Qualcomm 2014 Annual Report Download - page 27

A decline in global economic conditions or a slow-
down in economic growth, particularly in geographic regions with high concentrations of
wireless voice and data users, could have adverse, wide-ranging effects on demand for our products and for the products and services of our
customers or licensees, particularly equipment manufacturers or others in the wireless communications industry who buy their products, such as
wireless operators. Any prolonged economic downturn may result in a decrease in demand for our products or technologies; the insolvency of
key suppliers; delays in reporting and/or payments from our licensees and/or customers; failures by counterparties; and negative effects on
wireless device inventories. In addition, our customers’ ability to purchase or pay for our products and services and network operators’ ability to
upgrade their wireless networks could be adversely affected by economic conditions, leading to a reduction, cancelation or delay of orders for
our products or services.
Currency fluctuations could negatively affect future product sales or royalty revenues, harm our ability to collect receivables or increase the
U.S. dollar cost of our products or the activities of our foreign subsidiaries and strategic investments.
Our customers sell their products throughout the world in various currencies. Our consolidated revenues from international customers as a
percentage of our total revenues were greater than 90% during each of the last three fiscal years. Adverse movements in currency exchange rates
may negatively affect our business and our operating results due to a number of factors, including, among others:
Failures in our products or services or in the products or services of our customers or licensees, 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 focus on this issue and are taking measures to safeguard our products from cybersecurity threats,
device capabilities continue to evolve, 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. As our
chipset product complexities increase, we are required to migrate to integrated circuit technologies with smaller geometric feature sizes. The
design process interface in new domains of technology is complex and adds risk to manufacturing yields and reliability. Further, 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 products and
services could have an adverse impact on us, on our customers and on the end users of our customers’ products. Such adverse impact could
include product liability claims or recalls, write-offs of the recorded values of our inventories and/or intangible assets; a shift of business to our
competitors; 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 increasingly 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, to date 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
and/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 continue to devote additional resources to the security of our
information technology systems.
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• Our products and those of our customers and licensees that are sold outside the United States may become less price-
competitive, which
may result in reduced demand for those products and/or downward pressure on average selling prices;
• Certain of our revenues, such as royalties, that are derived from licensee or customer sales denominated in foreign currencies could
decrease;
• Our foreign suppliers may raise their prices if they are impacted by currency fluctuations, resulting in higher than expected costs and
lower margins; and/or
• 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.