Qualcomm FY 4Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

3G/4G device demand continues to grow, particularly in emerging markets

“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. The broad availability of compelling devices at these price tiers is driving demand for, and the migration to, 3G/4G devices.’

Global device shipments will hit 1.5 b in 2015

“Look forward to calendar year 2015, we estimate global 3G/4G device shipments to be approximately 1.5 billion units, up approximately 15% year over year. Turning to 3G/4G device ASPs, the ASP of devices reported to QTL during the fourth quarter of fiscal 2014 was $223 at the midpoint and $225 at the midpoint for the full fiscal 2014.’

2015 guidance reflects:

Our fiscal 2015 guidance reflects the following: continued healthy growth of global 3G/4G devices, particularly in emerging regions, at the mid and low tiers, which impact the financial outlook for both QTL and QCT; continued QTL challenges in China, coupled with increased spending on compliance and enforcement efforts by QTL; prioritize QTC R&D investments to maintain our leadership and balance our long term competitive roadmap with scale efficiencies to succeed across all price tiers, particularly the rapidly growing lower cost segments in emerging regions; a reduction and refocusing of our spend outside of QTC and QTL to a smaller number of potentially larger opportunities; focused efforts on our expanded set of adjacent growth opportunities.

Expect ASPs to fall

“We forecast that the global 3G/4G ASP will further decline by approximately 9% to 10% in fiscal 2015. Although we forecasted a modest year over year decline in the global 3G/4G device ASP at the outset of fiscal 2014, the global 3G/4G device ASP decreased more than we expected in fiscal 2014, driven by accelerated migration from GSM and TD-SCDMA devices to low and midpriced 3G/4G smartphones in emerging regions.”

ASPs should stabilize after 2015

“Beyond fiscal 2015, we expect further declines in the 3G/4G global ASP to moderate as the weighted impact of the factors that are driving the near term declines in ASP ease, and users in emerging regions trade up as they replace their low tier devices.’

Qualcomm at Deutsche Bank Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Still a thirst for innovation in high end smartphones

“If you look at what people are asking us to invest and asking us to do innovation in. There are still a quite a thirst for new innovation, it’s innovation across multiple technology areas, it’s not just one.”

Seeing a desire for “always on” features

“You’re also seeing a desire for a set of features that I think are very similar to what you are starting to see in wearables where something is always on sort of the context awareness category of features, where you have an audio path it’s on all the time or maybe you have a camera that’s doing more than just taking pictures it’s doing some rudimentary form of computer vision.”

There’s still technology delta in the developed world

“we’re seeing a lot of feature delta its still at the high end and in the developed world, even though I mean it’s lower growth than you would have in the first year of smartphone penetration. But we’re still seeing a lot of innovation there.”

In developing markets the phone is people’s primary device to access the internet

“its different than the 2G world where it didn’t move very rapidly, its moving pretty rapidly because remember this is a device that people are using not just for talk and text, they use this in many case the first or primary device to get onto the internet. And so they want a lot of functionality”

Qualcomm at Raymond James Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

“for the first few minutes, I’ll just go back and give you a little bit of a history about how we came into being and why we enjoy the position that we enjoy today.”

“28 years ago, the industry was grappling with an issue that we grapple with today and I think we always will, which was how do we get more spectrum”

“there was that famous McKinsey study that really caused AT&T a divestiture to let the wireless licenses go to the Regional Bell Operating Companies. And McKinsey forecast that by the year 2000 there would be 900,000 wireless users in United States. They were off by a little bit. It was about a 109 million. And that was a key decision for the phone company at break up, as I said to let those licenses go to the Regional Bells.”

“therefore, we’re spectrum constrained and how are we going to get more capacity on these analog networks that are out there, so the industry was making the move to digital. And they were doing that through time division technology.”

“what we said was with CDMA, we think we can do eight to 10 times and maybe even ultimately 30 to 40 times the capacity over the analog networks. And thankfully, we’ve over the years achieved that or even exceeded it.”

“nobody believed that CDMA would work. There is a famous quote from a Stanford professor that said CDMA defied the laws of physics and electrical engineering.’

“it’s really important context, because therefore we were left to do everything on our own. The rest of the industry didn’t believe it would work”

“So we had to start our own chipset business, we had to start our own infrastructure business and had to start our own handset business.”

“like every other startup, we have stories of people mortgaging their homes and literally we got to the point where we were at risk of not making payroll. And so it was the legal team, at that point in time we have been issued I think 50 patents, and they said, well maybe we could go out and drive some license revenue from a couple of these patents and keep the company going.”

“And it was actually our first licensees who said, we know you’re the only ones working on this. I think they handicapped the chances of it ever seeing the light of day as very low. So they said we don’t want to deal with you and your patents again, why don’t you just license them all to us. So that was a grand birth of the portfolio licensing program. So not a well thought out business plan on how to capitalize the company, one of just being opportunistic.”

“Thankfully, the legal team did it one better and said not only will we license you what we have today, but we’ll agree on a period in time going forward that you’ll also get access to the inventions that we create over that period of time. What that’s become is the vast majority of our licensees on evergreen license, where there license agreement renews for the life of the most recently used patent.”

“we’ve become this aggregation of research and development for industry, to where people will even refer to us now as the Bell Labs for wireless in terms of the role that we serve.”

“We look at our phones once every six minutes during waking hours”

“The point is that a phone unlike a computer, the CPU was the focus in the computer, CPU and a phone for us is less than 20% of the actual silicon content. So in wireless, in phones and in tablets, it’s about doing the whole thing well. You can’t just be good in CPU, you have to bring this whole solution together very elegantly.”

“I think its why some coming from the computing space to try to compete with us have been challenged, is they really looked at the modem as a commoditized peripheral and that the heart of device was the CPU.”

“it’s actually where there is a tremendous amount of innovation that’s taken place and a tremendous amount yet to come. So you have to be really good at the modem and there is no question that we’re known for that.”

“If I went back six or seven, eight years ago, we were a modem company, and now you look at the capabilities that we’re putting into the GPU, the type of engineers that we’ve hired over the last five years, while we still look for good modem engineers, have been much more around the software side.”

“I don’t think we get enough credit for being the software business that we actually are.”

“We’re calling it the 1,000x data challenge and the goal is that over the next decade we need to be able to support a 1,000 times the data coming to the device than comes to at today.”

“what happened with voice pricing when you think about in the early 2000s, we want to see the same thing happen with data pricing that we can radically change the economics and make it viable to offer much lower pricing or even getting back to some fixed pricing model, so that consumers don’t have to worry about running up that large bill.”

“Instead of trying to get the signal from outside the building in, our view is that we’re going to see the deployment of these very small base stations, the size of a phone in building, and then that coverage will actually radiate out.”

“much like today you probably have a broadband access point sitting in a closet or in the computer room in your house somewhere that provides Wi-Fi, vision is you’ll have a device that will broadcast wide area coverage as well.”

“we think this dense deployment model is the only way forward to get the kind of economic change that we need in the industry.”

“what that does actually is, it make some of the higher frequency bands useable. Today, the higher you get in the frequency band, the less distance that the signal will travel and therefore you need more base stations if you’re operating in 1.9 instead of 800 megahertz, you need more base stations to provide the same amount of coverage. In this small cell model, that’s exactly what we want. We don’t want the coverage to go too far and cause interference. So therefore it makes these upper spectrum bands usable for something that before previously would have been unthought-of.”

“We can’t think of a device that wouldn’t be better, if it was connected to the network enabled to exchange information.”

“the computing mentality doesn’t work coming down to a device that people don’t want to have to plug in all the time, and as mobile, it doesn’t have coax coming into the back with the gobs of bandwidth. You have to live in a spectrum and tower constrained environment. That’s what we’re good at designing to.”

“I think the days of designing for the desktop are really gone and it’s going to be much more about designing for these highly portable wireless devices giving them access to information in the cloud.”

“if you look at what the phone is capable of today, it knows where it is, it knows whether it’s moving, it can see, it can hear, it will be able to smell soon”

“When I walk into the grocery store, why shouldn’t I have been able to input my shopping list ahead of time, as I go into the grocery store, it recognizes I am there, my grocery store application takes over my phone and leads me isle by isle to item level location and walks me through the store and shops for me. Those are the sorts of things that we want to enable.”

Qualcomm FY 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Gartner estimates that approximately 700 million smartphones were sold in calendar 2012, up 44% year over year. Further, they estimate that in 2017 more than 1.7 billion smartphones will be sold, representing an approximate 20% compound annual growth rate versus a 2012 base.”

“Devices shipped by our licensees in the December quarter were estimated at 279 to 283 million units, with an estimated average selling price of $214 to $220.”

“For calendar year 2013 3G/4G device shipments we now estimate between 1.015 million and 1.085 billion devices will be shipped by our licensees, driven by strong global smartphone demand.”

“I think we saw a little bit of a downward trend in ASPs in Q2, although that was in line with what we expected. As we look back historically the last couple of years, we’ve seen actually ASPs kind of trend down in Q2. But then they’ve tended to trend up in Q3 and Q4. ”

“we have had some struggles with local Chinese companies necessarily paying all the royalties they owe on TDS CDMA units.”

“what I think you’re seeing is kind of as the historical mix in our business has been very modem-centric, and it’s had a particular gross margin associated with it.

As we go into getting more and more content on the phone, which is first coming in the form of application processor, and adding in that functionality, what you’re seeing is, I think, a growth in the raw dollars and the gross margin per MSM, but a reduction in the traditional gross margin percentage.”

“I think the general view is that the 28 nanometer node is likely to be the node that exists for a long time, and will probably sort of the mass market node for some time. We kind of felt that we got on that earlier than anybody else.”

“we’re putting our competitors farther and farther behind, and it’s not just the modem, although everybody’s quite focused on that. But it’s also we’re putting them behind on other areas, graphics, microprocessor design. And that is evidenced by the number of design wins we’ve had, 850 designs launched or announced. 475 more currently in design”