Qualcomm Conference Call Highlights

Qualcomm, Inc. QCOM reported its fourth quarter earnings on Wednesday. Shares of the company are down 10 percent.

Below are some key highlights from its conference call.

Performance Metrics:

• Despite challenges in the licensing business we delivered record revenues of $26.5 billion and record non-GAAP earnings-per-share, up 17% versus last year.
• Total reported device sales and MSM chipset shipments also set records as our multimode 3G LTE.
• We increased our dividend for the 12th consecutive year and returned $7.1 billion to stockholders in the form of buybacks and cash dividends.
• Looking at the fourth fiscal quarter, we shipped a record number of MSMs, driven by broad-based demand for our 3G and multimode 3G/4G chipsets, particularly in emerging regions.
• We continue to benefit from our tiered roadmap and diversified customer base as MSM chip shipments were up 24% year-over-year.
• QTL was in line with expectations as we continue work out the issues facing the licensing business.
• We made significant progress against our strategic and operational objectives this year.
• First, we set out to compete effectively across all tiers in LTE while driving the modem and AP roadmap to maintain our competitive lead.
• We are very pleased with our design activity in the premium tier including the leading flagship devices.
• The Snapdragon 805 is the first mobile processor to offer system-level Ultra HD support and 4K video capture and playback.
• In addition our fourth-generation modem, the Gobi 9x35 featuring Cat 6 carrier aggregation is now shipping.
• Our overall Wi-Fi handset-related revenues grew more than 40% in fiscal 2014.
• We acquired Wilocity, a leader in the development of 60 GHz chipsets based on the IEEE 802.11ad standard which provides us with the technology to address high bandwidth use cases.
• We announced our second-generation RF360 products and now have over 225 devices launched or in design that incorporate one or more of our RF360 components.
• On the automotive front, we have very strong design traction with our LTE solutions.
• We completed the sale of our Omnitracs business and restructured our Mirasol business.
• And finally, we recently announced our offer to acquire CSR which would complement our current offerings by adding products, channels and customers in the important growth categories of IOE and Automotive infotainment.
• Third, we achieved our operating expense targets while continuing to invest in our leading roadmap and our long-term supply chain initiatives.
• We believe that we are operating at scale and have exited fiscal year 2014 at a lower level of R&D and SG&A spending than last year.
• Finally, we committed to significantly increase our return of capital to stockholders and finished the year well ahead of our target of returning 75% of free cash flow to stockholders.
• Separately, as we note in the 10-K, two competition agencies have recently commenced investigations related to our licensing and our chipset businesses.
• We are fully cooperating with these agencies and believe our practices comply with the laws of their countries.
• But given that these matters are in their early stages, it's difficult to predict what, if anything, will come of them.
• Looking ahead, we have clear strategic priorities for fiscal 2015.
• Resolve the QTL challenges in China, maintain QCTs technology leadership across all tiers, further expand our business into adjacent and new growth opportunities, continue to manage operating expenses, and continue to return capital to stockholders.
• Fundamentally our long term growth drivers remain on track and we are aligning our resources to continue to capture these opportunities.
• Gartner estimates that more than 8 billion smartphones will be sold over the next five year period through calendar 2018.
• The installed base will reach approximately 4.4 billion, representing the largest technology platform on which to innovate and drive upgrade opportunities.
• We believe the smartphone will be central to the growing number of connected things around us and our focus is on aligning our resources to continue to capture these opportunities.
• I would first like to provide an update on our view of global 3G/4G device demand for the remainder of calendar 2014 and 2015.
• Prior to calendar 2014, we believe that our estimates of global 3G/4G devices and reported 3G/4G devices were not materially different.
• Last quarter, however, we introduced the separate global and reported naming conventions in light of the challenges we are experiencing in China.
• We think it's important and helpful to discuss both global and reported 3G/4G device estimates so we that can separately explain our views on our overall demand trend versus the portion of that demand that we expect will be reported to us during the applicable periods.
• We believe that global demand for 3G/4G devices continues to grow at a very healthy pace, particularly in the emerging regions at mid and low price tiers.
• We now have a positive bias to our prior estimate of approximately 1.3 billion units, up approximately 20% year-over-year.
• We estimate that approximately 258 million 3G/4G devices were reported to us during the fourth quarter of fiscal 2014.
• For calendar year 2014, we continue to estimate reported 3G/4G devices will be in the range of 1.04 to 1.13 billion units, which is approximately 215 million units below the global 3G/4G device estimate of approximately 1.3 billion units at the midpoint.
• We forecast that the global 3G/4G ASP will further decline by approximately 9% to 10% in fiscal 2015.