Qualcomm 2011 Annual Report Download - page 41

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2010 . The increase in revenues from sales of equipment and services was primarily due to a $2.18 billion increase in QCT equipment and
services revenues. Licensing revenues were $5.73 billion in fiscal 2011 , compared to $4.01 billion in fiscal 2010 . The increase in licensing
revenues was primarily due to a $1.76 billion increase in QTL revenues.
Cost of Equipment and Services. Cost of equipment and services revenues for fiscal 2011 was $4.88 billion, compared to $3.30 billion for
fiscal 2010 . Cost of equipment and services revenues as a percentage of equipment and services revenues was 53% for fiscal 2011
, compared to
47% for fiscal 2010 . The decrease in margin percentage was primarily attributable to a decrease in QCT gross margin percentage and the effect
of $137 million in charges from the recognition of the step-up of inventories to fair value and amortization of intangible assets related to the
acquisition of Atheros in fiscal 2011 . Cost of equipment and services revenues included $67 million in share-based compensation in fiscal
2011 , compared to $41 million in fiscal 2010 . Cost of equipment and services revenues as a percentage of equipment and services revenues
may fluctuate in future periods depending on the mix of products sold and services provided, competitive pricing, new product introduction costs
and other factors.
Research and Development Expenses. Research and development expenses for fiscal 2011
were $3.00 billion or 20% of revenues, compared
to $2.45 billion or 22% of revenues for fiscal 2010 . The dollar increase was primarily attributable to a $403 million increase in costs related to
the development of integrated circuit products, next generation 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 36% increase in revenues relative to the 22% increase in cost. Research and development expenses for fiscal
2011 included share-based compensation of $397 million, compared to $293 million in fiscal 2010 .
Selling, General and Administrative Expenses. Selling, general and administrative expenses for fiscal 2011 were $1.95 billion or 13% of
revenues, compared to $1.50 billion or 14% of revenues for fiscal 2010 . Selling, general and administrative expenses for fiscal 2010 included a
$62 million gain on the sale of our Australia spectrum license. The remaining dollar increase was primarily attributable to a $142 million
increase in employee-related expenses, a $66 million increase in depreciation and amortization expense, primarily attributable to the acquisition
of Atheros, a $44 million increase in charitable contributions, primarily resulting from the establishment of the Qualcomm Charitable
Foundation in fiscal 2011, and a $21 million increase in outside services. Selling, general and administrative expenses for fiscal 2011 included
share-based compensation of $349 million, compared to $263 million in fiscal 2010 .
Other Operating Expenses. We recorded a $114 million goodwill impairment charge related to our Firethorn division due to the operating
performance of a new product application falling significantly short of expectations in fiscal 2011 .
Net Investment Income. Net investment income was $661 million for fiscal 2011 , compared to $766 million for fiscal 2010 . The net
decrease was comprised as follows (in millions):
The increase in interest expense is primarily attributable to the bank loans related to the BWA spectrum won in the India auction in June
2010. The decrease in net impairment losses on investments is due to an overall increase in marketable securities values compared to the prior
fiscal year.
Income Tax Expense. Income tax expense was $1.1 billion for fiscal 2011 , compared to $973 million for fiscal 2010 . The
36
Year Ended
September 25,
2011
September 26,
2010
Change
Interest and dividend income:
Corporate and other segments
$
480
$
522
$
(42
)
QSI
20
8
$
12
Interest expense
(114
)
(43
)
(71
)
Net realized gains on investments:
Corporate and other segments
335
379
(44
)
QSI
2
26
(24
)
Net impairment losses on investments:
Corporate and other segments
(39
)
(110
)
71
QSI
(13
)
(15
)
2
(Losses) gains on derivative instruments
(3
)
3
(6
)
Equity in losses of investees
(7
)
(4
)
(3
)
$
661
$
766
$
(105
)