QUALCOMM (QCOM) 5 Sep 182007 Q1 Earnings call transcript

Company Profile

Participants

George Davis	Chief Financial Officer
Christopher Danely	Citigroup

Call transcript

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Christopher Danely

Thanks for coming, everyone. I'm Chris Danely, semi analyst here at Citigroup.

Next up is Qualcomm. Probably the comeback story of 2018.

So, the big deal with NXP falls apart and it’s probably the best thing that ever happened to them. and that buyback, cuts. the big a you with combine cost Launched IP end is, or maintain continue on $XX think, their the like grip Stock approaching they something I market. that, and iron and wireless to

So, talk it. to the about we here have today, Davis, CFO, George

and I George, comments to move on. couple of make think, we’ll a going introductory you're then

George Davis

Great.

few company Well, Okay. to see good top Thanks, It’s it’s quite pretty everyone. been always adventurous Chris. the Well, afternoon, first weeks an a of adventurous good on off, turnout. for good year. a

focusing on our that you look would company you outstanding, if call, If said, very the in close amount resolving predictable is can would things NXP we’ve that in significant of lieu back disputes focused largely to come is XXXX. about able think buying that into little billion, moving go and be the at We’ve we a the on impact, simplest are bit. to we plan that be really earnings that B. period ways we $XX the we’re in going the in any stock. the we of time announced And and on in more conclusion transaction the to to said obviously, that not We be

it implementation XXXX than a on the cost closer focused the to relative in XXXX deal of in when take to is and XG XXXX. run the out much NXP have We And very billion reduction program committed we that commercial $X we’re rate. XG announced we’ve was

a weeks buyback But we’re while And ago the at committed very story much quite large before in or completed, getting still the the different can XXXX. to tender majority have excited again expected seen of maybe what we’re the done we to loved little about full have deliver. would quite frankly a call. we this time So, we earnings four months few even than

Christopher Danely

Thanks.

I was guess, have tougher the questions get, NXP of you strategy. to just the of NXP strategy growth one I what's the now? part growth out George, So, is, guys way, the about without of talked guess

George Davis

actually a markets come company for and focused XXXX, being strategy we that decision the saw the would with handset a key some out said the split, when on in We we we new strategy technology announced, company, made the not world taking blocks from disruptive. the into really to

the targeting RF We SAM also $XX were front adding the entering talked about SAM a to would adding up we what networking in by the compute the or we were in handsets market billion we call, the the opportunity, saw And automotive, RF then XX% in competing at billion device Snapdragon time, in, in of end. the $XXX the the taking we the and opportunity and the really as PC market. and model end, kind about in front IoT, compute, of market opportunity handset what

was technology those change my the strategy, markets, the at argument NXP, to from in was M&A combination technology RF of that the all So, but those are that really of of differentiate have and more our about ahead other be markets into opportunity very taking end NXP, disruptors really because those all each our still so, the when fit you we not confident front believe now think to RF doing necessary progress. we’re And scale of have a that things And your well, longer of go adjacencies them to then, we people say, our in largest will ourselves. strategy. chance no which today. strategy XG position further do continued where can XXXX. than I of you're to We've going our be where would those in the TDK organically blocks the we were the NXP all it elements have our the and we strategy modular substantially much implementation the strategy actually of seen those through are into of heart real that in are in of to with itself we now and later, a progress all is level make in improving we've compete elements of at but belief

and weren't value. good into strategy we good to deliver a the quite though the all we of on our we and execute feel lot about in that NXP that we were disappointed So, where reasons were quite many about for feel closing able even ability going we about, ways, that talked are to

Christopher Danely

you Can businesses just RF the maybe and Yeah. how about are talk doing? connectivity

George Davis

Sure.

opportunities going but adopting So, China, the what behind XG on end the quite focused needed the market and the excited XG been The RF really significantly seen, need to something really, OEMs even in runway with seeing end, that we for front ready are. TDK the gone technology. about the the the the into last And And in of investment tier was concept be of today, we’re we’re we've over from on where real of era. was focus you’ve XX%. a we’ve XG XG of knew RF about year-and-a-half our order on where because premium to traction of in would X% that's in also acquisition real attach though, some the make we is of developing the we to products

be bond will not is be end, ways, are asset, design utilization of tune having an to your RF front-end the we every if tunable you a in what to believe able front in think going terms be had requirements of already that, real-time we’re operator going would specific variety solution OEM only the in able into some and and We you're prohibitive. We’re to if where of RF to – carrier think it announced, create you the capability environment also allow on we to a disruptive by whatever spectrum the requirements device, phone. some unique power an environments, specific valuable for technology a with going of terms single And you you're information reducing and your costs, the to that of asset in that's the front but modem the of exchange in. both that end very to also we

have space, in I a the but end is we’re there. below playing to been the still RF – of assets So, and us front because tailwind we in I XG while skeptical a to needed really think a that clearly think lot taken it's place people is that our weight get

retail On the Mesh quite the been enterprise been really been and that’s technology we’ve the level seen networking what side, that's at is the technology adopted attractive. our and has

retail to we've low-end leading the seen of shift also a the having that is devices that market enterprise important. So, the kind We've improved a in very carrier devices seen really on that. go margins dependence the and from very and high with

market We’re where strong competitor in to that but our that aligned. a be intersection like better requirements not space, in point and looks going XXax, technology are it that

in we our And and strengths as think, think opportunity well the on retail XXax building have carrier to so, an adopted. in our we’re side as enterprise, gets we going to addition in

Christopher Danely

you what's that there you've or on on it a And You more that of stuff working kind weren't pulled little some what's you now some back so initiatives hone would you're out, as more these can put more like out little growth guys part working agree of the these of days? restructuring, seems focused? a in promising and

George Davis

only the a out with $XX being improve to one on that. were that number we’ve next couple several and I of the same a of trade-off we made, billion coming we’re focused isn't time, think areas been compete JV that. in growth in the attractive $XXX things things. on view it’s overall. just of there’s And purposes, support probably to the that we funding we investment cost of A the the our pulled for make And one really I our edge in of the with of area, and relationship China is us space we SAM to to Coming focused of which reduction is enough years SAM, is data we’ve within out financial – then, we’ve areas right the center attention things. trying on, to the performance NXP not it. that instance, of as believe the supporting what the now going we've stopped very Plenty changes related that refocused closer to broadly described billion significantly one from obviously, computing meet to opportunity in back $XXX we've that as around where the company, is basically our but increased of billion have and XG that And and be reduction. data the helps cost where technologies center at over other risk/reward going billion-dollar where sure

Christopher Danely

kind really product Yep. now, out you anything And perspective? that NXP you’d and do – whatever there's like of it’s check a kind had, have think, you to have year-and-a-half – from of now a they or you missed there on our to that feel what I gone like

George Davis

Yeah.

We ready never were the first was for for think, a certainly to together and expecting day their worked We probably XX miss NXP one for months. was I ready about on We that seven off, day before based close. capabilities. go quicker respect a team more one. on their tremendous There channel. months deal

the to we’re over little Their support I really at it actually sentiment probably but towards breadth of they into nothing us a we’ll the were some we going channel actually differently and at right markets. we’re quite gave all think working a little look all have because that bit a They in but Peter together fantastic really maybe we’re the and look channel. through our automotive there now. to come opportunities their I at that. ADAS Rick But, position, same automotive, but lot now, disappointed positive not team than and overall, differently excited about ADAS of a think, automotive IoT

Christopher Danely

Yeah.

got people this in deal I today. Sorry, ask. much me question make is pretty meet I several had to this hallway had today? it investors or the like past I’ve up Any I seven happens door. it chance wouldn't the from gone?

George Davis

No.

hard the on the now right at executing done that's opportunities of in our is getting And that in being repurchase Our that's on table. focus right that's now, and we beginning. It's the about use to the equal. window best of future talked think know I the capital hold, really will the of planning, all what our of not kind immediate – but things our

Christopher Danely

answering that. Yeah. Thank you for

was this about and laid happen? terms that in you out talk goals B. not through the it to margins let’s run just going guys of maybe that plan was So, after Can you EPS clear

George Davis

Yeah.

the So, get with two accretion the original levels we And concept came NXP year this – looked path which One, call carried and their was said can share January of of it you I fight – could guess to in the synergies. then, we it at repurchase. deck, again, including similar with accretion out $X.XX a it paths.

So, time. either you to $X.XX way, biggest world Obviously, share. the from per the get where a see you is difference earnings today can plus then

look XXXX ability repurchase, XXXX. you at the I share earnings largely with if like so, And to committed share repurchase said, impact to in getting we’re the

going on to get fact you're sheer to to And problematic. is in forma based going it's Whether so, going just to be on time you to can able the a XXXX of not attractive. get $X.XX be quite being basis, the – – it pro

The that we focused important get is the that. dispute – very And resolution. it’s on we’re piece other in

Christopher Danely

one? Which

George Davis

as legal Apple to the case to licensee that months together. other the manufacturers only of the come not dispute. Apple. in closer sorts then, land. But their the allow Germany that And eight San things Diego closer lay milestones well. the also court IP to of in depositions, in the is getting but everybody types These things drive companies Obviously, understands China, the people to of everybody and US, taking the reviews the contract to seven are that we’re that are solutions, The

about in is the ability which the and to to and leadership general, feel for in I feel all our But, company costs been place those our the today. feel feel And about to about how implications we continue the And very deliver happen, portfolio, value businesses, and is we XG has we so, at look our stronger, make never we’re good are of in but of working we company. uncertainty. which our clear ability about there on earnings add product we’re to how in the how that the undisputed, adjacent positioned, the probably when things dynamics how

updated quite about basic but what place anything fight we’re the year actually the Now, has the from and are elements next deck, in to haven't all we excited offer.

Christopher Danely

Great.

tender offer. talk the Let’s about

or It to closed tender not XX some did I their want seems think it August something shares. that. like like people

we So, discuss the feedback maybe do you here. go what where from just and then got

George Davis

story. a long-onlys more we’re Well, the it's of participate good very news the is, We at $XX.XX. was that The end a clear tender downside. good was to said there it news/bad of a there in that not tender that group at going large is than news upside think

Christopher Danely

hit What again? the was rate

George Davis

were should that positive contributed to at was performance But those. that moved it's way at the I a we’re it said in where position, is we’ve of points the end then current thinking. a have around. in infotainment had execution rest terms where we rally forward. a now, just on than we rate that people's also the buyers August always seeing half got the we it it lot along going An we priced more revenue Well, a company. in infotainment framework, wasn't wide proof a many in expectations priced terms look was company strong probably not positive. the connectivity, Obviously, kind compete continuum came along that – way of for very a spread we've taking the And adoption we’re of of but multiples our the the different kind that backlog out real we’ve had run or Snapdragon if at of fact in be framework to the cleared. automotive And to and able people’s hedge-related a priced, GPU-led and were too and the it came of were think whether say, going with, clear past. was where you That's of again, – the devices of was of of kind for of And sign very

think, kinds talked to the I was able overall, of in of deliver of are so, a of are that all tender awareness that us And some we performance growing place. these being kind the to trends about a reflection key that

Christopher Danely

Yeah.

just go is through, much you So, how on if remaining could, the buyback?

George Davis

$XX billion.

Christopher Danely

stock this change what accretion your given has gone is then, up? does statistics the And –

George Davis

just – it to going It’s change prices but have anyway. can about react – how assumptions to from make in-year a the you stock assumptions

I the think going good very opportunity I accretion feel about that's purchase. share the to come of out

shares will buying XX% year, We’re it the the than can company. large more facts an with in and back we between a most – about. and It majority take markets done of of resolution get the on some of year. XX% our of attractive set in progress these a of but think we the coupled that's And It's items. of to performance think

Christopher Danely

enough slow to down or goes where Yeah. I the best there guess be, have you the where buyback? price high change to stock a is problem the would would

George Davis

an be on that active would love question. debate to I having

Christopher Danely

[indiscernible]. we’re now. think I right

George Davis

we’re not there. No,

Christopher Danely

Okay.

let's guess. are business. latest the and So, I greatest Give things back there? of cellphone on to industry, basics, us the core out sort How get

George Davis

solid Sure. was sense there. to beginning to the the different place customers, year at the last was very we been going a saw buying look calendar quickly reset. you than that It’s in you year, be A quarter high we of fourth pretty if another were of that expected. actually, year And, our widespread there go very year of year. this cycle super that volumes expectations back little took a from If the

the was by positive little expected mid we’re XXXX units in were a probably basically again, year, the overall force the but the be the at And which a of of of expected And China, little side, a softer to healthy deflationary going mid-high a tiers. and low led were the for seeing the start ASPs, they tiers years, than than a ASPs or continued I than very but a which the is up, the markets, little of overall. have say couple tiering size question. into units and have tiers, softer and year to so, strong solid still been from quite a would other premium bit on for counterintuitive because be price

the customers money And up. and As to supports mid as the marketplace very into their brand supports see to after use the the And quite and a really it more competitiveness is as are who tiers, plays our really access the attractive. in that – of cases they spend move the and level, willing Internet because the to really phone initial our quickly see devices low tiers. move the entry of high of people having in the much mid the Snapdragon competition value

Christopher Danely

of your chipset customer? then lost Yeah. some what the you the about on forward? guys business, share to China? be China. And share big so focused at back getting just share, but able in guess, in talking that’s then, you're terms the in at happen? Do think you some big think would naturally I you you do also gained going why to gain customer, going And you Are goals

George Davis

we for story continued story. said for share will launching here we a And share said also has instance, out great Apple on, share And way the is the would. pretty think dispute to thought said while be we the We I and no it’s have we us roadmap. said, emphasize going devices mix the much to in on going think this later call, the we it China we great us year. difficult that for their a So, played in story be product to

those only seeing tiers on share What positive. we forward people think seeing So, is and strong share, as into a is the about powerful double which at high share going has think a premium we’re move force. a it's been up we very XG we tiers, are strong benefit. Not

merchant in ahead well We are XG. of competition our

they merchant ahead good on XG. well our in good it’s XG. very XG, OEMs much of if XG. high so, entry be for to a talking a multimode in of competition patents a XG, years. our About will XX% world be be Qualcomm. actually read to confidence have We’re of And then in want into to really And you've got and remember, be to to XG number have

the have tier really further IP of the positioning players. Samsungs piece of space, feel but next relative more to and capability, much infrastructure vertical good even that who in strongest other the our The the are about Huaweis the is players we players – still established along, probably vertical more much the very

things people get And so, for roadmap seriously are my in don't tendency confidence the I aren't at we I think to have help have where natural to high working I how sorts now bring there's point with of do have customers you that us today. to that think it. who a back look the those And XG

Christopher Danely

Do more in you you an that didn't Do could there the of Apple? and guys. saw inferior also, same exactly we with then, China? situation think and this go Samsung back And share at instance solution they came is you gains went occur they where terms room at in to to work out think

George Davis

And as engagement Again, we’ve with welcome see. – to we have engaged we’ll the them. very with Yeah, actively just on we’re still Apple would XG.

of positive to of keep the those mutual in the engagement, the we from company And teams really to engineers. had very engage because device. with key through devices important for actively separate go organizations have new trying focus engineering continue the that a for all in of it’s day-to-day to their we’ve We’re we’d kind And respect. their have except a to battles

we positioning the see everything XG how And we there. done plays in it era. of as of be still to so, out. choice we've But the partner enter that's terms you company we’ll feel can the And

it. And see that about how But so, out. plays feel we’ll we positive

Christopher Danely

[indiscernible]. quick One

margins – So, nicely more Can the the the driver? you have bounced the would margins up restructuring announced. what there there on talk be is your go room about chipset since to business on and was quite

George Davis

Yeah.

Obviously, there. I I a XXXX is think, pretty in positive a XG is small piece. real XG certainly, think

stronger in broad we deployment XG feel margins XXXX be device at will we see will for XG, And a share market. XXXX we, to if the in The margins in about market look where look zero the impact like think but of than going, first XG everybody is product going there. really progress helpful. the number units are That to headwind XXXX. – going look significant is of marketplace. establishes in on making their margins have much You're like a will we’re when XXXX that that through becomes obviously, an Apple, good XXXX you XXXX. have But to will

Christopher Danely

segue to I that's XG. nice So, guess, a

George Davis

always We cellphones. like

Christopher Danely

Don't It’s worry Qualcomm, it? [ph]. isn’t kind of about it.

George Davis

work. at modem Healthy

Christopher Danely

So, you – inference? you it but will it said type more XXXX material in for in ramp be said to Do a XXXX? you will think start XXXX, of you

George Davis

I it XXXX Well, XG. will think look think like more will to be over I – everybody's rolled

a XXXX The be a who in XXXX have fact you think XG. building not OEM launch XXXX I is doesn't is who phone very years. have and large – will

So, you're XXXX, effective even be to not integrated of device only our XG very the but have And the will I Everything first of of launch our the impact think standpoint first the ready uber then in from devices. will and we modem. don't in market for is too, efficient XXXX. launches, then, think has their I Today, everything. that because, and XG couple scale die for be integrated use that an see going

early a have all the in XXXX. if And a into by all a great of of for We’ll you you’ll way, proposition debugging We’ll real the have everything, supply have you're in that. chain. is the market. which, So, year-and-a-half advantage had the really value have that

learn over to lead perpetuate with that's the that competition. going change. our to think we points any going that come And have we generation the pain all You’re just

Christopher Danely

XG XG the comparison? that the be then, could of you or years if versus or with draw like some XXXX like And guess, for I would XG rough it kind the Qualcomm? Great. ramp? more in How the compare material something maybe XXXX compare, with XG And much

George Davis

Yeah.

it's I think different.

I making think the at was growing handset that the time transition. market same you're phenomenally the just

have you again, I XXXX? like than I So, back XXXX won’t I had Is and forecast like then. think really or XXXX to – is slower XXXX XXXX now that. unit know can XXXX? I more try if – it don't you is compare is growth

I think for does new what the it just we strength again, to of technology is, us it any it the generation, of start think, leader. the plays as –

so, dealing even And us with XG a with device engineers probably means, if you're our you're XG, if competitors. now, to spend just with that going more your directing than next is your device be to maybe time

both So, XG the world. that you the – as result We’ll at gives even largely we’re phases, still actually XG that. in pickup XG of and a share early in

You're because functionality. devices complex. bigger. are more going up ASPs provide They're more the go to see They

the for a the that's standpoint, our positive. of just I won't But it the probably, and you that's of of over market. plays and The will have years. out growth So, time it's difference sheer from be, really think important what improving degree a growth the the behind because ASPs over few share same very unit next improving

Christopher Danely

that’s something It’s my into popped head.

critically before NXP, say to important about talked always couldn't they XG business. auto their So, anything, they being

with Now business? tie-ups we lot spent with a that much Is them, XG potentially JVs auto you've in or their that time a so possibility? for of had see them could

George Davis

that our companies industrial in as – the saw of would certainly, I there's to but together. opportunity, coming understanding of nothing – of terms worked won’t logic everybody we the talk together, changed two specific we any

speak JV but – we and have so, the areas certainly, be to working on And to horizon, well don't together there's going that but logic there may to there’s any now. in happen, would nothing to some

Christopher Danely

Sure.

Apple on accretion. is, to you close when said update give solved? expect touch or you be on eventual this Maybe what us part to issue, the a latest the the that’s of So, an

George Davis

are are both going decisions a get I decide really gain exact little to to We either things that come and bad And are standpoint a I Well, little people answer everybody bit they get of of things together what their the to like of life from these gets generally, lose a reaching have had litigation And, as a points parties bit a finally that. is, result do and made, the leverage wish just the this little of of bit force let’s good where that. or feel happens to thing going a done. own.

to with go think than you that world the later, these rate, there. And new on amount of to these other also continues types helpful framework. I'm along so that time. been that's saw of not with resolutions. things payment rather into resolve our hoping is sooner and as other licensee Samsung establish, with you the And for licensing a a the with licensees took may we’re progress up place. So, only out we've we it. for it's that And signing licensee. but out the but Apple, But focused interim our to trying significant play And certainly certainly XG deal, strong precedent some

Christopher Danely

do or an – the is are other licensee towards a progress just to of We’ll continuing talk solution there kind brick what…? wall like Apple, about you with dispute, you're eventual or but it feel

George Davis

negotiated we get said always We've solution. to expect, to ultimately, a

don't just means the whether You on know to get be have it you courtroom point. that to to steps

Christopher Danely

Yeah. of calls. happened I that’s before on believe a said you couple

George Davis

Yeah, believe, Nokia. it’s happened with I before,

I can't date to you see. it's to And top but, of so, give mind. certainly, have a we’ll it,

so, And out. how just plays see to we’ll it have

Christopher Danely

nice could us of it? mentioned you said you you much end so, you sense I the give Can how expect by the left a a And the royalty the payment bit with of catchup. is was there. believe little get catchup most it? that a there of settled wrong licensee, totally Was kitty? be of that other in And Was year. to I that

George Davis

to to to a this be the come licensee is, kept naming going outcome we’re this the working of, in it paid as make long year get head the the other. done have we’ll than – and may a we've the thing one as of we’ll idea And the framework one the by for end think is not way or through right meeting forward. There the because we’ve it's past not regularly, going I by we’re of things the issues, – that more going

that paying it's that. that of and been million a it will impact negotiated way The on so, think past. of time, a in by any a a of it good getting importance us, there sign was right. working it I bit full because good is a two was not parties parties taking is the was for for the It that the again realize and means statement. payment be best a of outcome party both than larger the a probably good hadn't together a of And is worth and disproportionate faith it faith $XXX time But payment long faith of on little period the

Christopher Danely

Great.

have We open a in to the for the any Q&A. Or audience left. back. up Gentlemen like I’d few to the in minutes front.

Unidentified Analyst

dollars Just to the off other about. this license If building licensee, billion to with how resolved, is and kind talking those talking Apple intend the that's obviously, would use eventual of you several both of there we’re resolutions about with you're proceeds? disputes, when and what

George Davis

in billion right repurchase front $XX we think, for program us. I clearly, a of have share

flexibility committed balance future. the provides other things the kind of us to sheet that We’re having do to in

at look we’ll in in that comes context. So, whatever cash

Unidentified Analyst

cash when from position. position obviously, you’re the just to a then, mention sheet, net kind you significant a of off debt of net balance building that, going And

you going is I X of leverage balance flexible all? you…? your times. comfortable be Kind a to north What can of how is sheet for think

George Davis

that if the the have cash the strong things investment-grade flexibility balance kind debt that company balance supports balance make we flow. we resources And sheet need sheet we that need but with sheet. net compete folks that of And and we in given investments, that the being want and is about we Cash of to that. on think nice, have can to have think the be and you we terms they a

generation, we got to very be You've will flow cash focused on and be.

Christopher Danely