Qualcomm 2011 Annual Report Download - page 25

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;
Failures in our products and services or in the products of our customers, including those resulting from security vulnerabilities, defects or
errors, could harm our business.
The use of devices containing our products to access untrusted content creates a risk of exposing the system software in those devices to viral
or malicious attacks. While we continue to expand our focus on this issue and are taking measures to safeguard our products from cybersecurity
threats, device capabilities continue to evolve in a 3G/4G environment, enabling more data and processes, such as mobile computing, and risks
that security failures will occur are increasing. Our products are inherently complex and may contain defects or 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. Manufacturing, testing, marketing and use of our products and those of our customers and
licensees entail the risk of product liability. Because our products and services are responsible for critical functions in our customers’ products
and/or networks, security failures, defects or errors in our components, materials or software or those used by our customers could have an
adverse impact on us, on our customers and on the end users of their products. Such adverse impact could include product liability claims or
recalls, a decrease in demand for connected devices and wireless services, damage to our reputation and to our customer relationships, and other
financial liability or harm to our business.
Our business and operations could suffer in the event of security breaches.
Attempts by others to gain unauthorized access to our information technology systems are becoming more sophisticated and are sometimes
successful. These attempts, which might be related to industrial or other espionage, include covertly introducing malware to our computers and
networks and impersonating authorized users, among others. We seek to detect and investigate all security incidents and to prevent their
recurrence, but in some cases, we might be unaware of an incident or its magnitude and effects. The theft, unauthorized use or publication of our
intellectual property and/or confidential business information could harm our competitive position, reduce the value of our investment in
research and development and other strategic initiatives or otherwise adversely affect our business. To the extent that any security breach results
in inappropriate disclosure of our customers' or licensees' 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.
Potential tax liabilities could adversely affect our results of operations.
We are subject to income taxes in 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 materially differ from amounts reflected in historical income tax provisions and accruals. In such case, our income tax provision
and results of operations in the period or periods in which that determination is made could be negatively affected.
Tax rules may change in a manner that adversely affects 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 for at least the next 12 months and the
foreseeable future. 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 financial results and liquidity may be adversely affected if tax 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.
If wireless devices pose safety risks, we may be subject to new regulations, and demand for our products and those of our customers and
licensees may decrease.
Concerns over the effects of radio frequency emissions continue. Interest 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, and state laws have been enacted to mitigate, the possibility of safety
20
•
Our loans payable are denominated in Indian rupees. If the U.S. dollar weakens, additional cash may 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.