Qualcomm 2012 Annual Report Download - page 27

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
increasing the risk of security failures. Further, 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 manufacturing 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 in our customers’ products
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. 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. While we have identified several incidents of unauthorized access, none have
caused material damage to our business. 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. 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.
During the third quarter of fiscal 2012, we established our QCT segment’s non-United States headquarters in Singapore. We obtained tax
incentives in Singapore, including a tax exemption for the first five years provided that we meet specified employment and incentive criteria in
Singapore. Our Singapore tax rate is expected to increase in fiscal 2017 and again in fiscal 2027 as a result of expiration of these incentives. If
we do not meet the criteria required to benefit from such incentives, our results of operations may be adversely 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 current needs for those earnings to be reinvested offshore as well as estimates that future domestic cash generation will be sufficient to meet
future domestic cash needs for 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
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• Foreign exchange hedging transactions that we engage in to reduce the impact of currency fluctuations 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;
•
We may need additional cash to settle our loan and debenture obligations that are denominated in Indian rupees and the related interest;
•
The U.S. dollar value of our marketable securities that are denominated directly or indirectly in foreign currencies may decline; and
•
Labor and the cost of goods in currencies other than the U.S. dollar may increase, resulting in higher than expected costs.