Qualcomm Reports Mixed Results

• By Zacks Equity Research
• On 8:36 am EST, Thursday November 5, 2009

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Symbol	Price	Change
BRCM	28.97	-0.59
QCOM	44.99	-0.45

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Qualcomm Inc. (NasdaqGS: QCOM - News) reported mixed financial results for its fourth quarter of fiscal 2009. Quarterly revenue of $2.69 billion was down 19% year-over-year and was down 2% sequentially. This was primarily due to lower sales of the company’s wireless chipsets and other related technologies. Fourth quarter revenue was also below the Zacks Consensus Estimate of $2.71 billion. On a GAAP basis, quarterly net income was $803 million or 48 cents per share. This was down 9% year-over-year and also down 9% sequentially. Fourth quarter adjusted (excluding special items) EPS was also 48 cents, above the Zacks Consensus Estimate of 46 cents.

Quarterly operating income was $597 million, down 55% year-over-year and down 33% sequentially. This was mainly due to a charge of $230 million related to an estimated fine expected to be levied by the Korea Fair Trade Commission and another $35 million charge resulting from the write-off of assets that were initially capitalized related to a litigation settlement and patent agreement with Broadcom Corp. (NasdaqGS: BRCM - News). Qualcomm has successfully extended its licensing contract for current and next-generation wireless technologies with Samsung Electronics, one of its key customers. Samsung will make a $1.3 billion down payment to the company for this new 15-year contract. During the fourth quarter, the company shipped around 91 million MSM chipsets, up 6% over the prior-year quarter.

During the reported quarter, Qualcomm generated more than $1.32 billion of cash from operations compared to $990 million in the prior-year quarter and $1.09 billion in the previous quarter. Free cash flow (cash flow from operations less capital expenditures) during the same quarter was approximately $1.18 billion compared to $576 million in the year-ago quarter and $938 million in the previous quarter. At the end of fiscal 2009, the company had more than $17.74 billion of cash and marketable securities on its balance sheet compared to $11.27 billion of cash and marketable securities at the end of fiscal 2008. Qualcomm maintains a debt free balance sheet.

Segment Results

Qualcomm CDMA Technologies business accounted for $1.7 billion of revenue in the fourth quarter, down 4% over the prior-year quarter and also down 5% sequentially. Quarterly operating margin was 30%. Qualcomm Technology Licensing generated $837 million, down 39% year-over-year but up 4% sequentially. Quarterly operating margin was 83%. Qualcomm Wireless & Internet segment generated $146 million, down 23% over the prior-year quarter and down 1% sequentially. Quarterly operating margin was negative (3%).

First Quarter of Fiscal 2010 Financial Guidance

First quarter revenue will be within the range of $2.55 billion - $2.75 billion. Pro Forma EPS will be within the range of 54 cents to 58 cents. Qualcomm is expected to ship 89 million – 92 million MSM chipsets during the quarter.

Full Fiscal 2010 Financial Guidance

Full fiscal 2010 revenue will be within the range of $10.5 billion - $11.3 billion. Pro Forma EPS will be within the range of $2.10 to $2.30. Qualcomm is expected to ship 600 million – 650 million MSM chipsets during the calendar year 2010.

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