Qualcomm 2011 Annual Report Download - page 44

prices, unfavorable product mix and higher product support costs, partially offset by a decrease in average unit costs.
QCT inventories increased by 48% in fiscal 2011 from $481 million to $714 million primarily due to the addition of inventories from the
acquisition of Atheros and an increase in work-in-process and finished goods related to growth of the business and the timing of inventory
builds.
QTL Segment. QTL revenues for fiscal 2011 were $5.42 billion, compared to $3.66 billion for fiscal 2010 . During the second quarter of
fiscal 2011, we entered into agreements with two licensees to settle ongoing disputes, including an arbitration proceeding with Panasonic, and
recorded $401 million in revenues related to prior quarters. The remaining $1.36 billion increase in revenues during fiscal 2011 was primarily
due to an increase in sales of CDMA-based devices by licensees and higher average royalties per unit for CDMA-based devices, partially offset
by the effect of $71 million that was included in QTL revenues in fiscal 2010 but was attributable to fiscal 2009 due to discussions regarding a
license agreement that was signed in the first quarter of fiscal 2010. QTL earnings before taxes for fiscal 2011 were $4.75 billion, compared to
$3.02 billion for fiscal 2010 . QTL operating margin percentage was 88% in fiscal 2011 , compared to 83% in fiscal 2010
. The increases in QTL
earnings before taxes and operating margin percentage were attributable to the 48% increase in licensing revenues relative to a 5% increase in
operating expenses.
QWI Segment. QWI revenues for fiscal 2011 were $656 million, compared to $628 million for fiscal 2010 . Revenues increased primarily
due to increases in QGOV and QES revenues of $27 million and $20 million, respectively, partially offset by a $23 million decrease in QIS
revenues. The increase in QGOV revenues was primarily attributable to growth in customer funded development contracts, and the increase in
QES revenues was primarily attributable to higher unit shipments of our asset-tracking products. The decrease in QIS revenues was primarily
attributable to a decrease in Brew revenues resulting from lower consumer demand. QWI loss before taxes for fiscal 2011 was $152 million,
compared to earnings before taxes of $12 million for fiscal 2010 . QWI operating margin percentage was negative in fiscal 2011 , compared to a
1% operating margin in fiscal 2010 . The decreases in QWI earnings before taxes and operating margin percentage were primarily attributable to
$120 million in impairment charges related to certain assets of our Firethorn division, including $114 million in goodwill impairment, and the
operating loss of our QIS division.
QSI Segment . QSI loss before taxes from continuing operations for fiscal 2011 was $132 million, compared to earnings before taxes from
continuing operations of $7 million for fiscal 2010 . QSI earnings before taxes from continuing operations for fiscal 2010 included a $62 million
gain on the sale of our Australia spectrum license. The remaining $77 million increase in QSI loss before taxes from continuing operations for
fiscal 2011 was primarily due to a $72 million increase in interest expense attributable to bank loans related to the BWA spectrum won in the
India auction in June 2010.
Our Segment Results for Fiscal 2010 Compared to Fiscal 2009
The following should be read in conjunction with the fiscal 2010 and 2009 financial results for each reporting segment. See “Notes to
Consolidated Financial Statements – Note 10 – Segment Information.”
QCT Segment. QCT revenues for fiscal 2010 were $6.70 billion, compared to $6.14 billion for fiscal 2009 . Equipment and services
revenues, mostly related to sales of MSM and accompanying RF and PM integrated circuits, were $6.47 billion for fiscal 2010 , compared to
$5.93 billion for fiscal 2009 . The increase in equipment and services revenues resulted primarily from a $1.25 billion increase related to higher
unit shipments, partially offset by a decrease of $713 million related to the net effects of changes in product mix and the average selling prices of
such products. Approximately 399 million MSM integrated circuits were sold during fiscal 2010 , compared to approximately 317 million for
fiscal 2009 . The chipset volume in fiscal 2009 was impacted by the slowdown in the worldwide economy that caused contraction in the CDMA-
based channel inventory and resulted in lower demand for CDMA-based MSM integrated chips.
QCT earnings before taxes for fiscal 2010 were $1.69 billion, compared to $1.44 billion for fiscal 2009
. The increase in QCT earnings before
taxes was primarily attributable to the increase in revenues, partially offset by an increase in research and development expenses. QCT operating
income as a percentage of revenues (operating margin percentage) was 25% in fiscal 2010 , compared to 23% in fiscal 2009 . The increase in
QCT operating margin percentage was primarily due to an increase in gross margin percentage and a decrease in selling, general and
administrative expenses as a percentage of revenues driven primarily by the increase in revenues. QCT gross margin percentage increased as a
result of the net effects of a decrease in average unit costs, lower average selling prices and favorable product mix.
QTL Segment. QTL revenues for fiscal 2010 were $3.66 billion, compared to $3.61 billion for fiscal 2009 . Revenues in fiscal 2010
included
$71 million attributable to fiscal 2009 that had previously not been recognized due to discussions regarding a license agreement that was signed
in the first quarter of fiscal 2010 . QTL earnings before taxes for fiscal 2010 were $3.02 billion, compared to $3.07 billion for fiscal 2009 . QTL
operating margin percentage was 83% in the fiscal 2010 , compared to 85% in fiscal 2009 . The decreases in QTL earnings before taxes and
operating margin percentage were primarily attributable to a higher increase in patent-related costs relative to the increase in licensing revenues.
QWI Segment. QWI revenues for fiscal 2010 were $628 million, compared to $641 million for fiscal 2009 . Revenues
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