SAN DIEGO, April 28, 2017 /PRNewswire/ -- Qualcomm
Incorporated (NASDAQ: QCOM) today announced that it has been
informed by Apple Inc. that Apple is withholding payments to its
contract manufacturers for the royalties those contract
manufacturers owe under their licenses with Qualcomm for sales
during the quarter ended March 31,
2017. Apple has indicated it will continue this behavior
until its dispute with Qualcomm is resolved.
"Apple is improperly interfering with Qualcomm's long-standing
agreements with Qualcomm's licensees," said Don Rosenberg, executive vice president and
general counsel of Qualcomm. "These license agreements remain
valid and enforceable. While Apple has acknowledged that
payment is owed for the use of Qualcomm's valuable intellectual
property, it nevertheless continues to interfere with our
contracts. Apple has now unilaterally declared the contract
terms unacceptable; the same terms that have applied to iPhones and
cellular-enabled iPads for a decade. Apple's continued
interference with Qualcomm's agreements to which Apple is not a
party is wrongful and the latest step in Apple's global attack on
Qualcomm. We will continue vigorously to defend our business
model, and pursue our right to protect and receive fair value for
our technological contributions to the industry."
Third Quarter Fiscal 2017 Guidance Update
As a result of the above developments, we are updating our
financial guidance for the third quarter of fiscal 2017 to exclude
royalty revenues from Apple's contract manufacturers. The
contract manufacturers may make some form of partial payment, but
initial indications are that any payment would likely be
insignificant. As a result of these actions, we are adjusting
our financial guidance to assume that no payment is made, and
therefore no revenues are recognized, in the quarter. This
differs from our prior guidance, which considered a variety of
payment scenarios (and related revenues) within the range, but did
not include a scenario where no payment was made (and no revenues
were recognized).
The following table summarizes GAAP and Non-GAAP guidance based
on the current outlook.
Qualcomm's
Business Outlook Summary and Reconciliation
|
|
|
Q3
FY16
Results
(2)
|
Prior
Guidance
Q3 FY17
Estimates
|
Current
Guidance
Q3 FY17
Estimates
|
Revenues
|
$6.0B
|
$5.3B -
$6.1B
|
$4.8B -
$5.6B
|
Year-over-year
change
|
|
decrease 12% -
increase 1%
|
decrease 7% -
21%
|
GAAP diluted
earnings per share (EPS)
|
$0.97
|
$0.67 -
$0.92
|
$0.52 -
$0.62
|
Year-over-year
change
|
|
decrease 5% -
31%
|
decrease 36% -
46%
|
Less diluted EPS
attributable to QSI
|
$0.00
|
$0.02
|
$0.02
|
Less diluted EPS
attributable to share-based compensation
|
($0.13)
|
($0.13)
|
($0.13)
|
Less diluted EPS
attributable to other items (1)
|
($0.06)
|
($0.12)
|
($0.12)
|
Non-GAAP diluted
EPS
|
$1.16
|
$0.90 -
$1.15
|
$0.75 -
$0.85
|
Year-over-year
change
|
|
decrease 1% -
22%
|
decrease 27% -
35%
|
|
|
(1)
|
Our guidance for
diluted EPS attributable to other items for the third quarter of
fiscal 2017 is primarily attributable to acquisition-related
items.
|
(2)
|
The reconciliation
between GAAP and Non-GAAP results for the prior period is included
in the news release for that period.
|
|
|
Sums may not equal
total due to rounding.
|
Our outlook does not include provisions for future asset
impairments or for pending legal matters, other than future legal
amounts that are probable and estimable. Further, due to
their nature, certain income and expense items, such as realized
investment and certain derivative gains or losses, cannot be
accurately forecast. Accordingly, we only include such items
in our financial outlook to the extent they are reasonably certain;
however, actual results may differ materially from the outlook. We
have not included any estimates related to any proposed
acquisitions in our third quarter of fiscal 2017 outlook.
Note Regarding Use of Non-GAAP Financial Measures
The Non-GAAP financial information presented herein should be
considered in addition to, not as a substitute for or superior to,
financial measures calculated in accordance with GAAP. In
addition, "Non-GAAP" is not a term defined by GAAP, and as a
result, the Company's measure of Non-GAAP results might be
different than similarly titled measures used by other
companies. Reconciliations between GAAP and Non-GAAP results
are presented herein.
The Company uses the Non-GAAP financial information: (i) to
evaluate, assess and benchmark the Company's operating results on a
consistent and comparable basis; (ii) to measure the performance
and efficiency of the Company's ongoing core operating businesses,
including the QCT (Qualcomm CDMA Technologies) and QTL (Qualcomm
Technology Licensing) segments; and (iii) to compare the
performance and efficiency of these segments against
competitors. Non-GAAP measurements used by the Company
include revenues, cost of revenues, research & development
expenses, selling, general & administrative expenses, other
income or expenses, operating income, interest expense, net
investment income, income or earnings before income taxes,
effective tax rate, net income and diluted earnings per
share. The Company is able to assess what it believes is a
more meaningful and comparable set of financial performance
measures for the Company and its business segments by using
Non-GAAP information. In addition, the Compensation Committee
of the Board of Directors uses certain Non-GAAP financial measures
in establishing portions of the performance-based incentive
compensation programs for our executive officers. The Company
presents Non-GAAP financial information to provide greater
transparency to investors with respect to its use of such
information in financial and operational decision-making.
This Non-GAAP financial information is also used by institutional
investors and analysts in evaluating the Company's business and
assessing trends and future expectations.
Non-GAAP information used by management excludes QSI and certain
share-based compensation, acquisition-related items, tax items and
other items.
- QSI is excluded because the Company expects to exit its
strategic investments in the foreseeable future, and the effects of
fluctuations in the value of such investments and realized gains or
losses are viewed by management as unrelated to the Company's
operational performance.
- Share-based compensation expense primarily relates to
restricted stock units. Management believes that excluding
non-cash share-based compensation from the Non-GAAP financial
information allows management and investors to make additional
comparisons of the operating activities of the Company's ongoing
core businesses over time and with respect to other companies.
- Certain other items are excluded because management views such
expenses as unrelated to the operating activities of the Company's
ongoing core businesses, as follows:
-
- Acquisition-related items include amortization of certain
intangible assets, recognition of the step-up of inventories to
fair value and the related tax effects of these items, as well as
any effects from restructuring the ownership of such acquired
assets. Additionally, the Company excludes expenses related
to the termination of contracts that limit the use of the acquired
intellectual property, third-party acquisition and integration
services costs and costs related to temporary debt facilities and
letters of credit executed prior to the close of an acquisition.
Starting with acquisitions in the second quarter of fiscal 2017,
the Company excludes recognition of the step-up of property, plant
and equipment from the net book value based on the original cost
basis to fair value. Such change related to acquisitions that
were completed prior to the second quarter of fiscal 2017 continue
to be allocated to the segments, and such amounts are not
material.
- The Company excludes certain other items that management views
as unrelated to the Company's ongoing business, such as major
restructuring and restructuring-related costs, goodwill and
indefinite- and long-lived asset impairments and awards,
settlements and/or damages arising from legal or regulatory
matters.
- Certain tax items that are unrelated to the fiscal year in
which they are recorded are excluded in order to provide a clearer
understanding of the Company's ongoing Non-GAAP tax rate and after
tax earnings.
About Qualcomm
Qualcomm's technologies powered the smartphone revolution and
connected billions of people. We pioneered 3G and 4G - and
now we are leading the way to 5G and a new era of intelligent,
connected devices. Our products are revolutionizing
industries, including automotive, computing, IoT, healthcare and
data center, and are allowing millions of devices to connect with
each other in ways never before imagined. Qualcomm
Incorporated includes our licensing business, QTL, and the vast
majority of our patent portfolio. Qualcomm Technologies,
Inc., a subsidiary of Qualcomm Incorporated, operates, along with
its subsidiaries, all of our engineering, research and development
functions, and all of our products and services businesses,
including, our QCT semiconductor business. For more
information, visit www.qualcomm.com.
Note Regarding Forward-Looking Statements
In addition to the historical information contained herein, this
news release contains forward-looking statements that are
inherently subject to risks and uncertainties, including but not
limited to statements regarding: Apple's intent to withhold
payments to its contract manufacturers; our intent to continue
vigorously to defend our business model and pursue our right to
protect and receive fair value for our technological contributions
to the industry; our business outlook; and our estimates and
guidance related to revenues, and GAAP and Non-GAAP diluted
earnings per share. Forward-looking statements are generally
identified by words such as "estimates," "guidance," "expects,"
"anticipates," "intends," "plans," "believes," "seeks" and similar
expressions. Actual results may differ materially from those
referred to in the forward-looking statements due to a number of
important factors, including but not limited to: risks to our
business, financial condition and results of operations associated
with Apple withholding payments to its contract manufacturers and
those contract manufacturers withholding royalty payments they owe
to us under their license agreements with us; our proposed
acquisition of NXP; commercial network deployments, expansions and
upgrades of CDMA, OFDMA and other communications technologies, our
customers' and licensees' sales of products and services based on
these technologies and our customers' demand for our products and
services; competition in an environment of rapid technological
change; our dependence on a small number of customers and
licensees; our dependence on the premium-tier device segment;
attacks on our licensing business model, including current and
future legal proceedings or actions of governmental or
quasi-governmental bodies or standards or industry organizations;
potential requirements to change our patent licensing practices due
to governmental investigations and/or private legal proceedings
challenging those practices; government regulations and policies,
or adverse rulings in enforcement or other proceedings; the
enforcement and protection of our intellectual property rights; the
commercial success of our new technologies, products and services,
including our ability to extend our products into new and expanded
product areas and adjacent industry segments; risks associated with
operation and control of manufacturing facilities acquired through
the formation of our joint venture, RF360; the continued and future
success of our licensing programs and the need to extend license
agreements that are expiring; our dependence on a limited number of
third-party suppliers; claims by third parties that we infringe
their intellectual property; strategic acquisitions, transactions
and investments; our use of open source software; our stock price
and earnings volatility; our indebtedness; foreign currency
fluctuations; global regional or local economic conditions that
impact the industries in which we operate; our ability to attract
and retain qualified employees; failures in our products or
services or in the products or services of our customers or
licensees, including those resulting from security vulnerabilities,
defects or errors; security breaches of our information technology
systems; and potential tax liabilities. These and other risks
are set forth in the Company's Quarterly Report on Form 10-Q for
the fiscal second quarter ended March 26, 2017 filed with the
SEC. Our reports filed with the SEC are available on our
website at www.qualcomm.com. We undertake no obligation to
update, or continue to provide information with respect to, any
forward-looking statement or risk factor, whether as a result of
new information, future events or otherwise.
Qualcomm is a trademark of Qualcomm Incorporated, registered
in the United States and other
countries. All other trademarks are the property of their
respective owners.
Qualcomm Contacts:
Pete Lancia, Corporate
Communications
Phone: 1-858-845-5959
email: corpcomm@qualcomm.com
John Sinnott, Investor
Relations
Phone: 1-858-658-4813
e-mail: ir@qualcomm.com
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SOURCE Qualcomm Incorporated