This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Qualcomm Inc. (QCOM) on November 6, 2008.
Management:
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VP of IR: John Gilbert
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CEO: Paul E. Jacobs
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EVP and President, Qualcomm CDMA Technologies: Steve Mollenkopf
Key Investors Issues
- Earnings were $3.16 billion or $1.90 a share down 4% from $3.3 billion or $1.99 a share in the prior year.
- Revenues increased 26% to $11.1 billion from $8.87 billion in 2007.
- The firm paid $982 million to shareholders through cash dividends and repurchased of 43 million shares of stock for $1.67 billion.
Fourth Quarter Highlights
- Revenue was $3.33 billion, up 45% from $2.3 billion in 2007.
- Net income was $878 million or 52 cents a share from $1.13 billion or 68 cents a share in the prior year, a 22% decrease.
Full Year Highlights:
Earnings were $3.16 billion or $1.90 a share down 4% from $3.3 billion or $1.99 a share in the prior year due to a 24% increase in operating expenses.
- Revenues increased 26% to $11.1 billion from $8.87 billion in 2007 due to higher volumes.
- Pro forma net investment income was $80 million, down significantly year-over-year due to a $502 million charge in other than temporary impairments, offset by $582 million of other investment income.
- Except for approximately $95 million of impairments related to Fannie and Freddie preferreds, Lehman and Washington Mutual Bank, all other impaired fixed income securities continue and we expect to continue paying interest in principle.
- The firm has increased the defensive posture of its investments by reducing equities, moving more than a billion dollars from prime money-market funds to government funds and investing more recent significant cash flows into government funds.
Approximately 85% of cash and marketable securities are invested in fixed income securities of which approximately 55% is in money market securities.
- Operating cash flow was $3.56 billion or approximately 32% of revenue.
- The firm returned approximately $2.65 billion capital to shareholders through the payment of $982 million in cash dividends and the repurchase of 43 million shares of stock for $1.67 billion.
- Given the current cash position, the firm may reconsider the rate of repurchase as well as the size of the repurchase program.
QCT shipped a record 336 million MSMs and recorded a 27% operating margin on the volume ramp, particularly in EV-DO and WCDMA.
- The licensing business also performed well as QTLs operating margin was 87% for fiscal 2008.
- The average selling price of CDMA devices was $219 for the fiscal year, up approximately 2% year-over-year with the increase positively impacted by a weaker dollar.
Key Business Highlights:
- The firm realized $336 million CDMA baseband chips shipped by QCT, an increase of 33% from the prior year.
- In the licensing business, it completed the settlement and licensing agreements with Nokia and now has over 155 licensees, including over 95 WCDMA and TD-SCDMA licensees.
It continues to make progress in signing OFDMA licensees and now have eight royalty-bearing single-mode OFDMA licensees, including with Nokia and one other major handset OEM.
- With respect to LTE, R&D efforts continue to remain on track with plans to sample the multi-mode 3G LTE chips in the second quarter of 2009.
- Firm will continue to make strategic investments in long-term program to capitalize on opportunities in new geographies, with new partners, in new devices such as mobile computing and network consumer electronics.
Macroeconomic Outlook:
- According to the CDG and the GSA, there are over 500 CDMA-based 3G networks that have been launched as of October 2008, and operators continue to deploy HSUPA and EV-DO Revision A.
- Over 800 HSDPA devices and over 525 EV-DO devices have been introduced into the market cumulatively.
- In addition, nearly 100 HSUPA devices and over 90 EV-DO Revision A devices have been introduced for subscribers to utilize the latest in mobile broadband networks.
As a result of the broad 3G network deployments and wide variety of feature-rich and competitively-priced devices worldwide, 3G subscribers grew 33% year-over-year according to Wireless Intelligence.
