Qualcomm Earnings Call NUGGETS: Licensing Focus on Mirasol, Balance Between Profitability and Growth
Licensing Focus on Mirasol
T. Michael Walkley – Canaccord Genuity: Bill, just two questions for me. One just on mirasol going to a licensing model, could you remind us what impact was mirasol might have had to earnings this year and how that business model might change? Then just on the higher level on the royalty side, much better than expected QTL ASPs, but there’s certain smartphones that are dominating the high end of the market, so with that coming more into the holiday season, would you expect us to see ASPs drop may be for the next two quarters and recover again into the March quarter given QTLs reported quarter, and just trying to get a feel for the new cadence of ASPs as that might be tied to certain high-end smartphone launches?
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Steve Mollenkopf – President and COO, QUALCOMM; President, QUALCOMM CDMA Technologies: Sure Mike on mirasol we did announce a shift in our focus, bit more of a licensing focus number one and number two commercialization, we’re going to be focused on certain mirasol products. The impact for the year, this fiscal year will be relatively muted. Since we’re largely through the year, but we do expect some changes to be taking affect for fiscal ’13. On royalty side, yes we Mike we do expect quite a strong December quarter for the QCT business and we expect a very large increase in the overall shipments of 3G/4G devices and that will then, should extend into a strong second fiscal quarter for the QTL business. On the ASP front, I think it’s always prudent to be cautious on ASPs rising we do, but I think a reasonable expectation is low single-digit decrease on an annual basis.
Balance Between Profitability and Growth
Tim Long – BMO Capital Markets: Thank you, just getting back to the chip business I think you said ASPs went up and they are expected to go up again next quarter, just looking at the profitability there, obviously the volumes hurt, but it looks to me by my calculations we have another tick down in gross margin. So I am just curious what would be causing the gross margin pressures still is it just competition and then you did mention 28 nanometer helping the ASP. I am curious both on ASP and gross margin as we get into Q3 and really calendar Q4 when the volumes are fully there how should that impact both ASP and gross margins and how much of that will be passed through the model and how much will be used to maybe accelerate the QRD program. So if you could help us talk about the balance between the profitability and growth as we transition to 28-nanometer?
William E. Keitel – EVP and CFO: Sure, I’ll take a stab at here, but others might want to chime in. On the chip ASPs yeah we do expect a sequential increase from Q3 to Q4. There is of course pressure on the gross margins we’ve been seeing that now for some time. It’s largely consistent with our expectations, no real surprises there. But we’ve added into the business mix what has traditionally been lower gross margin products, number one. Number two as we’re going more and more into emerging market it does have a lower cost profile and price profile. So that puts pressure on it. But I mean aside from the supply shortages and channel inventory corrections, we’ve been able to sustain still a pretty rich operating margin in this environment of pressure on the gross margins. 28-nanometer I think fits much into that fold, I won’t comment directly on the gross margins of 28-nanometer, but I think you’re aware we have stated in the past that we have been pricing pretty aggressively, but nonetheless these are very rich products and we think we’re quite a distance ahead of the competition as well. So, I do think it will be a nice positive to our business as we ramp the 28-nanometer here.