Qualcomm 2011 Annual Report Download - page 43

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During fiscal 2010, we recorded lower impairment losses and higher realized gains on marketable securities, compared to fiscal 2009.
Depressed security values caused by a major disruption in the United States and foreign financial markets impacted our results in fiscal 2009 and
continued to cause impairment losses in fiscal 2010, but to a much lesser extent. The increase in interest expense was primarily attributable to the
bank loans related to the BWA spectrum won in the India auction in June 2010.
Income Tax Expense. Income tax expense was $973 million for fiscal 2010 , compared to $611 million for fiscal 2009
. The annual effective
tax rate was 22% for fiscal 2010 , compared to 25% for fiscal 2009 . The annual effective tax rate for fiscal 2010 was lower than fiscal 2009
primarily as a result of the net decrease in valuation allowance on the deferred tax asset related to capital losses and an increase in tax benefits
related to foreign earnings taxed at less than the United States federal rate, partially offset by a decrease in tax benefit related to tax audits settled
during the year and a decrease in research and development tax credits.
The annual effective tax rate for fiscal 2010
was 22% and only reflected the United States federal research and development credits generated
through December 31, 2009, the date on which they expired. The annual effective tax rate for fiscal 2010 of 22% was less than the United States
federal statutory rate primarily due to benefits of 20% 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 valuation of deferred tax assets to reflect changes in California law, primarily deferred
revenue that was taxable in fiscal 2010 , but for which the resulting deferred tax asset will reverse in future years when our state tax rate will be
lower.
Our Segment Results for Fiscal 2011 Compared to Fiscal 2010
The following should be read in conjunction with the fiscal 2011 and 2010 financial results for each reporting segment. See “Notes to
Consolidated Financial Statements – Note 10 – Segment Information.”
QCT Segment. QCT revenues for fiscal 2011 were $8.86 billion, compared to $6.70 billion for fiscal 2010 . Equipment and services
revenues, mostly related to sales of MSM and accompanying RF and PM integrated circuits, were $8.65 billion for fiscal 2011 , compared to
$6.47 billion for fiscal 2010 . The increase in equipment and services revenues resulted primarily from a $1.48 billion increase related to higher
unit shipments, a $391 million increase related to sales of connectivity products, primarily resulting from the acquisition of Atheros in the third
quarter of fiscal 2011, and a $214 million increase related to the net effects of changes in product mix and lower selling prices of such products.
Approximately 483 million MSM integrated circuits were sold during fiscal 2011 (excluding the second MSM for customers who built devices
with two MSMs starting in fiscal 2011), compared to approximately 399 million in fiscal 2010 .
QCT earnings before taxes for fiscal 2011 were $2.06 billion, compared to $1.69 billion for fiscal 2010 . The increase in QCT earnings
before taxes was primarily attributable to the increase in revenues, partially offset by a $358 million increase in research and development
expenses and a $143 million increase in selling, general and administrative expenses. QCT operating income as a percentage of revenues
(operating margin percentage) was 23% in fiscal 2011 , compared to 25% in fiscal 2010 . The decrease in operating margin percentage was
primarily due to a decrease in gross margin percentage, partially offset by the effect of a higher increase in QCT revenues relative to the
increases in research and development expenses and selling, general and administrative expenses. QCT gross margin percentage decreased as a
result of the net effects of lower average selling
38
Year Ended
September 26,
2010
September 27,
2009
Change
Interest and dividend income:
Corporate and other segments
$
522
$
513
$
9
QSI
8
3
5
Interest expense
(43
)
(13
)
(30
)
Net realized gains on investments:
Corporate and other segments
379
107
272
QSI
26
30
(4
)
Net impairment losses on investments:
Corporate and other segments
(110
)
(734
)
624
QSI
(15
)
(29
)
14
Gains on derivative instruments
3
1
2
Equity in losses of investees
(4
)
(17
)
13
$
766
$
(139
)
$
905