Qualcomm Inc (QCOM)

[khemara_qc]

QUALCOMM Increases Financial Guidance for the Fourth Quarter and Fiscal Year Ending September 25, 2005
Wednesday September 21, 8:30 am ET

http://biz.yahoo.com/prnews/050921/law044.html?.v=29

SAN DIEGO, Sept. 21 /PRNewswire-FirstCall/ -- QUALCOMM Incorporated (Nasdaq: QCOM - News), a leading developer and innovator of Code Division Multiple Access (CDMA) and other advanced wireless technologies, today increased its financial guidance for the fourth fiscal quarter and fiscal year ended September 25, 2005.

The following statements are forward-looking and actual results may differ materially. Please see Note Regarding Forward-Looking Statements at the end of this news release for a description of certain risk factors and QUALCOMM's annual and quarterly reports on file with the Securities and Exchange Commission (SEC) for a more complete description of risks.

Pro Forma Defined

Consistent with the second and third quarters of 2005, pro forma results exclude the QUALCOMM Strategic Initiatives (QSI) segment and one-time tax benefits related to fiscal 2004 recorded in the second and third quarters of fiscal 2005, and year-over-year changes are calculated as if the "New Method"(1) of recording royalties had been in use in the prior year.

Business Outlook

Based on the current business outlook, we are increasing our revenue and earnings guidance for the fourth fiscal quarter. We now anticipate fourth fiscal quarter revenues for QUALCOMM pro forma to be in the range of approximately $1.48 -- $1.58 billion, an increase of approximately 8 -- 15 percent year-over-year. We now anticipate fourth fiscal quarter pro forma diluted earnings per share to be approximately $0.32 -- $0.33, an increase of approximately 7 -- 10 percent year-over-year. This estimate is based on the shipment of approximately 40 million MSM phone chips during the quarter compared to 39 million in the year ago quarter. On July 20, 2005, we estimated fourth fiscal quarter pro forma revenues in the range of approximately $1.43 to $1.53 billion. We previously anticipated fourth fiscal quarter pro forma diluted earnings per share of approximately $0.29 -- $0.31 and estimated shipments of approximately 38 to 40 million MSM phone chips.

The majority of our licensees have reported royalties in our fourth fiscal quarter for products shipped in the June quarter. Based on these reports we estimate June quarter shipments of approximately 48 million CDMA and WCDMA units at an average selling price of approximately $213 compared to our prior estimate of approximately 43 -- 45 million units at an average selling price of approximately $215.

"3G CDMA market momentum is strong," said Dr. Paul E. Jacobs, chief executive officer of QUALCOMM. "We are seeing strength across many geographies in shipments of 3G CDMA handsets. During the June quarter, both CDMA and WCDMA handset shipments increased sequentially in most regions of the world. The increase of 3 -- 4 million handsets, as compared to our prior guidance, is primarily attributable to greater CDMA2000 handset shipments to North America, Latin America, and the rest of the world. We are very pleased with the degree of traction our CDMA2000 1x EV-DO and WCDMA chipset solutions have received from device manufacturers. Consumers continue upgrading devices to take advantage of the many data services and advanced features that are now available on 3G CDMA networks."

Our pro forma earnings estimate for the fourth fiscal quarter includes $0.02 reduction in earnings per share for $35 million of additional tax expense for fiscal 2005 related to our decision to repatriate on a one-time basis $500 million of foreign earnings as provided for under the American Jobs Creation Act of 2004, and $0.01 increase in earnings per share for $18 million of investment income related to the expiration of a put option sold in connection with our stock repurchase program which expired in September 2005.

The following table summarizes total QUALCOMM and pro forma results for fiscal 2004 and guidance based on the current business outlook for fiscal 2005. Total QUALCOMM results for fiscal 2004 reflect only partial economic performance of the Company's licensing business in the fourth quarter of fiscal 2004 due to the prospective change to the New Method during that period.

Due to their nature, certain income and expense items such as realized investment gains or losses in QSI and asset impairments cannot be accurately forecast. Accordingly, the Company excludes forecasts of such items from its business outlook, and actual results may vary materially from the business outlook if the Company incurs any such income or expense items.



The following estimates are approximations and are based on the current
business outlook:



Business Outlook Summary

FOURTH QUARTER
Prior Year Prior Guidance Current Guidance
Q4'04 Q4'05 Q4'05
Results Estimates Estimates
QUALCOMM Pro Forma
Revenues $1.4B $1.43B - $1.53B $1.48B - $1.58B
Year-over-year
change increase 4% - 12% increase 8% - 15%
Diluted earnings
per share (EPS) $0.30 $0.29 - $0.31 $0.32 - $0.33
Year-over-year
change decrease 3% - increase 7% - 10%
increase 3%

Total QUALCOMM
Revenues $1.1B $1.43B - $1.53B $1.48B - $1.58B
Year-over-year
change increase 28% - 37% increase 32% - 41%
Diluted earnings
per share (EPS) $0.23 $0.28 - $0.30 $0.32 - $0.33
Year-over-year
change increase 22% - 30% increase 39% - 43%
EPS attributable
to QSI $0.03 ($0.01) $0.00

Metrics
MSM Shipments approx. 39M 38M - 40M 40M
CDMA/WCDMA
handset
units shipped
(Jun Qtr) approx. 40M 43M - 45M 48M
CDMA/WCDMA
handset
unit wholesale
average
selling price
(Jun Qtr) approx. $212 $215 $213



FISCAL YEAR
Prior Year Prior Guidance Current Guidance
FY 2004 FY 2005 FY 2005
Results Estimates Estimates
QUALCOMM Pro Forma
Revenues $5.0B $5.55B - $5.65B $5.6B - $5.7B
Year-over-year
change increase 10% - 12% increase 11% - 13%
Diluted earnings
per share (EPS) $1.07 $1.13 - $1.15 $1.16 - $1.17
Year-over-year
change increase 6% - 7% increase 8% - 9%

Total QUALCOMM
Revenues $4.9B $5.55B - $5.65B $5.6B - $5.7B
Year-over-year
change increase 14% - 16% increase 15% - 17%
Diluted earnings
per share (EPS) $1.03 $1.22 - $1.24 $1.26 - $1.27
Year-over-year
change increase 18% - 20% increase 22% - 23%
EPS attributable
to QSI $0.01 $0.05 $0.06
EPS attributable
to tax benefits
related to 2004 $0.04 $0.04

Metrics
Fiscal year*
CDMA/WCDMA
handset unit
wholesale
average
selling
price approx. $205 $215 $215


* Shipments in Sep. to June quarters, reported Dec. to Sep.

Sums may not equal totals due to rounding



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 2005 FORTUNE 500® company traded on The Nasdaq Stock Market® under the ticker symbol QCOM.

Note Regarding Use of Non-GAAP Financial Measures

Pro forma financial measurements are used by management to evaluate, assess and benchmark the Company's operating results, and the Company believes that pro forma reporting represents relevant and useful information that is widely used by analysts, investors, and other interested parties in our industry. The Company presents pro forma financial information excluding the QUALCOMM Strategic Initiatives (QSI) segment to facilitate evaluation of its ongoing core operating businesses, including QUALCOMM CDMA Technologies (QCT), QUALCOMM Technology Licensing (QTL) and QUALCOMM Wireless & Internet (QWI). QSI results relate to strategic investments for which the Company has exit strategies of varying durations. Management believes that the information excluding QSI presents a more representative view of the operating and liquidity performance of the Company because it excludes the effect of fluctuations in value of investments that are unrelated to the Company's operational performance.

The Company presents year-over-year comparisons of pro forma financial results as though the New Method of recording royalties had been in effect for prior periods to facilitate evaluation by management, investors and analysts of the results for these periods on a comparable basis to the Company's current guidance. The Company believes that this presentation is useful in evaluating performance on a consistent and comparable basis.

The Company presents pro forma results for fiscal 2005 excluding one-time tax benefits related to fiscal 2004 to provide management, as well as investors, a clearer understanding of its ongoing tax rate and after tax earnings. The Company believes that this presentation is useful in evaluating performance on a consistent and comparable basis.

The non-GAAP pro forma financial information presented herein should be considered in addition, 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 results and QUALCOMM pro forma results 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 development, deployment and commercial acceptance of CDMA based networks and CDMA based technology, including CDMA2000 1X, 1xEV-DO and WCDMA, both domestically and internationally; our dependence on major customers and licensees; fluctuations in the demand for CDMA based products, services or applications; 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; developments in current and future litigation, as well as the other risks detailed from time-to-time in the Company's SEC reports.

QUALCOMM®, MSM(TM), MediaFLO(TM) USA are trademarks and/or service marks of QUALCOMM Incorporated. CDMA2000® is a registered trademark of the Telecommunications Industry Association. All other trademarks are the property of their respective owners.


(1) The New Method of recording royalties is based solely on reports
received from licensees for royalty bearing sales of equipment in the
prior quarter. The Company adopted this New Method during the fourth
quarter of fiscal 2004 on a prospective basis. Under the Prior
Method of recording royalties, the Company recorded an estimate of
earned royalties in the quarter preceding its receipt of licensee
reports. Results under the New Method are used herein for
comparisons to fiscal 2004 to assist investors with evaluating
financial performance on a comparable basis.


QUALCOMM Contact:
Bill Davidson
Vice President, Investor Relations
1-[phone] (ph) 1-[phone] (fax)
e-mail: [e-mail]



QUALCOMM Incorporated
Reconciliation of Pro Forma Results to GAAP Results
for 2004 Periods for Comparative Purposes

(in millions, except per Three months ended Year ended
share data) September 26, September 26,
2004 2004
Prior Method of Recording
Royalties
Estimate of estimated
licensees for prior period $253 $151
Royalties reported by estimated
licensees for prior period 255 208
Prior period variance included
in reporting period 2 57
Other royalties reported in
reporting period 99 1,084
Estimate for estimated licensees
for current period -- --
Total QTL royalty revenues from
external licensees 101 1,141
Intercompany revenue 36 132
License revenue 14 59

Total QTL revenue using
Prior Method
Total QTL revenue including
prospective change to New
Method in Q4 '04 $151 $1,331

New Method of Recording Royalties
Total royalties reported by
external licensees (a) $354 $1,292
Intercompany revenue 36 132
License revenue 14 59
Total QTL revenue using New Method $404 $1,483

Difference between the methods $(253) $(151)

QTL earnings before tax using
Prior Method
QTL earnings before tax including
prospective change to New Method
in Q4'04 $111 $1,195
Less: Difference between the
royalty methods $(253) $(151)
QTL earnings before tax using
New Method $364 $1,346

Total QCOM revenues as reported
under GAAP $1,118 $4,880
Less: Difference between the
royalty methods (253) (151)
Total QCOM revenues using New Method 1,371 5,031
Total QCOM revenues and QCOM
pro forma revenues $1,371 $5,031

TOTAL QCOM earnings from
continuing operations before
taxes as reported under GAAP $431 $2,313
Less: earnings from continuing
operations before taxes attributed
to difference between the
royalty methods $(253) $(151)
Total QCOM earnings from continuing
operations before taxes using
New Method $684 $2,464
Less: QSI earnings from continuing
operations before taxes (c) $11 $(31)
QCOM pro forma earnings from
continuing operations before taxes (c) $673 $2,495

TOTAL QCOM net income as reported
under GAAP $393 $1,720
Less: Net income attributed to
difference between the royalty
methods (b) (154) (92)
Total QCOM net income using New Method 547 1,812
Less: QSI net income (loss) (c) 48 12
QCOM pro forma net income (c) $499 $1,800

QCOM diluted EPS as reported
under GAAP $0.23 $1.03
EPS attributed to difference
between the royalty methods $(0.09) $(0.06)
Total QCOM diluted EPS using
New Method $0.32 $1.08
EPS attributed to QSI (c) $0.03 $0.01
QCOM pro forma diluted EPS (c) $0.30 $1.07

Shares used for calculating
diluted EPS 1,692 1,675


(a) Represents royalty revenue that would have been reported during the
period if the "New Method" had been adopted retroactively.
Does not represent royalty revenue recognized under GAAP in these
periods.

(b) QTL's rounded effective tax rate was 39% in fiscal 2004.

(c) During the first quarter of 2005, the Company reorganized its
MediaFLO USA business into the QSI segment. The operating expenses
related to the MediaFLO(TM) USA business were included in reconciling
items through the end of fiscal 2004. Prior period segment
information has been adjusted to conform to the new segment
presentation.

QTL revenues as reported under GAAP and using the New Method are
presented to illustrate the difference between the Prior Method used for
royalties prior to the fourth quarter of fiscal 2004 and the New Method
implemented starting in the fourth quarter of fiscal 2004.

Sums may not equal totals due to rounding.





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Source: QUALCOMM Incorporated