QCOM

QUALCOMM Incorporated (QCOM)

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QUALCOMM Incorporated (QCOM)

Q1 2012 Earnings Call

February 01, 2012 4:45 pm ET

Executives

Warren Kneeshaw - Vice President of Investor Relations

Paul E. Jacobs - Chairman and Chief Executive Officer

Steven M. Mollenkopf - President and Chief Operating Officer

William E. Keitel - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Donald J. Rosenberg - Executive Vice President, Corporate Secretary and General Counsel

Derek K. Aberle - Executive Vice President and Group President

Analysts

Tim Long - BMO Capital Markets U.S.

Simona Jankowski - Goldman Sachs Group Inc., Research Division

T. Michael Walkley - Canaccord Genuity, Research Division

Brian T. Modoff - Deutsche Bank AG, Research Division

Eric A. Ghernati - BofA Merrill Lynch, Research Division

Ehud Gelblum - Morgan Stanley, Research Division

Ittai Kidron - Oppenheimer & Co. Inc., Research Division

Mark McKechnie - ThinkEquity LLC, Research Division

Kulbinder Garcha - Crédit Suisse AG, Research Division

Stacy A. Rasgon - Sanford C. Bernstein & Co., LLC., Research Division

Rod B. Hall - JP Morgan Chase & Co, Research Division

Mark Sue - RBC Capital Markets, LLC, Research Division

Jeffrey T. Kvaal - Barclays Capital, Research Division

Matthew Hoffman - Cowen and Company, LLC, Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm First Quarter Fiscal 2012 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, February 1, 2012. The playback number for today's call is (855) 859-2056. International callers, please dial (404) 537-3406. Our playback reservation number is 41343500. I would now like to turn the call over to Warren Kneeshaw, Vice President of Investor Relations. Mr. Kneeshaw, please go ahead.

Warren Kneeshaw

In addition, Steve Altman, Don Rosenberg and Derek Aberle 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 this 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-Q 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 projections, plans, objectives, expectations and other future events. Qualcomm's actual results may differ materially from these forward-looking statements. Please review our SEC filings, specifically our most recent 10-Q and 10-K, which identify important factors that could cause the company's actual results to differ materially from those contained in any forward-looking statements.

And now, it is my pleasure to introduce Qualcomm's Chairman and Chief Executive Officer, Dr. Paul Jacobs.

Paul E. Jacobs

Thanks, Warren, and good afternoon, everyone. We're very pleased to report record revenues, earnings per share and MSM shipments this quarter driven by increased demand for smartphones and data-centric devices across an expanding number of regions and price points. It was a very successful quarter, and we're pleased to be raising our financial outlook for fiscal 2012. QCT continues to execute and is well positioned to take advantage of the many opportunities ahead.

We announced the expansion of our Snapdragon S4 processor road map, demonstrated Windows 8 running on an MSM8960-based device over LTE and had several partners launch noteworthy devices based on our solutions. Our Licensing business had another strong quarter as well, driven by the global adoption of smartphones and other connected devices.

QTL continues to grow and expand its base of licensees. We now have over 205 CDMA licensees in more than 15 single-mode OFDMA licensees. The global migration from 2G to 3G, and the increase in the variety and number of smartphones and other device types at multiple price tiers positions QTL for strong growth in fiscal 2012.

We continue to make advancements with our mirasol Display technology and announced the launch of eReader products with 4 different partners in the last 90 days. Now these products are being supported from our development fab. We're on track to bring our commercial fab online later this year.

On the mobile health front, we announced the launch of Qualcomm Life in our 2net platform. We expect that this platform will help accelerate adoption of a variety of new mobile health-related devices and services. Further, the Qualcomm Foundation, partnering with the X PRIZE Foundation, also announced the launch of the $10 million Qualcomm Tricorder X Prize, which is a global competition with the goal of helping drive development of diagnostic devices that will give consumers access to their state of health in the palm of their hand.

And just after the close of our first fiscal quarter, we completed the sale of our 700 MHz Spectrum in the United States to AT&T for $1.9 billion, and we're now working with them to provide supplemental downlink technology that they intend to deploy in that spectrum to deliver faster downloads in greater capacity on their LTE network.

Looking forward, we continue to see favorable trends across the key growth drivers for our business. First, with respect to handsets, there continues to be strong consumer demand for smartphones across all key regions. According to Gartner, worldwide smartphone sales reached 477 million units in calendar year 2011, up approximately 60% year-over-year. Second, the 2G to 3G migration remains strong in emerging regions. According to Wireless Intelligence, in the December quarter, 3G connections in emerging regions grew greater than 45% year-over-year.

They also forecast that China will surpass 1 billion mobile connections before the end of the March quarter, and that 3G will soon account for 25% of the country's connections, driven by increased operator subsidies, as well as increased availability and consumer demand for smartphones. According to Gartner, China is currently the world's #2 region in terms of quarterly smartphone sales and is poised to become the leading consumer of smartphones in the world. Now recently I attended China Telecom's annual supply chain conference where they announced that they expect demand for 80 million 3G handsets on their CDMA network in calendar year 2012, of which 45 million are expected to be EV-DO smartphones.

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