Qualcomm Inc. F2Q10 (Qtr End 28/03/2010) Earnings Call Transcript

Qualcomm Inc. F2Q10 (Qtr End 28/03/2010) Earnings Call Transcript
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Qualcomm Inc. (QCOM)

F2Q10 Earnings Call

April 21, 2010; 04:45pm ET

Executives

Steven Altman - President

Steve Mollenkopf - EVP, President, Qualcomm CDMA Technologies

Derek Aberle - EVP, President, Qualcomm Technology Licensing

Bill Keitel - EVP & Chief Financial Officer

Warren Kneeshaw, Vice President of Industrial Relations

Analysts

Brian Modoff - Deutsche Bank

Tim Luke - Barclays Capital

Ehud Gelblum - Morgan Stanley

Mike Walkley - Piper Jaffray

Stacy Rasgon - Sanford Bernstein

Simona Jankowski - Goldman Sachs

Tal Liani - Bank of America

Kulbinder Garcha - Credit Suisse

Arnab Chanda - Roth Capital

Tavis Mccourt - Morgan Keegan

Edward Snyder - Charter Equity Research

Rod Hall - JP Morgan

Presentation

Operator

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Ladies and gentleman, thank you for standing. Welcome to the Qualcomm second quarter fiscal 2010 conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions)

I would now like to turn the call over to Ms. Warren Kneeshaw, Vice President of Industrial Relations. Mr. Kneeshaw, please go ahead.

Warren Kneeshaw

Thank you and good afternoon everyone. Today’s call will include prepared remarks by Dr. Paul Jacobs, Steve Mollenkopf, and Bill Keitel. In addition Steven Altman, Don Rosenberg and Derek Aberle will join the question-and-answer session.

An internet presentation and audio broadcast accompany this call and you can access them by visiting

www.qualcomm.com

. During this conference call if we use any non-GAAP financial measures as defined by the SEC and Regulation G, you can find the required reconciliations to GAAP on our website. I’d also like to direct you to our 10-Q and earnings release which were filed and furnished respectively with the SEC today and are available on our website.

We may make forward-looking statement relating to our expectations and other future events that may differ materially from Qualcomm’s actual results. Please review our SEC filings for a detailed presentation of each of our businesses and associated risks and other important factors that may cause our actual results to differ from these forward-looking statements.

Now it is my pleasure to introduce Qualcomm’s Chairman and Chief Executive Officer, Dr. Paul Jacobs.

Dr. Paul Jacobs

Thanks Warren and good afternoon everyone. I am very happy to be with you this quarter. I am also very pleased with our financial performance this quarter. Our revenues of $2.66 billion and pro forma earnings per share of $0.59 were very strong and exceeded the high end of our prior guidance. These results were driven by healthy 3G device shipments and greater than expected demand for our chipsets.

We also returned approximately $2 billion in capital to share holders this past quarter, including $1.7 billion in share repurchases. We announced a 12% increase in the dividend, and additional Board of Directors authorization of $3 billion for share repurchases. As I indicated we had a very strong quarter.

Given our knowledge of how the quarter was developing, we do not think it will appropriate until after our earnings report to implement our 10B5-1 plan that we used to execute on the new buyback authority. We anticipate getting that plan finalized in the near future, and anticipate the buybacks with commence under it as appropriate.

The device market has developed much as we had expected, with a bit stronger December quarter for CDMA based devices across most regions. In fact despite a challenging economic environment in calendar year 2009, we now estimate that 3G-device shipments increased by approximately 7% for the year based on mid-point estimate. In addition in calendar year 2010, we estimated 3G device shipments will grow approximately 23% based on the mid-point of our current estimate.

According to wireless intelligence, 3G subscribers have now surpassed $1 billion worldwide. The 3G option underway in India, the global 3G footprint is a step closer to completion.

We announced today that we are modifying the information we provide on our licensing business, including now the addition of total subscribe unit sales as reported to us by our subscriber licensees. Bill is going to be providing more detail on this topic, but with respect to ASP of the unit shipment, we believe we have improved our estimating process and we will continue to provide quarterly reports on a historical basis, fiscal year guidance in the case of ASPs, and calendar guidance in the case of unit shipment.

In respect to our current guidance for ASPs, we do expect that fiscal 2010 ASP’s will be down slightly from previous expectation. Chip business continues to execute well and we are pleased with the demand we are seeing across all products tiers, and what continues to be very competitive 3G chipset market.

Our licensing business continues to expand, particularly in China, where we have signed seven new license agreements so far this year, leaving our total at over 55 Chinese licensees.

In terms of key industry trends, the smartphone segment is continuing its strong momentum, driven by increased innovation and competition, and is taking an increasing share of what typically has been the feature phone segment. According to informers, smartphone sales are projected to increase approximately 33% year-over-year in 2010. That number would be even greater if they had included Google mp based smartphones in their numbers.

We are also pleased to see more and more operators experimenting with variable pricing plans with 3G data services. As you see, this is one of the catalysts for ramping 3G adoption going forward. Across the industry, device manufacturers continue to have 3G connectivity. They are growing a list of products outside the traditional handset market. While USB dongles and embedded notebooks continue to drive the majority of non-handset 3G-unit volumes, new and emerging categories are gaining interaction.

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