~~UNITED STATES~~
~~SECURITIES AND EXCHANGE COMMISSION~~

~~WASHINGTON, DC 20549~~

~~FORM 10-Q~~

~~(Mark one)~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_____________________

FORM 10-Q

_____________________

(Mark one)


þ
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June ~~27, 2010~~26, 2011



o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-19528

QUALCOMM Incorporated

(Exact name of registrant as specified in its charter)


~~Delaware~~		~~95-3685934~~

Delaware (State or other jurisdiction of incorporation or organization)		95-3685934 (I.R.S. Employer Identification No.)

5775 Morehouse Dr., San Diego, California (Address of principal executive offices)		92121-1714 (Zip Code)

(858) 587-1121

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding ~~twelve~~12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ~~ninety~~90 days. Yesþx Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesþx Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filerþx	Accelerated filero	Non-accelerated filero	~~Smaller reporting company~~o
		(Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþx

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares outstanding of each of the issuer’s classes of common stock, as of the close of business on July ~~19, 2010,~~18, 2011, was as follows:



Class		Number of Shares
Common Stock, $0.0001 per share par value		~~1,605,194,616~~1,679,739,316

~~INDEX~~

INDEX



		Page
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets	3
	3
Condensed Consolidated Statements of Operations	4
	4
Condensed Consolidated Statements of Cash Flows	5
	5
Notes to Condensed Consolidated Financial Statements			6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			21	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			49	42
Item 4.	Controls and Procedures			51	43

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings			51	44
Item 1A.	Risk Factors			51	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			52	44
Item 3.	Defaults Upon Senior Securities			52	44
Item 4. ~~[Removed~~	[Removed and Reserved]			52	44
Item 5.	Other Information			52	44
Item 6.	Exhibits			52	45

SIGNATURES		46



~~CERTIFICATIONS~~

~~EX-10.88~~
~~EX-31.1~~
~~EX-31.2~~
~~EX-32.1~~
~~EX-32.2~~
~~EX-101 INSTANCE DOCUMENT~~
~~EX-101 SCHEMA DOCUMENT~~
~~EX-101 CALCULATION LINKBASE DOCUMENT~~
~~EX-101 LABELS LINKBASE DOCUMENT~~
~~EX-101 PRESENTATION LINKBASE DOCUMENT~~
~~EX-101 DEFINITION LINKBASE DOCUMENT~~

PART I. FINANCIAL INFORMATION


ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

QUALCOMM Incorporated

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)
~~(Unaudited)~~

June 27, September 27,
2010 2009
ASSETS

Current assets:
Cash and cash equivalents $ 2,541 $ 2,717
Marketable securities 7,427 8,352
Accounts receivable, net 798 700
Inventories 446 453
Deferred tax assets 213 149
Other current assets 189 199

Total current assets 11,614 12,570
Marketable securities 7,618 6,673
Deferred tax assets 1,774 843
Property, plant and equipment, net 2,382 2,387
Goodwill 1,476 1,492
Other intangible assets, net 3,040 3,065
Other assets 1,497 415

Total assets $ 29,401 $ 27,445

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Trade accounts payable $ 640 $ 636
Payroll and other benefits related liabilities 433 480
Unearned revenues 601 441
Loan payable to banks 1,061 —
Income taxes payable 1,135 29
Other current liabilities 1,320 1,227

Total current liabilities 5,190 2,813
Unearned revenues 3,587 3,464
Other liabilities 738 852

Total liabilities 9,515 7,129

Commitments and contingencies (Note 8)

Stockholders’ equity:
Preferred stock, $0.0001 par value; issuable in series; 8 shares authorized; none outstanding at June 27, 2010 and September 27, 2009 — —
Common stock, $0.0001 par value; 6,000 shares authorized; 1,609 and 1,669 shares issued and outstanding at June 27, 2010 and September 27, 2009, respectively — —
Paid-in capital 6,611 8,493
Retained earnings 12,746 11,235
Accumulated other comprehensive income 529 588

Total stockholders’ equity 19,886 20,316

Total liabilities and stockholders’ equity $ 29,401 $ 27,445

(Unaudited)



	June 26, 2011		September 26, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	5,746	$	3,547
Marketable securities	4,982		6,732
Accounts receivable, net	832		730
Inventories	753		528
Deferred tax assets	310		321
Other current assets	210		275
Total current assets	12,833		12,133
Marketable securities	9,493		8,123
Deferred tax assets	1,884		1,922
Assets held for sale	746		—
Property, plant and equipment, net	2,267		2,373
Goodwill	3,195		1,488
Other intangible assets, net	3,098		3,022
Other assets	1,584		1,511
Total assets	$	35,100	$	30,572
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	761	$	764
Payroll and other benefits related liabilities	568		467
Unearned revenues	541		623
Loans payable	1,092		1,086
Income taxes payable	84		1,443
Other current liabilities	1,418		1,085
Total current liabilities	4,464		5,468
Unearned revenues	3,630		3,485
Other liabilities	705		761
Total liabilities	8,799		9,714

Commitments and contingencies (Note 8)

Stockholders’ equity:
QUALCOMM Incorporated (QUALCOMM) stockholders’ equity:
Preferred stock, $0.0001 par value; issuable in series; 8 shares authorized; none outstanding at
June 26, 2011 and September 26, 2010	—		—
Common stock, $0.0001 par value; 6,000 shares authorized; 1,677 and 1,612 shares issued and
outstanding at June 26, 2011 and September 26, 2010, respectively	—		—
Paid-in capital	10,011		6,856
Retained earnings	15,516		13,305
Accumulated other comprehensive income	744		697
Total QUALCOMM stockholders’ equity	26,271		20,858
Noncontrolling interests (Note 7)	30		—
Total stockholders’ equity	26,301		20,858
Total liabilities and stockholders’ equity	$	35,100	$	30,572

See Accompanying Notes to Condensed Consolidated Financial Statements.

QUALCOMM Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)
~~(Unaudited)~~

Three Months Ended Nine Months Ended
June 27, June 28, June 27, June 28,
2010 2009 2010 2009
Revenues:
Equipment and services $ 1,772 $ 1,862 $ 5,030 $ 4,698
Licensing and royalty fees 934 891 3,009 3,028

Total revenues 2,706 2,753 8,039 7,726

Operating expenses:
Cost of equipment and services revenues 905 864 2,529 2,357
Research and development 649 618 1,892 1,826
Selling, general and administrative 360 377 1,171 1,165
Litigation settlement, patent license and other related items (Note 8) — — — 748

Total operating expenses 1,914 1,859 5,592 6,096

Operating income 792 894 2,447 1,630

Investment income (loss), net (Note 5) 179 90 541 (296 )

Income before income taxes 971 984 2,988 1,334
Income tax expense (204 ) (247 ) (606 ) (544 )

Net income $ 767 $ 737 $ 2,382 $ 790

Basic earnings per common share $ 0.47 $ 0.45 $ 1.44 $ 0.48

Diluted earnings per common share $ 0.47 $ 0.44 $ 1.43 $ 0.47

Shares used in per share calculations:
Basic 1,629 1,656 1,654 1,653

Diluted 1,642 1,675 1,670 1,668

Dividends per share announced $ 0.19 $ 0.17 $ 0.53 $ 0.49

(Unaudited)



	Three Months Ended						Nine Months Ended
	June 26, 2011			June 27, 2010*			June 26, 2011			June 27, 2010*
Revenues:
Equipment and services	$	2,297		$	1,766		$	6,550		$	5,021
Licensing and royalty fees	1,326			934			4,290			3,009
Total revenues	3,623			2,700			10,840			8,030

Operating expenses:
Cost of equipment and services revenues	1,278			852			3,380			2,375
Research and development	757			623			2,144			1,822
Selling, general and administrative	475			332			1,413			1,063
Goodwill impairment (Note 11)	—			—			114			—
Total operating expenses	2,510			1,807			7,051			5,260

Operating income	1,113			893			3,789			2,770

Investment income, net (Note 5)	161			183			574			552
Income from continuing operations before income taxes	1,274			1,076			4,363			3,322
Income tax expense	(289		)	(244		)	(862		)	(740		)
Income from continuing operations	985			832			3,501			2,582
Discontinued operations, net of income taxes (Note 10)	44			(65		)	(307		)	(200		)
Net income	1,029			767			3,194			2,382
Net loss attributable to noncontrolling interests (Note 7)	6			—			10			—
Net income attributable to QUALCOMM	$	1,035		$	767		$	3,204		$	2,382

Basic earnings (loss) per share attributable to QUALCOMM:
Continuing operations	$	0.59		$	0.51		$	2.13		$	1.56
Discontinued operations	0.03			(0.04		)	(0.19		)	(0.12		)
Net income	$	0.62		$	0.47		$	1.94		$	1.44
Diluted earnings (loss) per share attributable to QUALCOMM:
Continuing operations	$	0.58		$	0.51		$	2.09		$	1.55
Discontinued operations	0.03			(0.04		)	(0.19		)	(0.12		)
Net income	$	0.61		$	0.47		$	1.90		$	1.43
Shares used in per share calculations:
Basic	1,673			1,629			1,650			1,654
Diluted	1,709			1,642			1,682			1,670

Dividends per share announced	$	0.215		$	0.190		$	0.595		$	0.530

*As adjusted for discontinued operations (Note 10)

See Accompanying Notes to Condensed Consolidated Financial Statements.

QUALCOMM Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)
~~(Unaudited)~~

Nine Months Ended
June 27, June 28,
2010 2009
Operating Activities:

Net income $ 2,382 $ 790
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 495 460
Revenues related to non-monetary exchanges (99 ) (86 )
Income tax provision in excess of income tax payments 80 222
Non-cash portion of share-based compensation expense 453 436
Incremental tax benefit from stock options exercised (34 ) (54 )
Net realized gains on marketable securities and other investments (274 ) (57 )
Impairment losses on marketable securities and other investments 102 717
Other items, net (70 ) (22 )
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net (91 ) 2,691
Inventories 7 143
Other assets (71 ) (17 )
Trade accounts payable 23 (8 )
Payroll, benefits and other liabilities (161 ) 737
Unearned revenues 241 (101 )

Net cash provided by operating activities 2,983 5,851

Investing Activities:

Capital expenditures (313 ) (617 )
Advance payment on spectrum (1,064 ) —
Purchases of available-for-sale securities (7,049 ) (6,497 )
Proceeds from sale of available-for-sale securities 7,354 3,606
Cash received for partial settlement of investment receivables 33 349
Other investments and acquisitions, net of cash acquired (45 ) (47 )
Change in collateral held under securities lending — 173
Other items, net 88 6

Net cash used by investing activities (996 ) (3,027 )

Financing Activities:

Borrowing under loan payable to banks 1,064 —
Proceeds from issuance of common stock 519 276
Incremental tax benefit from stock options exercised 34 54
Repurchase and retirement of common stock (2,893 ) (285 )
Dividends paid (872 ) (810 )
Change in obligations under securities lending — (173 )
Other items, net (2 ) —

Net cash used by financing activities (2,150 ) (938 )

Effect of exchange rate changes on cash (13 ) (5 )

Net (decrease) increase in cash and cash equivalents
(176 ) 1,881
Cash and cash equivalents at beginning of period
2,717 1,840

Cash and cash equivalents at end of period
$ 2,541 $ 3,721

(Unaudited)



	Nine Months Ended
	June 26, 2011			June 27, 2010
Operating Activities:
Net income	$	3,194		$	2,382
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	820			495
Goodwill impairment	114			—
Revenues related to non-monetary exchanges	(93		)	(99		)
Income tax provision (less than) in excess of income tax payments	(1,218		)	80
Non-cash portion of share-based compensation expense	568			453
Incremental tax benefit from stock options exercised	(167		)	(34		)
Net realized gains on marketable securities and other investments	(304		)	(274		)
Net impairment losses on marketable securities and other investments	26			102
Other items, net	23			(70		)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net	21			(91		)
Inventories	(43		)	7
Other assets	(36		)	(71		)
Trade accounts payable	(191		)	23
Payroll, benefits and other liabilities	210			(161		)
Unearned revenues	156			241
Net cash provided by operating activities	3,080			2,983
Investing Activities:
Capital expenditures	(400		)	(313		)
Advance payment on spectrum	—			(1,064		)
Purchases of available-for-sale securities	(8,271		)	(7,049		)
Proceeds from sale of available-for-sale securities	9,355			7,354
Atheros acquisition, net of cash acquired (Note 12)	(3,130		)	—
Other acquisitions and investments, net of cash acquired	(95		)	(45		)
Other items, net	(22		)	121
Net cash used by investing activities	(2,563		)	(996		)
Financing Activities:
Borrowing under loans payable	1,260			1,064
Repayment of loans payable	(1,260		)	—
Proceeds from issuance of common stock	2,392			519
Proceeds from issuance of subsidiary shares to noncontrolling interests (Note 7)	62			—
Incremental tax benefit from stock options exercised	167			34
Repurchase and retirement of common stock	—			(2,893		)
Dividends paid	(985		)	(872		)
Other items, net	36			(2		)
Net cash provided (used) by financing activities	1,672			(2,150		)
Effect of exchange rate changes on cash	10			(13		)
Net increase (decrease) in cash and cash equivalents	2,199			(176		)
Cash and cash equivalents at beginning of period	3,547			2,717
Cash and cash equivalents at end of period	$	5,746		$	2,541

See Accompanying Notes to Condensed Consolidated Financial Statements.

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 –- Basis of Presentation

Financial Statement Preparation.The accompanying interim condensed consolidated financial statements have been prepared by QUALCOMM Incorporated ~~and~~(collectively with its subsidiaries, ~~(collectively~~ the Company or QUALCOMM), without audit, in accordance with the instructions to Form 10-Q and, therefore, do not necessarily include all information and footnotes necessary for a fair presentation of its consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States. The condensed consolidated balance sheet at September ~~27, 2009~~26, 2010 was derived from the audited financial statements at that date but may not include all disclosures required by accounting principles generally accepted in the United States. The Company operates and reports using a 52-53 week fiscal year ending on the last Sunday in September. The three-month and nine-month periods ended June 26, 2011 and June 27, 2010 included 13 weeks and ~~June 28, 2009 included 13 weeks and~~ 39 weeks, respectively.

In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, which are only normal and recurring, necessary for a fair statement of results of operations, financial position and cash flows. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September ~~27, 2009.~~26, 2010. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Certain prior ~~year~~period amounts have been ~~reclassified~~adjusted to ~~conform to~~reflect the ~~current year presentation.~~

~~Revenue Recognition.~~Beginning in the first quarter of fiscal 2010, the Company elected to early adopt the Financial Accounting Standards Board’s (FASB) amended accounting guidance for revenue recognition that (a) removes tangible products containing software components and non-software components that function together to deliver the product’s essential functionality from the scope of software revenue recognition guidance; and (b) eliminates the usepresentation of the residual method for arrangements with multiple deliverables and requires entities to allocate revenue using the relative selling price method. This new guidance applies to applicable transactions originating or arrangements materially modified after September 27, 2009. The adoption of this new guidance did not have a material impact on the timing or pattern of revenue recognition.FLO TV business as discontinued operations (Note 10).

Earnings Per Common Share.Basic earnings per common share is computed by dividing net income attributable to QUALCOMM by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed by dividing net income attributable to QUALCOMM by the combination of dilutive common share equivalents, comprised of shares issuable under the Company’s share-based compensation plans and shares subject to written put options, and the weighted-average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which isare calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of an ~~option,~~award, if any, the amount of compensation cost, if any, for future service that the Company has not yet recognized, and the estimated tax benefits that would be recorded in paid-in capital, if any, when ~~the~~an award is settled are assumed to be used to repurchase shares in the current period. Share-based awards with market conditions are included in the computation of earnings per share if they are dilutive and if the established conditions have been satisfied or would have been satisfied at the reporting date. The incremental dilutive common share equivalents, calculated using the treasury stock method, for the three months and nine months ended June ~~27, 2010~~26, 2011 were ~~13,039,000~~35,820,000 and ~~16,303,000,~~32,094,000, respectively. The incremental dilutive common share equivalents, calculated using the treasury stock method, for the three months and nine months ended June ~~28, 2009~~27, 2010 were ~~18,781,000~~13,039,000 and ~~15,114,000,~~16,303,000, respectively.

Employee stock options to purchase approximately ~~163,146,000~~4,492,000 and ~~145,464,000~~23,721,000 shares of common stock during the three months and nine months ended June ~~27, 2010,~~26, 2011, respectively, and employee stock options to purchase approximately ~~134,515,000~~163,146,000 and ~~149,528,000~~145,464,000 shares of common stock during the three months and nine months ended June ~~28, 2009,~~27, 2010, were outstanding but not included in the computation of diluted earnings per common share because the effect ~~on diluted earnings per share~~ would be anti-dilutive. ~~The computation~~In addition, 2,891,000 and 1,146,000 shares of ~~diluted earnings per share for~~other share-based payment awards during the three months and nine months ended June 26, 2011, respectively, and 574,000 and 314,000 shares of other common stock equivalents during the three months and nine months ended June 27, 2010 ~~excluded 574,000 and 314,000 performance-~~

~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~based stock units issued during fiscal 2010,~~, respectively, were outstanding but not included in the computation of diluted earnings per common share because the effect ~~on diluted earnings per share~~ would be anti-dilutive.

Comprehensive Income.Total comprehensive income consisted of the following (in millions):

QUALCOMM Incorporated

Three Months Ended Nine Months Ended
June 27, June 28, June 27, June 28,
2010 2009 2010 2009
Net income $ 767 $ 737 $ 2,382 $ 790

Other comprehensive income:
Foreign currency translation (56 ) 28 (58 ) (32 )
Noncredit other-than-temporary impairment losses and subsequent changes in fair value related to certain marketable debt securities, net of income taxes (7 ) 97 13 97
Net unrealized (losses) gains on other marketable securities and derivative instruments, net of income taxes (180 ) 665 151 (283 )
Reclassification of net realized gains on marketable securities and derivative instruments included in net income, net of income taxes (64 ) (85 ) (228 ) (59 )
Reclassification of other-than-temporary losses on marketable securities included in net income, net of income taxes 16 97 63 587

Total other comprehensive (loss) income (291 ) 802 (59 ) 310

Total comprehensive income $ 476 $ 1,539 $ 2,323 $ 1,100

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



	Three Months Ended						Nine Months Ended
	June 26, 2011			June 27, 2010			June 26, 2011			June 27, 2010
Net income	$	1,029		$	767		$	3,194		$	2,382
Other comprehensive income:
Foreign currency translation	—			(56		)	13			(58		)
Noncredit other-than-temporary impairment losses and subsequent changes in fair value related to certain marketable debt securities, net of income taxes	(2		)	(7		)	(12		)	13
Net unrealized gains (losses) on other marketable securities and derivative instruments, net of income taxes	(7		)	(180		)	215			151
Reclassification of net realized gains on marketable securities and derivative instruments included in net income, net of income taxes	(45		)	(64		)	(179		)	(228		)
Reclassification of other-than-temporary losses on marketable securities included in net income, net of income taxes	3			16			10			63
Total other comprehensive (loss) income	(51		)	(291		)	47			(59		)
Total comprehensive income	978			476			3,241			2,323
Comprehensive loss attributable to noncontrolling interests	6			—			10			—
Comprehensive income attributable to QUALCOMM	$	984		$	476		$	3,251		$	2,323

Components of accumulated other comprehensive income consisted of the following (in millions):

June 27, September 27,
2010 2009
Noncredit other-than-temporary impairment losses and subsequent changes in fair value related to certain marketable debt securities, net of income taxes $ 65 $ 71
Net unrealized gains on other marketable securities, net of income taxes 564 574
Net unrealized losses on derivative instruments, net of income taxes (2 ) (17 )
Foreign currency translation (98 ) (40 )

$ 529 $ 588



	June 26, 2011			September 26, 2010
Noncredit other-than-temporary impairment losses and subsequent changes in fair value related to certain marketable debt securities, net of income taxes	$	36		$	62
Net unrealized gains on marketable securities, net of income taxes	779			723
Net unrealized losses on derivative instruments, net of income taxes	(4		)	(8		)
Foreign currency translation	(67		)	(80		)
	$	744		$	697

At June ~~27, 2010, the~~26, 2011, accumulated ~~noncredit other-than-temporary impairment losses~~other comprehensive income included ~~$40~~$14 million of other-than-temporary losses on marketable debt securities related to factors other than credit, net of income taxes.

Share-Based Payments.Total ~~estimated~~ share-based compensation expense, net of income taxes was as follows (in millions):

~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~



	Three Months Ended						Nine Months Ended
	June 26, 2011			June 27, 2010*			June 26, 2011			June 27, 2010*
Cost of equipment and services revenues	$	14		$	10		$	44		$	30
Research and development	95			72			277			216
Selling, general and administrative	84			63			240			195
Continuing operations	193			145			561			441
Related income tax benefit	(46		)	(37		)	(155		)	(127		)
Continuing operations, net of income taxes	147			108			406			314
Discontinued operations	1			4			7			12
Related income tax benefit	(1		)	(1		)	(3		)	(4		)
Discontinued operations, net of income taxes	—			3			4			8
	$	147		$	111		$	410		$	322

Three Months Ended Nine Months Ended
June 27, June 28, June 27, June 28,
2010 2009 2010 2009
Cost of equipment and services revenues $ 10 $ 11 $ 30 $ 30
Research and development 74 72 221 209
Selling, general and administrative 65 68 202 197

Share-based compensation expense before income taxes 149 151 453 436
Related income tax benefit (38 ) (24 ) (131 ) (66 )

Share-based compensation expense, net of income taxes $ 111 $ 127 $ 322 $ 370

*As adjusted for discontinued operations (Note 10)

The Company recorded ~~$73~~$95 million and ~~$68~~$73 million in share-based compensation expense during the nine months ended June 26, 2011 and June 27, 2010 ~~and June 28, 2009,~~, respectively, related to share-based awards granted during those periods. In addition, for the nine months ended June 26, 2011 and June 27, 2010, $167 million and ~~June 28, 2009, $34~~$34 million ~~and $54 million,~~, respectively, were reclassified to reduce net

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

cash provided by operating activities with an offsetting increase in net cash ~~used~~provided by financing activities to reflect the incremental tax ~~benefits~~benefit from stock options exercised in those periods.

At June ~~27, 2010,~~26, 2011, total unrecognized compensation ~~cost~~costs related to non-vested stock options and restricted stock units granted prior to that date ~~was $1.2 billion,~~were $714 million and $732 million, respectively, which isare each expected to be recognized over a weighted-average period of ~~2.9 years.~~2.2 years and 2.5 years, respectively. Net ~~stock options,~~share-based awards, after forfeitures and cancellations, granted during the nine months ended June 26, 2011 and June 27, 2010 represented 0.7% and ~~June 28, 2009 represented~~ 1.3% ~~and 2.2%~~, respectively, of outstanding shares as of the beginning of each fiscal period. Total ~~stock options~~share-based awards granted during the nine months ended June 26, 2011 and June 27, 2010 represented 0.5% and ~~June 28, 2009 represented~~ 1.8% ~~and 2.4%~~, respectively, of outstanding shares as of the end of each ~~fiscal~~fishcal period.

During the three months ended June ~~27, 2010,~~26, 2011, the Company ~~granted~~assumed a total of approximately ~~5,569,000 restricted stock units on~~9,564,000 outstanding share-based payment awards under various incentive plans as a ~~broad basis to employees. The awards include dividend-equivalent rights and generally vest three years from the date of grant. The weighted-average estimated fair value~~result of the ~~employee restricted stock units granted during fiscal 2010 was $35.59 per share, determined based on the fair value~~acquisition of the Company’s common stock on the grant date. At June 27, 2010, approximately 5,551,000 awards were unvested, and the total unrecognized estimated compensation cost related to non-vested restricted stock units granted prior to that date was $176 million, which is expected to be recognized over a weighted-average period of 2.9 years.Atheros (Note 12).

Note 2 –— Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

	•		Level 1 includes financial instruments for which quoted market prices for identical instruments are available in active markets.

	•		Level 2 includes financial instruments for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets with insufficient volume or infrequent transactions (less active markets) or model-driven valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

	•		~~Level 3 includes financial instruments for which fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including the Company’s own assumptions.~~

Level 2 includes financial instruments for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument.

Level 3 includes financial instruments for which fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including the Company’s own assumptions.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the

~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The following table presents the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at June ~~27, 2010~~26, 2011 (in millions):

QUALCOMM Incorporated

Level 1 Level 2 Level 3 Total
Assets

Cash equivalents $ 1,693 $ 537 $ — $ 2,230

Marketable securities
U.S. Treasury securities and government-related securities 41 909 — 950
Corporate bonds and notes — 5,228 — 5,228
Mortgage- and asset-backed securities — 766 6 772
Auction rate securities — — 171 171
Non-investment-grade debt securities — 3,146 13 3,159
Common and preferred stock 1,014 590 — 1,604
Equity mutual and exchange-traded funds 943 — — 943
Debt mutual funds — 2,218 — 2,218

Total marketable securities 1,998 12,857 190 15,045

Derivative instruments — 15 — 15
Other investments⁽¹⁾
133 — — 133

Total assets measured at fair value $ 3,824 $ 13,409 $ 190 $ 17,423

Liabilities

Derivative instruments $ — $ 20 $ — $ 20
Other liabilities⁽¹⁾
133 — — 133

Total liabilities measured at fair value $ 133 $ 20 $ — $ 153

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


~~(1)~~		~~Comprised of the Company’s deferred compensation plan liability and related assets which are invested in mutual funds.~~

Level 1 Level 2 Level 3 Total
Assets
Cash equivalents $ 2,520
$ 2,489
$ —
$ 5,009
Marketable securities
U.S. Treasury securities and government-related securities 15
198
—
213
Corporate bonds and notes —
5,068
—
5,068
Mortgage- and asset-backed securities —
656
9
665
Auction rate securities —
—
126
126
Non-investment-grade debt securities —
3,606
12
3,618
Common and preferred stock 1,186
766
—
1,952
Equity mutual and exchange-traded funds 1,021
—
—
1,021
Debt mutual funds 1,327
485
—
1,812
Total marketable securities 3,549
10,779
147
14,475
Derivative instruments —
19
—
19
Other investments ⁽¹⁾
162
—
—
162
Total assets measured at fair value $ 6,231
$ 13,287
$ 147
$ 19,665
Liabilities
Derivative instruments $ —
$ 23
$ —
$ 23
Other liabilities ⁽¹⁾
162
—
8
170
Total liabilities measured at fair value $ 162
$ 23
$ 8
$ 193

⁽¹⁾Level 1 measurements are comprised of the Company’s deferred compensation plan liability and related assets, which are invested in mutual funds.

Marketable Securities.With the exception of auction rate securities, the Company obtains pricing information from quoted market prices, ~~recognized independent pricing vendors or multiple~~ pricing vendors or quotes from brokers/dealers. The Company conducts reviews of its primary pricing vendors to ~~validate that~~determine whether the inputs used in ~~that~~the vendor’s pricing ~~process~~processes are deemed to be observable.

The fair value of ~~other~~U.S. Treasury securities and government-related securities, ~~and investment- and non-investment-grade~~ corporate bonds and notes isand common and preferred stock are generally determined using standard observable inputs, including reported trades, quoted market prices, matrix pricing, ~~or reported trades,~~ benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets ~~benchmark securities, bids~~ and/or ~~offers.~~benchmark securities.

The fair value of debt and equity mutual funds is ~~determined based on~~reported as published net asset values. ~~Debt mutual funds are included in Level 2~~The Company assesses the daily frequency and size of ~~the fair value hierarchy if the~~transactions at published net asset values ~~are reported other than daily~~ and/or ~~if the mutual funds are considered illiquid. The Company looks to the characteristics of the underlying collateral to assess~~ the fund’s ~~valuation and~~underlying holdings to determine whether fair value is ~~determined using~~based on observable or unobservable inputs.

The fair value of AAA mortgage- and asset-backed securities is derived from the use of matrix pricing (prices for similar securities) or, in some cases cash flow pricing models ~~in which~~with observable inputs, ~~are observable, including~~such as contractual terms, maturity, ~~prepayment speeds,~~ credit rating ~~and~~and/or securitization structure, to determine the timing and amount of future cash flows. Certain mortgage- and asset-backed securities, principally those that are rated below AAA, may require use of significant unobservable inputs to estimate fair value, ~~including significant assumptions about prioritization of the payment schedule,~~such as default likelihood, recovery rates and prepayment speed.

The fair value of auction rate securities is estimated by the Company using a discounted cash flow model that incorporates transaction details such as contractual terms, maturity and timing and amount of future cash flows, as well as assumptions related to liquidity, default likelihood and recovery, the future state of the auction rate market and credit valuation adjustments of market participants. Though ~~the vast majority~~certain of the securities held by the Company are pools of student loans guaranteed by the U.S. government, prepayment speeds and

~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

illiquidity discounts are considered significant unobservable inputs. ~~Therefore,~~These additional inputs are generally unobservable and, therefore, auction rate securities are included in Level 3.

Derivative Instruments.Derivative instruments include foreign currency option and forward contracts to ~~hedge~~manage foreign exchange risk for certain foreign currency ~~transactions.~~transactions and certain balances denominated in a foreign currency. Derivative instruments are valued using standard calculations/models that are primarily based on observable inputs, including foreign currency exchange rates, volatilities and interest rates. Therefore, derivative instruments are included in Level 2.

Other Liabilities. Other liabilities included in Level 3 are comprised of put rights held by third parties representing interests in certain of the Company’s subsidiaries (Note 7). These put rights are valued with a standard option pricing model

9
QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

using significant unobservable inputs.

Activity between Levels of the Fair Value Hierarchy.There were no significant transfers between Level 1 and Level 2 during the nine months ended June 26, 2011 or June 27, 2010 ~~or June 28, 2009.~~. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. The following table includes the activity for marketable securities and other liabilities classified within Level 3 of the valuation hierarchy (in millions):

Nine Months Ended June 27, 2010
Auction rate Other marketable
securities securities Total
Beginning balance of Level 3 marketable securities $ 174 $ 31 $ 205
Total realized and unrealized gains (losses):
Included in investment income (loss), net — 5 5
Included in other comprehensive income 3 (2 ) 1
Settlements (6 ) (19 ) (25 )
Transfers into Level 3 — 4 4

Ending balance of Level 3 marketable securities $ 171 $ 19 $ 190

Nine Months Ended June 28, 2009
Auction rate Other marketable
securities securities Total
Beginning balance of Level 3 marketable securities $ 186 $ 25 $ 211
Total realized and unrealized (losses) gains:
Included in investment loss, net (2 ) (7 ) (9 )
Included in other comprehensive income 2 7 9
Settlements (5 ) (16 ) (21 )
Transfers into Level 3 — 18 18

Ending balance of Level 3 marketable securities $ 181 $ 27 $ 208



	Nine Months Ended June 26, 2011
	Auction Rate Securities			Other Marketable Securities			Other Liabilities
Beginning balance of Level 3	$	126		$	18		$	8
Total realized and unrealized gains:
Included in investment income, net	—			1			—
Included in other comprehensive income	2			—			—
Purchases	4			—			—
Settlements	(6		)	(4		)	—
Transfers into Level 3	—			6			—
Ending balance of Level 3	$	126		$	21		$	8



	Nine Months Ended June 27, 2010
	Auction Rate Securities			Other Marketable Securities
Beginning balance of Level 3	$	174		$	31
Total realized and unrealized gains (losses):
Included in investment income, net	—			5
Included in other comprehensive loss	3			(2		)
Settlements	(6		)	(19		)
Transfers into Level 3	—			4
Ending balance of Level 3	$	171		$	19

The ~~Company’s~~Company’s policy is to recognize transfers into and out of levels within the fair value hierarchy at the end of the fiscal month in which the actual event or change in circumstances that caused the transfer occurs. Transfers into Level 3 induring the ~~nine-month periods~~nine months ended June 26, 2011 and June 27, 2010 ~~and June 28, 2009~~ primarily consisted of debt securities with significant inputs that became unobservable as a result of an increased likelihood of a shortfall in contractual cash flows or a significant downgrade in ~~the~~ credit ratings.

Nonrecurring Fair Value Measurements.The Company measures certain assets at fair value on a nonrecurring basis. These assets include ~~cost~~cost- and ~~equity method~~equity-method investments when they are deemed to be other-than-temporarily impaired, assets acquired and liabilities assumed in an acquisition or in a nonmonetary exchange, and property, plant and equipment and intangible assets that are written down to fair value when they are held for sale or determined to be impaired. During the nine months ended June ~~27, 2010 and June 28, 2009, the Company recorded $7~~26, 2011, goodwill with a carrying amount of $154 million and $13 million, respectively, in other-than-temporary impairments on cost and equity method investments, which had carrying values of $15 million and $5 million at June 27, 2010 and June 28, 2009, respectively. The was written down to its implied fair value of ~~these investments was measured using financial metrics, comparison to other private and public companies and analysis~~$40 million, resulting in an impairment charge of ~~the financial condition and near-term prospects of the issuer, including recent financing activities and their capital structure as well as other economic variables. These~~$114 million (Note 11). The implied fair value ~~measurements were~~was based on significant unobservable inputs, and as a result, the fair value measurement was classified as Level ~~3 because~~3. During the nine months ended June 26, 2011 and June 27, 2010, the Company ~~used~~did not have any other significant ~~unobservable inputs~~assets or liabilities that were measured at fair value on a nonrecurring basis in periods subsequent to ~~value them, principally because the issuers are non-public entities.~~

~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~initial recognition.

Note 3 –— Marketable Securities

Marketable securities were comprised as follows (in millions):

Current Noncurrent
June 27, September 27, June 27, September 27,
2010 2009 2010 2009
Available-for-sale:
U.S. Treasury securities and government-related securities $ 950 $ 1,407 $ — $ —
Corporate bonds and notes 3,852 3,988 1,376 1,204
Mortgage- and asset-backed securities 733 821 39 36
Auction rate securities — — 171 174
Non-investment-grade debt securities 21 21 3,138 2,719
Common and preferred stock 54 140 1,550 1,377
Equity mutual and exchange-traded funds — — 943 948
Debt mutual funds 1,817 1,975 401 215

$ 7,427 $ 8,352 $ 7,618 $ 6,673

QUALCOMM Incorporated

AsNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



	Current				Noncurrent
	June 26, 2011		September 26, 2010		June 26, 2011		September 26, 2010
Available-for-sale:
U.S. Treasury securities and government-related securities	$	209	$	650	$	4	$	4
Corporate bonds and notes	2,764		3,504		2,304		1,495
Mortgage- and asset-backed securities	570		629		95		38
Auction rate securities	—		—		126		126
Non-investment-grade debt securities	21		21		3,597		3,344
Common and preferred stock	91		52		1,861		1,670
Equity mutual and exchange-traded funds	—		—		1,021		979
Debt mutual funds	1,327		1,476		—		—
Total available-for-sale	4,982		6,332		9,008		7,656
Fair value option:
Debt mutual fund	—		—		485		467
Time deposits	—		400		—		—
Total marketable securities	$	4,982	$	6,732	$	9,493	$	8,123

The Company holds an investment in a debt mutual fund for which the Company elected the fair value option. The investment would have otherwise been recorded using the equity method. The debt mutual fund has no single maturity date. At June 26, 2011, the Company had an effective ownership interest in the debt mutual fund of 19.0%. Changes in fair value associated with this investment are recognized in net investment income. The Company believes that recording the investment at fair value and reporting the investment as a marketable security is preferable to applying the equity method because the Company is able to redeem its shares at net asset value, which is determined daily. At September 26, 2010, marketable securities also included $400 million of time deposits that matured in December 2010.

At June ~~27, 2010,~~26, 2011, the contractual maturities of available-for-sale debt securities were as follows (in millions):

Years to Maturity No Single
Less Than One to Five to Greater Than Maturity
One Year Five Years Ten Years Ten Years Date Total
1,138 4,768 1,572 784 4,236 12,498



Years to Maturity
Less Than One Year		One to Five Years		Five to Ten Years		Greater Than Ten Years		No Single Maturity Date		Total
$	464	$	4,016	$	2,306	$	966	$	3,265	$	11,017

Securities with no single maturity date included debt mutual funds, non-investment-grade debt securities, mortgage- and asset-backed securities and auction rate ~~securities, non-investment-grade debt securities and debt mutual funds.~~securities.

The Company recorded realized gains and losses on sales of available-for-sale marketable securities as follows (in millions):

Gross Realized Gross Realized Net Realized
Gains Losses Gains
For the three months ended
June 27, 2010 $ 96 $ (6 ) 90
June 28, 2009 95 (5 ) 90

For the nine months ended

June 27, 2010 $ 289 $ (17 ) 272
June 28, 2009 127 (70 ) 57



	Gross Realized Gains		Gross Realized Losses			Net Realized Gains
For the three months ended
June 26, 2011	$	74	$	(2	)	$	72
June 27, 2010	96		(6		)	90
For the nine months ended
June 26, 2011	$	297	$	(13	)	$	284
June 27, 2010	289		(17		)	272

Available-for-sale securities were comprised as follows (in millions):

Unrealized Unrealized
Cost Gains Losses Fair Value
June 27, 2010
Equity securities $ 2,342 $ 283 $ (78 ) $ 2,547
Debt securities 12,061 487 (50 ) 12,498

$ 14,403 $ 770 $ (128 ) $ 15,045

September 27, 2009

Equity securities $ 2,282 $ 340 $ (157 ) $ 2,465
Debt securities 12,069 530 (39 ) 12,560

$ 14,351 $ 870 $ (196 ) $ 15,025

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~(Unaudited)~~

(Unaudited)



	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 26, 2011
Equity securities	$	2,443	$	545	$	(15	)	$	2,973
Debt securities	10,616		423		(22		)	11,017
	$	13,059	$	968	$	(37	)	$	13,990
September 26, 2010
Equity securities	$	2,309	$	403	$	(11	)	$	2,701
Debt securities	10,795		512		(20		)	11,287
	$	13,104	$	915	$	(31	)	$	13,988

The following table shows the gross unrealized losses and fair values of the Company’s investments in individual securities that have been in a continuous unrealized loss position deemed to be temporary for less than 12 months and for more than 12 months, aggregated by investment category (in millions):

June 27, 2010
Less than 12 months More than 12 months
Unrealized Unrealized
Fair Value Losses Fair Value Losses
Corporate bonds and notes $ 887 $ (11 ) $ 19 $ —
Auction rate securities — — 171 (9 )
Non-investment-grade debt securities 592 (16 ) 111 (13 )
Common and preferred stock 338 (31 ) 10 (1 )
Equity mutual and exchange-traded funds 705 (46 ) — —
Debt mutual funds 217 (1 ) 1 —

$ 2,739 $ (105 ) $ 312 $ (23 )


	September 27, 2009
	Less than 12 months					More than 12 months					June 26, 2011
			Unrealized					Unrealized			Less than 12 months					More than 12 months
	Fair Value		Losses			Fair Value		Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate bonds and notes	$	462	$	(1	)	$	183	$	(5	)	$	480	$	(4	)	$	18	$	—
Mortgage- and asset-backed securities		56		(1	)		20		(1	)
Auction rate securities		23		(1	)		151		(10	)	3		—			123		(2		)
Non-investment-grade debt securities		127		(5	)		263		(15	)	754		(14		)	21		(2		)
Common and preferred stock		155		(11	)		155		(16	)	239		(15		)	3		—
Equity mutual and exchange-traded funds		44		(6	)		730		(124	)
											$	1,476	$	(33	)	$	165	$	(4	)
	$	867	$	(25	)	$	1,502	$	(171	)



	September 26, 2010
	Less than 12 months					More than 12 months
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate bonds and notes	$	425	$	(1	)	$	23	$	—
Auction rate securities	—		—			126		(4		)
Non-investment-grade debt securities	296		(7		)	90		(8		)
Common and preferred stock	133		(10		)	3		—
Equity mutual and exchange-traded funds	277		(1		)	—		—
	$	1,131	$	(19	)	$	242	$	(12	)

At June ~~27, 2010,~~26, 2011, the Company concluded that the unrealized losses were temporary. Further, for common and preferred stock ~~equity mutual and exchange-traded funds and debt mutual funds~~ with unrealized losses, the Company has the ability and the intent to hold such securities until they recover, which is expected to be within a reasonable period of time. For debt securities with unrealized losses, the Company does not have the intent to sell, nor is it more likely than not that the Company will be required to sell, such securities before recovery or maturity.

The following table shows the activity for the credit loss portion of other-than-temporary impairments on debt securities held by the Company (in millions):

Three Months Nine Months
Ended Ended
June 27, June 27,
2010 2010
Beginning balance of credit losses $ 134 $ 170
Credit losses recognized on securities previously not impaired — 1
Reductions in credit losses related to securities sold (8 ) (26 )
Accretion of credit losses due to an increase in cash flows expected to be collected (2 ) (21 )

Ending balance of credit losses $ 124 $ 124

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~(Unaudited)~~

(Unaudited)

Three Months Ended Nine Months Ended
June 26,
2011 June 27,
2010 June 26,
2011 June 27,
2010
Beginning balance of credit losses $ 52
$ 134
$ 109
$ 170
Credit losses recognized on securities previously impaired —
—
(40 ) —
Credit losses recognized on securities previously not impaired —
—
—
1
Reductions in credit losses related to securities sold (3 ) (8 ) (15 ) (26 )
Accretion of credit losses due to an increase in cash flows expected to be collected —
(2 ) (5 ) (21 )
Ending balance of credit losses $ 49
$ 124
$ 49
$ 124

Note 4 –— Composition of Certain Financial Statement Items

Accounts Receivable.


	June 27,		September 27,
	2010		2009		June 26, 2011		September 26, 2010
	(In millions)				(In millions)
Trade, net of allowances for doubtful accounts of $2 and $4, respectively	$	762	$	639
Trade, net of allowances for doubtful accounts of $2 and $3, respectively					$	787	$	697
Long-term contracts		27		38	38		25
Other		9		23	7		8
					$	832	$	730
	$	798	$	700

Inventories.


	June 27,		September 27,
	2010		2009		June 26, 2011		September 26, 2010
	(In millions)				(In millions)
Raw materials	$	14	$	15	$	18	$	15
Work-in-process		219		199	347		284
Finished goods		213		239	388		229
					$	753	$	528
	$	446	$	453

~~Intangible Assets.~~Gross technology-based intangible assets increased by $138 million during the nine months ended June 27, 2010 primarily due to the assignment of certain patents to the Company pursuant to a license agreement entered into in the first quarter of fiscal 2010. The estimated fair value of these patents was determined using the income approach.

Other Current Liabilities.

June 27, September 27,
2010 2009
(In millions)
Customer-related liabilities, including incentives, rebates and other reserves $ 648 $ 461
Current portion of payable to Broadcom (Note 8) 170 170
Accrued liability to KFTC (Note 8) — 230
Payable for unsettled securities trades 258 101
Other 244 265

$ 1,320 $ 1,227

June 26,
2011 September 26,
2010
(In millions)
Customer-related liabilities, including incentives, rebates and other accrued liabilities $ 873
$ 574
Current portion of payable to Broadcom for litigation settlement 170
170
Payable for unsettled securities trades 48
80
Other 327
261
$ 1,418
$ 1,085

Note 5 –— Investment Income, ~~(Loss),~~ Net

Three Months Ended Nine Months Ended
June 27, June 28, June 27, June 28,
2010 2009 2010 2009
(In millions) (In millions)
Interest and dividend income $ 131 $ 132 $ 405 $ 389
Interest expense (14 ) (8 ) (30 ) (16 )
Net realized gains on marketable securities 90 90 272 57
Net realized gains on other investments 2 — 2 —
Impairment losses on marketable securities (28 ) (112 ) (95 ) (704 )
Impairment losses on other investments (1 ) (4 ) (7 ) (13 )
(Losses) gains on derivative instruments (2 ) (7 ) (3 ) 5
Equity in earnings (losses) of investees 1 (1 ) (3 ) (14 )

$ 179 $ 90 $ 541 $ (296 )

~~Impairment losses on marketable securities for the nine months ended June 28, 2009 were comprised of total~~

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~(Unaudited)~~

other-than-temporary impairment losses of $712 million less $8 million related to the noncredit portion of losses on debt securities recognized in other comprehensive income. The other-than-temporary losses on marketable securities were generally caused by a disruption in U.S. and foreign credit and financial markets that depressed securities values.(Unaudited)

Three Months Ended Nine Months Ended
June 26,
2011 June 27, 2010* June 26,
2011 June 27, 2010*
(In millions)
Interest and dividend income $ 127
$ 131
$ 384
$ 405
Interest expense (29 ) (10 ) (84 ) (19 )
Net realized gains on marketable securities 72
90
302
272
Net realized gains on other investments 1
2
2
2
Impairment losses on marketable securities (5 ) (28 ) (16 ) (95 )
Impairment losses on other investments (5 ) (1 ) (10 ) (7 )
(Losses) gains on derivative instruments —
(2 ) 1
(3 )
Equity in earnings (losses) of investees —
1
(5 ) (3 )
$ 161
$ 183
$ 574
$ 552
*As adjusted for discontinued operations (Note 10)

Note 6 –— Income Taxes

The Company ~~currently~~ estimates its annual effective income tax rate for continuing operations to be approximately 20% for fiscal ~~2010,~~2011, compared to the ~~23%~~22% effective income tax rate infor fiscal ~~2009. The~~2010. During the first quarter of fiscal 2011, the United States government extended the federal research and development tax credit ~~expired on~~to include qualified research expenditures paid or incurred after December 31, ~~2009. Therefore,~~2009 and before January 1, 2012. The Company recorded a tax benefit of $32 million related to fiscal 2010 in the ~~Company’s~~first quarter of fiscal 2011 for the retroactive extension of this credit. The annual effective tax rate for fiscal 2010 ~~only reflects federal research and development credits generated through December 31, 2009. The annual effective tax rate also includes~~ included tax expense of ~~$130~~approximately $137 million that ~~arises~~arose because certain deferred revenue ~~related to the Company’s 2008 license and settlement agreements with Nokia is~~was taxable in fiscal 2010, but the resulting deferred tax asset will reverse in future years when the Company’s state tax rate will be lower as a result of California tax legislation enacted in ~~fiscal 2009.~~2009.

The estimated annual effective tax rate for continuing operations for fiscal ~~2010~~2011 of 20% is less than the United States federal statutory rate primarily due to benefits of ~~22%~~approximately 18% related to foreign earnings taxed at less than the United States federal rate and benefits of approximately 2% related to the research and development tax credit, partially offset by state taxes of approximately 5% and tax expense of 4% related to the deferred revenue that is taxable in fiscal 2010, but for which the resulting deferred tax asset will reverse in future years when the Company’s state tax rate will be lower.. The prior fiscal year rate was lower than the United States federal statutory rate primarily due to benefits related to foreign earnings taxed at less than the United States federal rate, ~~adjustments~~partially offset by state taxes and tax expense related to ~~prior year estimates~~the valuation of ~~uncertain~~deferred tax ~~positions as~~assets to reflect changes in California law.

The Company had unrecognized tax benefits of $490 million and $353 million at June 26, 2011 and September 26, 2010, respectively. The increase in unrecognized tax benefits during the nine months ended June 26, 2011 primarily resulted from the acquisition of Atheros Communications, Inc. (Note 12). The Company expects the total amount of unrecognized tax benefits to significantly decrease during the fourth quarter of fiscal 2011 due to agreement with the California Franchise Tax Board on a component of its fiscal 2006 through 2010 tax returns. As a result of this agreement, the Company expects to record a $44 milliontax ~~audits during the year and the generation of research and development credits, partially offset by an increase~~benefit in the ~~valuation allowance related to capital losses, the revaluation of deferred items and state taxes.~~

~~The Internal Revenue Service (IRS) completed its examination of the Company’s tax return for fiscal 2008 and issued a full acceptance letter for fiscal 2009 during the third~~fourth quarter of fiscal 2010, resulting in an increase to the tax provision of $20 million. The Company is no longer subject to United States federal income tax examinations for years prior to fiscal 2009. The IRS is performing a limited post-filing review of the 2009 tax return to ensure compliance with the agreed tax return positions.2011.

Note 7 –— Stockholders’ Equity

Changes in stockholders’ equity for the nine months ended June ~~27, 2010~~26, 2011 were as follows (in millions):

QUALCOMM Incorporated

Balance at September 27, 2009 $ 20,316
Net income 2,382
Other comprehensive income (59 )
Repurchase of common stock (2,893 )
Net proceeds from the issuance of common stock 516
Share-based compensation 456
Tax benefit from exercise of stock options 29
Dividends (872 )
Other 11

Balance at June 27, 2010 $ 19,886

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Stock Repurchase Program.~~~~During the three months and nine months ended~~(Unaudited)



	QUALCOMM Stockholders’ Equity			Noncontrolling Interests			Total Stockholders’ Equity
Balance at September 26, 2010	$	20,858		$	—		$	20,858
Issuance of subsidiary shares to noncontrolling interests	16			40			56
Net income (loss)⁽¹⁾	3,204			(10		)	3,194
Other comprehensive income	47			—			47
Common stock issued under employee benefit plans	2,355			—			2,355
Share-based compensation	587			—			587
Tax benefit from exercise of stock options	110			—			110
Dividends	(993		)	—			(993		)
Value of stock awards assumed in acquisition	106			—			106
Other	(19		)	—			(19		)
Balance at June 26, 2011	$	26,271		$	30		$	26,301

⁽¹⁾ Loss from discontinued operations, net of income taxes (Note 10), was attributable to QUALCOMM.

Noncontrolling Interests. In June ~~27,~~ 2010, the Company ~~repurchased~~won a 20 MHz slot of Broadband Wireless Access (BWA) spectrum in four telecom circles in India as a result of the completion of the BWA spectrum auction. Assignment of licenses to operate wireless networks on this spectrum, with an initial license period of 20 years, is pending approval by the Indian government. At June 26, 2011 and ~~retired 32,388,000~~September 26, 2010, the Company had a $1.1 billion advance payment included in noncurrent other assets related to this spectrum. The Company will amortize the spectrum licenses over the remaining license period commencing upon the commercial launch of wireless services in India, which is expected to occur within five years of the assignment date. The Company’s goal is to attract one or more operator partners into a venture (or ventures) for construction of an LTE network in compliance with the Indian government’s rollout requirement for the BWA spectrum and ~~76,259,000 shares~~then to exit the venture(s). The manner and timing of such exit will be dependent upon a number of factors, such as market conditions and regulatory considerations, among others.

During the second quarter of fiscal 2011, in connection with the India BWA spectrum purchase, certain of the Company’s ~~common stock, respectively,~~subsidiaries in India issued noncontrolling interests to two third-party Indian investors for ~~$1.2 billion and $2.9 billion, respectively. During the nine months ended June 28, 2009,~~$62 million, such that the Company ~~repurchased and retired 8,920,000 shares~~now holds a 74% interest in each of those subsidiaries, the ~~Company’s common stock~~maximum interest permitted under applicable Indian Foreign Direct Investment regulations. In addition, the third parties representing the noncontrolling interests in the subsidiaries hold put rights that provide them with options to sell their ownership interests in the subsidiaries to QUALCOMM Incorporated or its nominee (subject to applicable regulatory approvals) after July 29, 2014, or earlier if certain events occur, at a price equal to their original capital contribution. The aggregate fair value of these put rights, which are accounted for ~~$284 million.~~ as freestanding financial instruments classified in other liabilities, was $8 million at June 26, 2011.

Stock Repurchase Program. The Company did not repurchase any shares during the three and nine months ended June ~~28, 2009. On March 1,~~26, 2011. During the three and nine months ended June 27, 2010, the Company ~~announced that it had been authorized to repurchase up to $3.0 billion~~repurchased and retired 32,388,000 and 76,259,000 shares of the Company’s common stock, respectively, for $1.2 billionand ~~$1.8~~$2.9 billion ~~of that amount~~, respectively. At June 26, 2011, approximately $1.7 billion remained ~~available at June 27, 2010.~~authorized for repurchase under the Company’s stock repurchase program. The stock repurchase program has no expiration date. ~~Since June 27, 2010, the Company has repurchased and retired 3,529,000 shares of the Company’s common stock for $122 million.~~

Dividends.On March ~~1, 2010,~~8, 2011, the Company announced an increase in its quarterly cash dividend per share of common stock from ~~$0.17~~$0.190 to ~~$0.19,~~$0.215, which ~~was~~is effective for ~~quarterly~~ dividends payable after March ~~28, 2010.~~25, 2011. On

~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

July ~~8, 2010,~~13, 2011, the Company announced a cash dividend of ~~$0.19~~$0.215 per share on the Company’s common stock, payable on September ~~24, 2010~~23, 2011 to stockholders of record as of August ~~27, 2010. Cash dividends announced in~~26, 2011. During the nine months ended June 26, 2011 and June 27, 2010 ~~and June 28, 2009~~, dividends charged to retained earnings were as follows (in millions, except per share data):

2010 2009
Per Share Total Per Share Total
First quarter $ 0.17 $ 284 $ 0.16 $ 264
Second quarter 0.17 279 0.16 264
Third quarter 0.19 309 0.17 282

Total $ 0.53 $ 872 $ 0.49 $ 810

2011 2010
Per Share Total Per Share Total
First Quarter $ 0.190
$ 314
$ 0.170
$ 284
Second Quarter 0.190
319
0.170
279
Third Quarter 0.215
360
0.190
309
$ 0.595
$ 993
$ 0.530
$ 872

15
QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 8 –— Commitments and Contingencies

Litigation.Tessera, Inc. v. QUALCOMM Incorporated:On April 17, 2007, Tessera filed a patent infringement lawsuit in the United States District Court for the Eastern ~~Division~~District of Texas and a complaint with the United States International Trade Commission (ITC) pursuant to Section 337 of the Tariff Act of 1930 against the Company and other companies, alleging infringement of two ~~patents relating to semiconductor packaging structures and seeking monetary damages and injunctive and other relief.~~patents. The ~~District Court~~district court action is stayed pending resolution of the ITC proceeding, including ~~appeals. The U.S. Patent and Trademark Office’s (USPTO) Central Reexamination Unit has issued office actions rejecting~~ all of the asserted patent claims on the grounds that they are invalid in view of certain prior art and has made these rejections final. Tessera has appealed the rejections to the Board of Appeals and Interferences. On December 1, 2008, the Administrative Law Judge (ALJ) ruled that the patents are valid but not infringed.appeals. On May 20, 2009, ~~however,~~ the ITC ~~reversed the ALJ’s determination that the patents were not infringed, and it~~ issued ~~the following remedial orders: (1)~~ a limited exclusion order ~~that bans the Company~~ and ~~the other named respondents from importing into the United States the accused chip packages (except to the extent those products are licensed) and (2)~~ a cease and desist order, ~~that prohibits~~both of which were terminated when the ~~Company from engaging in certain domestic activities respecting those products. The President declined to review~~patents expired on September 24, 2010. During the ~~decision. The~~period of the exclusion order, the Company and other respondents have appealed. The ITC and the appeals court declined to stay the ITC’s decision pending appeal. The appellate briefing is complete and oral arguments were held on June 9, 2010. The appeals court decision is expected within the next several months. The Company has shifted supply of accused chips for customers who manufacture products that may be imported to the United States ~~market~~ to a licensed supplier ~~Amkor. A licensed source~~ of ~~supply permits~~Tessera, and the Company ~~to continue~~continued to supply those customers without interruption. On December 21, 2010, the United States ~~market without interruption.~~Court of Appeals for the Federal Circuit issued a decision affirming the ITC’s orders, and on March 29, 2011, it declined to reconsider that decision. The ~~subject~~Company may appeal to the United States Supreme Court. Once the stay is lifted, Tessera may continue to seek back damages in the district court, but it may not seek injunctive relief due to the expiration of the patents.

MicroUnity Systems Engineering, Inc. v. QUALCOMM Incorporated, et al.: MicroUnity filed a total of three patent infringement complaints, on March 16, 2010, June 3, 2010 and January 27, 2011, against the Company and a number of other technology companies, including Texas Instruments, Samsung, Apple, Nokia, Google and HTC, in the United States District Court for the Eastern District of Texas. The complaints against the Company allege infringement of a total of 15 patents ~~expire on September 24, 2010, at which time~~and appear to accuse Snapdragon products. The district court consolidated the ~~ITC orders will cease~~actions in May 2011. The claim construction hearing is set for August 12, 2012, and trial is scheduled for June 3, 2013. The Company has filed a motion to ~~be operative.~~sever the claims against it from the other defendants and to transfer the case to the United States District Court for the Northern District of California.

~~Korea Fair Trade Commission Complaint:~~~~Two U.S. companies (Texas Instruments and Broadcom) and two South Korean companies (Nextreaming and Thin Multimedia) filed complaints with the~~ Korea Fair Trade Commission (KFTC) alleging that certain of the Company’s business practices violate South Korean antitrust regulations. As a result of its agreement with the Company, Broadcom withdrew its complaint to the KFTC in May 2009. After a hearing, the KFTC announced its ruling via press release in July 2009. Complaint: On January 4, 2010, the KFTC issued ~~its~~a written decision, ~~explaining its ruling~~finding that the Company had violated South Korean law by offering certain discounts and rebates for purchases of its CDMA chips and for including in certain agreements language requiring the continued payment of royalties after all licensed patents have expired. The KFTC levied a fine, ~~of 273.2 billion Korean won,~~ which ~~was accrued in fiscal 2009 (Note 4) and~~the Company paid in the second quarter of fiscal 2010 ~~and ordered the Company to cease the practices at issue. In February 2010, the Company filed a complaint against the KFTC with the Seoul High Court appealing the KFTC’s written decision.~~. The Company ~~does not anticipate~~is appealing that decision in the cease and desist remedies ordered will have a material effect on the results of its operations. In July 2009, the KFTC also announced that it would continue its review of the Company’s integration of multimedia functions into its chips, but it has not announced any decisions in that regard. The Company believes that its practices do not violate South Korean ~~competition law, are grounded in sound business practice and are consistent with its customers’ desires.~~courts.

~~Japan Fair Trade Commission Complaint~~~~: The~~ Japan Fair Trade Commission (JFTC) Complaint: The JFTC received unspecified complaints alleging that the Company’s business practices are, in some way, a violation of Japanese law. On September 29, 2009, the JFTC issued a cease and desist order ~~(CDO)~~ concluding that the Company’s Japanese licensees were forced to cross-license patents to the Company on a royalty-free basis and were forced to accept a

~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

provision under which they agreed not to assert their essential patents against the Company’s other licensees who made a similar commitment in their license agreements with the Company. The ~~CDO~~cease and desist order seeks to require the Company to modify its existing license agreements with Japanese companies to eliminate these provisions while preserving the license of the Company’s patents to those companies. The Company disagrees with the conclusions that it forced its Japanese licensees to agree to any provision in the parties’ agreements and that those provisions violate ~~Japan’s Anti-Monopoly~~the Japanese Antimonopoly Act. The Company has invoked its right under Japanese law to an administrative hearing before the JFTC. In February 2010, the Tokyo High Court granted the Company’s motion and issued a stay of the ~~CDO~~cease and desist order pending the administrative hearing before the JFTC. The JFTC has had ~~three~~nine hearing days to date, with an additional hearing day scheduled on October 19, 2011, and additional hearing days ~~scheduled for August and October 2010.~~yet to be scheduled.

Icera Complaint to the European Commission: On June 7, 2010, the European Commission (the Commission) notified and provided the Company with a redacted copy of a complaint filed with the Commission by Icera, Inc. alleging that the Company has engaged in anticompetitive activity. The Company has been asked by the Commission to submit a preliminary response to the portions of the Complaint disclosed to it, and the Company ~~expects to submit~~submitted its response in July 2010. The Company will cooperate fully with the Commission.

~~Panasonic Arbitration:~~Broadcom Corporation et al. v. Commonwealth Scientific and Industrial Research Organisation: On ~~August 5,~~November 10, 2009, ~~Panasonic~~Broadcom and Atheros (Note 12), which was acquired by the Company in May 2011, filed ~~an arbitration demand alleging~~a complaint for declaratory judgment against Commonwealth Scientific and Industrial Research Organisation (CSIRO) in the United States District Court for the Eastern District of Texas, requesting the court to declare, among other things, that itUnited States patent number 5,487,069 (the '069 Patent) assigned to CSIRO is invalid, unenforceable and that Atheros does not ~~owe royalties, or owes less royalties,~~infringe any valid claims of the '069 Patent. On October 14, 2010, CSIRO filed a complaint against Atheros and Broadcom (amended and consolidated with complaints against other third parties on April 6, 2011) alleging infringement of the '069 Patent. Trial is scheduled for April 9, 2012.

MOSAID Technologies Incorporated v. Dell, Inc. et al.: On March 16, 2011, MOSAID filed a complaint against Atheros and 32 other entities in the United States District Court for the Eastern District of Texas. In its ~~WCDMA subscriber devices sold on or after December 21, 2008,~~infringement contentions, MOSAID alleges that certain of Atheros’ products infringe United States patent numbers 5,131,006, 5,151,920, 5,422,887,

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

5,706,428, 5,563,786 and 6,992,972. MOSAID seeks unspecified damages and other relief. Discovery has not yet begun.

Formal Order of Private Investigation: On September 8, 2010, the Company was notified by the Securities and Exchange Commission’s Los Angeles Regional office (SEC) of a formal order of private investigation. The Company understands that the Company breached the license agreement between the parties as well as certain commitments to standards setting organizations. On January 31, 2010, Panasonic amended the arbitration demand to include claims based on alleged misrepresentations and the Japanese Antimonopoly Act and increased its claim for damages to include royalties it has paid on its WCDMA subscriber devices sold prior toinvestigation arose from a “whistleblower’s” allegations made in December 21, 2008. The arbitration demand seeks declaratory relief regarding the amount of royalties due and payable by Panasonic, as well as the return of certain royalties it had previously paid. The Company has responded2009 to the ~~arbitration demand, denying~~audit committee of the Company’s Board of Directors and to the SEC. The audit committee completed an internal review with the assistance of independent counsel and independent forensic accountants. This internal review into the allegations and ~~requesting judgment in its favor on all claims. The arbitration hearing will proceed in phases. The first phase hearing began on July 12, 2010. Additional phases have~~related accounting practices did not yet been scheduled. Although the Company believes Panasonic’s claims are without merit, it has deferred the recognition of revenue related to WCDMA subscriber unit royalties reported and paid by Panasonicidentify any errors in the ~~fourth quarter of fiscal 2009 and~~Company’s financial statements. The Company continues to cooperate with the ~~first nine months of fiscal 2010.~~SEC’s ongoing investigation.

Other:The Company has been named, along with many other manufacturers of wireless phones, wireless operators and industry-related organizations, as a defendant in purported class action lawsuits, and individually filed actions pending in federal court in Pennsylvania and Washington D.C. superior court, seeking monetary damages arising out of its sale of cellular phones.

While there can be no assurance of favorable outcomes, the Company believes the claims made by other parties in the foregoing matters are without merit and will vigorously defend the actions. The Company has not recorded any accrual for contingent liabilities associated with the legal proceedings described above based on the Company’s belief that liabilities, while possible, are not probable. Further, any possible range of loss cannot be reasonably estimated at this time. The Company is engaged in numerous other legal actions not described above arising in the ordinary course of its business and, while there can be no assurance, believes that the ultimate outcome of these actions will not have a material adverse effect on its operating results, liquidity or financial position.

Litigation Settlement, Patent License and Other Related Items.On April 26, 2009, the Company entered into a Settlement and Patent License and Non-Assert Agreement with Broadcom. The Company agreed to pay Broadcom ~~$891~~$891 million, of which ~~$373~~$546 million was paid through June ~~27, 2010,~~26, 2011, and the remainder will be paid ratably through April ~~2013.~~2013. The Company recorded a pre-tax charge of ~~$783~~$783 million related to this agreement during fiscal 2009 ~~including $748 million recorded in the second quarter of fiscal 2009.~~. At June ~~27, 2010,~~26, 2011, the carrying value of the liability was ~~$495~~$335 million, which also approximated the fair value of the contractual liability net of imputed interest.

Loans Payable Related to India Spectrum ~~Acquisition and Related Debt.~~Acquisition. In June 2010, the Company won a 20 MHz slot of Broadband Wireless Access (BWA) spectrum in four telecom circles in India as a result of the completion of the BWA spectrum auction. The Company expects that licenses to operate wireless networks on this spectrum will be assigned to the Company by December 2010 with an initial license period of 20 years. At June 27, 2010, the Company had a $1.06 billion advance payment included in noncurrent other assets related to this spectrum. The Company will amortize the spectrum licenses over the remaining license period commencing upon the commercial launch of wireless services in India, which is expected to occur within five years of the assignment date. The Company’s goal

~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

is to attract one or more operator partners into a venture (or ventures) for construction of an LTE network in compliance with the Indian government’s rollout requirement for the BWA spectrum, and then to exit the venture(s). The manner and timing of such exit will be dependent upon a number of factors, such as market conditions and regulatory considerations, among others.

~~In June 2010, in~~ connection with the ~~Indian~~India BWA spectrum purchase in June 2010, certain of the ~~Company~~Company’s subsidiaries in India entered into ~~a bank~~ loan ~~agreement~~agreements with multiple lenders that isare denominated in Indian rupees. The ~~loan~~loans bear interest at an annual rate based on the highest rate among the bank lenders, which is ~~payable in full in December 2010. The loan has a fixed interest rate of 6.75% per year~~reset quarterly, plus 0.25% (9.75% at June 26, 2011) with interest payments due monthly. The loans are due and payable in full in December 2012. However, each lender has the right to demand prepayment of its portion of the outstanding loans on December 15, 2011 subject to sufficient prior written notice. As a result, the loans are classified as a component of current liabilities. The loans can be prepaid without penalty on certain dates and are guaranteed by QUALCOMM Incorporated and one of its subsidiaries. The loan agreements contain standard covenants, which, among other things, limit actions by the subsidiaries that are party to the loan agreements, including the incurrence of loans and equity investments, disposition of assets, mergers and consolidations and other matters customarily restricted in such agreements. At June ~~27, 2010,~~26, 2011, the aggregate carrying value of the ~~loan~~loans was ~~$1.06~~$1.1 billion, which approximated ~~its~~ fair value.

Indemnifications.~~In general,~~With the exception of the practices of Atheros (Note 12), which the Company acquired in May 2011, the Company generally does not ~~agree to~~ indemnify its customers and licensees for losses sustained from infringement of third-party intellectual ~~property.~~property rights. However, the Company is contingently liable under certain product sales, services, license and other agreements to indemnify certain customers against certain types of liability and/or damages arising from qualifying claims of patent infringement by products or services sold or provided by the Company. The Company’s obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments made by the Company. Under Atheros’ indemnification agreements, software license agreements and product sale agreements, including its standard software license agreements and standard terms and conditions of semiconductor sales, Atheros agrees, subject to restrictions and after certain conditions are met, to indemnify and defend its licensees and customers against third-party claims asserting infringement of certain intellectual property rights, which may include patents, copyrights, trademarks or trade secrets, and to pay any judgments entered on such claims against the licensees or customers. Through June 26, 2011, Atheros has received a number of claims from its direct and indirect customers and other third parties for indemnification under such agreements with respect to alleged infringement of third-party intellectual property rights by Atheros’ products.

These indemnification arrangements are not initially measured and recognized at fair value because they are deemed to be similar to product warranties in that they relate to claims and/or other actions that could impair the ability of the Company’s direct or indirect customers to use the Company’s products or services. Accordingly, the Company records liabilities resulting

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

from the arrangements when they are probable and can be reasonably estimated. Reimbursements under indemnification arrangements have not been material to the Company’s consolidated financial statements. The Company has not recorded any accrual for contingent liabilities at June ~~27, 2010~~26, 2011 associated with these indemnification arrangements, other than negligible amounts for reimbursement of legal costs, based on the Company’s belief that additional liabilities, while possible, are not probable. Further, any possible range of loss cannot be estimated at this time.

Purchase Obligations.The Company has agreements with suppliers and other parties to purchase inventory, other goods and services and long-lived assets. Noncancelable obligations under these agreements at June ~~27, 2010~~26, 2011 for the remainder of fiscal ~~2010~~2011 and for each of the subsequent four years from fiscal ~~2011~~2012 through ~~2014~~2015 were ~~$915~~approximately $1.5 billion, $336 million ~~$365~~, $30 million ~~$119~~, $4 million ~~$42~~ and $33 million ~~and $15 million,~~, respectively, and ~~$86~~$24 million thereafter. Of these amounts, for the remainder of fiscal ~~2010~~2011 and for fiscal ~~2011,~~2012, commitments to purchase integrated circuit product inventories comprised ~~$809~~$1.2 billion and $34 million, respectively.

Leases. The future minimum lease payments for all capital leases and ~~$136 million, respectively.~~operating leases at June 26, 2011 were as follows (in millions):

~~Leases.~~



	Capital Leases		Operating Leases		Total
Remainder of fiscal 2011	$	2	$	23	$	25
2012	14		85		99
2013	14		46		60
2014	14		37		51
2015	14		27		41
Thereafter	370		206		576
Total minimum lease payments	$	428	$	424	$	852
Deduct: Amounts representing interest	243
Present value of minimum lease payments	185
Deduct: Current portion of capital lease obligations	1
Long-term portion of capital lease obligations	$	184

The Company leases certain of its land, facilities and equipment under noncancelable operating leases, with terms ranging from less than one year to 35 years and with provisions in certain leases for cost-of-living increases. The Company leases certain property under capital lease agreements associated with its discontinued operations (Note 10), primarily related to site leases that ~~expire at various dates through 2043. Capital~~have an initial term of five to seven years with renewal options of up to five additional renewal periods. In determining the capital lease classification for the site leases upon commencement of each lease, the Company included all renewal options. As a result of its restructuring plan, the Company does not intend to renew its existing site capital leases. At June 26, 2011, the Company expects to write off $161 million of site capital lease assets (which are included in buildings and improvements in property, plant and equipment) and $184 million of its capital lease obligations (which are included in other ~~liabilities. The future minimum~~liabilities) at the end of the current contractual lease ~~payments for all capital leases and operating leases at June 27, 2010 were as follows (in millions):~~terms related to lease renewal option periods thereafter. Any early terminations may impact the amounts that are written off.

Capital Operating
Leases Leases Total
Remainder of fiscal 2010 $ 4 $ 16 $ 20
2011 16 91 107
2012 16 64 80
2013 16 35 51
2014 16 26 42
Thereafter 440 244 684

Total minimum lease payments $ 508 $ 476 $ 984

Deduct: Amounts representing interest 291

Present value of minimum lease payments 217
Deduct: Current portion of capital lease obligations 2

Long-term portion of capital lease obligations $ 215

~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

Note 9 — Segment Information

The Company is organized on the basis of products and services. The Company aggregates four of its divisions into the Qualcomm Wireless & Internet segment. Reportable segments are as follows:

	•		Qualcomm CDMA Technologies (QCT) — develops and supplies integrated circuits and system software for wireless voice and data communications, multimedia functions and global positioning system products based on its CDMA technology and other technologies;

	•		Qualcomm CDMA Technologies (QCT) — develops and supplies integrated circuits and system software based on CDMA, OFDMA and other technologies for voice and data communications, networking, application processing, multimedia and global positioning system products. Qualcomm Technology Licensing (QTL) — grants licenses or otherwise provides rights to use portions of the Company’s intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products, including, without limitation, products implementing cdmaOne, CDMA2000, WCDMA, CDMA TDD (including TD-SCDMA), GSM/GPRS/EDGE and/or OFDMA standards, and collects license fees and royalties in partial consideration for such licenses; Qualcomm Wireless & Internet (QWI) — comprised of: 18 QUALCOMM Incorporated NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Qualcomm Internet Services (QIS) — provides content enablement services for the wireless industry and push-to-talk and other products and services for wireless network operators; Qualcomm Government Technologies (QGOV) — provides development, hardware and analytical expertise to United States government agencies involving wireless communications technologies; Qualcomm Enterprise Services (QES) — provides satellite- and terrestrial-based two-way wireless information and position reporting services to transportation and logistics companies and other enterprise companies with fleet vehicles; and Firethorn — builds and manages software applications that enable certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products, including, without limitation, products implementing cdmaOne, CDMA2000, WCDMA, CDMA TDD (including TD-SCDMA), GSM/GPRS/EDGE and/or OFDMA standards and their derivatives, and collects license fees and royalties in partial consideration for such licenses;

	•		~~Qualcomm Wireless & Internet (QWI) — comprised of:~~

	•		~~Qualcomm Internet Services (QIS) — provides content enablement services for the wireless industry and push-to-talk and other products and services for wireless network operators;~~

	•		~~Qualcomm Government Technologies (QGOV) — provides development, hardware and analytical expertise to United States government agencies involving wireless communications technologies;~~

	•		Qualcomm Enterprise Services (QES) — provides satellite- and terrestrial-based two-way data messaging, position reporting, wireless application services and managed data services to transportation and logistics companies and other enterprise companies; and

	•		~~Firethorn — builds and manages software applications that enable financial institutions and wireless operators to offer~~ mobile commerce services.

Qualcomm Strategic Initiatives (QSI) — ~~manages the Company’s strategic investment activities, including FLO TV Incorporated (FLO TV), the Company’s wholly-owned wireless multimedia operator subsidiary. QSI~~ makes strategic investments ~~in early stage companies and in wireless spectrum, such as the BWA spectrum recently won in the auction in India,~~ that the Company believes will open new ~~markets~~opportunities for CDMA and OFDMA technologies, support the design and introduction of new CDMA and OFDMA products or possess unique capabilities or technology. Many of these strategic investments are in early-stage companies and in wireless spectrum, such as the BWA spectrum won in the auction in India. QSI also includes FLO TV Incorporated (FLO TV), the Company’s wholly-owned wireless multimedia operator subsidiary. Since the shut down of the FLO TV business and network on March 27, 2011, the Company has been working to sell its remaining assets and exit contracts. The 700 MHz spectrum was classified as held for sale, and all other FLO TV assets were considered disposed of, at June 26, 2011. Accordingly, the results of operations related to the FLO TV business were presented as discontinued operations at June 26, 2011 (Note 10). Share-based payments that had been included in reconciling items and QSI revenues and earnings (loss) from continuing operations before income taxes (EBT) have been adjusted to conform for all prior periods presented.

The Company evaluates the performance of its segments based on ~~earnings (loss) before income taxes (EBT).~~EBT from continuing operations. Segment EBT includes the allocation of certain corporate expenses to the segments, including depreciation and amortization expense related to unallocated corporate assets. Certain income and charges are not allocated to segments in the Company’s management reports because they are not considered in evaluating the segments’ operating performance. Unallocated income and charges include certain investment income (loss),; certain share-based ~~compensation~~compensation; and certain research and development expenses and other selling and marketing expenses that were deemed to be not directly related to the businesses of the segments. Additionally, starting with acquisitions in the third quarter of fiscal 2011, unallocated charges include recognition of the step-up of inventories to fair value and amortization of certain intangible assets. Such charges related to acquisitions that were completed prior to the third quarter of fiscal 2011 are allocated to the respective segments. The table below presents revenues and EBT for reportable segments (in millions):

~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~


											Reconciling
	QCT		QTL		QWI			QSI			Items			Total		QCT		QTL		QWI			QSI*			Reconciling Items*			Total*
For the three months ended:
June 27, 2010
June 26, 2011
Revenues	$	1,691	$	847	$	162		$	6		$	—		$	2,706	$	2,194	$	1,257	$	164		$	—		$	8		$	3,623
EBT		404		673		6			(41	)		(71	)		971	430		1,092		(13		)	(30		)	(205		)	1,274
June 28, 2009
June 27, 2010
Revenues	$	1,786	$	807	$	148		$	9		$	3		$	2,753	$	1,691	$	847	$	162		$	—		$	—		$	2,700
EBT		548		663		(3	)		(66	)		(158	)		984	404		673		6			60			(67		)	1,076

For the nine months ended:
June 26, 2011
Revenues																$	6,272	$	4,061	$	493		$	—		$	14		$	10,840
EBT																1,487		3,559		(147		)	(97		)	(439		)	4,363
June 27, 2010
Revenues	$	4,835	$	2,738	$	456		$	9		$	1		$	8,039	$	4,835	$	2,738	$	456		$	—		$	1		$	8,030
EBT		1,173		2,266		14			(283	)		(182	)		2,988	1,173		2,266		14			38			(169		)	3,322
June 28, 2009
Revenues	$	4,436	$	2,769	$	494		$	22		$	5		$	7,726
EBT		933		2,376		25			(266	)		(1,734	)		1,334

*As adjusted for discontinued operations (Note 10)

Reconciling items in the previous table were as follows (in millions):

Three Months Ended Nine Months Ended
June 27, June 28, June 27, June 28,
2010 2009 2010 2009
Revenues

Elimination of intersegment revenue $ (1 ) $ (4 ) $ (7 ) $ (10 )
Other nonreportable segments 1 7 8 15

Reconciling items $ — $ 3 $ 1 $ 5

Earnings (losses) before income taxes

Unallocated cost of equipment and services revenues $ (10 ) $ (11 ) $ (30 ) $ (30 )
Unallocated research and development expenses (95 ) (104 ) (300 ) (283 )
Unallocated selling, general and administrative expenses (74 ) (70 ) (218 ) (220 )
Unallocated litigation settlement — — — (748 )
Unallocated investment income (loss), net 169 79 535 (297 )
Other nonreportable segments (61 ) (50 ) (166 ) (152 )
Intracompany eliminations — (2 ) (3 ) (4 )

Reconciling items $ (71 ) $ (158 ) $ (182 ) $ (1,734 )

QUALCOMM Incorporated

~~During~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



	Three Months Ended						Nine Months Ended
	June 26, 2011			June 27, 2010*			June 26, 2011			June 27, 2010*
Revenues
Elimination of intersegment revenues	$	(1	)	$	(1	)	$	(3	)	$	(7	)
Other nonreportable segments	9			1			17			8
	$	8		$	—		$	14		$	1
EBT
Unallocated cost of equipment and services revenues	$	(73	)	$	(10	)	$	(103	)	$	(30	)
Unallocated research and development expenses	(129		)	(93		)	(400		)	(294		)
Unallocated selling, general and administrative expenses	(106		)	(72		)	(353		)	(211		)
Unallocated investment income, net	181			169			642			535
Other nonreportable segments	(78		)	(61		)	(225		)	(166		)
Intersegment eliminations	—			—			—			(3		)
	$	(205	)	$	(67	)	$	(439	)	$	(169	)

*As adjusted for discontinued operations (Note 10)

Reconciling items for both the three months and nine months ended June ~~27, 2010,~~26, 2011 included $59 million and $18 million of unallocated ~~research~~cost of equipment and ~~development expenses included $74 million and $221 million, respectively,~~services revenues and unallocated selling, general and administrative expenses, ~~included $65 million~~respectively, related to the step-up of inventories to fair value and ~~$202 million, respectively,~~amortization of ~~share-based compensation expense. During~~intangible assets resulting from the three months and nine months ended June 28, 2009, unallocated research and development expenses included $72 million and $209 million, respectively, and unallocated selling, general and administrative expenses included $68 million and $197 million, respectively,acquisition of ~~share-based compensation expense. Unallocated cost of equipment and services revenues was comprised entirely of share-based compensation expense.~~Atheros (Note 12).

Revenues from external customers and intersegment revenues were as follows (in millions):

~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~



	QCT		QTL		QWI		QSI		QCT		QTL		QWI
For the three months ended:
June 27, 2010
June 26, 2011
Revenues from external customers	$	1,691	$	847	$	162	$	6	$	2,193	$	1,257	$	164
Intersegment revenues		—		—		—		—	1		—		—
June 28, 2009
June 27, 2010
Revenues from external customers	$	1,784	$	807	$	147	$	9	$	1,691	$	847	$	162
Intersegment revenues		2		—		1		—	—		—		—

For the nine months ended:
June 26, 2011
Revenues from external customers									$	6,270	$	4,061	$	493
Intersegment revenues									2		—		—
June 27, 2010
Revenues from external customers	$	4,828	$	2,738	$	456	$	9	$	4,828	$	2,738	$	456
Intersegment revenues		7		—		—		—	7		—		—
June 28, 2009
Revenues from external customers	$	4,430	$	2,767	$	491	$	22
Intersegment revenues		6		2		3		—

Intersegment revenues are based on prevailing market rates for substantially similar products and services or an approximation thereof, but the purchasing segment may record the cost of revenues at the selling segment’s original cost. The elimination of the selling segment’s gross margin is included with other intersegment eliminations in reconciling items.

Segment assets are comprised of accounts receivable ~~finance receivables~~ and inventories for all reportable segments other than QSI. QCT ~~QTL and QWI. The~~inventories at June 26, 2011 excluded $37 million related to the step-up of inventories to fair value resulting from the acquisition of Atheros (Note 12); such amount was included in reconciling items. QSI segment assets include certain marketable securities, notes receivable, spectrum licenses, other investments and all assets of ~~QSI~~QSI’s consolidated ~~subsidiaries, including FLO TV.~~subsidiaries. QSI segment ~~assets increased primarily as a result of the advance payment made in June 2010 related to the BWA spectrum recently won in the India auction. QSI~~ assets related to the discontinued FLO TV business totaled ~~$1.3~~$926 million and $1.3 billion at ~~both~~ June ~~27,~~26, 2011 and September 26, 2010 ~~and September 27, 2009.~~, respectively. Reconciling items for total assets included ~~$390~~$631 million and ~~$389~~$384 million at June ~~27,~~26, 2011 and September 26, 2010 ~~and September 27, 2009,~~, respectively, of ~~property, plant and equipment,~~ goodwill and other assets related to the ~~Qualcomm MEMS Technologies~~Company’s QMT division, a nonreportable segment developing display technology for mobile devices and other applications. Total segment assets also differ from total assets on a consolidated basis as a result of unallocated corporate assets primarily comprised of certain cash, cash equivalents, marketable securities, property, plant and equipment, deferred tax assets, goodwill, ~~and~~ other intangible assets and assets of nonreportable segments. Segment assets and reconciling items were as follows (in millions):

QUALCOMM Incorporated

June 27, September 27,
2010 2009
QCT $ 1,059 $ 892
QTL 28 89
QWI 135 142
QSI 2,726 1,614
Reconciling items 25,453 24,708

Total consolidated assets $ 29,401 $ 27,445

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



	June 26, 2011		September 26, 2010
QCT	$	1,345	$	1,085
QTL	32		28
QWI	154		129
QSI	2,531		2,745
Reconciling items	31,038		26,585
Total consolidated assets	$	35,100	$	30,572

Note 10 — Discontinued Operations

On December 20, 2010, the Company agreed to sell substantially all of its 700 MHz spectrum for $1.9 billion, subject to the satisfaction of customary closing conditions, including approval by the U.S. Federal Communications Commission. The agreement followed the Company’s previously announced plan to restructure and evaluate strategic options related to the FLO TV business and network. The FLO TV business and network were shut down on March 27, 2011. Since then, the Company has been working to sell the remaining assets and exit contracts. The 700 MHz spectrum with a carrying value of $746 million that the Company has agreed to sell was classified as held for sale, and all other assets were considered disposed of, at June 26, 2011. Accordingly, the results of operations of the FLO TV business were presented as discontinued operations at June 26, 2011. The Company’s statements of operations for all prior periods presented have been adjusted to conform.

Summarized results from discontinued operations were as follows (in millions):



	Three Months Ended					Nine Months Ended
	June 26, 2011		June 27, 2010			June 26, 2011			June 27, 2010
Revenues	$	1	$	5		$	5		$	9
Income (loss) from discontinued operations	1		(105		)	(502		)	(334		)
Income tax benefit	43		40			195			134
Discontinued operations, net of income taxes	$	44	$	(65	)	$	(307	)	$	(200	)

Income (loss) from discontinued operations includes share-based payments and excludes certain general corporate expenses allocated to the FLO TV business during the periods presented. During the third quarter of fiscal 2011, in connection with the presentation of the FLO TV business as discontinued operations and the requirement to compute the tax effect of discontinued operations on a discrete basis, the Company recorded a tax benefit of $43 million for tax benefits related to losses incurred in the first and second quarter of fiscal 2011 that were previously included in the calculation of the estimated annual effective tax rate.

The carrying amounts of the major classes of assets and liabilities of discontinued operations in the condensed consolidated balance sheet were as follows (in millions):

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



	June 26, 2011
Assets
Current assets	$	8
Property, plant and equipment, net	170
Assets held for sale	746
Other assets	2
Total assets	$	926
Liabilities
Trade accounts payable	$	2
Payroll and other benefits related liabilities	2
Other current liabilities	88
Other noncurrent liabilities	198
Total liabilities	$	290

The Company has a significant number of site leases, and the Company has corresponding capital lease assets, capital lease liabilities and asset retirement obligations (Note 8). The capital lease assets, included in property, plant and equipment, net, were considered disposed of at March 27, 2011 when the Company shut down the FLO TV business.

Restructuring and restructuring-related activities under the Company’s plan related to discontinued operations were initiated in the fourth quarter of fiscal 2010 and are expected to be substantially complete by the end of fiscal 2012 as the Company continues to negotiate the exit of certain contracts and removes certain of its equipment from the network sites. The Company estimates that it will incur future restructuring and restructuring-related charges of up to $40 million, primarily related to lease exit costs. Restructuring charges consist of lease exit and other contract termination costs and certain severance costs. Restructuring-related charges primarily consist of asset impairment and accelerated depreciation. The Company may also realize certain gains, primarily due to the potential release of liabilities associated with ongoing efforts to exit certain contracts, the amount of which cannot be reasonably estimated at this time. Future cash expenditures are expected to be in the range of $100 million to $140 million. As a result of exiting various contractual obligations on favorable terms, the Company recorded net reversals of $4 million and $8 million in restructuring charges and restructuring-related charges, respectively, during the three months ended June 26, 2011. During the nine months ended June 26, 2011, the Company recorded net restructuring charges of $58 million, including $48 million in contract termination costs, and net restructuring-related charges of $308 million, including $305 million in asset impairments and accelerated depreciation.

Changes in the restructuring accrual, which is reported as a component of other liabilities, for the nine months ended June 26, 2011 were as follows (in millions):



	Balance at September 26, 2010		Initial Costs		Adjustments to Costs			Cash Payments			Balance at June 26, 2011
Contract termination costs	$	—	$	63	$	(2	)	$	(18	)	$	43
Other costs	—		16		(6		)	(6		)	4
	$	—	$	79	$	(8	)	$	(24	)	$	47

Note 11 — Goodwill Impairment

During the first quarter of fiscal 2011, the Firethorn division in the QWI segment introduced a new product application trademarked as SWAGG. The initial consumer adoption rate of SWAGG had fallen significantly short of the Company's expectations, and as a result, in the second quarter of fiscal 2011, the Company revised its internal forecasts to reflect lower than expected demand and reduced the Firethorn cost structure. Based on these adverse changes, in the second quarter of fiscal 2011, the Company performed a goodwill impairment test for the Firethorn division, which was determined to be a reporting unit for purposes of the goodwill impairment test. The goodwill impairment test is a two-step process. First, the Company estimated the fair value of the Firethorn reporting unit by considering both discounted future projected cash flows and prices of comparable businesses. The results of this analysis indicated that the carrying value of the reporting unit exceeded its fair value. Therefore, the Company measured the amount of impairment charge by determining the implied fair value of the goodwill as if the Firethorn reporting unit were being acquired in a business combination. The Company determined the fair value of the

assets and the liabilities, primarily using a cost approach. Based on the results of the goodwill impairment test, the Company recorded a pre-tax goodwill impairment charge of $114 million in the second quarter of fiscal 2011. Subsequent to the impairment, $40 million of goodwill remained for the Firethorn reporting unit.

Note 12 — Acquisition

On May 24, 2011, the Company acquired Atheros Communications, Inc., which was renamed Qualcomm Atheros, Inc. (Atheros), for total cash consideration of $3.1 billion (net of $233 million of cash acquired) and the exchange of vested and earned unvested share-based payment awards with an estimated fair value of $106 million. Atheros sells communication chipsets to manufacturers of networking, computing and consumer electronics products. The primary objective of the acquisition is to help accelerate the expansion of the Company’s technologies and platforms to new businesses beyond cellular, including home, enterprise and carrier networking. Atheros was integrated into the QCT segment.

The allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values was as follows (in millions):




Current assets	$	925
Amortizable intangible assets:
Technology-based intangible assets	692
Marketing-related intangible assets	50
Customer-related intangible assets	114
In-process research and development (IPR&D)	150
Goodwill	1,779
Other assets	75
Total assets	3,785
Liabilities	(316		)
Total	$	3,469

Goodwill recognized in this transaction is not deductible for tax purposes and was allocated to the QCT segment for annual impairment testing purposes. Goodwill largely consists of expected revenue synergies resulting from the combination of product portfolios, cost synergies related to reduction in headcount growth and lower manufacturing costs, assembled workforce and access to additional sales and distribution channels. The intangible assets acquired will be amortized on a straight-line basis over weighted-average useful lives of 4 years, 6 years and 3 years for technology-based, marketing-related and customer-related intangible assets, respectively. The estimated fair values of the intangible assets acquired were primarily determined using the income approach based on significant inputs that were not observable. IPR&D consists of 26 projects, primarily related to wireless local-area network and powerline communications technologies. The projects are expected to be completed over the next 3 years. The estimated remaining costs to complete the IPR&D projects were $36 million as of the acquisition date. The acquired IPR&D will not be amortized until completion of the related products as it was determined that the underlying projects had not reached technological feasibility at the date of acquisition. Upon completion, each IPR&D project will be amortized over its useful life; useful lives for IPR&D are expected to range between 2 years and 6 years. Acquisition costs related to the merger of $23 million were recognized as selling, general and administrative expenses as incurred in fiscal 2011. The Company’s results of operations for the three months ended June 26, 2011 included the operating results of Atheros since the date of acquisition, the amounts of which were not material.

The following table presents the unaudited pro forma results for the nine months ended June 26, 2011 and June 27, 2010. The unaudited pro forma financial information combines the results of operations of QUALCOMM and Atheros as though the companies had been combined as of the beginning of fiscal 2010, and the pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at such times. The unaudited pro forma results presented include amortization charges for acquired intangible assets, eliminations of intercompany transactions, adjustments for increased fair value of acquired inventory, adjustments for incremental stock-based compensation expense related to the unearned portion of Atheros stock options and restricted stock units assumed, adjustments for depreciation expense for property, plant and equipment and related tax effects.

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



	Nine Months Ended
	June 26, 2011		June 27, 2010
	(In millions)
Revenues	$	11,467	$	8,868
Net income attributable to QUALCOMM	3,168		2,089

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Thisinformation should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended September ~~27, 2009~~26, 2010 contained in our ~~2009~~2010 Annual Report on Form 10-K.

In addition to historical information, the following discussion 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 described in the section entitled Risk Factors and elsewhere in this Quarterly Report.

Overview

Recent Developments

Revenues for the third quarter of ~~$2.7~~fiscal 2011 were $3.6 billion, ~~and~~with net income of ~~$767 million for the third quarter of fiscal 2010~~$1.0 billion, which were impacted by the following key items:

We shipped approximately 103 million Mobile Station Modem (MSM) integrated circuits for CDMA-based wireless devices, an increase of 10%, compared to approximately 94 million MSM integrated circuits in the year ago quarter.


•	We shipped approximately 120 million Mobile Station Modem (MSM) integrated circuits for CDMA- and OFDMA-based wireless devices, an increase of 17% compared to approximately 103 million MSM integrated circuits in the year ago quarter. ⁽¹⁾


•	Total reported device sales were approximately ~~$25.2~~$36.4 billion, an increase of approximately ~~19%,~~44% compared to approximately ~~$21.2~~$25.2 billion in the year ago quarter.⁽¹⁾⁽²⁾

On May 24, 2011, we acquired Atheros Communications, Inc., which was renamed Qualcomm Atheros, Inc. (Atheros), for total cash consideration of $3.1 billion, net of cash acquired, and the exchange of equity awards. Atheros was integrated into the Qualcomm CDMA Technologies (QCT) segment.

Our results of operations reflect the presentation of the FLO TV business as discontinued operations, and all prior period amounts have been adjusted accordingly.

Against this backdrop, the following recent developments occurred during the third quarter of fiscal ~~2010~~2011 with respect to key elements of our business or our industry:


•		Worldwide wireless ~~subscribers~~subscriptions grew by approximately 4%3% to reach approximately ~~5.0~~5.7 billion.⁽²⁾⁽³⁾


•		Worldwide 3G ~~subscribers~~subscriptions (all CDMA-based) grew to approximately ~~1.09~~1.4 billion, approximately ~~22%~~24% of total wireless ~~subscribers,~~subscriptions, including approximately ~~500~~534 million CDMA2000 1X/1xEV-DO ~~subscribers~~subscriptions and approximately ~~585~~865 million WCDMA/HSPA/TD-SCDMA ~~subscribers.~~subscriptions.⁽²⁾⁽³⁾


•		~~In the handset market,~~ Unit shipments of CDMA-based ~~unit shipments~~handsets grew an estimated ~~29% year-over-year,~~28% over the prior year quarter, compared to an estimated increase of 19% ~~year-over-year~~ across all wireless technologies.⁽³⁾⁽⁴⁾

In June 2010, we won a 20 MHz slot of Broadband Wireless Access (BWA) spectrum in four telecom circles in India as a result of the completion of the BWA spectrum auction for $1.1 billion. We entered the BWA auction to facilitate the deployment of LTE technology as a complement to the existing 3G HSPA and EV-DO networks in India.


⁽¹⁾	During the third quarter of fiscal 2011, some customers built devices that incorporated two MSMs. In such cases, which represent less than 1% of our gross volume, we count only one MSM in reporting the MSM shipments.

(2)

Total reported device sales is the sum of all reported sales in U.S. dollars (as reported to us by our licensees) of all licensed CDMA-based subscriber devices (including handsets, modules, modem cards and other subscriber devices) by our licensees during a particular period. Not all licensees report sales the same way (e.g., some licensees report sales net of permitted deductions, such as transportation, insurance and packing costs, while other licensees report sales and then identify the amount of permitted deductions in their reports), and the way in which licensees report such information may change from time to time.


⁽²⁾	(3)	According to Wireless Intelligence estimates as of July ~~19, 2010,~~18, 2011, for the quarter ending June 30, ~~2010.~~2011. Wireless Intelligence estimates for CDMA2000 1X/1xEV-DO subscribers do not include Wireless Local Loop.


⁽³⁾	(4)	Based on current reports by Strategy Analytics, a global research and consulting firm, in their May ~~2010~~2011 Global Handset Market Share Update.

Our Business and Operating Segments

We design, manufacture, have manufactured on our behalf and market ~~digital wireless telecommunications~~communications products and services based on ~~our~~ CDMA, ~~technology~~OFDMA and other technologies. We derive revenues principally from sales of integrated circuit products, license fees and royalties for use of our intellectual property, messaging and other services and related hardware sales, software development and licensing and related services and software hosting ~~services and services related to delivery of multimedia content.~~services. Operating expenses primarily consist of cost of equipment and services, research and development and selling, general and administrative expenses.

We conduct business primarily through four reportable segments. These segments are: Qualcomm CDMA Technologies, or QCT; Qualcomm Technology Licensing, or QTL; Qualcomm Wireless & Internet, or QWI; and Qualcomm Strategic Initiatives, or QSI.

QCT is a leading developer and supplier of ~~CDMA-based~~ integrated circuits and system software based on CDMA, OFDMA and other technologies for ~~wireless~~use in voice and data communications, networking, application processing, multimedia ~~functions~~ and global positioning system products. QCT’s integrated circuit products and system software are ~~used~~sold to or licensed to manufacturers that use our products in wireless devices, particularly mobile phones, tablets, laptops, data modules, handheld wireless computers and gaming devices, access points and routers, data cards and infrastructure ~~equipment.~~equipment, and in wired devices, particularly broadband gateway equipment, desktop computers, televisions and Blu-ray players. The MSM integrated circuits, ~~for wireless devices include~~including the ~~Mobile Station Modem (MSM),~~ Mobile Data Modem, ~~(MDM),~~ Qualcomm Single Chip ~~(QSC),~~and Qualcomm Snapdragon, ~~(QSD), Radio Frequency (RF), Power Management (PM) and Bluetooth devices. These integrated circuits~~ for wireless devices ~~and system software~~ perform voice and data ~~communication,~~communications, application processing, multimedia and global positioning ~~functions, radio conversion between RF and baseband signals, power management and peripheral connectivity.~~functions. QCT’s system software enables the other device components to interface with the integrated circuit products and is the foundation software enabling ~~equipment~~ manufacturers to develop devices utilizing the functionality within the integrated circuits. ~~The infrastructure equipment integrated circuits and system software perform the core baseband CDMA modem functionality in the wireless operator’s base station equipment.~~ QCT revenues comprised ~~62%~~61% and ~~65%~~63% of total consolidated revenues in the third quarter of fiscal ~~2010~~2011 and ~~2009,~~2010, respectively, and ~~60%~~58% and ~~57%~~60% of total consolidated revenues for the first nine months of fiscal ~~2010~~2011 and ~~2009,~~2010, respectively.

QCT utilizes a fabless production business model, which means that we do not own or operate foundries for the production of silicon wafers from which our integrated circuits are made. Integrated circuits are die cut from silicon wafers that have completed the assembly and final test manufacturing processes. We rely on independent third-party suppliers to perform the manufacturing and assembly, and most of the testing, of our integrated circuits. Our suppliers are also responsible for the procurement of most of the raw materials used in the production of our integrated circuits. We employ both turnkey and two-stage manufacturing business models to purchase our integrated circuits. Turnkey is when our foundry suppliers are responsible for delivering fully assembled and tested integrated circuits. Under the two-stage manufacturing business model, we purchase die from semiconductor manufacturing foundries and contract with separate third-party manufacturers for back-end assembly and test services. We refer to this two-stage manufacturing business model as Integrated Fabless Manufacturing (IFM).

QTL grants licenses or otherwise provides rights to use portions of our intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products, including, without limitation, products implementing cdmaOne, CDMA2000, WCDMA, CDMA TDD (including TD-SCDMA), GSM/GPRS/EDGE and/or OFDMA standards and their derivatives. QTL receives license fees as well as ongoing royalties based on worldwide sales by licensees of products incorporating or using our intellectual property. License fees are fixed amounts paid in one or more installments. Ongoing royalties are generally based upon a percentage of the wholesale (i.e., licensee’s) selling price of licensed products, net of certain permissible deductions (e.g., certain shipping costs, packing costs, VAT, etc.). QTL revenues comprised ~~31%~~35% and ~~29%~~31% of total consolidated revenues in the third quarter of fiscal ~~2010~~2011 and ~~2009,~~2010, respectively, and ~~34%~~37% and ~~36%~~34% of total consolidated revenues for the first nine months of fiscal ~~2010~~2011 and ~~2009,~~2010, respectively. The vast majority of such revenues were generated through our licensees’ sales of cdmaOne, CDMA2000 and WCDMA subscriber equipment products.

QWI, which includes Qualcomm Enterprise Services (QES), Qualcomm Internet Services (QIS), Qualcomm Government Technologies (QGOV) and Firethorn, generates revenues primarily through mobile information products and services and software and software development aimed at support and delivery of wireless applications. QES sells equipment, software and services used by transportation and other companies to connect wirelessly with their assets and workforce. Through June ~~2010,~~2011, QES has shipped approximately ~~1,395,000~~1,491,000 terrestrial-based and satellite-based mobile information units. QIS provides content enablement services for the wireless industry, including ~~BREW (Binary Runtime Environment for Wireless),~~Brew, the Plaza suite and other services. QIS also provides QChat push-to-talk, QPoint and other products for wireless network operators. QGOV provides development, hardware and analytical expertise involving wireless communications technologies to United States government agencies. Firethorn builds and manages software applications that enable ~~financial institutions and wireless operators to offer~~ mobile commerce services. QWI revenues comprised 6%5% and 5%6% of total consolidated revenues in the third quarter of fiscal ~~2010~~2011 and ~~2009, respectively,~~2010, and 5% and 6% of total consolidated revenues for the first nine months of ~~both~~ fiscal ~~2010~~2011 and ~~2009.~~

~~QSI manages the Company’s strategic investment activities, including FLO TV Incorporated (FLO TV)~~2010, ~~our wholly-owned wireless multimedia operator subsidiary.~~ respectively.

QSI makes strategic investments ~~in early stage companies, including licensed device manufacturers, and in wireless spectrum, such as the BWA spectrum recently won in the auction in India,~~ that we believe will open new ~~markets~~opportunities for ~~CDMA~~CDMA- and ~~OFDMA~~OFDMA-based technologies, support the design and introduction of new CDMA and OFDMA products and services for wireless voice and internet data communications or possess unique capabilities or technology. ~~Our~~Many of these strategic investments are in early-stage companies and in wireless spectrum, such as the BWA spectrum won in the auction in India. QSI also includes FLO TV Incorporated (FLO TV), our wholly-owned wireless multimedia operator subsidiary, ~~offers its service over our nationwide multicast network based on our MediaFLO Media Distribution System (MDS) and MediaFLO technology,~~ which ~~leverages~~is presented as discontinued operations. Since the ~~Forward Link Only (FLO) air interface standard. This network is utilized as a shared resource for wireless operators and their customers in the United States. The commercial availability~~shut down of the FLO TV business and network on March 27, 2011, we have been working to sell our remaining assets and ~~service on wireless operator devices will continue, in part,~~exit contracts. On December 20, 2010, we announced that we have agreed to ~~be determined by~~sell substantially all of our ~~wireless operator partners. FLO TV’s network uses the~~ 700 MHz spectrum for ~~which we hold licenses nationwide. Additionally, FLO TV has and will continue~~$1.9 billion, subject to procure, aggregate and distribute content in service packages, which we will continue to make available on a wholesale basis to our wireless operator customers (whether they operate on CDMA, WCDMA or GSM) in the ~~United States. In November 2009, FLO TV began to offer~~satisfaction of customary closing conditions, including approval by the FLO TV service on a subscription basis directly to consumers in the United States. FLO TV currently provides the services for use in personal television devices and automotive devices and plans to make it available in other portable device accessories in the future. These devices are sold through various retail and distribution channels. We are evaluating the FLO TV business model, including sale to, or joint venture with, a third party and/or alternative use of the spectrum licenses, technology and network assets, if we do not achieve adequate consumer acceptance of our FLO TV service offerings in the United States or based on other factors. As part of our strategic investment activities, we intend to pursue various exit strategies at some point in the future, which may include distribution of our ownership interest in FLO TV to our stockholders in a spin-off transaction.U.S. Federal Communications Commission.

Nonreportable segments include: the Qualcomm MEMS Technologies division, which ~~is developing~~continues to develop an interferometric modulator (IMOD) display technology based on micro-electro-mechanical-system (MEMS) structure combined with thin film optics; ~~the~~and other product initiatives. The MediaFLO Technologies ~~division, comprised~~business is no longer being pursued.

Discontinued Operations

On December 20, 2010, we agreed to sell substantially all of our 700 MHz spectrum for $1.9 billion, subject to the satisfaction of customary closing conditions, including approval by the U.S. Federal Communications Commission. The agreement followed our previously announced plan to restructure and evaluate strategic options related to the FLO TV business and network. The FLO TV business and network were shut down on March 27, 2011. Since then, we have been working to sell the remaining assets and exit contracts. The 700 MHz spectrum with a carrying value of $746 million that we have agreed to sell was classified as held for sale, and all other assets were considered disposed of, at June 26, 2011. Accordingly, the results of operations of the FLO ~~Technology group, which is developing our MediaFLO MDS~~TV business were presented as discontinued operations at June 26, 2011. Our statements of operations for all prior periods have been adjusted to conform.

Summarized results from discontinued operations were as follows (in millions):



	Three Months Ended					Nine Months Ended
	June 26, 2011		June 27, 2010			June 26, 2011			June 27, 2010
Revenues	$	1	$	5		$	5		$	9
Income (loss) from discontinued operations	1		(105		)	(502		)	(334		)
Income tax benefit	43		40			195			134
Discontinued operations, net of income taxes	$	44	$	(65	)	$	(307	)	$	(200	)

Income from discontinued operations includes share-based payments and ~~MediaFLO technology,~~excludes certain general corporate expenses allocated to the FLO TV business during the periods presented. During the third quarter of fiscal 2011, in connection with the presentation of the FLO TV business as discontinued operations and the ~~FLO International group, which markets MediaFLO~~requirement to compute the tax effect of discontinued operations on a discrete basis, we recorded a tax benefit of $43 million for ~~deployment outside~~tax benefits related to losses incurred in the first and second quarter of fiscal 2011 that were previously included in the calculation of the ~~United States;~~estimated annual effective tax rate.

Restructuring and restructuring-related activities under our plan related to discontinued operations were initiated in the fourth quarter of fiscal 2010 and are expected to be substantially complete by the end of fiscal 2012 as we continue to negotiate the exit of certain contracts and remove certain of our equipment from the network sites. We estimate that we will incur future restructuring and restructuring-related charges of up to $40 million, primarily related to lease exit costs. Restructuring charges consist of lease exit and other ~~product initiatives.~~contract termination costs and certain severance costs. Restructuring-related charges primarily consist of asset impairment and accelerated depreciation. We may also realize certain gains, primarily due to the potential release of liabilities associated with ongoing efforts to exit certain contracts, the amount of which cannot be reasonably estimated at this time. Future cash expenditures are expected to be in the range of $100 million to $140 million. As a result of exiting various contractual obligations on favorable terms, the Company recorded net reversals of $4 million and $8 million in restructuring charges and restructuring-related charges, respectively, during the three months ended June 26, 2011. During the nine months ended June 26, 2011, the Company recorded net restructuring charges of $58 million, including $48 million in contract termination costs, and net restructuring-related charges of $308 million, including $305 million in asset impairments and accelerated depreciation.

Looking Forward

The deployment of 3G networks enables increased voice capacity and higher data rates than prior generation networks, thereby supporting more minutes of use and a wide range of mobile broadband data applications for handsets, 3G connected computing devices and other consumer electronics. ~~Data applications include broadband connectivity, streaming video, location-based services, mobile social networking and multimedia messaging.~~Many wireless operators have or are planning to complement their existing 3G networks by deploying OFDMA-based technology, often called 4G, in new spectrum to gain additional capacity for data services. As a result, we expect continued growth in the coming years in consumer demand for 3G and 3G/4G multimode products and services around the world. In addition, we expect an increasing number of devices, such as computers, consumer electronics and networking equipment, to require multiple communications technologies to support a variety of connected applications.

As we look forward to the next several months, the following items are likely to have an impact on our business:

	•		The worldwide transition to 3G CDMA-based networks is expected to continue. With the recently completed auction of 3G spectrum in India, we look forward to network launches and expansion of 3G in that region along with the continued expansion of 3G in China. In addition, we expect to partner with one or more operators in a venture (or ventures) for construction of an LTE network in India in compliance with the Indian government’s rollout requirement for the BWA spectrum, and then to exit the venture(s). The manner and timing of such exit will be dependent upon a number of factors, such as market conditions and regulatory conditions, among others. LTE can operate seamlessly in conjunction with 3G HSPA or EV-DO on a wireless network.

	•		We expect that CDMA-based device prices will continue to segment into high and low end due to high volumes and active competition throughout the world. This, along with a tempered economic recovery in developed regions combined with relative strength at the lower end of the overall market, including certain data-centric devices, is expected to continue to impact the average selling price of CDMA-based devices.

	•		We expect consumer demand for advanced 3G-based devices, including smartphones, data devices and new device categories, such as eBook readers and tablets, to continue at a strong pace. We also expect growth in low-end 3G devices as 3G expands in emerging markets.

The worldwide transition to 3G CDMA-based networks is expected to continue, including the further expansion of 3G in China, India and other emerging regions.

We expect consumer demand for advanced 3G-based and 3G/4G multimode devices, including smartphones, data-centric devices and new device categories, such as tablets and eBook readers, to continue at a strong pace. We also expect growth in lower-end 3G devices as 3G expands in emerging regions. We still face significant competition in lower-end devices from GSM-based products, particularly in emerging regions.

We expect that CDMA-based device prices will continue to vary broadly due to the increased penetration of smartphones and the popularity of smartphone applications combined with active competition throughout the world at

all price tiers. This, along with varying rates of economic growth by region and stronger than average growth in emerging regions, is expected to continue to impact the average and range of selling prices of CDMA-based devices.

	•		We ~~intend to~~ continue to invest significant resources toward the development of technology to increase the data rates available with 3G and 4G networks, wireless baseband chips, converged computing/communication chips, multimedia products, software and services for the wireless industry.

	•		We expect demand for cost-effective wireless devices to continue to grow and have developed a family of Qualcomm Single Chip (QSC) products, which integrate the baseband, radio frequency and power management functions into a single chip or package, lowering component counts and enabling faster time-to-market for our customers. We still face significant competition in the lower-end market from GSM-based products, particularly in emerging markets.

	•		We expect demand for data-centric smartphone and smartbook devices to continue to grow and have developed the Snapdragon platform of chipset products, which integrate the baseband and a low-power, high-performance microprocessor into a single chip or package, enabling our customers to develop computing-centric devices that also offer a full range of wireless connectivity capabilities. We face significant competition in this market, particularly from competing chipset suppliers providing non-integrated basebands or application processors.

	•		We expect to continue to invest in the evolution of CDMA and a broad range of other technologies, such as LTE, our FLO TV mobile television service, our IMOD display technology and our Snapdragon platform, as part of our vision to enable a wide range of products and technologies.

We continue to invest in the evolution of CDMA and a broad range of other technologies, such as LTE, WLAN, our IMOD display technology and our Snapdragon platform, as part of our vision to enable a wide range of products and technologies.

We have agreed to sell substantially all of our 700 MHz spectrum for $1.9 billion, subject to the satisfaction of customary closing conditions, including approval from the U.S. Federal Communications Commission. If the closing conditions are met, we expect to recognize a gain in discontinued operations of $1.2 billion.

In addition to the foregoing business and market-based matters, we continue to devote resources to working with and educating participants in the ~~following items are likely~~wireless value chain as to ~~have an impact on~~the benefits of our business model in promoting a highly competitive and ~~results~~innovative wireless market. However, we expect that certain companies may continue to be dissatisfied with the need to pay reasonable royalties for the use of ~~operations over~~our technology and not welcome the ~~next several months:~~success of our business model in enabling new, highly cost-effective competitors to their products. We expect that such companies will continue to challenge our business model in various forums throughout the world.

	•		We expect to continue to devote resources to working with and educating participants in the wireless value chain as to the benefits of our business model in promoting a highly competitive and innovative wireless market. However, we expect that certain companies may continue to be dissatisfied with the need to pay reasonable royalties for the use of our technology and not welcome the success of our business model in enabling new, highly cost-effective competitors to their products. We expect that such companies will continue to challenge our business model in various forums throughout the world.

	•		We have been and will continue evaluating and providing reasonable assistance to our customers. This includes, in some cases, certain levels of financial support to minimize the impact of litigation in which we or our customers may become involved.

Further discussion of risks related to our business is presented in the Risk Factors included in this Quarterly Report.

Third Quarter of Fiscal ~~2010~~2011 Compared to Third Quarter of Fiscal ~~2009~~2010

Revenues.Total revenues for the third quarter of fiscal ~~2010~~2011 were ~~$2.71~~$3.62 billion, compared to ~~$2.75~~$2.70 billion for the third quarter of fiscal ~~2009.~~2010. Revenues from sales of equipment and services for the third quarter of fiscal ~~2010~~2011 were ~~$1.77~~$2.30 billion, compared to ~~$1.86~~$1.77 billion for the third quarter of fiscal ~~2009.~~2010. The ~~decrease~~increase in revenues from sales of equipment and services was primarily due to a ~~$99~~$512 million ~~decrease~~increase in QCT equipment and services revenues. Revenues from licensing and royalty fees for the third quarter of fiscal ~~2010~~2011 were ~~$934 million,~~$1.33 billion, compared to ~~$891~~$934 million for the third quarter of fiscal ~~2009.~~2010. The increase in revenues from licensing and royalty fees was primarily due to a ~~$40~~$410 million increase in QTL revenues.

Cost of Equipment and Services.Cost of equipment and services revenues for the third quarter of fiscal ~~2010~~2011 was ~~$905 million,~~$1.28 billion, compared to ~~$864~~$852 million for the third quarter of fiscal ~~2009.~~2010. Cost of equipment and services revenues as a percentage of equipment and services revenues was ~~51%~~56% for the third quarter of fiscal ~~2010,~~2011, compared to ~~46%~~48% for the third quarter of fiscal ~~2009.~~2010. The decrease in margin percentage in the third quarter of fiscal 2011 compared to the third quarter of fiscal 2010 was primarily attributable to a decrease in QCT gross margin percentage and the effect of ~~an increase~~$59 million in ~~costs~~charges from the recognition of the step-up of inventories to fair value and amortization of intangible assets related to ~~our FLO TV subsidiary and Qualcomm MEMS Technologies division. Cost~~the acquisition of ~~equipment and services revenues included $10 million in share-based compensation~~Atheros in the third quarter of fiscal ~~2010, compared to $11 million for~~2011. Cost of equipment and services in the third quarter of fiscal ~~2009.~~2011 included $14 million in share-based compensation, compared to $10 million in the third quarter of fiscal 2010. Cost of equipment and services revenues as a percentage of equipment and services revenues may fluctuate in future quarters depending on the mix of products sold and services provided, competitive pricing, new product introduction costs and other factors.

Research and Development Expenses.~~For~~Research and development expenses for the third quarter of fiscal ~~2010, research and development expenses~~2011 were ~~$649~~$757 million or ~~24%~~21% of revenues, compared to ~~$618~~$623 million or ~~22%~~23% of revenues for the third quarter of fiscal ~~2009.~~2010. The dollar increase iswas primarily attributable to a ~~$36~~$114 million increase in costs related to the development of integrated circuit products, next generation ~~CDMA and OFDMA~~ technologies and other initiatives to support the acceleration of advanced wireless products and services, including lower-cost devices, the integration of wireless with consumer electronics and computing, the convergence of multiband, multimode, multinetwork products and technologies, third-party operating systems and services platforms. The percentage decrease was primarily attributable to the 34% increase in revenues relative to the 22% increase in costs. Research and development expenses for the third quarter of fiscal ~~2010~~2011 included share-based compensation of ~~$74~~$95 million, compared to $72 million in the third quarter of fiscal ~~2009.~~2010.

Selling, General and Administrative Expenses.~~For the third quarter of fiscal 2010, selling,~~Selling, general and administrative expenses for the third quarter of fiscal 2011were ~~$360~~$475 million or 13% of revenues, compared to ~~$377~~$332 million or ~~14%~~12% of revenues for the third quarter of fiscal ~~2009. The dollar decrease was primarily attributable to~~2010. Selling, general and administrative expenses for the third quarter of fiscal 2010 included a $62 million gain on the sale of our Australia spectrum ~~license, partially offset by an $18 million~~license. The remaining dollar increase ~~in patent-related costs,~~was primarily attributable to a ~~$13 million increase in selling and marketing expenses primarily related to our FLO TV subsidiary and a $10~~$31 million increase in employee-related ~~expenses.~~expenses and $18 million in amortization of intangible assets related to the acquisition of Atheros in the third quarter of fiscal 2011. Selling, general and administrative expenses for the third quarter of fiscal ~~2010~~2011 included share-based compensation of ~~$65~~$84 million, compared to ~~$68~~$63 million in the third quarter of fiscal ~~2009.~~2010.

Net Investment Income.Net investment income was ~~$179~~$161 million for the third quarter of fiscal ~~2010,~~2011, compared to ~~$90~~$183 million for the third quarter of fiscal ~~2009.~~2010. The net ~~increase~~decrease was comprised as follows (in millions):


	Three Months Ended
	June 27,			June 28,						Three Months Ended
	2010			2009			Change			June 26, 2011			June 27, 2010			Change
Interest and dividend income:
Corporate and other segments	$	127		$	130		$	(3	)	$	117		$	127		$	(10	)
QSI		4			2		$	2		10			4			6
Interest expense		(14	)		(8	)		(6	)	(29		)	(10		)	(19		)
Net realized gains on investments:
Corporate and other segments		78			73			5		73			78			(5		)
QSI		14			17			(3	)	—			14			(14		)
Net impairment losses on investments:
Corporate and other segments		(28	)		(112	)		84		(5		)	(28		)	23
QSI		(1	)		(4	)		3		(5		)	(1		)	(4		)
Losses on derivative instruments		(2	)		(7	)		5		—			(2		)	2
Equity in earnings (losses) of investees		1			(1	)		2
Equity in earnings of investees										—			1			(1		)
										$	161		$	183		$	(22	)
	$	179		$	90		$	89

The increase in interest expense is primarily attributable to the bank loans related to the BWA spectrum purchased in the India auction in June 2010.

~~During~~Income Tax Expense. Income tax expense from continuing operations was $289 million for the third quarter of fiscal 2011, compared to $244 million for the third quarter of fiscal 2010. The effective tax rates for the third quarter of fiscal 2011 and the third quarter of fiscal 2010 we recorded lower impairment losses on marketable securities, compared to the third quarter of fiscal 2009. Depressed security values caused by a major disruption in the United States and foreign financial markets impacted our results in the third quarter of fiscal 2009 and continued to cause impairment losses in the third quarter of fiscal 2010, but to a lesser extent.were 23%.

~~Income Tax Expense.~~Income tax expense was $204 million for the third quarter of fiscal 2010, compared to $247 million for the third quarter of fiscal 2009. The effective tax rate for the third quarter of fiscal 2010 was 21%, as compared to 25% for the third quarter of fiscal 2009. The effective tax rate for the third quarter of fiscal 2010 was lower than the effective tax rate for the third quarter of fiscal 2009 primarily as a result of a valuation allowance recorded in fiscal 2009 associated with net capital losses.

First Nine Months of Fiscal ~~2010~~2011 Compared to First Nine Months of Fiscal ~~2009~~2010

Revenues.Total revenues for the first nine months of fiscal ~~2010~~2011 were ~~$8.04~~$10.84 billion, compared to ~~$7.73~~$8.03 billion for the first nine months of fiscal 2009. Revenues from two customers of our QCT and QTL segments (each of whom accounted for more than 10% of our consolidated revenues for the period) comprised 26% and 30% in aggregate of total consolidated revenues in the first nine months of fiscal 2010 and 2009, respectively.2010. Revenues from sales of equipment and services for the first nine months of fiscal ~~2010~~2011 were ~~$5.03~~$6.55 billion, compared to ~~$4.70~~$5.02 billion for the first nine months of fiscal ~~2009.~~2010. The increase in revenues from sales of equipment and services was

primarily due to a ~~$380 million~~$1.46 billion increase in QCT ~~revenues, partially offset by a $30 million decrease in QWI~~equipment and services revenues. Revenues from licensing and royalty fees for the first nine months of fiscal ~~2010~~2011 were ~~$3.01~~$4.29 billion, compared to ~~$3.03~~$3.01 billion for the first nine months of fiscal ~~2009.~~2010. The ~~decrease~~increase in revenues from licensing and royalty fees was primarily due to a ~~$29 million decrease~~$1.32 billion increase in QTL revenues.

Cost of Equipment and Services.Cost of equipment and services revenues for the first nine months of fiscal ~~2010~~2011 was ~~$2.53~~$3.38 billion, compared to ~~$2.36~~$2.38 billion for the first nine months of fiscal ~~2009.~~2010. Cost of equipment and services revenues as a percentage of equipment and services revenues was ~~50%~~52% for the first nine months of ~~both~~ fiscal ~~2010 and 2009.~~2011, compared to 47% for the first nine months of fiscal 2010. The decrease in margin percentage ~~remained flat~~ in the first nine months of fiscal ~~2010 as~~2011 compared to the first nine months of fiscal ~~2009~~2010 was primarily ~~due~~attributable to ~~an increase~~a decrease in QCT gross margin percentage ~~that was offset by~~and the effect of ~~increases~~$59 million in ~~costs~~charges from the recognition of the step-up of inventories to fair value and amortization of intangible assets related to ~~our FLO TV subsidiary and Qualcomm MEMS Technologies division.~~the acquisition of Atheros in the third quarter of fiscal 2011. Cost of equipment and services revenues in the first nine months of ~~both~~ fiscal ~~2010 and 2009~~2011 included $44 million in share-based compensation, compared to $30 million in ~~share-based compensation.~~

~~Research and Development Expenses.~~~~For~~ the first nine months of fiscal ~~2010, research~~2010.

Research and Development Expenses. Research and development expenses for the first nine months of fiscal 2011 were ~~$1.89~~$2.14 billion or ~~24%~~20% of revenues, compared to ~~$1.83~~$1.82 billion or ~~24%~~23% of revenues for the first nine months of fiscal ~~2009.~~2010. The dollar increase was primarily attributable to a ~~$96~~$245 million increase in costs related to the development of integrated circuit products, next generation ~~CDMA and OFDMA~~ technologies and other initiatives to support the acceleration of advanced wireless products and services, including lower-cost devices, the integration of wireless with consumer electronics and computing, the convergence of multiband, multimode, multinetwork products and technologies, third-party operating systems and services platforms. ~~This~~The percentage decrease was primarily attributable to the 35% increase in ~~research and development expenses was partially offset by decreases in development costs related to other products and services, including a $17 million decrease related~~revenues relative to the ~~development of our QES division asset-tracking products and services.~~18% increase in costs. Research and development expenses in the first nine months of fiscal ~~2010~~2011 included share-based compensation of ~~$221~~$277 million, compared to ~~$209~~$216 million in the first nine months of fiscal ~~2009.~~2010.

Selling, General and Administrative Expenses.Selling, general and administrative expenses for the first nine months of fiscal 2011 were ~~$1.17~~$1.41 billion or ~~15%~~13% of revenues, compared to $1.06 billion or 13% of revenues for the first nine months of ~~both~~ fiscal ~~2010 and 2009.~~2010. Selling, general and administrative expenses ~~remained flat primarily as a result~~for the first nine months of fiscal 2010 included a $62 million gain on the sale of our Australia spectrum ~~license and~~license. The remaining dollar increase was primarily attributable to a ~~$33~~$104 million ~~decrease~~increase in ~~costs related to litigation and other legal matters, partially offset by~~employee-related expenses, a ~~$44~~$54 million increase in charitable contributions, primarily resulting from the establishment of the Qualcomm Charitable Foundation in the second quarter of fiscal 2011, a $36 million increase in patent-related costs and other

professional fees, a ~~$41~~$25 million increase in ~~selling~~depreciation and ~~marketing expenses~~amortization expense, primarily ~~related~~attributable to ~~our FLO TV subsidiary.~~the acquisition of Atheros, and a $17 million increase in outside services. Selling, general and administrative expenses in the first nine months of fiscal ~~2010~~2011 included share-based compensation of ~~$202~~$240 million, compared to ~~$197~~$195 million in the first nine months of fiscal ~~2009.~~2010.

~~Litigation Settlement, Patent License and Other Related Items.~~~~The~~Goodwill Impairment. Operating expenses for the first nine months of fiscal ~~2009 operating expenses~~2011 included a ~~$748~~$114 million ~~litigation settlement~~goodwill impairment charge related to our Firethorn division due to the ~~Settlement and Patent License and Non-Assert Agreement with Broadcom, which resulted in the dismissal with prejudice~~operating performance of ~~all litigation between the companies.~~a new product application falling significantly short of expectations.

Net Investment ~~Income (Loss).~~Income. Net investment income was ~~$541~~$574 million for the first nine months of fiscal ~~2010,~~2011, compared to ~~a net investment loss of $296~~$552 million for the first nine months of fiscal ~~2009.~~2010. The net ~~change~~increase was comprised as follows (in millions):

Nine Months Ended
June 27, June 28,
2010 2009 Change
Interest and dividend income:
Corporate and other segments $ 401 $ 387 $ 14
QSI 4 2 2
Interest expense (30 ) (16 ) (14 )
Net realized gains on investments:
Corporate and other segments 249 35 214
QSI 25 22 3
Net impairment losses on investments:
Corporate and other segments (94 ) (699 ) 605
QSI (8 ) (18 ) 10
(Losses) gains on derivative instruments (3 ) 5 (8 )
Equity in losses of investees (3 ) (14 ) 11

$ 541 $ (296 ) $ 837



	Nine Months Ended
	June 26, 2011			June 27, 2010			Change
Interest and dividend income:
Corporate and other segments	$	369		$	401		$	(32	)
QSI	15			4			11
Interest expense	(84		)	(19		)	(65		)
Net realized gains on investments:
Corporate and other segments	303			249			54
QSI	1			25			(24		)
Net impairment losses on investments:
Corporate and other segments	(16		)	(94		)	78
QSI	(10		)	(8		)	(2		)
Gains (losses) on derivative instruments	1			(3		)	4
Equity in losses of investees	(5		)	(3		)	(2		)
	$	574		$	552		$	22

During the first nine months of fiscal ~~2010,~~2011, we recorded lower impairment losses ~~on marketable securities~~ and higher net realized gains on ~~corporate investments,~~marketable securities as compared to the first nine months of fiscal ~~2009. Depressed securities values caused by a major disruption~~2010 due to improvements in ~~United States and foreign~~ financial ~~markets impacted our results~~market conditions. The increase in interest expense is primarily attributable to the bank loans related to the BWA spectrum purchased in the ~~first nine months of fiscal 2009 and continued to cause impairment losses~~India auction in ~~the first nine months of fiscal 2010, but to a lesser extent.~~June 2010.

Income Tax Expense.Income tax expense from continuing operations was ~~$606~~$862 million for the first nine months of fiscal ~~2010,~~2011, compared to ~~$544~~$740 million for the first nine months of fiscal ~~2009.~~2010. The effective tax rate ~~was 20%~~for continuing operations for the first nine months of fiscal ~~2010,~~2011 was 20%, compared to ~~41%~~22% for the first nine months of fiscal ~~2009. The effective tax rate for~~2010. During the first ~~nine months~~quarter of fiscal 2010 is lower than the effective tax rate for the first nine months of fiscal 2009 primarily as a result of a $748 million pre-tax litigation settlement charge recorded in fiscal 2009 that had a discrete tax benefit computed at a rate less than2011, the United States government extended the federal ~~rate,~~research and development tax credit to include qualified research expenditures paid or incurred after December 31, 2009 and before January 1, 2012. We recorded a ~~valuation allowance recorded in fiscal 2009 on the deferred~~ tax ~~asset~~benefit of $32 million related to ~~capital assets and~~fiscal 2010 in the ~~revaluation in~~first quarter of fiscal ~~2009~~2011 from the retroactive extension of ~~net deferred tax assets related to changes in California tax legislation enacted in fiscal 2009.~~

this credit. The annual effective tax rate for fiscal 2010 ~~is estimated to~~included tax expense of approximately $137 million that arose because certain deferred revenue was taxable in fiscal 2010, but the resulting deferred tax asset will reverse in future years when our state tax rate will be ~~20% and only reflects the United States federal research and development credits generated through December 21, 2009, the date on which they expired.~~ lower as a result of California tax legislation enacted in 2009.

The estimated annual effective tax rate for fiscal ~~2010~~2011 of 20% is less than the United States federal statutory rate primarily due to benefits of ~~22%~~approximately 18% related to foreign earnings taxed at less than the United States federal rate and benefits of approximately 2% related to the research and development tax credit, partially offset by state taxes of approximately 5%. The prior fiscal year rate was lower than the United States federal statutory rate primarily due to benefits related to foreign earnings taxed at less than the United States federal rate, partially offset by state taxes ~~of 5%~~ and tax expense ~~of 4%~~ related to the ~~deferred revenue that is taxable in fiscal 2010, but for which the resulting~~valuation of deferred tax ~~asset will reverse~~assets to reflect changes in ~~future years when the Company’s state tax rate will be lower.~~California law.

Deferred tax assets, net of valuation allowance, increased from September 27, 2009 to June 27, 2010 primarily due to the establishment of the deferred tax asset related to revenue derived from the Company’s 2008 license and settlement agreements with Nokia.

Our Segment Results for the Third Quarter of Fiscal ~~2010~~2011 Compared to the Third Quarter of Fiscal ~~2009~~2010

The following should be read in conjunction with the third quarter financial results of fiscal ~~2010~~2011 for each reporting segment. See “Notes to Condensed Consolidated Financial Statements, Note 9 —- Segment Information.”

QCT Segment.QCT revenues for the third quarter of fiscal ~~2010~~2011 were ~~$1.69~~$2.19 billion, compared to ~~$1.79~~$1.69 billion for the third quarter of fiscal ~~2009.~~2010. Equipment and services revenues, mostly related to sales of MSM and accompanying RF and PM integrated circuits, were $2.15 billion for the third quarter of fiscal 2011, compared to $1.64 billion for the third quarter of fiscal ~~2010, compared to $1.74 billion for the third quarter of fiscal 2009.~~2010. The ~~decrease~~increase in equipment and services revenues resulted primarily from a ~~decrease of $186~~$271 million increase related to higher

unit shipments, a $100 million increase related to the net effects of changes in product mix and ~~the~~lower average selling prices of such products ~~partially offset by~~and a ~~$92~~$95 million increase related to ~~higher unit shipments.~~sales of connectivity products, primarily resulting from the acquisition of Atheros. Approximately ~~103~~120 million MSM integrated circuits were sold during the third quarter of fiscal ~~2010,~~2011, compared to approximately 94103 million for the third quarter of fiscal ~~2009.~~2010. ⁽¹⁾

~~QCT’s~~ QCT earnings before taxes for the third quarter of fiscal ~~2010~~2011 were ~~$404~~$430 million, compared to ~~$548~~$404 million for the third quarter of fiscal ~~2009.~~2010. QCT operating income as a percentage of ~~its~~ revenues (operating margin percentage) was 20% in the third quarter of fiscal 2011, compared to 24% in the third quarter of fiscal ~~2010, compared to 31% in the third quarter of fiscal 2009.~~2010. The ~~decrease~~increase in QCT earnings before taxes was primarily attributable to the ~~decrease~~increase in QCT revenues, ~~and~~partially offset by a ~~$38~~$107 million increase in research and development expenses and a $42 million increase in selling, general and administrative expenses. The decrease in operating margin percentage was primarily due to ana decrease in gross margin percentage, partially offset by a higher increase in QCT revenues relative to the increase in research and development ~~expenses as a percentage of QCT revenues and a decrease in gross margin percentage.~~expenses. QCT gross margin percentage decreased as a result of the net effects of lower average selling prices, unfavorable product mix and higher product support costs, partially offset by a decrease in average unit ~~costs~~costs. Starting with acquisitions in the third quarter of fiscal 2011, expenses related to the step-up of acquired inventories to fair value and ~~lower product support costs.~~acquired intangible assets are not allocated to our operating segments. Such expenses related to the acquisition of Atheros that were not included in QCT’s earnings before taxes were $77 million in the third quarter of fiscal 2011.

QTL Segment.QTL revenues for the third quarter of fiscal ~~2010~~2011 were ~~$847 million,~~$1.26 billion, compared to ~~$807~~$847 million for the third quarter of fiscal ~~2009.~~2010. The ~~$40~~$410 million increase in revenues was primarily due to an increase in sales of CDMA-based devices by licensees ~~partially offset by lower~~and higher average royalties per unit of ~~such~~ CDMA-based ~~devices, including the effect of underreported royalties by a licensee and the deferral of revenue due to an on-going arbitration with Panasonic.~~devices. QTL earnings before taxes for the third quarter of fiscal 2011 were $1.09 billion, compared to $673 million for the third quarter of fiscal 2010. QTL operating margin percentage was 87% in the third quarter of fiscal 2011, compared to 80% in the third quarter of fiscal 2010. The increases in QTL earnings before taxes and operating margin percentage were attributable to the 48% increase in QTL revenues.

QWI Segment. QWI revenues for the third quarter of fiscal 2011 were $164 million, compared to $162 million for the third quarter of fiscal 2010. QWI loss before taxes for the third quarter of fiscal 2011 was $13 million, compared to earnings before taxes of $6 million for the third quarter of fiscal 2010. QWI operating margin percentage was negative in the third quarter of fiscal 2011, principally due to the operating losses of our QIS and Firethorn divisions, compared to a 2% operating margin in the third quarter of 2010.

QSI Segment. QSI loss before taxes from continuing operations for the third quarter of fiscal 2011 was $30 million, compared to earnings before taxes from continuing operations of $60 million for the third quarter of fiscal 2010. QSI earnings before taxes from continuing operations for the third quarter of fiscal 2010 were $673 million, compared to $663 million for the third quarter of fiscal 2009. QTL operating margin percentage was 80% in the third quarter of fiscal 2010, compared to 83% in the third quarter of fiscal 2009. The increase in QTL earnings before taxes was primarily attributable to the increase in QTL revenues, partially offset by an increase in costs related to patents and to litigation and other legal matters, which caused a corresponding decline in operating margin percentage.

~~QWI Segment.~~QWI revenues for the third quarter of fiscal 2010 were $162 million, compared to $148 million for the third quarter of fiscal 2009. Revenues increased primarily due to a $16 million increase in QES equipment and services revenues resulting primarily from higher unit shipments of our asset-tracking products. QWI earnings before taxes for the third quarter of fiscal 2010 were $6 million, compared to a $3 million loss before taxes for the third quarter of fiscal 2009. QWI operating margin percentage was 2% in the third quarter of fiscal 2010, compared to negative 2% in the third quarter of fiscal 2009. The increase in QWI earnings before taxes was primarily attributable to decreases in QES and QIS research and development expenses. The increase in operating margin percentage was attributable to both the effect of the decrease in research and development expenses and lower ongoing operating losses of Firethorn, partially offset by a decrease in QES gross margin percentage.

~~QSI Segment.~~QSI revenues for the third quarter of fiscal 2010 were $6 million, compared to $9 million for the third quarter of fiscal 2009. QSI revenues are attributable to our FLO TV subsidiary. The decrease in FLO TV revenues was primarily due to lower service-related revenues. QSI loss before taxes for the third quarter of fiscal 2010 was $41 million, compared to $66 million for the third quarter of fiscal 2009. QSI’s loss before taxes decreased by $25 million primarily due toincluded a $62 million gain on the sale of our Australia spectrum ~~license, partially offset by a $30~~license. The remaining $28 million increase in ~~our FLO TV subsidiary’s~~QSI loss before ~~taxes.~~taxes from continuing operations for the third quarter of fiscal 2011 was primarily due to a $21 million increase in interest expense attributable to the loans related to the BWA spectrum won in the India auction in June 2010.

Our Segment Results for the First Nine Months of Fiscal ~~2010~~2011 Compared to the First Nine Months of Fiscal ~~2009~~2010

The following should be read in conjunction with the first nine months financial results of fiscal ~~2010~~2011 for each reporting segment. See “Notes to Condensed Consolidated Financial Statements, Note 9 —- Segment Information.”

QCT Segment.QCT revenues for the first nine months of fiscal ~~2010~~2011 were ~~$4.84~~$6.27 billion, compared to ~~$4.44~~$4.84 billion for the first nine months of fiscal ~~2009.~~2010. Equipment and services revenues, mostly related to sales of MSM and accompanying RF and PM integrated circuits, were $6.12 billion for the first nine months of fiscal 2011, compared to $4.66 billion for the first nine months of fiscal ~~2010, compared to $4.29 billion for the first nine months of fiscal 2009.~~2010. The increase in equipment and services revenues resulted primarily from a ~~$900 million~~$1.10 billion increase related to higher unit shipments, ~~partially offset by~~ a ~~decrease of $527~~$225 million increase related to the net effects of changes in product mix and ~~the~~lower average selling prices of such ~~products.~~products and a $102 million increase related to sales of connectivity products, primarily resulting from the acquisition of Atheros. Approximately ~~288~~356 million MSM integrated circuits were sold during the first nine months of fiscal ~~2010,~~2011, compared to approximately ~~226~~288 million for the first nine months of fiscal 2009. The chipset volume in the first nine months of fiscal 2009 was impacted by the slowdown in the worldwide economy that caused contraction in the CDMA-based channel inventory and resulted in lower demand for CDMA-based MSM integrated chips.2010. ⁽¹⁾

~~QCT’s~~QCT earnings before taxes for the first nine months of fiscal ~~2010~~2011 were ~~$1.17~~$1.49 billion, compared to ~~$933 million~~$1.17 billion for the first nine months of fiscal ~~2009. QCT’s~~2010. QCT operating income as a percentage of ~~its~~ revenues (operating margin percentage) was 24% in both the first nine months of fiscal ~~2010, compared to 21% in the first nine months of fiscal 2009.~~2011 and 2010. The increase in QCT earnings before taxes was primarily attributable to the increase in QCT revenues,

partially offset by ana $209 million increase in research and development ~~expenses. The~~expenses and a $99 million increase in ~~operating margin percentage~~selling, general and administrative expenses.

QCT inventories increased by 37% to $659 million in the first nine months of fiscal 2011 from $481 million at September 26, 2010 primarily due to the addition of inventories from the acquisition of Atheros, excluding the amount of step-up to fair value, and an increase in finished goods related to the timing of inventory builds and changes in product mix. The step-up to fair value in Atheros inventory of $37 million at June 26, 2011 is an unallocated corporate asset that is not included in QCT inventories.

QTL Segment. QTL revenues for the first nine months of fiscal 2011 were $4.06 billion, compared to $2.74 billion for the first nine months of fiscal 2010. During the second quarter of fiscal 2011, we entered into agreements with two licensees to settle ongoing disputes, including the arbitration proceeding with Panasonic, and recorded $401 million in revenues related to prior quarters. The remaining $922 million increase in revenues during the first nine months of fiscal 2011 was primarily due to an increase in ~~gross margin percentage~~sales of CDMA-based devices by licensees and ~~decreases in research and development and selling, general and administrative expenses as a percentage~~higher average royalties per unit of ~~QCT revenues driven primarily~~CDMA-based devices, partially offset by the ~~increase~~effect of $71 million that was included in ~~QCT revenues. QCT gross margin percentage increased as a result of the net effects of a decrease in average unit costs and lower average selling prices.~~

~~QTL Segment.~~~~QTL revenues for the first nine months of fiscal 2010 were $2.74 billion, compared to $2.77 billion for the first nine months of fiscal 2009.~~ QTL revenues in the first nine months of fiscal 2010 ~~included $71 million~~but was attributable to fiscal ~~2009 that~~2009. The $71 million had ~~previously~~ not been previously recognized in fiscal 2009 due to discussions regarding a license agreement that was signed in the first quarter of fiscal 2010. QTL earnings before taxes for the first nine months of fiscal 2011 were $3.56 billion, compared to $2.27 billion for the first nine months of fiscal 2010. QTL operating margin percentage was 88% in the first nine months of fiscal 2011, compared to 83% in the first nine months of fiscal 2010. The ~~$101~~increases in QTL earnings before taxes and operating margin percentage were attributable to the 48% increase in QTL revenues, partially offset by a 7% increase in QTL operating expenses.

QWI Segment. QWI revenues for the first nine months of fiscal 2011 were $493 million, ~~decrease in revenues (before~~compared to $456 million for the ~~$71 million offset) was~~first nine months of fiscal 2010. Revenues increased primarily due to ~~lower royalties per~~a $33 million increase in QES equipment and services revenues resulting from higher unit shipments of ~~CDMA-based devices sold by licensees,~~our asset-tracking products. QWI loss before taxes for the first nine months of fiscal 2011 was $147 million, compared to earnings before taxes of $14 million for the first nine months of fiscal 2010. QWI operating margin percentage was negative in the first nine months of fiscal 2011, compared to a 1% operating margin in the first nine months of fiscal 2010. The decreases in QWI earnings before taxes and operating margin percentage were primarily attributable to $120 million in impairment charges related to certain assets of our Firethorn division, including ~~the effect of underreported royalties by a licensee~~$114 million in goodwill impairment, and the ~~deferral~~operating loss of ~~revenue due~~our QIS division.

QSI Segment. QSI loss before taxes from continuing operations for the first nine months of fiscal 2011 was $97 million, compared to ~~an on-going arbitration with Panasonic, partially offset by an increase in the volume of sales of CDMA-based devices by licensees. QTL’s~~ earnings before taxes from continuing operations of $38 million for the first nine months of fiscal 2010. QSI earnings before taxes from continuing operations for the first nine months of fiscal 2010 were $2.27 billion, compared to $2.38 billion for the first nine months of fiscal 2009. QTL’s operating margin percentage was 83% in the first nine months of fiscal 2010, compared to 85% in the first nine months of fiscal 2009. The decrease in QTL earnings before taxes was primarily attributable to the decrease in QTL revenues and an increase in patent related costs, which caused a corresponding decline in operating margin percentage.

~~QWI Segment.~~QWI revenues for the first nine months of fiscal 2010 were $456 million, compared to $494 million for the first nine months of fiscal 2009. Revenues decreased primarily due to a $51 million decrease in QIS revenues. The decrease in QIS revenues was primarily attributable to a $41 million decrease in QChat revenues resulting primarily from the cessation of development efforts under the licensing agreement with Sprint and an $11 million decrease in BREW revenues resulting from lower consumer demand. QWI earnings before taxes for the first nine months of fiscal 2010 were $14 million, compared to $25 million for the first nine months of fiscal 2009. QWI operating margin percentage was 1% in the first nine months of fiscal 2010, compared to 5% in the first nine months of fiscal 2009. The decrease in QWI earnings before taxes was primarily attributable to the decrease in QIS revenues, partially offset by a decrease in QES operating expenses. The decrease in QWI operating margin percentage was primarily attributable to a decrease in QIS gross margin percentage, partially offset by the effect of the decrease in QES operating expenses.

~~QSI Segment~~. QSI revenues for the first nine months of fiscal 2010 were $9 million, compared to $22 million for the first nine months of fiscal 2009. QSI revenues are attributable to our FLO TV subsidiary. The decrease in FLO TV revenues was primarily due to an increase in customer-related incentives that were recorded as reductions in revenues and lower service-related revenues. QSI loss before taxes for the first nine months of fiscal 2010 was $283 million, compared to $266 million for the first nine months of fiscal 2009. QSI loss before taxes increased by $17 million primarily due to a $94 million increase in our FLO TV subsidiary’s loss before taxes, partially offset byincluded a $62 million gain on the sale of our Australia spectrum ~~license and~~license. The remaining $73 million increase in QSI loss before taxes from continuing operations for the first nine months of fiscal 2011 was primarily due to a ~~$15~~$67 million ~~decrease~~increase in ~~net investment losses (unrelated~~interest expense attributable to ~~FLO TV).~~the loans related to the BWA spectrum won in the India auction in June 2010.

(1) During the first nine months of fiscal 2011, some customers built devices that incorporated two MSMs. In such cases, which represent less than 1% of our gross volume, we count only one MSM in reporting the MSM shipments.

Liquidity and Capital Resources

Our principal sources of liquidity are our existing cash, cash equivalents and marketable securities, cash generated from operations and proceeds from the issuance of common stock under our stock option and employee stock purchase plans. Cash, cash equivalents and marketable securities were ~~$17.6~~$20.2 billion at June ~~27, 2010, a decrease~~26, 2011, an increase of ~~$156 million~~$1.8 billion from September ~~27, 2009.~~26, 2010. This increase was primarily due to cash provided by operating activities of $3.1 billion and proceeds from the issuance of common stock under our equity compensation plans of $2.4 billion, partially offset by cash used to acquire Atheros of $3.1 billion, net of cash acquired. Our cash, cash equivalents and marketable securities at June ~~27, 2010~~26, 2011 consisted of ~~$5.9~~$5.6 billion held domestically and ~~$11.7~~$14.6 billion held by foreign subsidiaries. Due to tax and accounting considerations, we derive liquidity for operations primarily from domestic cash flow and investments held domestically. ~~Total cash provided by operating activities decreased to $3.0~~

At June 26, 2011, approximately $1.7 billion during the first nine months of fiscal 2010, compared to $5.9 billion during the first nine months of fiscal 2009. The decrease was primarily due to collection of the $2.5 billion trade receivable in the first quarter of fiscal 2009 related to the license and settlement agreements completed with Nokia in September 2008.

~~During the first nine months of fiscal 2010, we repurchased and retired 76,259,000 shares of~~remained authorized for repurchase under our ~~common~~ stock ~~for $2.9 billion. On March 1, 2010, we announced that we had been authorized to~~ repurchase ~~up to $3.0 billion of our common stock, and $1.8 billion of that amount remained available at June 27, 2010.~~program. The stock repurchase program has no expiration date. ~~Since June 27, 2010,~~While we ~~have repurchased and retired 3,529,000 shares~~did not repurchase any of our common stock ~~for $122 million. We intend to~~during the first nine months of fiscal 2011, we continue to ~~repurchase shares of our common stock~~evaluate repurchases under this

program ~~as a means of returning capital to stockholders,~~ subject to capital availability and periodic determinations that ~~stock~~such repurchases are in the best ~~interests~~interest of our stockholders.

We paid cash dividends totaling $360 million, or $0.215 per share on June 24, 2011. On ~~March 1, 2010,~~July 13, 2011, we announced ~~an increase in our quarterly~~a cash dividend per share of common stock from $0.17 to $0.19, which is effective for quarterly dividends payable after March 28, 2010. We announced cash dividends totaling $309 million, or $0.19 per share, during the third quarter of fiscal 2010, which were paid on June 25, 2010. On July 8, 2010, we announced a cash dividend of $0.19$0.215 per share on our common stock, payable on September ~~24, 2010~~23, 2011 to stockholders of record as of August ~~27, 2010.~~26, 2011. We intend to continue to use cash dividends as a means of returning capital to stockholders, subject to capital availability and periodic determinations that cash dividends are in the best interests of our stockholders.

Accounts receivable increased ~~17%~~16% during the third quarter of fiscal ~~2010.~~2011. Days sales outstanding, on a consolidated basis, were 2720 days at June ~~27, 2010~~26, 2011 compared to 2217 days at March ~~28, 2010.~~27, 2011. The ~~increases~~increase in accounts receivable ~~and~~was primarily due to the ~~related~~accounts receivable relating to Atheros, which were acquired in the third quarter of fiscal 2011. The increase in the days sales outstanding ~~were~~was primarily due to ~~increased sales and~~ the ~~effects~~effect of the ~~timing~~decrease in QTL revenues in the third quarter of ~~shipments and customer payments for receivables related~~fiscal 2011 as compared to ~~integrated circuits.~~the second quarter.

We believe our current cash and cash equivalents, marketable securities and our expected cash flow generated from operations will provide us with flexibility and satisfy our working and other capital requirements over the next fiscal year and beyond based on our current business plans.

	•		Our total research and development expenditures were $1.9 billion in the first nine months of fiscal 2010 and $2.4 billion in fiscal 2009, and we expect to continue to invest heavily in research and development for new technologies, applications and services for the wireless industry.

	•		Capital expenditures were $313 million in the first nine months of fiscal 2010 and $761 million in fiscal 2009, and advance payment on spectrum was $1.1 billion in the first nine months of fiscal 2010. We anticipate that capital expenditures, which exclude the advance payment on spectrum, will be lower in fiscal 2010 as compared to fiscal 2009 because fiscal 2009 capital expenditures included amounts for the build-out of a manufacturing facility related to our Qualcomm MEMS Technologies division, however, future capital expenditures may be impacted by transactions that are currently not forecasted.

	•		Our purchase obligations for the remainder of fiscal 2010 and for fiscal 2011, some of which relate to research and development activities and capital expenditures, totaled $915 million and $365 million, respectively, at June 27, 2010.

	•		In the first quarter of fiscal 2011, we are obligated to pay $1.4 billion to the United States tax authorities as a result of the cash and intangible assets received in connection with the 2008 license and settlement agreements with Nokia. We intend to use cash held domestically to settle this obligation.

	•		In the first quarter of fiscal 2011, we are obligated to repay a $1.1 billion short-term bank loan that is denominated in Indian rupees. The loan has a fixed interest rate of 6.75% per year with interest payments due monthly. The loan is related to the BWA spectrum recently won in the India auction.

	•		~~Pursuant to the Settlement and Patent License and Non-Assert Agreement with Broadcom, we are obligated to pay a remaining $518 million ratably through April 2013, including interest.~~

	•		Cash used for strategic investments and acquisitions, net of cash acquired, was $45 million in the first nine months of fiscal 2010 and $54 million in fiscal 2009, and we expect to continue making strategic investments and acquisitions to open new markets for our technology, expand our technology, obtain development resources, grow our patent portfolio or pursue new business opportunities.

Our research and development expenditures were $2.1 billion in the first nine months of fiscal 2011 and $2.5 billion in

fiscal 2010, and we expect to continue to invest heavily in research and development for new technologies, applications and services for the wireless industry.

Capital expenditures were $400 million in the first nine months of fiscal 2011 and $426 million in fiscal 2010. We anticipate that capital expenditures will be higher in fiscal 2011 as compared to fiscal 2010, excluding the fiscal 2010 $1.1 billion advance payment on the BWA spectrum in India, primarily due to estimated capital expenditures of $400 million in fiscal 2011 related to the construction of a new manufacturing facility in Taiwan for our QMT division. The estimated cost for the initial phase of the facility of $975 million is expected to be funded using cash held by foreign subsidiaries, and the facility is expected to be operational in fiscal 2012. Future capital expenditures may also be impacted by transactions that are currently not forecasted.

Our purchase obligations for the third quarter of fiscal 2011, some of which relate to research and development activities and capital expenditures, totaled $1.5 billion at June 26, 2011.

The acquisition of Atheros was more significant than others we have made in the past. We expect to continue making strategic investments and acquisitions, the amounts of which could vary significantly, to open new opportunities for our technologies, obtain development resources, grow our patent portfolio or pursue new business.

The $1.1 billion in loans related to the BWA spectrum purchase in India bear interest at an annual rate of 9.75% that is based on the highest base rate among the bank lenders, which is reset quarterly, plus 0.25% with interest payments due monthly and are due and payable in full in December 2012. However, each lender has the right to demand prepayment of its portion of the outstanding loans on December 15, 2011 subject to sufficient prior written notice. As a result, the loans are classified as a component of current liabilities.

Contractual Obligations/Off-Balance Sheet Arrangements

We have no significant contractual obligations not fully recorded on our condensed consolidated balance sheets or fully disclosed in the notes to our condensed consolidated financial statements. Our consolidated balance sheet at June ~~27, 2010~~26, 2011 includes aan aggregate of $1.1 billion ~~bank loan~~in loans that isare payable in full in Indian rupees in December ~~2010.~~2012. We have no material off-balance sheet arrangements as defined in S-K 303(a)(4)(ii).

Additional information regarding our financial commitments at June ~~27, 2010~~26, 2011 is provided in the notes to our condensed consolidated financial statements. See “Notes to Condensed Consolidated Financial Statements, Note 6 — Income ~~Taxes” and~~Taxes,” “Note 8 — Commitments and ~~Contingencies.~~Contingencies,” “Note 10 — Discontinued Operations” and “Note 12 — Acquisitions.”

Risk Factors

You should consider each of the following factors as well as the other information in this Quarterly Report in evaluating our business and our prospects. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. If any of the following risks actually occur, our business and financial results could be harmed. In that case, the ~~market~~trading price of our common stock could decline. You should also refer to the other information set forth in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended September ~~27, 2009,~~26, 2010, including our financial statements and the related notes.

IfRisks Related to Our Businesses

Our revenues are dependent on the commercial deployment of ~~our~~ technologies ~~does not expand as expected, our revenues may not grow as anticipated.~~

~~Historically, we have focused our business primarily~~based on ~~developing, patenting~~CDMA, OFDMA and ~~commercializing CDMA technology for wireless telecommunications applications. Other digital~~other technologies and upgrades of 3G and 3G/4G multimode wireless communications equipment, products and services based on these technologies.

We develop, patent and commercialize technology based on CDMA, OFDMA and other technologies. Our revenues are dependent upon the commercial deployment of these technologies ~~particularly GSM technology, have been more widely deployed than CDMA technology. If adoption~~ and ~~use~~upgrades of ~~CDMA-based~~3G and 3G/4G multimode wireless communications ~~standards do not continue in the countries where our~~equipment, products and ~~those of our customers~~services based on these technologies. Our business may be harmed, and licensees are sold, our business and financial results could suffer. If GSM wireless operators do not select CDMA for their networks or upgrade their current networks to any CDMA-based third-generation (3G) technology, our business and financial results could suffer since we have not previously generated significant revenues from sales of single-mode GSM products. In addition to CDMA technology, we continue to increase our investments in developing, patenting and commercializing OFDMA technology, which has not yet been widely adopted and commercially deployed, and our MediaFLO technology, which was commercially deployed in the United States in fiscal 2007. If OFDMA is not widely adopted and commercially deployed and/or MediaFLO technology is not more widely adopted by consumers in the United States or commercially deployed internationally, our investments in OFDMA and MediaFLOthese technologies may not provide us an adequate ~~return.~~return if:

wireless operators delay 3G and/or 3G/4G multimode deployments, expansions or upgrades;

LTE, an OFDMA-based wireless standard, is not widely deployed or commercial deployment is delayed; or

wireless operators and other industries using these technologies deploy other technologies.

Our business is dependent on our ability to increase our market share and to continue to drive the ~~deployment~~adoption of our ~~technologies,~~ products and services into 3G, 3G/4G multimode and 4G wireless device markets. We are also dependent on the success of our customers, licensees and ~~CDMA-based~~CDMA- and OFDMA-based wireless operators and other industries using our technologies, as well as the timing of their deployment of new ~~services. Our licensees~~services, and ~~CDMA-based wireless operators~~they may incur lower gross margins on products or services based on ~~our~~these technologies than on products using alternative technologies as a result of greater competition or other factors. If ~~CDMA-based wireless operators, wireless device and/or infrastructure manufacturers cease providing CDMA-based products and/or services, the~~ commercial

deployment of ~~CDMA technology could be negatively affected, and our business could suffer.~~

~~We are dependent on the commercial deployment~~these technologies and upgrades ofto 3G, ~~wireless communications equipment, products and services to increase our revenues, and our business may be harmed if wireless network operators delay~~3G/4G multimode or ~~are unsuccessful in the commercial deployment or upgrade of 3G technology or if they deploy other technologies.~~

~~To increase our revenues in future periods, we are dependent upon the commercial deployment and upgrades of 3G~~4G wireless communications equipment, products and services based on our CDMA technology. Although wireless network operators have commercially deployed CDMA2000 and WCDMA, we cannot predict the timing or success of further commercial deployments or expansions or upgrades of CDMA2000, WCDMA or other CDMA systems. If existing deployments are not commercially successful orthese technologies do not continue ~~to grow their subscriber base,~~ or ~~if new commercial deployments of CDMA2000, WCDMA or other CDMA-based systems~~ are delayed, ~~or unsuccessful,~~ our ~~business~~revenues could be negatively impacted, and ~~financial results may be harmed. In addition,~~ our business could suffer.

Our revenues can be ~~harmed if wireless network operators deploy~~impacted by the deployment of other technologies in place of technologies based on CDMA, OFDMA and their derivatives or ~~switch~~by the need to extend certain existing ~~networks from CDMA~~license agreements to GSM without upgrading to WCDMA or if wireless network operators introduce new technologies. A limited number of wireless operators have deployed and/or started testing OFDMA technology, but the timing and extent ofcover additional ~~OFDMA deployments is uncertain, and we might not be successful in developing and marketing OFDMA products.~~later patents.

~~Our patent portfolio may not be as successful in generating licensing income with respect to other technologies as it has been for CDMA-based technologies.~~

Although we own a very strong portfolio of issued and pending patents related to GSM, GPRS, EDGE, OFDM, OFDMA, WLAN and/or Multiple Input, Multiple Output (MIMO) technologies, our patent portfolio licensing program in these areas is less established and might not be as successful in generating licensing income as our CDMA portfolio licensing program. Many wireless operators are investigating or have selected LTE (or to a lesser extent ~~WiMAX)~~WiMax) as next-generation technologies for deployment in existing or future spectrum bands as complementary to their

existing CDMA-based networks. Although we believe that our patented technology is essential and useful to implementation of the LTE and ~~WiMAX~~WiMax industry standards and have granted royalty-bearing licenses to ~~nine~~12 companies to make and sell products implementing those standards ~~(including Nokia, LG Electronics and Samsung),~~but not implementing 3G standards, we might not achieve the same royalty revenues on such LTE or ~~WiMAX deployments~~WiMax products as on CDMA-based ~~deployments, and we might not achieve the same level of success in selling LTE~~ or ~~WiMAX products as we have in CDMA-based~~multimode CDMA/OFDMA-based products.

~~Our earnings are subject to substantial quarterly and annual fluctuations and to market downturns.~~

Our revenues and earnings have fluctuated significantly in the past and may fluctuate significantly in the future. General economic or other conditions have caused a downturn in the market for our products or technology. Despite the recent improvements in market conditions, a future downturn in the demand for our products or technology could adversely affect our operating results and increase the risk of substantial quarterly and annual fluctuations in our earnings. Any prolonged financial or economic crisis may result in the insolvency of key suppliers resulting in product delays; delays in reporting and/or payments from our licensees; customer/licensee insolvencies that impact our customers’/licensees’ ability to pay us, which may delay or impede our ability to recognize revenue and/or result in bad debt expense; the inability of our customers to obtain credit to finance purchases of our products and/or cause our customers to change delivery schedules, cancel committed purchase orders or reduce purchase order commitment projections; uncertainty in global economies, which could impact demand for CDMA-based products in various regions; counterparty failures negatively impacting our treasury operations; and the inability to utilize federal and/or state capital loss carryovers.

Financial market volatility has impacted, and could continue to impact, the value and performance of our marketable securities. Net investment income could vary depending on the gains or losses realized on the sale or exchange of securities, gains or losses from equity method investments, impairment charges related to marketable securities and other investments, changes in interest rates and changes in fair values of derivative instruments. Our cash equivalent and marketable securities investments represent significant assets that may be subject to fluctuating or even negative returns depending upon interest rate movements and financial market conditions in fixed income and equity securities.

Our future operating results may be affected by many factors, including, but not limited to: our ability to retain existing or secure anticipated customers or licensees, both domestically and internationally; our ability to develop, introduce and market new technology, products and services on a timely basis; management of inventory by us and our customers and their customers in response to shifts in market demand; changes in the mix of technology and products developed, licensed, produced and sold; seasonal customer demand; disputes with our customers and licensees; and other factors described elsewhere in this Quarterly Report and in these risk factors.

These factors affecting our future earnings are difficult to forecast and could harm our quarterly and/or annual operating results. If our earnings fail to meet the financial guidance we provide to investors, or the expectations of investment analysts or investors in any period, securities class action litigation could be brought against us and/or the market price of our common stock could decline.

~~Global economic conditions that impact the wireless communications industry could negatively affect our revenues and operating results.~~

Despite the recent improvements in market conditions, a future decline in global economic conditions could have adverse, wide-ranging effects on demand for our products and for the products of our customers, particularly wireless communications equipment manufacturers or other members of the wireless industry, such as wireless network operators. We cannot predict other negative events that may have adverse effects on the economy, on demand for wireless device products or on wireless device inventories at CDMA-based equipment manufacturers and wireless operators. Inflation and/or deflation and economic recessions that adversely affect the global economy and capital markets also adversely affect our customers and our end consumers. For example, our customers’ ability to purchase or pay for our products and services, obtain financing and upgrade wireless networks could be adversely affected, leading to cancellation or delay of orders for our products. Also, our end consumers’ standards of living could be lowered, and their ability to purchase wireless devices based on our technology could be diminished. Inflation could also increase our costs of raw materials and the cost of our products, our operating expenses and harm our business in other ways, and deflation could reduce our revenues if product prices fall. Any

~~of these results from worsening global economic conditions could negatively affect our revenues and operating results.~~

A significant downturn in the economies of Asian countries where many of our customers and licensees are located or the economies of the other major markets (e.g., Europe and North America) they serve could materially harm our business. During the first nine months of fiscal 2010, 67% of our revenues were from customers and licensees based in South Korea, China and Taiwan as compared to 64% during the first nine months of fiscal 2009. During fiscal 2009, 66% of our revenues were from customers and licensees based in South Korea, China and Taiwan, as compared to 61% during fiscal 2008. These customers sell their products to markets worldwide, including in Japan, South Korea, China, India, North America, South America and Europe. In addition, the continued threat of terrorism and heightened security and military action in response to this threat, or any future acts of war or terrorism, may cause disruptions to the global economy and to the wireless communications industry and create uncertainties. Should such negative events occur, subsequent economic recovery might not benefit us in the near term. If it does not, our ability to increase or maintain our revenues and operating results may be impaired. In addition, because we intend to continue to make significant investments in research and development and to maintain extensive ongoing customer service and support capability, any decline in the rate of growth of our revenues will have a significant adverse impact on our operating results.

Our four largest customers accounted for 43% and 48% of consolidated revenues in the first nine months of fiscal 2010 and 2009, respectively, and 49% and 42% in fiscal 2009 and 2008, respectively. The loss of any one of our major customers or any reduction in the demand for devices utilizing our CDMA technology could reduce our revenues and harm our ability to achieve or sustain desired levels of operating results.

The loss of any one of our QCT segment’s significant customers or the delay, even if only temporary, or cancellation of significant orders from any of these customers would reduce our revenues in the period of the deferral or cancellation and harm our ability to achieve or sustain expected levels of operating results. We derive a significant portion of our QCT segment revenues from four major customers. Accordingly, unless and until our QCT segment diversifies and expands its customer base, our future success will significantly depend upon the timing and size of any future purchase orders from these customers. Factors that may impact the size and timing of orders from customers of our QCT segment include, among others, the following:

	•		~~the product requirements of our customers and the network operators;~~

	•		~~the level of component integration and interoperability required by our customers;~~

	•		~~the financial and operational success of our customers;~~

	•		~~the success of our customers’ products that incorporate our products;~~

	•		~~changes in wireless penetration growth rates;~~

	•		~~value-added features that drive replacement rates;~~

	•		~~shortages of key products and components;~~

	•		~~fluctuations in channel inventory levels;~~

	•		~~the success of products sold to our customers by competitors;~~

	•		~~the rate of deployment of new technology by the wireless network operators and the rate of adoption of new technology by end consumers;~~

	•		~~the extent to which certain customers successfully develop and produce CDMA-based integrated circuits and system software to meet their own needs or source such products from other suppliers;~~

	•		~~general economic conditions; and~~

	•		~~changes in governmental regulations in countries where we or our customers currently operate or plan to operate.~~

We derive a significant portion of our royalty revenues in our QTL segment from a limited number of licensees and our future success depends on the ability of our licensees to obtain market acceptance for their products.

Our QTL segment today derives royalty revenues primarily from sales of CDMA products by our licensees. Although we have more than 180 licensees, we derive a significant portion of our royalty revenues from a limited number of licensees. Our future success depends upon the ability of our licensees to develop, introduce and deliver high-volume products that achieve and sustain market acceptance. We have little or no control over the sales efforts of our licensees, and our licensees might not be successful. Reductions in the average selling price of wireless communications devices utilizing our CDMA technology, without a sufficient increase in the volumes of such devices sold, could have a material adverse effect on our business.

We may not be able to modify some of our license agreements to license later patents without modifying some of the other material terms and conditions of such license agreements, and such modifications may impact our revenues.

The licenses granted to and from us under a number of our license agreements include only patents that are either filed or issued prior to a certain date and, in a small number of agreements, royalties are payable on those patents for a specified time period. As a result, there are agreements with some licensees where later patents are not licensed by or to us under our license agreements. In order to license any such later patents, we will need to extend or modify our license agreements or enter into new license agreements with such licensees. We might not be able to modify such license agreements in the future to license any such later patents or extend such date(s) to incorporate later patents without affecting the material terms and conditions of our license agreements with such ~~licensees.~~licensees, and such modifications may impact our revenues.

Global economic conditions that impact the communications industry could negatively affect the demand for our products and our customers’ products, which may negatively affect our revenues.

Despite the improvements in market conditions, a future decline in global economic conditions, particularly in geographic regions with high customer concentrations, could have adverse, wide-ranging effects on demand for our products and for the products of our customers, particularly wireless communications equipment manufacturers or others in the wireless industry who buy their products, such as wireless operators. Other unexpected negative events may have adverse effects on the economy, on demand for wireless device products or on wireless device inventories at equipment manufacturers and held by their customers. In addition, our direct and indirect customers’ ability to purchase or pay for our products and services, obtain financing and upgrade wireless networks could be adversely affected by economic conditions, leading to cancellation or delay of orders for our products.

Our industry is subject to competition in an environment of rapid technological change that could result in decreased demand for our products and the products of our customers and licensees, declining average selling prices for our licensees’ products and our products and/or new specifications or requirements placed upon our products, each of which could negatively affect our revenues and operating results.

Our industry is subject to rapid technological change, and we must make substantial investments in new products, services and technologies to compete successfully. New technological innovations generally require a substantial investment before they are commercially viable. We intend to continue to make substantial investments in developing new products and technologies, and it is possible that our development efforts will not be successful and that our new technologies will not result in meaningful revenues. Our products, services and technologies face significant competition, and we cannot assure you that the revenues generated or the timing of their deployment, which may be dependent on the actions of others, will meet our expectations. Competition in the communications industry is affected by various factors that include, among others: evolving industry standards, evolving methods of transmission for voice and data communications; networking; value-added features that drive replacement rates and selling prices; scalability and the ability of the system technology to meet customers’ immediate and future network requirements.

Our future success will depend on, among other factors, our ability to:

continue to keep pace with technological developments;

drive adoption of our integrated circuit products across a broad spectrum of devices sold by our customers and licensees;

develop and introduce new products, services, technologies and enhancements on a timely basis;

effectively develop and commercialize turnkey, integrated product offerings that incorporate our integrated circuits, software, user interface and applications;

become a preferred partner for operating system platforms, such as Android and Windows Mobile;

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focus our service businesses on key platforms that create standalone value or contribute to the success of our other businesses; and
succeed in significant foreign markets, such as China, India and Europe.
Companies that promote WWAN (wireless wide area network) technologies that are neither CDMA- nor OFDMA-based (e.g., GSM) and companies that design integrated circuits based on CDMA, OFDMA or their derivatives are generally competitors or potential competitors. Examples (some of whom are strategic partners of ours in other areas) include Broadcom, CSR plc, Freescale, Fujitsu, Intel, Lantiq, Marvell Technology, Mediatek, nVidia, RaLink Technology Corporation, Renesas Electronics, Spreadtrum Communications, ST-Ericsson (a joint venture between Ericsson Mobile Platforms and ST-NXP Wireless), Texas Instruments and VIA Telecom. Many of these current and potential competitors have advantages over us that include, among others: motivation by our customers in certain circumstances to find alternate suppliers; government support of other technologies; and more extensive relationships with indigenous distribution and original equipment manufacturer (OEM) companies in developing territories (e.g., China).
In addition to the foregoing, we have seen, and believe we will continue to see, an increase in customers requesting that we develop products, including chipsets and associated software, that will incorporate “open source” software elements and operate in an “open source” environment, which may offer accessibility to a portion of a product’s source code and may expose related intellectual property to adverse licensing conditions. Developing open source products, while adequately protecting the intellectual property rights upon which our licensing business depends, may prove burdensome and time-consuming under certain circumstances, thereby placing us at a competitive disadvantage for new product designs.
Competition may reduce average selling prices for our chipset products and the products of our customers and licensees. Reductions in the average selling prices of our licensees’ products, unless offset by an increase in volumes, generally result in reduced royalties payable to us. We anticipate that additional competitors will enter our markets as a result of growth opportunities in wireless communications, the trend toward global expansion by foreign and domestic competitors, technological and public policy changes and relatively low barriers to entry in selected segments of the industry.
We derive a significant portion of our consolidated revenues from a small number of customers and licensees. If revenues derived from these customers or licensees decrease, our operating results could be negatively affected.
Our QCT segment derives a significant portion of revenues from a small number of customers. The loss of any one of our QCT segment’s significant customers or the delay, even if only temporary, or cancellation of significant orders from any of these customers would reduce our revenues in the period of the deferral or cancellation and harm our ability to achieve or sustain expected levels of operating results. Accordingly, unless and until our QCT segment diversifies and expands its customer base, our future success will largely depend upon the timing and size of any future purchase orders from these customers.
Although we have more than 195 licensees, our QTL segment derives a significant portion of royalty revenues from a limited number of licensees. Our future success depends upon the ability of our licensees to develop, introduce and deliver high-volume products that achieve and sustain market acceptance. We have little or no control over the sales efforts of our licensees, and our licensees might not be successful. Reductions in the average selling price of wireless communications devices sold by our major licensees, without a sufficient increase in the volumes of such devices sold, could have a material adverse effect on our revenues.

Efforts by some telecommunications equipment manufacturers or their customers to avoid paying fair and reasonable royalties for the use of our intellectual property may create uncertainty about our future business prospects, may require the investment of substantial management time and financial resources, and may result in legal decisions and/or ~~political~~ actions by foreign governments, Standards Development Organizations (SDOs) or other industry groups that harm our business.

A small number of companies, in the past, have initiated various strategies in an attempt to renegotiate, mitigate and/or eliminate their need to pay royalties to us for the use of our intellectual property in order to negatively affect our business model and that of our other licensees. These strategies have included (i) litigation, often alleging infringement of patents held by such companies, patent misuse, patent exhaustion and patent and license unenforceability, or some form of unfair competition, (ii) taking ~~questionable~~ positions ~~on the interpretation~~contrary to our understanding of their contracts with us, (iii) appeals to governmental authorities, ~~such as the complaints filed with the Korea Fair Trade Commission (KFTC) and the Japan Fair Trade Commission (JFTC) during 2006,~~ (iv) collective action, including working with ~~carriers,~~operators, standards bodies, other like-minded ~~technology~~ companies and other organizations, on both formal and informal bases, to adopt intellectual property policies and practices that could have the effect of limiting returns on intellectual property innovations, and (v) lobbying with governmental regulators and elected officials for the purpose of seeking the imposition of some form of compulsory licensing and/or to weaken a patent holder’s ability to enforce its rights or obtain a fair return for such rights. Some companies have proposed significant changes to existing intellectual property policies for implementation by SDOs and other industry organizations, some of which would require a maximum aggregate intellectual property royalty rate for the use of all essential patents owned by all of the member companies to be applied to the selling price of any product implementing the relevant standard. They have further proposed that such

maximum aggregate royalty rate be apportioned to each member company with essential patents based upon the number of essential patents held by such company. A number of these strategies are purportedly based on interpretations of the policies of certain standards development organizations concerning the licensing of patents that are or may be essential to industry standards and our alleged failure to abide by these policies. There is a risk that relevant courts or governmental agencies will interpret those policies in a manner adverse to our interests.

~~Although we believe that these challenges~~ If such proposals and strategies continue and are ~~without merit, and we will continue to vigorously defend our intellectual property and contract rights and our right to continue to receive a fair return for our innovations,~~successful in the ~~distractions caused by challenges to~~future, our business model would be harmed, either by artificially limiting our return on investment with respect to new technologies or forcing us to work outside of the SDOs or such other industry groups to promote our new technologies, and ~~licensing program are undesirable and~~our results of operations could be negatively impacted. As well, the legal and other costs associated with defending our position have been and continue to be significant. We assume ~~as should investors,~~ that such challenges regardless of their merits will continue into the foreseeable future and may require the investment of substantial management time and financial resources to explain and defend our position.

The enforcement and protection of our intellectual property rights may be expensive, ~~and~~ could ~~divert~~fail to prevent misappropriation or unauthorized use of our ~~valuable resources.~~proprietary intellectual property rights or could result in the loss of our ability to enforce one or more patents.

We rely primarily on patent, copyright, trademark and trade secret laws, as well as nondisclosure and confidentiality agreements and other methods, to protect our proprietary information, technologies and processes, including our patent portfolio. Policing unauthorized use of our products and technologies is difficult and time consuming. We cannot be certain that the steps we have taken, or may take in the future, will prevent the misappropriation or unauthorized use of our proprietary information and technologies, particularly in foreign countries where the laws may not protect our proprietary intellectual property rights as fully or as readily as United States laws. We cannot be certain that the laws and policies of any country, including the United States, or the practices of any of the standards bodies, foreign or domestic, with respect to intellectual property enforcement or licensing, issuance of spectrum licenses or the

adoption of standards, will not be changed in a way detrimental to our licensing program or to the sale or use of our products or technology. We may have difficulty in protecting or enforcing our intellectual property rights and/or contracts in a particular foreign jurisdiction, including: challenges to our licensing practices under such jurisdictions’ competition laws; adoption of mandatory licensing provisions by foreign jurisdictions (either with controlled/regulated royalties or royalty free); and challenges pending before foreign competition agencies to the pricing and integration of additional features and functionality into our wireless chipset products.

~~The vast majority~~A substantial portion of our patents and patent applications relate to our wireless communications technology and much of the remainder of our patents and patent applications relate to our other technologies and products. We may need to litigate in the United States or elsewhere in the world to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of proprietary rights of others. As a result of any such litigation, we could lose our ability to enforce one or more patents or incur substantial unexpected operating costs. Any action we take to enforce our intellectual property rights could be costly and could absorb significant management time and attention, which, in turn, could negatively impact our operating results. ~~In addition, failure to protect our trademark rights could impair our brand identity.~~

Claims by other companies that we infringe their intellectual property or that patents on which we rely are invalid could adversely affect our business.

From time to time, companies have asserted, and may again assert, patent, copyright and other intellectual property rights against our products or products using our technologies or other technologies used in our industry. These claims have resulted and may again result in our involvement in litigation. We may not prevail in such litigation given the complex technical issues and inherent uncertainties in intellectual property litigation. If any of our products were found to infringe on another company’s intellectual property rights, we could be subject to an injunction or required to redesign our products, which could be costly, or to license such rights and/or pay damages or other compensation to such other company. If we were unable to redesign our products, license such intellectual property rights used in our products or otherwise distribute our products through a licensed supplier, we could be prohibited from making and selling such products.

We expect that we will continue to be involved in litigation and may have to appear in front of administrative bodies (such as the U.S. International Trade Commission) to defend against patent assertions against our products by companies, some of whom are attempting to gain competitive advantage or negotiating leverage in licensing negotiations. We may not be successful and, if we are not, the range of possible outcomes includes everything from a royalty payment to an injunction on the sale of certain of our chipsets (and on the sale of our customers’ devices using our chipsets) and the imposition of royalty payments that might make purchases of our chipsets less economical for our customers. A negative outcome in any such litigation could severely disrupt the business of our chipset customers and their wireless operator customers, which in turn could hurt our relationships with our chipset customers and wireless operators and could result in a decline in our share of worldwide chipset sales and/or a reduction in our licensees’ sales to wireless operators, causing a corresponding decline in our chipset and/or licensing revenues.

In addition, as the number of competitors or other patent holders in the market increases and the functionality of our products expand to include additional technologies and features, we may become subject to claims of infringement or misappropriation of the intellectual property rights of others. Any claims, regardless of their merit, could be time consuming to address, result in costly litigation, divert the efforts of our technical and management personnel or cause product release or shipment delays, any of which could have a material adverse effect upon our operating results. In any potential dispute involving other companies’ patents or other intellectual property, our chipset ~~suppliers~~foundries, semiconductor assembly and test providers and customers could also become the targets of litigation. We are contingently liable under certain product sales, services, license and other agreements to indemnify certain customers against certain types of liability and/or damages arising from qualifying claims of patent infringement by products or services sold or provided by us. Reimbursements under indemnification arrangements could have a material adverse effect on our results of operations. Furthermore, any such litigation could severely disrupt the supply of our products and the business of our chipset customers and their wireless operator customers, which in turn could hurt our relationships with our chipset customers and wireless operators and could result in a decline in our chipset sales and/or a reduction in our licensees’ sales to wireless operators, causing a corresponding decline in our chipset and/or licensing revenues. Any claims, regardless of their merit, could be time consuming to address, result in costly litigation, divert the efforts of our technical and management personnel or cause product release or shipment delays, any of which could have a material adverse effect upon our operating results.

We expect that we may continue to be involved in litigation and may have to appear in front of administrative bodies (such

as the U.S. International Trade Commission) to defend against patent assertions against our products by companies, some of whom are attempting to gain competitive advantage or leverage in licensing negotiations. We may not be successful in such proceedings, and if we are not, the range of possible outcomes includes everything from a royalty payment to an injunction on the sale of certain of our chipsets (and on the sale of our customers’ devices using our chipsets) and the imposition of royalty payments that might make purchases of our chipsets less economical for our customers. A negative outcome in any such proceeding could severely disrupt the business of our chipset customers and their wireless operator customers, which in turn could hurt our relationships with our chipset customers and wireless operators and could result in a decline in our share of worldwide chipset sales and/or a reduction in our licensees’ sales to wireless operators, causing a corresponding decline in our chipset and/or licensing revenues.

A number of other companies have claimed to own patents essential to various CDMA standards, GSM standards and OFDMA standards or implementations of OFDM and OFDMA systems. If we or other product manufacturers are required to obtain additional licenses and/or pay royalties to one or more of such other patent holders, this could have a material adverse effect on the commercial implementation of our CDMA, GSM, OFDMA or multimode products and technologies, demand for our licensees’ products and our profitability.

Other companies or entities also have commenced, and may again commence, actions seeking to establish the invalidity of our patents. In the event that one or more of our patents are challenged, a court may invalidate the patent(s) or determine that the patent(s) is not enforceable, which could harm our competitive position. If our key patents are invalidated, or if the scope of the claims in any of these patents is limited by court decision, we could be prevented from licensing the invalidated or limited portion of such patents. Such adverse decisions could negatively impact our revenues. Even if such a patent challenge is not successful, it could be expensive and time consuming to address, divert management attention from our business and harm our reputation.

Our ~~industry is~~earnings and stock price are subject to ~~competition that could result~~substantial quarterly and annual fluctuations and to market downturns.

The stock market in ~~decreased demand for our products~~general, and the ~~products~~stock prices of technology-based and wireless communications companies in particular, have experienced volatility that often has been unrelated to the operating performance of any specific public company. The market price of our common stock has fluctuated in the past and is likely to fluctuate in the future as well. Factors that may have a significant impact on the market price of our stock include, among others:

announcements concerning us or our competitors, including the selection of wireless communications technology by wireless operators and the timing of the roll-out of those systems;

international developments, such as technology mandates, political developments or changes in economic policies;

changes in recommendations of securities analysts;

proprietary rights or product or patent litigation against us or against our customers or licensees;

strategic transactions, such as spin-offs, acquisitions and ~~licensees~~divestitures;

unexpected and/or ~~declining~~significant changes in the average selling ~~prices for~~price of our licensees’ products and our products;

unresolved disputes with licensees that result in non-payment and/or non-recognition of royalty revenues that may be owed to us; or

rumors or allegations regarding our financial disclosures or practices.

In the past, securities class action litigation often has been brought against a company following periods of volatility in the market price of its securities. Due to changes in the potential volatility of our stock price, we may be the target of securities litigation in the future. Securities litigation could result in substantial uninsured costs and divert management’s attention and resources.

Any prolonged financial or economic crisis may result in a downturn in demand for our products or technology; the insolvency of key suppliers resulting in product delays; delays in reporting and/or payments from our licensees and/or customers; and counterparty failures negatively impacting our treasury operations.

Financial market volatility has impacted, and could continue to impact, the value and performance of our marketable securities. Net investment income could vary depending on the gains or losses realized on the sale or exchange of securities, impairment charges related to marketable securities and other investments, changes in interest rates and changes in fair values of derivative instruments. Our cash equivalent and marketable securities investments represent significant assets that may be subject to fluctuating or even negative returns depending upon interest rate movements and financial market conditions in fixed income and equity securities.

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investors in any period, securities class action litigation could be brought against us and/or the market price of our common stock could decline.
We depend upon a limited number of third-party suppliers to manufacture and test component parts, subassemblies and finished goods for our products. If these third-party suppliers do not allocate adequate manufacturing and test capacity in their facilities to produce products on our behalf, or if there are any disruptions in the operations of, or a loss of, any of these third parties, it could harm our ability to meet our delivery obligations to our customers, reduce our revenues, increase our cost of sales and harm our business.

Our ability to meet customer demand depends, in part, on our ability to obtain timely and adequate delivery of parts and components from our suppliers. A reduction or interruption in our product supply source, an inability of our suppliers to react to shifts in product demand or an increase in component prices could have a material adverse effect on our business or profitability. The loss of a significant supplier or the inability of a supplier to meet performance and quality specifications or delivery schedules could harm our ability to meet our delivery obligations to our customers and negatively impact our revenues and ~~operating results.~~business operations. In the event of a loss of, or a decision to change, a supplier, qualifying a new foundry supplier and commencing volume production or testing could involve delay and expense, resulting in possible loss of customers.

While our goal is to establish alternate suppliers for technologies that we consider critical, we rely on sole- or limited-source suppliers for some products, subjecting us to significant risks, including: possible shortages of raw materials or manufacturing capacity; poor product performance; and reduced control over delivery schedules, manufacturing capability and yields, quality assurance, quantity and costs. Our arrangements with our suppliers may oblige us to incur costs to manufacture and test our products that do not decrease at the same rate as decreases in pricing to our customers.

QCT Segment. Although we have entered into long-term contracts with our suppliers, these contracts generally do not provide for long-term capacity commitments, except as may be provided in a particular purchase order that has been accepted by our supplier. To the extent that we do not have firm commitments from our suppliers over a specific time period, or for any specific quantity, our suppliers may allocate, and in the past have allocated, capacity to the production and testing of products for their other customers while reducing capacity to manufacture or test our products. Accordingly, capacity for our products may not be available when we need it or available at reasonable prices. We ~~currently face significant competition~~have experienced capacity limitations from our suppliers, which resulted in supply constraints and our inability to meet certain customer demand. There can be no assurance that we will not experience these or other supply constraints in the future, which could result in our ~~markets~~failure to meet customer demand. In addition, the timely readiness of our foundry suppliers to support transitions to smaller geometry process technologies could impact our ability to meet customer demand, revenues and ~~expect that competition will continue. Competition~~cost expectations. The timing of acceptance of technology design changes by our customers may subject us to the risk of excess inventories of earlier designs.

QMT Division. Our QMT division needs to form and maintain reliable business relationships with component supply partners to support the manufacture of interferometric modulator (IMOD) displays and/or modules in commercial volumes. All of our current relationships have been for the development and limited production of certain IMOD display panels and/or modules. Some or all of these relationships may not succeed or, even if they are successful, may not result in the ~~telecommunications market is affected by various factors, including:~~component supply partners entering into material supply relationships with us.

	•		~~comprehensiveness~~Our suppliers may also be our competitors, putting us at a disadvantage for pricing and capacity allocation. One or more of our suppliers may obtain rights from us to manufacture CDMA- or OFDMA-based integrated circuits that compete with our products. In this event, the supplier could elect to allocate raw materials and manufacturing capacity to their own products ~~and technologies;~~

	•		~~value-added features that drive replacement rates and selling prices;~~

	•		~~manufacturing capability;~~

	•		~~scalability and the ability of the system technology to meet customers’ immediate and future network requirements;~~

	•		~~product performance and quality;~~

	•		~~design and engineering capabilities;~~

	•		~~compliance with industry standards;~~

	•		~~time-to-market;~~

	•		~~system cost; and~~

	•		~~customer support.~~

~~This competition may increase development costs~~ and reduce ~~average selling prices for~~deliveries to us to our detriment. In addition, we may not receive reasonable pricing, manufacturing or delivery terms. We cannot guarantee that the actions of our suppliers will not cause disruptions in our operations that could harm our ability to meet our delivery obligations to our customers or increase our cost of sales.

Currency fluctuations could negatively affect future product sales or royalty revenues, harm our ability to collect receivables or increase the U.S. dollar cost of the activities of our foreign subsidiaries and international strategic investments.

Our international customers sell their products throughout the world, including China, India, Japan, South Korea, North America, South America and Europe. Consolidated revenues from international customers as a percentage of total revenues were greater than 90% in the first nine months of fiscal 2011 and in the last three fiscal years. We are exposed to risk from fluctuations in currencies that could negatively affect our operating results. Adverse movements in currency exchange rates may negatively affect our business due to a number of situations, including the following, among others:

Our products and those of our customers and ~~licensees. Reductions in~~licensees that are sold outside the ~~average selling prices of our licensees’ products, unless offset by an increase in volumes, generally result in reduced royalties payable to us. While pricing pressures from competition~~United States may to a large extent, be mitigated by the introduction of new features and functionality in our licensees’ products as evidenced by the recent success of smartphones and other feature-rich, data-capable devices, there is no guarantee that such mitigation will continue to occur. We anticipate that additional competitors will enter our marketsbecome less price-competitive as a result of ~~growth opportunities~~adverse currency fluctuations;

Certain of our revenues, such as royalty revenues, are derived from licensee or customer sales that are denominated in ~~wireless telecommunications,~~foreign currencies. Weakening of currency values versus the ~~trend toward global expansion by foreign and domestic competitors, technological and public policy changes and relatively low barriers to entry~~U.S. dollar in selected ~~segments~~regions could adversely affect our revenues and cash flows;

We may engage in foreign exchange hedging transactions that could affect our cash flows and earnings because they may require the payment of structuring fees, limit the U.S. dollar value of royalties from licensees’ sales that are denominated in foreign currencies, cause earnings volatility if the hedges do not qualify for hedge accounting and expose us to counterparty risk if the counterparty fails to perform;

Our loans payable are denominated in Indian rupees. If the U.S. dollar weakens, additional cash will be required to settle this obligation and the related interest;

Currency exchange rate fluctuations may reduce the U.S. dollar value of our marketable securities that are denominated directly or indirectly in foreign currencies; and

Certain suppliers may price goods in currencies other than the U.S. dollar. A weakening dollar would result in higher than expected costs for these goods.

We may engage in acquisitions or strategic transactions or make investments that could result in significant changes or management disruption and fail to enhance stockholder value.

From time to time, we engage in acquisitions or strategic transactions or make investments with the goal of maximizing stockholder value. We acquire businesses and other assets, including spectrum licenses and other intangible assets, enter into joint ventures or other strategic transactions and purchase equity and debt securities, including minority interests in publicly-traded and private companies. Many of our strategic investments are in early-stage companies to expand the wireless industry and promote the global adoption of CDMA- or OFDMA-based technologies and related services. Most of our acquisitions or strategic investments entail a high degree of risk and will not become liquid until more than one year from the date of investment, if at all. Our acquisitions or strategic investments (either those we have completed or may undertake in the future) may not generate financial returns or result in increased adoption or continued use of our technologies. In some cases, we may be required to consolidate or record our share of the ~~industry.~~earnings or losses of companies in which we have acquired ownership interests. Our share of any losses will adversely affect our financial results until we exit from or reduce our exposure to these investments.

~~Companies that promote non-CDMA technologies (e.g., GSM, WiMAX)~~Achieving the anticipated benefits of business acquisitions, such as our recent acquisition of Atheros, depends in part upon our ability to integrate the acquired businesses in an efficient and effective manner. The integration of companies that ~~design CDMA-based integrated circuits are generally included amongst our competitors or potential competitors~~have previously operated independently may result in ~~the United States~~significant challenges, and abroad. Examples (some of whom are strategic partners of ours in other areas) include Broadcom, Freescale, Fujitsu, Icera, Infineon, Intel, Marvell Technology, Mediatek, nVidia, Renesas Electronics, ST-Ericsson (a joint venture between Ericsson Mobile Platforms and ST-NXP Wireless), Texas Instruments and VIA Telecom.

~~Many of these current and potential competitors have advantages over us, including:~~

	•		~~longer operating histories and market presence;~~

	•		~~greater name recognition;~~

	•		~~motivation by our customers in certain circumstances to find alternate suppliers;~~

	•		~~access to larger customer bases;~~

	•		~~greater sales and marketing, manufacturing, distribution, technical and other resources;~~

	•		~~government support of other technologies; and~~

	•		~~more extensive relationships with indigenous distribution and original equipment manufacturer (OEM) companies in developing territories (e.g., China).~~

~~As a result of these and other factors, our competitors~~we may be ~~more successful than us. In addition, we anticipate new competitors, including~~unable to accomplish the integration smoothly or successfully. The difficulties of integrating companies include, among others: retaining key employees; maintaining important relationships between us and the acquired business; minimizing the diversion of management’s attention from ongoing business matters; coordinating geographically separate organizations; consolidating research and development operations; and consolidating corporate and administrative infrastructures.

We may not ~~previously engaged in manufacturing telecommunications chipsets, to begin offering~~derive any commercial value from acquired technology, products and ~~selling~~intellectual property or from future technologies and products based on ~~3G standards, LTE~~the acquired technology and/or intellectual property, and ~~WiMAX. These competitors~~we may ~~have more established relationships and distribution channels in markets~~be subject to liabilities that are not ~~currently deploying CDMA-based wireless communications technology. These competitors also~~covered by indemnification protection we may ~~have established or may establish financial or strategic relationships among themselves or~~obtain. We cannot ensure that the integration of acquired businesses with our ~~existing or~~business will result in the realization of the full benefits anticipated by us to result from the acquisitions. We may not be successful in expanding into the markets served by an acquired business and in addressing potential ~~customers, resellers or other third parties. These relationships~~new opportunities that may affect our customers’ decisions to purchase products or license technology from us or to use alternative technologies. Accordingly, new competitors or alliances among competitors could emerge and rapidly acquire significant market sharearise out of ~~sales~~the combination. Due to our ~~detriment. In addition~~inexperience with Atheros’ business, we may overestimate the benefits. For example, Atheros’ business has focused on LAN connectivity and products for WLAN (also referred to ~~the foregoing,~~as WiFi), Bluetooth, Ethernet, GPS, powerline communications and other technologies primarily for networking, computing and other consumer electronic devices. If we have ~~seen,~~overestimated the potential benefits of product synergies and ~~believe~~growth opportunities, we ~~will continue to see, an increase~~may not realize the expected return on our investment in ~~customers requesting that we develop products, including chipsets and associated software, that will incorporate “open source” software elements and operate~~Atheros.

Defects or errors in an “open source” environment, which may offer accessibility to a portion of a product’s source code and may expose related intellectual property to adverse licensing conditions. Developing open source products, without imperiling the intellectual property rights upon which our ~~licensing business depends, may prove difficult under certain circumstances, thereby placing us at a competitive disadvantage for new product designs.~~

~~With respect to our QES business, our competitors are aggressively pricing~~ products and services or in the products of our customers could harm our business. If we experience product liability claims or recalls, we may incur significant expenses and experience decreased demand for our products.

Our products are ~~offering~~inherently complex and may contain defects and errors that are detected only when the products are in use. For example, as our chipset product complexities increase, we are required to migrate to integrated circuit technologies with smaller geometric feature sizes. The design process interface issues are more complex as we enter into these new ~~value-added~~domains of technology, which adds risk to yields and reliability. Because our products and services are responsible for critical functions in our customers’ products and/or networks, such defects or errors could have an adverse impact on our customers, which ~~may impact margins, intensify competition in current and new markets and~~could damage our reputation, harm our customer relationships and expose us to liability. Defects or impurities in our components, materials or software or those used by our customers or licensees, equipment failures or other difficulties could adversely affect our ability, and that of our customers and licensees, to ~~compete~~ship products on a timely basis, customer or licensee demand for our products or the commitment of financial and/or engineering resources that could reduce operating margins and affect future product release schedules. Additionally, a defect or failure, including those related to security vulnerabilities, in ~~certain markets.~~our products or the products of our customers or licensees could lead to liability claims, harm our reputation and/or adversely affect the demand for 3G and 3G/4G multimode wireless products and components.

Manufacturing, testing, marketing and use of our products and those of our licensees and customers entail the risk of product liability. The use of wireless devices containing our products to access untrusted content creates a risk of exposing the system software in those devices to viral or malicious attacks. We continue to ~~believe~~expand our ~~FLO TV service offering provides compelling advantages~~focus on this issue and take measures to ~~consumers.~~safeguard the software from this threat. However, ~~we face indirect competition to~~this issue carries the risk of general product liability claims along with the associated impacts on reputation and demand. In addition, a product liability claim or recall, whether against our ~~FLO TV products~~licensees, customers or us, could harm our reputation and services from wireless delivery of streaming and downloadable video content via wireless operators, OEMs and other providers of mobile video content, as well as from internet video content accessed through the mobile web browser. result in decreased demand for our products.

Our ~~FLO TV~~QMT division’s business ~~had $1.3 billion in assets (including $746 million in spectrum licenses) at June 27, 2010. If we are unable to~~does not currently generate ~~adequate~~ operating income ~~in the future,~~and may not succeed or its operating results may not meet our ~~assets could become impaired, which could negatively impact our operating results.~~expectations.

While we continue to believe our QMT division’s ~~interferometric modulator (IMOD)~~IMOD displays will offer compelling advantages to users of displays, there can be no assurance that our IMOD product development efforts will be successful, that we will be able to cost-effectively manufacture these new products, that we will be able to successfully market these products or that other technologies will not continue to improve in ways that reduce the advantages we anticipate from our IMOD displays. Sales of flat panel displays are currently dominated, and we believe will likely continue to be dominated for some time, ~~dominated~~ by displays based on liquid crystal display (LCD) technology. Numerous companies are making substantial investments in, and conducting research to improve characteristics of, LCDs. Additionally, several other flat panel display technologies have been, or are being, developed, including technologies for the production of organic light-emitting diode (OLED), field emission, inorganic electroluminescence, gas plasma and vacuum fluorescent displays. In each case, advances in LCD or other flat panel display technologies could result in technologies that are more cost effective, have fewer display limitations or can be brought to market faster than our IMOD technology. These advances in competing technologies might cause ~~display~~device manufacturers to avoid entering into commercial relationships with us or to not renew planned or existing relationships with us. Our QMT division had ~~$390~~$631 million in assets (including ~~$128~~$130 million in goodwill) at June ~~27, 2010.~~26, 2011. If we do not expect to achieve adequate market penetration with our IMOD display technology, our assets may become impaired, which could negatively impact our operating results.

~~Attempts by certain companies, if successful, to amend~~Our Firethorn business does not currently generate operating income and may not succeed or ~~modify Standards Development Organizations’ (SDOs) and other industry forums’ intellectual property policies could impact our licensing business.~~

Some companies have proposed significant changes to existing intellectual property policies for implementation by SDOs and other industry organizations, some of which would require a maximum aggregate intellectual property royalty rate for the use of all essential patents owned by all of the member companies to be applied to the selling price of any product implementing the relevant standard. They have further proposed that such maximum aggregate royalty rate be apportioned to each member company with essential patents based upon the number of essential patents held by such company. In May 2007, seven companies (Nokia, Nokia-Siemens, NEC, Ericsson, SonyEricsson, Alcatel-Lucent and NextWave) issued a press release announcing their commitment to the principles

described above with respect to the licensing of patents essential to LTE and inviting all other industry participants to join them in adopting such policies. Although the European Telecommunications Standards Institute (ETSI) IPR Special Committee and the Next Generation Mobile Network industry group have thus far determined that such proposals shouldits operating results may not be adopted as amendments to existing ETSI policies or new policies, and no other companies have joined these seven companies, such proposals as described above might be revisited within ETSI and might be adopted by other SDOs or industry groups, formal and/or informal, resulting in a potential disadvantage to our business model either by artificially limiting our return on investment with respect to new technologies or forcing us to work outside of the SDOs or such other industry groups for promoting our new technologies.

We depend upon a limited number of third-party suppliers to manufacture and test component parts, subassemblies and finished goods for our products. If these third-party suppliers do not allocate adequate manufacturing and test capacity in their facilities to produce products on our behalf, or if there are any disruptions in the operations, or the loss, of any of these third parties, it could harm our ability to meet our ~~delivery obligations~~expectations.

While we continue to believe that our ~~customers, reduce our revenues, increase our cost of sales~~Firethorn division’s mCommerce products will offer advantages to consumers and ~~harm our business.~~

A supplier’s ability to meet our product manufacturing and test demand is limited mainly by its overall capacity and current capacity availability. Our ability to meet customer demand depends, in part, on our ability to obtain timely and adequate delivery of parts and components from our suppliers. A reduction or interruption in our product supply source, an inability of our suppliers to react to shifts in product demand or an increase in component prices could have a material adverse effect on our business or profitability. Component shortages could adversely affect our ability and that of our customers to ship products on a timely basis and, as a result, our customers’ demand for our products. Any such shipment delays or declines in demand could reduce our revenues and harm our ability to achieve or sustain desired levels of profitability. Additionally, failure to meet customer demand in a timely manner could damage our reputation and harm our customer relationships. Our operations may also be harmed by lengthy or recurring disruptions at any of our suppliers’ manufacturing or test facilities and by disruptions in the distribution channels from our suppliers and to our customers. Any such disruptions could cause significant delays in shipments until we are able to shift the products from an affected manufacturer to another manufacturer. If the affected supplier was a sole-source supplier, we may not be able to obtain the product without significant cost and delay. The loss of a significant third-party supplier or the inability of a third-party supplier to meet performance and quality specifications or delivery schedules could harm our ability to meet our delivery obligations to our customers and negatively impact our revenues and business operations.

~~QCT Segment.~~Although we have entered into long-term contracts with our suppliers, most of these contracts do not provide for long-term capacity commitments, except as may be provided in a particular purchase order that has been accepted by our supplier. To the extent that we do not have firm commitments from our suppliers over a specific time period, or in any specific quantity, our suppliers may allocate, and in the past have allocated, capacity to the production and testing of products for their other customers while reducing capacity to manufacture or test our products. Accordingly, capacity for our products may not be available when we need it or available at reasonable prices. We have experienced capacity limitations from our suppliers, which resulted in supply constraints and our inability to meet certain customer demand. Theremerchants, there can be no assurance that weour mCommerce efforts will be successful. If our Firethorn business does not ~~experience these or other supply constraints~~succeed, our investment in ~~the future, which could result in our failure to meet customer demand.~~

While our goal is to establish alternate suppliers for technologies that we consider critical, some of our integrated circuits products are only available from single sources, with which we do not have long-term capacity commitments. Our reliance on sole- or limited-source suppliers involves significant risks including possible shortages of manufacturing capacity, poor product performance and reduced control over delivery schedules, manufacturing capability and yields, quality assurance, quantity and costs. Our arrangements with our suppliers may oblige us to incur costs to manufacture and test our products that do not decrease at the same rate as decreases in pricing to our customers, which may result in lowering our operating margins. In addition, the timely readiness of our foundry suppliers to support transitions to smaller geometry process technologies could impact our ability to meet customer demand, revenues and cost expectations. The timing of acceptance of the smallerits technology ~~designs by our customers may subject us to the risk of excess inventories of earlier designs.~~

In the event of a loss of, or a decision to change, a third-party supplier, qualifying a new foundry supplier and commencing volume production or testing could involve delay and expense, resulting in lost revenues, reduced operating margins and possible loss of customers. We work closely with our customers to expedite their processes for evaluating new integrated circuits from our foundry suppliers; however, in some instances, transition of

~~integrated circuit production to a new foundry supplier may cause a temporary decline in shipments of specific integrated circuits to individual customers.~~

Under our Integrated Fabless Manufacturing (IFM) model, we purchase die from semiconductor manufacturing foundries, contract with separate third-party manufacturers for back-end assembly and test services and ship the completed integrated circuits to our customers. We are unable to directly control the services provided by our semiconductor assembly and test (SAT) suppliers, including the timely procurement of packaging materials for our products, availability of assembly and test capacity, manufacturing yields, quality assurance and product delivery schedules. This lack of control could cause disruptions in our operations that could harm our ability to meet our delivery obligations to our customers, reduce our revenues or increase our cost of sales.

~~QMT Division.~~QMT needs to form and maintain reliable business relationships with flat panel display manufacturers or other targeted partners to support the manufacture of IMOD displays in commercial volumes. All of our current relationships have been for the development and limited production of certain IMOD display panels and/or modules. Some or all of these relationships may not ~~succeed or, even if they are successful, may not result in the display manufacturers’ entering into material supply relationships with us.~~

~~FLO TV Business.~~~~FLO TV depends on a limited number of third-party suppliers to manufacture~~provide us an adequate return, and test component parts, subassemblies and finished goods for products related to our direct-to-consumer FLO TV service offering. If these third-party suppliers do not allocate adequate manufacturing and test capacity in their facilities to produce products on our behalf, or if there are any disruptions in the operations, or the loss, of any of these third parties, our ability to meet our or our partners’ delivery obligations to customers could be harmed, which could negatively impact our operating results. Lack of devices could also delay subscriber adoption of our FLO TV service.

~~Our suppliers may also be our competitors, putting us at a disadvantage for pricing and capacity allocation.~~

One or more of our suppliers may obtain licenses from us to manufacture CDMA-based integrated circuits that compete with our products. In this event, the supplier could elect to allocate raw materials and manufacturing capacity to their own products and reduce deliveries to us to our detriment. In addition, we may not receive reasonable pricing, manufacturing or delivery terms. We cannot guarantee that the actions of our suppliers will not cause disruptions in our operations that could harm our ability to meet our delivery obligations to our customers or increase our cost of sales.

~~We, and our licensees, are subject to the risks of conducting business outside the United States.~~

A significant part of our strategy involves our continued pursuit of growth opportunities in a number of international market locations. We market, sell and service our products internationally. We have established sales offices around the world. We expect to continue to expand our international sales operations and to sell products in additional countries and locations. This expansion will require significant management attention and financial resources to successfully develop direct and indirect international sales and support channels, and we cannot assure you that we will be successful or that our expenditures in this effort will not exceed the amount of any resulting revenues. If we are not able to maintain or increase international market demand for our products and technologies, we may not be able to maintain a desired rate of growth in our business.

Our international customers sell their products to markets throughout the world, including China, India, Japan, South Korea, North America, South America and Europe. We distinguish revenues from external customers by geographic areas based on the location to which our products, software or services are delivered and, for QTL’s licensing and royalty revenues, the invoiced addresses of our licensees. Consolidated revenues from international customers as a percentage of total revenues were greater than 90% in the first nine months of both fiscal 2010 and 2009. In many international markets, barriers to entry are created by long-standing relationships between our potential customers and their local service providers and protective regulations, including local content and service requirements. In addition, our pursuit of international growth opportunities may require significant investments for an extended period before we realize returns, if any, on our investments. Our business could be adversely affected by a variety of uncontrollable and changing factors, including:

difficulty in protecting or enforcing our intellectual property rights and/or contracts in a particular foreign jurisdiction, including challenges to our licensing practices under such jurisdictions’ competition laws;

	•		~~adoption of mandatory licensing provisions by foreign jurisdictions (either with controlled/regulated royalties or royalty free);~~

	•		~~challenges pending before foreign competition agencies to the pricing and integration of additional features and functionality into our wireless chipset products;~~

	•		~~our inability to succeed in significant foreign markets, such as China, India or Europe;~~

	•		~~cultural differences in the conduct of business;~~

	•		~~difficulty in attracting qualified personnel and managing foreign activities;~~

	•		~~longer payment cycles for and greater difficulties collecting accounts receivable;~~

	•		~~export controls, tariffs and other trade protection measures;~~

	•		~~nationalization, expropriation and limitations on repatriation of cash;~~

	•		~~social, economic and political instability;~~

	•		~~natural disasters, energy blackouts, acts of terrorism, widespread illness and war;~~

	•		~~taxation;~~

	•		~~variability in the value of the dollar against foreign currency; and~~

	•		~~changes in laws and policies affecting trade, foreign investments, licensing practices, environmental protection, loans and employment.~~

We cannot be certain that the laws and policies of any country with respect to intellectual property enforcement or licensing, issuance of spectrum licenses or the adoption of standards will not be changed or enforced in a way detrimental to our licensing program or to the sale or use of our products or technology.

The wireless markets in China and India, among others, represent growth opportunities for us. If wireless operators in China or India, or the governments of China or India, make technology deployment, implement limitations on intellectual property rights or make other decisions that result in actions that are adverse to the expansion of CDMA technologies, our business could be harmed.

We are subject to risks in certain global markets in which wireless operators provide subsidies on wireless device sales to their customers. Increases in device prices that negatively impact device sales can result from changes in regulatory policies related to device subsidies. Limitations or changes in policy on device subsidies in South Korea, Japan, China and other countries may have additional negative impacts on our revenues.

Currency fluctuations could negatively affect future product sales or royalty revenues, harm our ability to collect receivables, or increase the U.S. dollar cost of the activities of our foreign subsidiaries and international strategic investments.

We are exposed to risk from fluctuations in currencies, which may change over time as our business practices evolve, that could impact our operating results, liquidity and financial condition. We operate and invest globally. Adverse movements in currency exchange rates may negatively affect our business due to a number of situations, including the following:

If the effective price of products sold by our customers were to increase as a result of fluctuations in the exchange rate of the relevant currencies, demand for the products could fall, which in turn would reduce our royalty and chipset revenues.

Our products and those of our customers and licensees that are sold in U.S. dollars become less price-competitive in international markets if the value of the U.S. dollar increases relative to foreign currencies, and our revenues may not grow as quickly as they otherwise might in response to worldwide growth in wireless products and services.

	•		Declines in currency values in selected regions may adversely affect our operating results because our products and those of our customers and licensees may become more expensive to purchase in the countries of the affected currencies.

	•		Assets or liabilities of our consolidated subsidiaries and our foreign investees that are not denominated in the functional currency of those entities are subject to the effects of currency fluctuations, which may affect our reported earnings. Our exposure to foreign currencies may increase as we increase our presence in existing markets or expand into new markets.

	•		Investments in our consolidated foreign subsidiaries and in other foreign entities that use the local currency as the functional currency (and the assets held by such entities) may decline in value as a result of declines in local currency values.

	•		Certain of our revenues, such as royalty revenues, are derived from licensee or customer sales that are denominated in foreign currencies. If these revenues are not subject to foreign exchange hedging transactions, weakening of currency values in selected regions could adversely affect our near term revenues and cash flows. In addition, continued weakening of currency values in selected regions over an extended period could adversely affect our future revenues and cash flows.

	•		We may engage in foreign exchange hedging transactions that could affect our cash flows and earnings because they may require the payment of structuring fees, limit the U.S. dollar value of royalties from licensees’ sales that are denominated in foreign currencies, cause earnings volatility if the hedges do not qualify for hedge accounting and expose us to counterparty risk if the counterparty fails to perform.

	•		Our trade receivables are generally U.S. dollar denominated. Any significant increase in the value of the dollar against our customers’ or licensees’ functional currencies could result in an increase in our customers’ or licensees’ cash flow requirements and could consequently affect our ability to sell products and collect receivables.

	•		~~Our loan payable to banks is denominated in Indian rupees. If the U.S. dollar significantly weakens, additional cash may be required to settle this obligation and the related interest.~~

	•		Strengthening currency values in selected regions may adversely affect our operating results because the activities of our foreign subsidiaries, and the costs of procuring component parts and chipsets from foreign vendors, may become more expensive in U.S. dollars.

	•		Strengthening currency values in selected regions may adversely affect our cash flows and investment results because strategic investment obligations denominated in foreign currencies may become more expensive, and the U.S. dollar cost of equity in losses of foreign investees may increase.

	•		~~Currency exchange rate fluctuations may reduce the U.S. dollar value of our marketable securities that are denominated directly or indirectly in foreign currencies.~~

~~We may engage in acquisitions or strategic transactions or make investments that could result in significant changes or management disruption and fail to enhance stockholder value.~~

From time to time, we engage in acquisitions or strategic transactions or make investments with the goal of maximizing stockholder value. We acquire businesses and other assets, including spectrum licenses, enter into joint ventures or other strategic transactions and purchase equity and debt securities, including minority interests in publicly-traded and private companies, non-investment-grade debt securities, equity and debt mutual and exchange-traded funds, corporate bonds/notes, auction rate securities and other mortgage/asset-backed securities. Many of our strategic investments are in early-stage companies to support our business, including the global adoption of CDMA-based technologies and related services. Our investments in spectrum licenses may involve the build-out of commercial wireless systems or other additional investments. Failure or delay in the completion of a build-out and the launch of services, or increases in the associated costs, could have a material adverse effect on our future operating results. Most of our acquisitions or strategic investments entail a high degree of risk and will not become liquid until more than one year from the date of investment, if at all. Our acquisitions or strategic investments (either those we have completed or may undertake in the future) may not generate financial returns or result in increased adoption or continued use of our technologies. In addition, our acquisitions or other investments may not generate financial returns or may result in losses due to market volatility, the general level of interest rates, inflation

expectations or other developments affecting their values. In some cases, we may be required to consolidate or record our share of the earnings or losses of companies in which we have acquired ownership interests. Our share of any losses will adversely affect our financial results until we exit from or reduce our exposure to these investments.

Achieving the anticipated benefits of business acquisitions depends in part upon our ability to integrate the acquired businesses in an efficient and effective manner. The integration of companies that have previously operated independently may result in significant challenges, and we may be unable to accomplish the integration smoothly or successfully. The difficulties of integrating companies include, among others:

	•		~~retaining key employees;~~

	•		~~maintaining important relationships of Qualcomm and the acquired business;~~

	•		~~minimizing the diversion of management’s attention from ongoing business matters;~~

	•		~~coordinating geographically separate organizations;~~

	•		~~consolidating research and development operations; and~~

	•		~~consolidating corporate and administrative infrastructures.~~

We cannot assure you that the integration of acquired businesses with our business will result in the realization of the full benefits anticipated by us to result from the acquisition. We may not derive any commercial value from the acquired technology, products and intellectual property or from future technologies and products based on the acquired technology and/or intellectual property, and we may be subject to liabilities that are not covered by indemnification protection we may obtain.

Defects or errors in our products and services or in products made by our suppliers could harm our relations with our customers and expose us to liability. Similar problems related to the products of our customers or licensees could harm our business. If we experience product liability claims or recalls, we may incur significant expenses and experience decreased demand for our products.

Our products are inherently complex and may contain defects and errors that are detected only when the products are in use. For example, as our chipset product complexities increase, we are required to migrate to integrated circuit technologies with smaller geometric feature sizes. The design process interface issues are more complex as we enter into these new domains of technology, which adds risk to yields and reliability. Because our products and services are responsible for critical functions in our customers’ products and/or networks, such defects or errors could have a serious impact on our customers, which could damage our reputation, harm our customer relationships and expose us to liability. Defects or impurities in our components, materials or software or those used by our customers or licensees, equipment failures or other difficulties could adversely affect our ability, and that of our customers and licensees, to ship products on a timely basis as well as customer or licensee demand for our products. Any such shipment delays or declines in demand could reduce our revenues and harm our ability to achieve or sustain desired levels of profitability. We and our customers or licensees may also experience component or software failures or defects that could require significant product recalls, rework and/or repairs that are not covered by warranty reserves and which could consume a substantial portion of the capacity of our third-party manufacturers or those of our customers or licensees. Resolving any defect- or failure-related issues could consume financial and/or engineering resources that could affect future product release schedules. Additionally, a defect or failure in our products or the products of our customers or licensees could harm our reputation and/or adversely affect the growth of 3G wireless markets.

Manufacturing, testing, marketing and use of our products and those of our licensees and customers entail the risk of product liability. The use of wireless devices containing our products to access untrusted content creates a risk of exposing the system software in those devices to viral or malicious attacks. We continue to expand our focus on this issue and take measures to safeguard the software from this threat. However, this issue carries the risk of general product liability claims along with the associated impacts on reputation and demand. Although we carry product liability insurance to protect against product liability claims, we cannot assure you that our insurance coverage will be sufficient to protect us against losses due to product liability claims, or that we will be able to continue to maintain such insurance at a reasonable cost. Furthermore, not all losses associated with alleged product failure are insurable. Our inability to maintain insurance at an acceptable cost or to protect ourselves in other ways

against potential product liability claims could prevent or inhibit the commercialization of our products and those of our licensees and customers and harm our future operating results. In addition, a product liability claim or recall, whether against our licensees, customers or us could harm our reputation and result in decreased demand for our products.

~~FLO TV does not fully control promotional activities necessary to stimulate demand for our services that are offered on a wholesale basis through the wireless operator channel.~~

As part of our FLO TV business, FLO TV provides mobile entertainment and information service to our wireless operator partners on a wholesale basis. Under wholesale arrangements, we do not set the retail price of our service, nor do we directly control all of the marketing and promotion of the service to the wireless operator’s subscriber base. Therefore, we are dependent upon our wireless operator partners to price, market and otherwise promote our service to their end users. If our wireless operator partners do not effectively price, market and otherwise promote the service offered through the wireless operator channel to their subscriber base, our ability to achieve the subscriber and revenue targets contemplated in our business plan will be negatively impacted.

~~Consumer acceptance and adoption of our MediaFLO technology and mobile commerce applications will have a considerable impact on the success of our FLO TV and Firethorn businesses, respectively.~~

Consumer acceptance of our ~~FLO TV and~~ Firethorn service offerings ~~is, and~~ will continue to be affected by competition, technology-based differences and by the operational performance, quality ~~reliability~~ and ~~coverage~~reliability of our ~~wireless network and~~ services platforms. ~~Consumer demand could be impacted by differences~~After $120 million in ~~technology, coverage and service areas, network quality, consumer perceptions, program and service offerings and rate plans. We and~~impairment charges recorded during the second quarter of fiscal 2011, our wireless operator and financial services partners may have difficulty retaining subscribers if we are unable to meet subscriber expectations for network quality and coverage, customer care, content or security. Obtaining content for our FLO TVFirethorn business that is appealing to subscribers on economically feasible terms may be limited by our content provider partners’ inability to obtain the mobile rights to such programming. An inability to address these issues could limit our ability to expand our subscriber base, placing ushad $60 million in assets (including $40 million in goodwill) at a competitive disadvantage, which could adversely affect our operating results. Additionally, adoption and deployment of our MediaFLO technology could be adversely impacted by government regulatory practices that support a single standard other than our technology, wireless operator selection of competing technologies or consumer preferences.

June 26, 2011. If MediaFLO technology is not more widely adopted by consumers in the United States or commercially deployed internationally, our investment in MediaFLO technology may not provide us an adequate return. In addition, we are evaluating the FLO TV business model, including sale to, or joint venture with, a third party and/or alternative uses of the spectrum licenses, technology and network assets, if we do not expect to achieve adequate ~~consumer acceptance of~~market penetration with our ~~FLO TV service offerings in the United States or based on other factors.~~

~~Our business and operating results will be harmed if we are unable to manage growth in~~mobile commerce products, our ~~business.~~

Certain of our businesses have experienced periods of rapid growth and/or increased their international activities, placing significant demands on our managerial, operational and financial resources. In order to manage growth and geographic expansion, we must continue to improve and develop our management, operational and financial systems and controls, including quality control and delivery and service capabilities. We also need to continue to expand, train and manage our employee base. We must carefully manage research and development capabilities and production and inventory levels to meet product demand, new product introductions and product and technology transitions. We cannot assure you that we will be able to timely and effectively meet that demand and maintain the quality standards required by our existing and potential customers and licensees.

In addition, inaccuracies in our demand forecasts, or failure of the systems used to develop the forecasts, could quickly result in both insufficient or excessive inventories and disproportionate overhead expenses. If we ineffectively manage our growth or are unsuccessful in recruiting and retaining personnel, our business and operating results will be harmed.

~~Our stock price~~remaining assets may ~~be volatile.~~

The stock market in general, and the stock prices of technology-based and wireless communications companies in particular, have experienced volatility that often has been unrelated to the operating performance of any specific public company. The market price of our common stock has fluctuated in the past and is likely to fluctuate in the future as well. Factors that may have a significant impact on the market price of our stock include:

	•		~~announcements concerning us or our competitors, including the selection of wireless communications technology by wireless operators and the timing of the roll-out of those systems;~~

	•		~~court or regulatory body decisions or settlements regarding intellectual property licensing and patent litigation and arbitration;~~

	•		~~receipt of substantial orders or order cancellations for integrated circuits and system software products;~~

	•		~~quality deficiencies in services or products;~~

	•		~~announcements regarding financial developments or technological innovations;~~

	•		~~international developments, such as technology mandates, political developments or changes in economic policies;~~

	•		~~lack of capital to invest in 3G networks;~~

	•		~~new commercial products;~~

	•		~~changes in recommendations of securities analysts;~~

	•		~~general stock market volatility;~~

	•		~~disruption in the United States and foreign credit and financial markets affecting both the availability of credit and credit spreads on investment securities;~~

	•		~~government regulations, including tax regulations;~~

	•		~~natural disasters, energy blackouts, acts of terrorism, widespread illness and war;~~

	•		~~inflation and deflation;~~

	•		~~concerns regarding global economic conditions that may impact one or more of the countries in which we, our customers or our licensees compete;~~

	•		~~proprietary rights or product or patent litigation against us or against our customers or licensees;~~

	•		~~strategic transactions, such as spin-offs, acquisitions and divestitures;~~

	•		~~unexpected and/or significant changes in the average selling price of our licensees’ products;~~

	•		~~unresolved disputes with licensees that result in non-payment and/or non-recognition of royalty revenues that may be owed to us; or~~

	•		~~rumors or allegations regarding our financial disclosures or practices.~~

Our future earnings and stock price may be subject to volatility, particularly on a quarterly basis. Shortfalls in our revenues or earnings in any given period relative to the levels expected by securities analysts could immediately, significantly and adversely affect the trading price of our common stock.

In the past, securities class action litigation often has been brought against a company following periods of volatility in the market price of its securities. Due to changes in the potential volatility of our stock price, we may be the target of securities litigation in the future. Securities and patent litigation could result in substantial uninsured costs and divert management’s attention and resources. In addition, stock price volatility may be precipitated by failure to meet earnings expectations or other factors.

~~Our industry is subject to rapid technological change, and we must make substantial investments in new products, services and technologies to compete successfully.~~

New technological innovations generally require a substantial investment before they are commercially viable. We intend to continue to make substantial investments in developing new products and technologies, and it is possible that our development efforts will not be successful and that our new technologies will not result in meaningful revenues. In particular, we intend to continue to invest significant resources in developing integrated circuit products to support high-speed wireless internet access and multimode, multiband, multinetwork operation and multimedia applications, which encompass development of graphical display, camera and video capabilities, as

well as higher computational capability and lower power on-chip computers and signal processors. We also continue to invest in the development of our Plaza and BREW applications development platform, our MediaFLO MDS, MediaFLO technology and FLO TV service offering and our IMOD display technology. Certain of these new products, services and technologies face significant competition, and we cannot assure you that the revenues generated from these products or the timing of the deployment of these products or technologies, which may be dependent on the actions of others, will meet our expectations. We cannot be certain that we will make the additional advances in development that may be essential to commercialize our IMOD technology successfully.

~~The market for our wireless products, services and technologies is characterized by many factors, including:~~

	•		~~rapid technological advances and evolving industry standards;~~

	•		~~changes in customer requirements and consumer expectations and preferences;~~

	•		~~frequent introductions of new products and enhancements;~~

	•		~~evolving methods for transmission of wireless voice and data communications; and~~

	•		~~intense competition from companies with greater resources, customer relationships and distribution capabilities.~~

Our future success will depend on our ability to continue to develop and introduce new products, services, technologies and enhancements on a timely basis. Our future success will also depend on our ability to keep pace with technological developments, protect our intellectual property, satisfy customer requirements, meet consumer expectations, price our products and services competitively and achieve market acceptance. The introduction of products embodying new technologies and the emergence of new industry standards could render our existing products and technologies, and products and technologies currently under development, obsolete and unmarketable. If we fail to anticipate or respond adequately to technological developments or customer requirements, or experience any significant delays in development, introduction or shipment of our products and technologies in commercial quantities, demand for our products and our customers’ and licensees’ products that use our technologies could decrease, and our competitive position could be damaged.

~~Changes in assumptions used to estimate the values of certain share-based compensation have a significant effect on our reported results.~~

We are required to estimate and record compensation expense in the statement of operations for certain share-based payments, such as employee stock options and stock units, using the fair value method. This method has a significant effect on our reported earnings, although it generally will not affect our cash flows, and could adversely impact our ability to provide accurate guidance on our future reported financial results due to the variability of the factors used to estimate the values of such share-based payments. If factors change and/or we employ different assumptions or different valuation methods in future periods, the compensation expense that we record may differ significantly from amounts recorded previously,become impaired, which could negatively affect our ~~stock price and our stock price volatility.~~operating results.

There are significant differences among valuation models, and there is a possibility that we will adopt different valuation models in the future. This may result in a lack of consistency in future periods and materially affect the fair value estimate of certain share-based payments. It may also result in a lack of comparability with other companies that use different models, methods and assumptions.

Theoretical valuation models and market-based methods are evolving and may result in lower or higher fair value estimates for certain share-based compensation. The timing, readiness, adoption, general acceptance, reliability and testing of these methods is uncertain. Sophisticated mathematical models may require voluminous historical information, modeling expertise, financial analyses, correlation analyses, integrated software and databases, consulting fees, customization and testing for adequacy of internal controls. The uncertainties and costs of these extensive valuation efforts may outweigh the benefits to our investors.

Potential tax liabilities could adversely affect our results.

We are subject to income taxes in ~~both~~ the United States and in numerous foreign jurisdictions. Significant judgment is required in determining our provision for income taxes. Although we believe that our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially ~~different~~differ from ~~that~~

~~which is~~amounts reflected in historical income tax provisions and accruals. In such case, ~~a material effect on~~ our income tax provision and net income in the period or periods in which that determination is made could ~~result.~~be negatively affected. In addition, tax rules may change that may adversely affect our future reported financial results or the way we conduct our business. For example, we consider the operating earnings of certain non-United States subsidiaries to be indefinitely invested outside the United States based on estimates that future domestic cash generation will be sufficient to meet future domestic cash needs. No provision has been made for United States federal and state or foreign taxes that may result from future remittances of undistributed earnings of our foreign subsidiaries. Our future ~~reported~~ financial results and liquidity may be adversely affected if accounting rules regarding unrepatriated earnings change, if domestic cash needs require us to repatriate foreign earnings, or if the United States international tax rules change as part of comprehensive tax reform or other tax legislation.

The high amount of capital required to obtain radio frequency licenses, deploy and expand wireless networks and obtain new subscribers could slow the growth of the wireless communications industry and adversely affect our business.

Our growth is dependent upon the increased use of wireless communications services that utilize our technology. In order to provide wireless communications services, wireless operators must obtain rights to use specific radio frequencies. The allocation of frequencies is regulated in the United States and other countries throughout the world, and limited spectrum space is allocated to wireless communications services. Industry growth may be affected by the amount of capital required to: obtain licenses to use new frequencies; deploy wireless networks to offer voice and data services; expand wireless networks to grow voice and data services; and obtain new subscribers. The significant cost of licenses, wireless networks and subscriber additions may slow the growth of the industry if wireless operators are unable to obtain or service the additional capital necessary to implement or expand 3G wireless networks. Our growth could be adversely affected if this occurs.

If wireless devices pose safety risks, we may be subject to new regulations, and demand for our products and those of our licensees and customers may decrease.

Concerns over the effects of radio frequency emissions ~~even if unfounded,~~ may have the effect of discouraging the use of wireless devices, which may decrease demand for our products and those of our licensees and customers. In recent years, the FCC and foreign regulatory agencies have updated the guidelines and methods they use for evaluating radio frequency emissions from radio equipment, including wireless phones and other wireless devices. In addition, interestInterest groups have requested that the FCC investigate claims that wireless communications technologies pose health concerns and cause interference with airbags, hearing aids and medical devices. Concerns have also been expressed over the possibility of safety risks due to a lack of attention associated with the use of wireless devices while driving. Any legislation that may be adopted in response to these ~~expressions of concern~~concerns could reduce demand for our products and those of our licensees and customers in the United States as well as foreign countries.

~~Our QES and FLO TV businesses depend on the availability of satellite and other networks.~~

Our satellite-based mobile fleet management services are provided using leased Kurtz-under band (Ku-band) satellite transponders in the United States, Mexico and Europe. Our primary data satellite transponder and position reporting satellite transponder lease for the system in the United States runs through September 2012 and includes transponder and satellite protection (back-up capacity in the event of a transponder or satellite failure). The service term of the transponder lease for the system in Mexico runs through the end of May 2016 and has transponder protection. Our agreement with a third party to provide network management and satellite space (including procuring satellite space) in Europe expires in February 2013. We believe our agreements will provide sufficient transponder capacity for our satellite-based operations through the expiration dates. A failure to maintain adequate satellite capacity could harm our business, operating results, liquidity and financial position. QES terrestrial-based products rely on wireless terrestrial communication networks operated by third parties. The unavailability or nonperformance of these network systems could harm our business.

Our FLO TV network and systems currently operate in the United States market on a leased Ku-band satellite transponder. Our primary program content and data distribution satellite transponder lease runs through December 2012 and includes transponder and satellite protection (back-up capacity in the event of a transponder or satellite failure), which we believe will provide sufficient transponder capacity for our United States FLO TV service through fiscal 2012. Additionally, our FLO TV transmitter sites are monitored and controlled by a variety of

terrestrial-based data circuits relying on various terrestrial and satellite communication networks operated by third parties. A failure to maintain adequate satellite capacity or the unavailability or nonperformance of the terrestrial-based network systems could have an adverse effect on our business and operating results.40

Our business and operations would suffer in the event of system ~~failures.~~failures or security breaches.

Despite system redundancy, the implementation of security measures and the existence of a Disaster Recovery Plan for our internal information technology networking systems, our systems are vulnerable to damages from computer viruses, unauthorized access, energy blackouts ~~natural disasters, terrorism, war~~ and telecommunication ~~failures.~~failures, among other factors. As has been widely reported, attempts by others to gain unauthorized access to information technology systems are becoming more sophisticated and are sometimes successful. The theft or publication of our confidential business information could harm our competitive position, reduce the value of our strategic initiatives or otherwise adversely affect our business. Any system failure, accident or security breach that causes interruptions in our operations, or in our vendors’, customers’ or licensees’ operations, could result in a material disruption to our business. To the extent that any disruption or security breach results in a loss or damage to our customers’ data or applications, or inappropriate disclosure of their confidential information, we may incur liability as a result. In addition, we expect to devote additional resources to the security of our information technology systems, and we may incur additional costs to remedy ~~the~~any damages caused by ~~these~~ disruptions or security breaches.

Data transmissions for QES operations are formatted and processed at the Network Management and Data Center in San Diego, California, with a redundant backup Network Management and Data Center located in Las Vegas, Nevada. Content from third parties for FLO TV operations is received, processed and retransmitted at the Broadcast Operations Center in San Diego, California. Certain Plaza and BREW products and services provided by our QIS operations are hosted at the Network Operations Center in San Diego, California with a fully redundant backup Network Operations Center located in Las Vegas, Nevada. The centers, operated by us, are subject to system failures, which could interrupt the services and have an adverse effect on our operating results.

From time to time, we install new or upgraded business management systems. To the extent such systems fail or are not properly implemented, we may experience material disruptions to our business, delays in our external financial reporting or failures in our system of internal controls, that could have a material adverse effect on our results of operations.

We are subject to government regulation pertaining to environmental and safety laws, to our industry, products and ~~regulations.~~services, to corporate governance and public disclosure and to health care.

National, state and local environmental laws and regulations affect our operations around the world. These laws may make it more expensive to manufacture, have manufactured and sell products. It may also be difficult to comply with laws and regulations in a timely manner, and we may not have compliant products available in the quantities requested by our customers, which may have an adverse impact on our results of operations. WeThere is also ~~recognize~~ the potential for higher costs driven by climate change regulations. Our costs could increase if our vendors (e.g., third-party manufacturers or utility companies) pass on their costs to us.

As part of the development and commercialization of our IMOD display technology, we are operating both a development and a production fabrication facility. The development and commercialization of IMOD display prototypes is a complex and precise process involving restricted materials subject to environmental and safety regulations. Our failure or inability to comply with existing or future environmental and safety regulations could result in significant remediation liabilities, the imposition of fines and/or the suspension or termination of development and production activities.

~~Our stock repurchase program may not result in a positive return of capital to stockholders and may expose us to counterparty risk.~~

At June 27, 2010, we had remaining authority to repurchase up to $1.8 billion of our common stock. Since June 27, 2010, we have repurchased and retired 3,529,000 shares of our common stock for $122 million. Our stock repurchases may not return value to stockholders because the market price of the stock may decline significantly below the levels at which we repurchased shares of stock. Our stock repurchase program is intended to deliver stockholder value over the long-term, but stock price fluctuations can reduce the program’s effectiveness.

As part of our stock repurchase program, we may sell put options or engage in structured derivative transactions to reduce the cost of repurchasing stock. In the event of a significant and unexpected drop in stock price, these arrangements may require us to repurchase stock at price levels that are significantly above the then-prevailing market price of our stock. Such overpayments may have an adverse effect on the effectiveness of our overall stock repurchase program and may reduce value for our stockholders. In the event of financial insolvency or distress of a counterparty to our put options, structured derivative transactions or 10b5-1 stock repurchase plan, we may be

~~unable to settle transactions if the counterparty does not provide us with sufficient collateral to secure its net settlement obligations to us.~~

~~We cannot provide assurance that we will continue to declare dividends at all or in any particular amounts.~~

We intend to continue to pay quarterly cash dividends subject to capital availability and periodic determinations that cash dividends are in the best interest of our stockholders. Future dividends may be affected by, among other items, our views on potential future capital requirements, including those related to research and development, creation and expansion of sales distribution channels and investments and acquisitions, legal risks, stock repurchase programs, changes in federal and state income tax law and changes to our business model. Our dividend payments may change from time to time, and we cannot provide assurance that we will continue to declare dividends at all or in any particular amounts. A reduction in our dividend payments could have a negative effect on our stock price.

~~Government regulation and policies of industry standards bodies may adversely affect our business.~~

Our products and services, and those of our customers and licensees, are subject to various regulations, including FCC regulations in the United States and other international regulations, as well as the specifications of national, regional and international standards bodies. ~~Changes~~The adoption of new laws or regulations, changes in the regulation of our activities, ~~including changes in the allocation of available spectrum by the United States government and other governments~~ or exclusion or limitation of our technology or products by a government or standards body, could have a material adverse effect on our business, ~~operating results, liquidity~~including, among other factors, changes in laws, policies, practices or enforcement affecting trade, foreign investments, licensing practices, spectrum license issuance, adoption of standards, the provision of wireless device subsidies by wireless operators to their customers, taxation, environmental protection, loans and ~~financial position.~~employment.

We hold licenses to use spectrum in the United States ~~from~~and the ~~FCC for~~United Kingdom, and we are awaiting assignment of licenses to use the BWA spectrum ~~referred to as Block D~~won in the ~~Lower 700 MHz Band (also known as TV Channel 55) covering~~auction in India, which is pending approval by the entire nation and spectrum referred to as Block E in the Lower 700 MHz Band (also known as TV Channel 56) covering five economic areas on the east and west coasts for use in our FLO TV business. In addition, we holdIndian government. All of these licenses for the spectrum referred to as B Block in the Lower 700 MHz Band for use initially in our various research and development initiatives. The FCC regulates our use of the licensed spectrum pursuant to the terms of our licenses and the Federal Communications Act of 1934, as amended, and pursuant to Part 27 of the FCC’s rules, which are subject to a variety of ongoing ~~FCC proceedings. It is impossible to predict with certainty the outcome of pending FCC or other federal or state~~ regulatory proceedings ~~and~~in these respective countries. Additionally, certain of our licenses in the ~~potential impact~~United States are subject to our FLO TV service or to our use of the spectrum for which we hold licenses. Unless we are able to obtain relief, existing laws and regulations may inhibit our ability to expand our business and to introduce new products and services. In addition, the adoption of new laws or regulations or changes to the existing regulatory framework could adversely affect our business plans. Furthermore, FCC regulations require that we meet certainminimum build-out requirements ~~with respect~~ to ~~our Channel 56 spectrum~~be met at various dates beginning in June 2013. On December 20, 2010, we announced that we have agreed to sell substantially all of our licenses in the United States, subject to the satisfaction of customary closing conditions, including approval by the FCC and clearance from the U.S. Department of Justice. If we do not receive approval to sell these licenses pursuant to this agreement, there is no assurance that we would be able to obtain a comparable price from another party or that we would be able to meet the applicable build-out requirements for those licenses. The BWA spectrum licenses will be subject to minimum build-out requirements to be met within five years of the effective date of the license. If we do not meet these requirements, the ~~FCC~~relevant government authorities could impose a fine or could rescind the license in the area(s) in which the build-out requirements are not met.

We Changes in the allocation of available spectrum by the countries in which we hold licenses incould have a material adverse risk on our business and the United Kingdom from the Office of Communications (Ofcom) to use 40 MHz of spectrum in the so-called L-Band (1452 MHz to 1492 MHz). These licenses give us the right to use this spectrum throughout the entire United Kingdom. Ofcom regulates our use of this spectrum pursuant to the termsvalue of our ~~license~~assets.

Changing laws, regulations and ~~the United Kingdom’s Wireless Technology Act~~standards relating to corporate governance, public disclosure and health care may create uncertainty regarding compliance matters. New or changed laws, regulations and standards are subject to varying interpretations in many cases. As a result, their application in practice may evolve over time. We are committed to maintaining high standards of ~~2006. The adoption~~corporate governance and public disclosure and complying with laws and regulations. Evolving interpretations of new or changed legal requirements may cause us to incur higher costs as we revise current practices, policies, procedures, and/or health plans and may divert management time and attention to compliance activities. Our efforts to comply with new or changed laws, regulations and standards may fail, particularly if there is ambiguity as to how such new or changed

laws, regulations ~~or changes to~~and standards should be applied in practice. Further, our board members, chief executive officer and chief financial officer could face an increased risk of personal liability in connection with the ~~existing regulatory framework~~performance of their duties. As a result, we may have difficulty attracting and retaining qualified board members and executive officers, which could ~~adversely affect~~harm our ~~business plans.~~business.

We may not be able to attract and retain qualified employees.

Our future success depends largely upon the continued service of our board members, executive officers and other key management and technical personnel. Our success also depends on our ability to continue to attract, retain and motivate qualified personnel. In addition, implementing our product and business strategy requires specialized engineering and other talent, and our revenues are highly dependent on technological and product innovations. The market for such specialized engineering and other talented employees in our industry is extremely competitive. In addition, existing immigration laws make it more difficult for us to recruit and retain highly skilled foreign national graduates of U.S. universities, making the pool of available talent even smaller. Key employees represent a significant asset, and the competition for these employees is intense in the wireless communications industry. We do not have employment agreements with our key management personnel. In the event of a labor shortage, or in the event of an unfavorable change in prevailing labor and/or immigration laws, we could experience difficulty attracting and retaining qualified employees. We continue to anticipate increases in human resource needs, particularly in engineering. If we are unable to attract and retain the qualified employees that we need, our business may be harmed.

We may have particular difficulty attracting and retaining key personnel in periods of poor operating performance given the significant use of incentive compensation by our competitors. We do not have employment agreements with our key management personnel and do not maintain key person life insurance on any of our personnel. To the extent that new regulations make it less attractive to grant share-based awards to employees or if stockholders do not authorize shares for the continuation of equity compensation programs in the future, we may incur increased compensation costs, change our equity compensation strategy or find it difficult to attract, retain and motivate employees, each of which could materially and adversely affect our business.

~~Compliance with changing regulation of corporate governance, public disclosure and health care may result in additional expenses.~~

Changing laws, regulations and standards relating to corporate governance, public disclosure and health care may create uncertainty regarding compliance matters. New or changed laws, regulations and standards are subject to varying interpretations in many cases. As a result, their application in practice may evolve over time. We are committed to maintaining high standards of corporate governance and public disclosure and complying with laws and regulations. Complying with evolving interpretations of new or changed legal requirements may cause us to incur higher costs as we revise current practices, policies, procedures, and/or health plans may divert management time and attention from revenue generating to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation might also be harmed. Further, our board members, chief executive officer and chief financial officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified board members and executive officers, which could harm our business.

~~Our charter documents and Delaware law could limit transactions in which stockholders might obtain a premium over current market prices.~~

Our certificate of incorporation includes a provision that requires the approval of holders of at least 66 2/3% of our voting stock as a condition to certain mergers or other business transactions with, or proposed by, a holder of 15% or more of our voting stock. Under our charter documents, stockholders are not permitted to call special meetings of our stockholders or to act by written consent. These charter provisions may discourage certain types of transactions involving an actual or potential change in our control, including those offering stockholders a premium over current market prices. These provisions may also limit our stockholders’ ability to approve transactions that they may deem to be in their best interests.

Further, our Board of Directors has the authority under Delaware law to fix the rights and preferences of and issue shares of preferred stock, and our preferred share purchase rights agreement will cause substantial dilution to the ownership of a person or group that attempts to acquire us on terms not approved by our Board of Directors. While our Board of Directors approved our preferred share purchase rights agreement to provide the board with greater ability to maximize stockholder value, these rights could deter takeover attempts that the board finds inadequate and make it more difficult to bring about a change in our ownership.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

Financial market risks related to interest rates, foreign currency exchange rates and equity prices are described in our ~~2009~~2010 Annual Report on Form 10-K. At June ~~27, 2010,~~26, 2011, there have been no other material changes to the market risks described at September ~~27, 2009~~26, 2010 except as described below. Additionally, we do not anticipate any other near-term changes in the nature of our market risk exposures or in management’s objectives and strategies with respect to managing such exposures.

Interest Rate Risk.The following table provides information about our interest-bearing cash and cash equivalents, ~~and~~ marketable securities and ~~bank loan~~loans payable that are sensitive to changes in interest rates. The table presents principal cash flows, weighted-average yield at cost and contractual maturity dates. Additionally, we have assumed that the interest-bearing securities are similar enough within the specified categories to aggregate the securities for presentation purposes.

Interest Rate Sensitivity Principal Amount by Expected Maturity Average Interest Rates (Dollars in millions)

	2011			2012			2013			2014			2015			Thereafter			No Single Maturity			Total
Fixed interest-bearing securities:
Cash and cash equivalents	$	3,046		$	—		$	—		$	—		$	—		$	—		$	—		$	3,046
Interest rate	0.1		%
Available-for-sale securities:
Investment grade	$	316		$	692		$	762		$	687		$	234		$	819		$	1,575		$	5,085
Interest rate	0.6		%	2.4		%	2.3		%	3.4		%	3.2		%	4.8		%	0.9		%
Non-investment grade	$	4		$	7		$	9		$	35		$	87		$	834		$	13		$	989
Interest rate	13.7		%	10.3		%	8.6		%	9.5		%	10.2		%	8.1		%	0.8		%
Floating interest-bearing securities:
Cash and cash equivalents	$	1,963		$	—		$	—		$	—		$	—		$	—		$	—		$	1,963
Interest rate	0.0%
Available-for-sale securities:
Investment grade	$	102		$	352		$	429		$	434		$	11		$	443		$	543		$	2,314
Interest rate	1.0		%	0.6		%	0.8		%	1.0		%	5.5		%	8.7		%	1.9		%
Non-investment grade	$	—		$	12		$	73		$	229		$	151		$	1,030		$	1,134		$	2,629
Interest rate				7.8		%	5.9		%	6.4		%	6.0		%	5.7		%	4.1		%
Loans payable⁽¹⁾	$	—		$	1,092		$	—		$	—		$	—		$	—		$	—		$	1,092
Floating interest rate				9.8		%

~~Interest Rate Sensitivity~~
~~Principal Amount by Expected Maturity~~
~~Average Interest Rates~~
~~(Dollars~~⁽¹⁾Denominated in ~~millions)~~Indian rupees.

No Single
2010 2011 2012 2013 2014 Thereafter Maturity Total
Fixed interest-bearing securities:
Cash and cash equivalents $ 604 $ — $ — $ — $ — $ — $ — $ 604
Interest rate 0.3 %
Available-for-sale securities:
Investment grade $ 910 $ 1,029 $ 728 $ 486 $ 604 $ 349 $ 2,584 $ 6,690
Interest rate 1.1 % 2.8 % 3.2 % 3.2 % 4.5 % 6.5 % 1.6 %
Non-investment grade $ 6 $ 11 $ 27 $ 49 $ 104 $ 963 $ 28 $ 1,188
Interest rate 7.0 % 12.6 % 7.7 % 10.2 % 9.9 % 9.7 % 0.7 %

Floating interest-bearing securities:
Cash and cash equivalents $ 1,626 $ — $ — $ — $ — $ — $ — $ 1,626
Interest rate 0.2 %
Available-for-sale securities:
Investment grade $ 197 $ 785 $ 443 $ 196 $ 34 $ 417 $ 577 $ 2,649
Interest rate 1.5 % 1.1 % 0.8 % 0.9 % 1.6 % 8.1 % 3.1 %
Non-investment grade $ — $ 7 $ 49 $ 147 $ 314 $ 407 $ 1,047 $ 1,971
Interest rate 5.2 % 6.2 % 6.5 % 6.7 % 6.6 % 3.9 %

Loan payable to banks $ 1,061 $ — $ — $ — $ — $ — $ — $ 1,061
Fixed interest rate 6.8 %

Cash and cash equivalents and available-for-sale securities are recorded at fair value. The ~~loan~~loans payable ~~to bank approximates~~approximate fair value.

~~Credit Market~~Foreign Exchange Risk.At June ~~27, 2010, a portion of our corporate cash in diversified portfolios of fixed- and~~26, 2011, we had floating-rate ~~investment-grade marketable securities, mortgage- and asset-backed securities, non-investment-grade~~long-term bank loans and bonds, certain preferred stocks and other securities continue to be affected by credit market concerns and had temporary gross unrealized losses of $50 million. Although we consider these unrealized losses to be temporary, there is a risk that we may incur net other-than-temporary impairment charges or realized losses on the values of these and other similarly affected securities if they do not recover in value in the ~~coming quarters.~~

~~Equity Price Risk.~~We have a diversified marketable securities portfolio that includes equity securities held by mutual and exchange-traded fund shares that are subject to equity price risk. We have made investments in marketable equity securities of companies of varying size, style, industry and geography, and changes in investment allocations may affect the price volatility of our investments. A 10% decrease in the market price of our marketable equity securities and equity mutual fund and exchange-traded fund shares at June 27, 2010 would cause a decrease in the carrying amounts of these securities of $255 million. At June 27, 2010, gross unrealized losses of our marketable equity securities and equity mutual and exchange-traded fund shares were $78 million. Although we consider these unrealized losses to be temporary, there is a risk that we may incur net other-than-temporary impairment charges or realized losses on the values of these securities if they do not recover in value within a reasonable period.

~~Foreign Exchange Risk.~~We manage our exposure to foreign exchange market risks, when deemed appropriate, through the use of derivative financial instruments, including foreign currency forward and option contracts with financial counterparties. Such derivative financial instruments are viewed as hedging or risk management tools and are not used for speculative or trading purposes. At June 27, 2010, we had a net liability of $2 million related to foreign currency option contracts that were designated as hedges of foreign currency risk on royalties earned from certain international licensees on their sales of CDMA-based devices and a net liability of $3 million related to foreign currency option contracts that have been rendered ineffective as a result of changes in our forecast of royalty revenues. Counterparties to our derivative contracts are all major banking institutions. In the event of the financial insolvency or distress of a counterparty to our derivative financial instruments, we may be unable to settle transactions if the counterparty does not provide us with sufficient collateral to secure its net settlement obligations to us, which could materially impact our results. If our forecasted royalty revenues were to decline by 30% and

foreign exchange rates were to change unfavorably by 30% for each of our hedged foreign currencies, we would incur a loss of $1 million resulting from a decrease in the fair value of the portion of our hedges that would be rendered ineffective. In addition, we are subject to market risk on foreign currency option contracts that have been deemed ineffective. If foreign exchange rates relevant to those contracts were to change unfavorably by 30%, we would incur a loss of $58 million resulting from a decrease in the fair value of our hedges.

~~At June 27, 2010, we had a fixed-rate short-term bank loan~~aggregate of $1.1 billion, which isare payable in full in Indian rupees in December ~~2010.~~2012; however, each lender has the right to demand prepayment of its portion of the outstanding loans on December 15, 2011 subject to sufficient prior written notice. The ~~loan is~~loans are payable in the functional currency of our consolidated ~~subsidiary~~subsidiaries that isare party to the ~~loan,~~loans; however, we are subject to foreign currency translation risk, which may impact ~~the amount of~~ our liability for principal repayment and interest expense that we will record in the future. If the foreign currency exchange rate were to change unfavorably by 20%, we would incur additional principal of $273 million and interest expense of $7$39 million ~~throughout~~through the remainder of the contractual ~~term~~terms of the ~~loan.~~

loans. Our analysis methods used to assess and mitigate the risks discussed above should not be considered projections of future risks.

~~ITEM 4. CONTROLS AND PROCEDURES~~


ITEM 4.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as ~~amended (the Exchange Act).~~amended. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report.

Changes in Internal Control over Financial Reporting.There ~~were~~have been no changes in our internal control over financial reporting during the third quarter of fiscal ~~2010~~2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

~~ITEM 1. LEGAL PROCEEDINGS~~

~~Our~~A review of our current ~~legal proceedings are~~litigation is disclosed in the notes to our condensed consolidated financial statements. See “Notes to Condensed Consolidated Financial Statements, Note 8 — Commitments and Contingencies.” We are also engaged in other legal actions arising in the ordinary course of our business ~~that are not disclosed~~ and believe that the ultimate outcome of these actions will not have a material adverse effect on our results of operations, liquidity or financial position.


ITEM 1A.	RISK FACTORS

~~ITEM 1A. RISK FACTORS~~

We have provided updated Risk Factors in the section labeled “Risk Factors” in Part I, Item 2, ~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of Operations. To reflect ~~risks resulting from~~ the ~~Broadband Wireless Access (BWA) spectrum recently won by us in the India auction,~~acquisition of Atheros Communications, Inc., we revised the ~~Risk Factors~~risk factor entitled:

	•		“Currency fluctuations could negatively affect future product sales or royalty revenues, harm our ability to collect receivables, or increase the U.S. dollar cost of the activities of our foreign subsidiaries and international strategic investments;” and

	•		“We may engage in acquisitions or strategic transactions or make investments that could result in significant changes or management disruption and fail to enhance stockholder value.”

Other than with respect to ~~the changes relating to the BWA spectrum auction,~~this revision, we do not believe the updates to the Risk Factors have materially changed the type or magnitude of the risks we face in comparison to the disclosure provided in our most recent Annual Report on Form 10-K.

~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

~~Issuer purchases of equity securities during the third quarter of fiscal 2010 were (in millions, except per share data):~~

Total Number of Shares Approximate Dollar
Average Purchased as Part of Value of Shares that May
Total Number of Price Paid Per Share Publicly Announced Yet Be Purchased Under
Shares Purchased ⁽¹⁾ Plans or Programs⁽²⁾ the Plans or Programs⁽²⁾
March 29, 2010 to April 25, 2010 — $ — — $ 3,000

April 26, 2010 to May 23, 2010 13.9 37.59 13.9 2,477

May 24, 2010 to June 27, 2010 18.5 35.43 18.5 1,822

Total 32.4 32.4 $ 1,822


⁽¹⁾ITEM 2.		~~Average Price Paid Per Share excludes cash paid for commissions.~~

⁽²⁾		On March 1, 2010, we announced that we had been authorized to repurchase up to $3.0 billion of our common stock, and $1.8 billion of that amount remained available at June 27, 2010. The stock repurchase program has no expiration date. Since June 27, 2010, we repurchased and retired 3,529,000 of our shares for $122 million.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On March 1, 2010, we announced that we had been authorized to repurchase up to $3.0 billion of our common stock with no expiration date. At June 26, 2011, approximately $1.7 billion remained authorized for repurchase. While we did not repurchase any of our common stock during the first nine months of fiscal 2011, we continue to evaluate repurchases under this program subject to capital availability and periodic determinations that such repurchases are in the best interest of our stockholders.


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES~~

Not applicable.


ITEM 4.	[REMOVED AND RESERVED]

~~ITEM 4. [REMOVED AND RESERVED]~~


ITEM 5.	OTHER INFORMATION

~~ITEM 5. OTHER INFORMATION~~

Not applicable.


ITEM 6.	EXHIBITS

~~ITEM 6. EXHIBITS~~



Exhibit Number
~~Exhibits~~		Description
3.1		Restated Certificate of Incorporation. (1)
3.2		Certificate of Amendment of Certificate of Designation. (2)
3.4		Amended and Restated Bylaws. (3)
~~10.88~~10.96		Atheros Communications, Inc. 2004 Stock Incentive Plan, as amended (4)(5)
10.97		Atheros Communications, Inc. 2009 Inducement Grant Incentive Plan (4)(5)
10.98		Atheros Communications, Inc. (formerly T-Span Corporation) 1998 Stock Incentive Plan, as amended (4)(5)
10.99		Third Amended and Restated ~~Qualcomm Incorporated 2001~~Intellon Corporation 2000 Employee ~~Stock Purchase Plan.~~Incentive Plan (4)(5)
10.100		Intellon Corporation 2007 Equity Incentive Plan (4)(5)
10.101		Resolutions Amending Atheros Communications, Inc. Equity Plans (4)(5)
31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Paul E. Jacobs.
31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for William E. Keitel.
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Paul E. Jacobs.
32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for William E. Keitel.
101.INS		XBRL Instance Document. ~~(4)~~(6)
101.SCH		XBRL Taxonomy Extension Schema. ~~(4)~~(6)
101.CAL		XBRL Taxonomy Extension Calculation Linkbase. ~~(4)~~(6)
101.LAB		XBRL Taxonomy Extension Labels Linkbase. ~~(4)~~(6)
101.PRE		XBRL Taxonomy Extension Presentation Linkbase. ~~(4)~~(6)
101.DEF		XBRL Taxonomy Extension Definition Linkbase. ~~(4)~~(6)


(1)		Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 27, 2009.


(2)		Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on September 30, 2005.


(3)		Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on September 25, 2009.


(4)	Filed as an exhibit to the Registrant’s Registration Statement on Form S-8 filed on June 1, 2011.


(5)	Indicates management or compensatory plan or arrangement required to be identified pursuant to Item 15(a).


(6)	Furnished, not filed.

SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	QUALCOMM Incorporated
	/s/ William E. Keitel
	William E. Keitel
	Executive Vice President and Chief Financial Officer

~~Dated: July 21, 2010~~

Dated: July 20, 2011


	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	1,693	$	537	$	—	$	2,230

Marketable securities
U.S. Treasury securities and government-related securities		41		909		—		950
Corporate bonds and notes		—		5,228		—		5,228
Mortgage- and asset-backed securities		—		766		6		772
Auction rate securities		—		—		171		171
Non-investment-grade debt securities		—		3,146		13		3,159
Common and preferred stock		1,014		590		—		1,604
Equity mutual and exchange-traded funds		943		—		—		943
Debt mutual funds		—		2,218		—		2,218

Total marketable securities		1,998		12,857		190		15,045

Derivative instruments		—		15		—		15
Other investments⁽¹⁾		133		—		—		133

Total assets measured at fair value	$	3,824	$	13,409	$	190	$	17,423


Liabilities
Derivative instruments	$	—	$	20	$	—	$	20
Other liabilities⁽¹⁾		133		—		—		133

Total liabilities measured at fair value	$	133	$	20	$	—	$	153


	Nine Months Ended June 27, 2010
	Auction rate			Other marketable
	securities			securities			Total
Beginning balance of Level 3 marketable securities	$	174		$	31		$	205
Total realized and unrealized gains (losses):
Included in investment income (loss), net		—			5			5
Included in other comprehensive income		3			(2	)		1
Settlements		(6	)		(19	)		(25	)
Transfers into Level 3		—			4			4

Ending balance of Level 3 marketable securities	$	171		$	19		$	190


	Nine Months Ended June 28, 2009
	Auction rate			Other marketable
	securities			securities			Total
Beginning balance of Level 3 marketable securities	$	186		$	25		$	211
Total realized and unrealized (losses) gains:
Included in investment loss, net		(2	)		(7	)		(9	)
Included in other comprehensive income		2			7			9
Settlements		(5	)		(16	)		(21	)
Transfers into Level 3		—			18			18

Ending balance of Level 3 marketable securities	$	181		$	27		$	208


	Gross Realized		Gross Realized			Net Realized
	Gains		Losses			Gains
For the three months ended
June 27, 2010	$	96	$	(6	)		90
June 28, 2009		95		(5	)		90

For the nine months ended
June 27, 2010	$	289	$	(17	)		272
June 28, 2009		127		(70	)		57


	Three Months			Nine Months
	Ended			Ended
	June 27,			June 27,
	2010			2010
Beginning balance of credit losses	$	134		$	170
Credit losses recognized on securities previously not impaired		—			1
Reductions in credit losses related to securities sold		(8	)		(26	)
Accretion of credit losses due to an increase in cash flows expected to be collected		(2	)		(21	)

Ending balance of credit losses	$	124		$	124


Balance at September 27, 2009	$	20,316
Net income		2,382
Other comprehensive income		(59	)
Repurchase of common stock		(2,893	)
Net proceeds from the issuance of common stock		516
Share-based compensation		456
Tax benefit from exercise of stock options		29
Dividends		(872	)
Other		11

Balance at June 27, 2010	$	19,886


	2010				2009
	Per Share		Total		Per Share		Total
First quarter	$	0.17	$	284	$	0.16	$	264
Second quarter		0.17		279		0.16		264
Third quarter		0.19		309		0.17		282

Total	$	0.53	$	872	$	0.49	$	810


	Capital		Operating
	Leases		Leases		Total
Remainder of fiscal 2010	$	4	$	16	$	20
2011		16		91		107
2012		16		64		80
2013		16		35		51
2014		16		26		42
Thereafter		440		244		684

Total minimum lease payments	$	508	$	476	$	984


Deduct: Amounts representing interest		291

Present value of minimum lease payments		217
Deduct: Current portion of capital lease obligations		2

Long-term portion of capital lease obligations	$	215


																			No Single
	2010			2011			2012			2013			2014			Thereafter			Maturity			Total
Fixed interest-bearing securities:
Cash and cash equivalents	$	604		$	—		$	—		$	—		$	—		$	—		$	—		$	604
Interest rate		0.3	%
Available-for-sale securities:
Investment grade	$	910		$	1,029		$	728		$	486		$	604		$	349		$	2,584		$	6,690
Interest rate		1.1	%		2.8	%		3.2	%		3.2	%		4.5	%		6.5	%		1.6	%
Non-investment grade	$	6		$	11		$	27		$	49		$	104		$	963		$	28		$	1,188
Interest rate		7.0	%		12.6	%		7.7	%		10.2	%		9.9	%		9.7	%		0.7	%

Floating interest-bearing securities:
Cash and cash equivalents	$	1,626		$	—		$	—		$	—		$	—		$	—		$	—		$	1,626
Interest rate		0.2	%
Available-for-sale securities:
Investment grade	$	197		$	785		$	443		$	196		$	34		$	417		$	577		$	2,649
Interest rate		1.5	%		1.1	%		0.8	%		0.9	%		1.6	%		8.1	%		3.1	%
Non-investment grade	$	—		$	7		$	49		$	147		$	314		$	407		$	1,047		$	1,971
Interest rate					5.2	%		6.2	%		6.5	%		6.7	%		6.6	%		3.9	%

Loan payable to banks	$	1,061		$	—		$	—		$	—		$	—		$	—		$	—		$	1,061
Fixed interest rate		6.8	%


					Total Number of Shares		Approximate Dollar
			Average		Purchased as Part of		Value of Shares that May
	Total Number of		Price Paid Per Share		Publicly Announced		Yet Be Purchased Under
	Shares Purchased		⁽¹⁾		Plans or Programs⁽²⁾		the Plans or Programs⁽²⁾
March 29, 2010 to April 25, 2010		—	$	—		—	$	3,000

April 26, 2010 to May 23, 2010		13.9		37.59		13.9		2,477

May 24, 2010 to June 27, 2010		18.5		35.43		18.5		1,822


Total		32.4				32.4	$	1,822