Qualcomm FY 3Q15 Earnings Call Notes

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Six initiatives to realign the company

Our strategic realignment plan is designed to enable us to extend our core strengths and deliver value for our customers and stockholders in more efficient and powerful ways. The plan has six key initiatives: number one, aggressively right-sizing our cost structure; number two, reviewing financial and structural alternatives that are available to us that may create stockholder value; number three, reaffirming our intent to return significant capital to stockholders; number four, adding new directors with complementary skill sets while reducing the average tenure of our board; number five, further aligning executive compensation with performance and stockholder return objectives; and number six, making disciplined investments to further our leadership positions and build upon our core technologies and capabilities.”

We have been working with a consultant to reduce costs

“we have been working with an independent third-party consultant to conduct a comprehensive review of our cost structure across the company. Based on the results of this review, we are taking actions to substantially reduce costs”

Reducing share based compensation grants

“we are reducing share-based compensation grants across the company. Annual share-based awards will come down by $300 million. To be clear, this $300 million reduction in share-based awards is in addition to the $1.1 billion in other cost reductions. ”

Going to buyback 10B worth of stock

“We remain committed to returning at least 75% of free cash flow to stockholders through dividends and buybacks. In March, we announced that we will repurchase $10 billion of common stock before March 2016.”

8.5 b smartphones should ship between 2015 and 2019

“Cumulative smartphone unit shipments are forecast to be more than 8.5 billion between 2015 and 2019, according to IDC, and we are growing our share of content within devices with new technologies. ”

networking, mobile computing, IoT and automotive are areas of focus

“We have identified networking, mobile computing, IoT, and automotive as the highest return areas and will focus our investments there. In fact, we continue to expand our investment in these growth areas.”

Our design traction in premium tier has not changed

“our design traction in the premium tier has not had any change. So we did cite that we had lower volumes at one vertical OEM, which you could describe it as share loss. But overall, it’s really the fact that we have this concentrated environment and a very large impact on a number of our premium tier customers as a result of that. The other piece is we cited in China that certain handset models using our chipsets had lower demand than was forecasted going into the quarter.”

The whole industry is having trouble making money at the low tier

“”With respect to the low tier, I think the entire industry is actually challenged in terms of making money at the low tier. We’re probably in a better position than most because of the ability to leverage our IP roadmap across the tiers. We’re making some changes in this realignment plan where we’re doing work to try to get the cost per head more in alignment with some of our competitors. But we still think it’s an interesting opportunity for us to go after. And as George mentioned, we are assuming that this aggressive price environment continues with respect to our planning assumption on the realignment plan.”