 (21) 648 Diluted EPS $0.43 $(0.05) $0.02 $(0.01) $0.38 Diluted shares used 1,685 1,685 1,685 1,685 1,685 (1) Certain share-based compensation is included in operating expenses as part of employee-related costs but is not allocated to the Company's segments as such costs are not considered relevant by management in evaluating segment performance. (2) At fiscal year-end, the sum of the quarterly tax provisions for each column, including QSI, equals the annual tax provisions for each column computed in accordance with GAAP. In interim quarters, the tax provision for the QSI operating segment is computed by subtracting the tax provision for Qualcomm pro forma, the tax items column and the tax provisions related to estimated share-based compensation and in-process R&D from the tax provision for total Qualcomm (GAAP). N/M - Not Meaningful Sums may not equal totals due to rounding. Qualcomm Contact: John Gilbert, Investor Relations Phone: 1-858-658-4813 Email: ir@qualcomm.com [3]