Qualcomm Inc. (QCOM)
F1Q13 Earnings Call
January 30, 2013 4:45 p.m. ET
Warren Kneeshaw – VP, IR
Paul Jacobs - Chairman and CEO
Steven Mollenkopf - President and COO
Bill Keitel - EVP and CFO
Derek Aberle - EVP and Group President
T. Michael Walkley - Canaccord Genuity
Brian Modoff - Deutsche Bank
Tim Long - Bank of Montreal
Rod Hall – JPMorgan
Ehud Gelblum - Morgan Stanley
Simona Jankowski - Goldman Sachs
Stacy Rasgon - Sanford C. Bernstein
Matthew Hoffman - Cowen & Company
Tal Liani - Bank of America
Kulbinder Garcha - Credit Suisse
James Faucette - Pacific Crest Securities
Jeffrey Kvaal - Barclays Capital
Mark McKechnie - Evercore Partners
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I would now like to turn the call over to Warren Kneeshaw, Vice President of Investor Relations. Mr. Kneeshaw, please go ahead.
Thank you, Ryan, and good afternoon everyone. Today's call will include prepared remarks by Dr. Paul Jacobs, Steve Mollenkopf and Bill Keitel. In addition, Derek Aberle and Don Rosenberg will join the question-and-answer session. An Internet presentation and audio broadcast accompany this call, and you can access them by visiting our website at www.qualcomm.com.
During the conference call, if we use non-GAAP financial measures as defined in Regulation G, you can find the related reconciliations to GAAP on our website. I'd also like to direct you to our 10-K and earnings release, which were filed and furnished, respectively, with the SEC today and are available on our website.
During this conference call, we will make forward-looking statements regarding future events or results of the company. Actual events or results could differ materially from those projected in these forward-looking statements. Please refer to our SEC filings, including our most recent Form 10-K and 10-Q, which contain important factors that could cause actual results to differ materially from the forward-looking statements.
And now it is my pleasure to introduce Qualcomm's Chairman and Chief Executive Officer, Dr. Paul Jacobs.
Thanks Warren and good afternoon everyone. We’re obviously off to an excellent start in fiscal 2013 and pleased to report a record quarter driven by strong year over year growth in both our QCT and QTL businesses. Revenues were up 29% and non-GAAP earnings per share were up 30% compared to a year ago. In QCT, we delivered record chipset volumes which included eliminating the constraint on 28 nanometer devices as we had expected. In addition, QCT continues to drive technology and product leadership as we announced the new Qualcomm’s Snapdragon 800 and 600 processors, featuring ultra-high definition video playback and capture and our latest generation micro-architecture with clock speeds up to 2.3 gigahertz per core, the 800 processor is class leading and we continue to set the bar for the smartphone user experience.
Turning to QTL, our licensees reported stronger than expected total reported device sales as the broad based adoption of 3G and 3G/4G products continues driven by strength in smartphones. We continue to invest and innovate across a broad set of technologies and believe that our patent portfolio applicable to 3G and 4G products is the most widely licensed in the industry. In fact, we have now over 225 CDMA licenses and - licensees – and more than 40 royalty bearing single mode OFDMA licensees.
And with respect to our display business, we recently announced an expansion of our display arrangement with Sharp in order to accelerate the commercialization of our Pixtronix MEMS displays utilizing Sharp’s IGZO technology with the goal of driving high performance, lower-power displays from a variety of devices, including smartphones and tablets.
Our Pixtronix technology uses the MEMS-based shutter system to deliver color performance similar to OLED with wide angle view ability and lower power consumption than LCD or OLED. As we previously indicated, we are increasing our focus on licensing our display technologies, including our next generation Mirasol display technology while at the same time directly commercializing certain current generation Mirasol displays.
Looking forward we believe our long-term growth drivers remain intact. Smartphone demand remains strong. Gartner estimates that approximately 169 million smartphones were shipped in the third calendar quarter of 2012 representing a 47% year-over-year growth. In China alone, Gartner estimates that approximately 47 million smartphones were shipped in the third calendar quarter of 2012 representing greater than 115% year-over-year growth.
In the U.S. both AT&T and Verizon Wireless recently reported a healthy fourth quarter – fourth calendar quarter smartphone sales with close to 20 million units between them. And in emerging markets, Wireless Intelligence estimates that there are now more than 1 billion 3G 4G connections, representing 34% year-over-year growth. In China in particular Wireless Intelligence estimates that there were 325 million 3G connections, including [one act] (ph) at the end of 2012 which represents 49% year-over-year growth.
Now this brings 3G penetration to 29% in China, so excellent progress and still plenty of opportunity ahead. China Mobile recently announced a pre-commercial trial for LTE TDD and Qualcomm chipsets were in 14 out of 31 devices selected for the trial. In addition, I recently attended China Telecom’s annual handset fair where they discussed having 480 CDMA 2000 ecosystem partners and their goal to have 200 million mobile subscribers by the end of 2013. And there are currently over 0.5 billion CDMA 2000 connections globally according to Wireless Intelligence.