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Qualcomm to Boost Investor Returns with $10B Bond Sale - Analyst Blog

Zacks Equity Research

In order to boost shareholder returns, the world’s largest mobile chipset developer, Qualcomm Incorporated QCOM has taken a $10 billion corporate loan, issued in eight parts. These bonds are scheduled to mature within a timeframe ranging between 3 and 30 years.

The company has issued both longer-term, fixed-interest corporate bonds and shorter-term, floating interest rate debt.  These fixed-rate notes have interest rates varying from as low as 1.4% on $1.25 billion due in 2018 to as high as 4.8% on $1.5 billion due in 2045. With the Federal Reserve expected to raise interest rates later this year, Qualcomm will likely benefit from low borrowing costs.

In Mar 2015, Qualcomm announced a share buyback program, wherein the company will purchase up to $15 billion worth of shares. The latest share repurchase program replaced its predecessor, which had $2.1 billion authorization remaining. The company aims to buy back $10 billion shares within 12 months of this announcement. Qualcomm also revealed its plans to return at least three-fourth of its cash flow to shareholders. In the second quarter of fiscal 2015, the company returned $2.6 billion to shareholders through stock buybacks and dividend payouts.

At the end of the second quarter of fiscal 2015, Qualcomm had $29,610 million of cash and marketable securities and $1,096 million of short-term debt on its balance sheet compared with $32,022 million of cash and marketable securities and no outstanding debt at the end of fiscal 2014.

Qualcomm has lowered its financial outlook for fiscal 2015 for the second time now. The current guidance for total revenue stands in the range of $25–$27 billion compared with the prior guidance of $26.3–$28 billion. The revised non-GAAP EPS is projected within the range of $4.60–$5.00, lower than the prior guidance of $4.85–$5.05.

Qualcomm currently has a Zacks Rank #4 (Sell).

Stocks to Consider

Better-ranked stocks worth considering in this sector include Harris Corporation HRS, InterDigital, Inc. IDCC and Polycom, Inc. PLCM. All these stocks holds a Zacks Rank #2 (Buy).


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