UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark one)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-19528

QUALCOMM Incorporated

Delaware		95-3685934
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
5775 Morehouse Dr., San Diego, California (Address of principal executive offices)		92121-1714 (Zip Code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

     The number of shares outstanding of each of the issuer’s classes of common stock, as of the close of business on July 19, 2010, was as follows:

Class		Number of Shares
Common Stock, $0.0001 per share par value		1,605,194,616

 

 

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Operations			4
Condensed Consolidated Statements of Cash Flows			5
Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk			49
Item 4. Controls and Procedures			51
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			51
Item 1A. Risk Factors			51
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			52
Item 3. Defaults Upon Senior Securities			52
Item 4. [Removed and Reserved]			52
Item 5. Other Information			52
Item 6. Exhibits			52
SIGNATURES
CERTIFICATIONS
EX-10.88
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUALCOMM Incorporated

(In millions, except per share data)
(Unaudited)

		June 27,				September 27,
		2010				2009
ASSETS
Current assets:
Cash and cash equivalents		$	2,541			$	2,717
Marketable securities			7,427				8,352
Accounts receivable, net			798				700
Inventories			446				453
Deferred tax assets			213				149
Other current assets			189				199
Total current assets			11,614				12,570
Marketable securities			7,618				6,673
Deferred tax assets			1,774				843
Property, plant and equipment, net			2,382				2,387
Goodwill			1,476				1,492
Other intangible assets, net			3,040				3,065
Other assets			1,497				415
Total assets		$	29,401			$	27,445
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable		$	640			$	636
Payroll and other benefits related liabilities			433				480
Unearned revenues			601				441
Loan payable to banks			1,061				—
Income taxes payable			1,135				29
Other current liabilities			1,320				1,227
Total current liabilities			5,190				2,813
Unearned revenues			3,587				3,464
Other liabilities			738				852
Total liabilities			9,515				7,129
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.0001 par value; issuable in series; 8 shares authorized; none outstanding at June 27, 2010 and September 27, 2009			—				—
Common stock, $0.0001 par value; 6,000 shares authorized; 1,609 and 1,669 shares issued and outstanding at June 27, 2010 and September 27, 2009, respectively			—				—
Paid-in capital			6,611				8,493
Retained earnings			12,746				11,235
Accumulated other comprehensive income			529				588
Total stockholders’ equity			19,886				20,316
Total liabilities and stockholders’ equity		$	29,401			$	27,445

See Notes to Condensed Consolidated Financial Statements.

QUALCOMM Incorporated

(In millions, except per share data)
(Unaudited)

		Three Months Ended								Nine Months Ended
		June 27,				June 28,				June 27,				June 28,
		2010				2009				2010				2009
Revenues:
Equipment and services		$	1,772			$	1,862			$	5,030			$	4,698
Licensing and royalty fees			934				891				3,009				3,028
Total revenues			2,706				2,753				8,039				7,726
Operating expenses:
Cost of equipment and services revenues			905				864				2,529				2,357
Research and development			649				618				1,892				1,826
Selling, general and administrative			360				377				1,171				1,165
Litigation settlement, patent license and other related items (Note 8)			—				—				—				748
Total operating expenses			1,914				1,859				5,592				6,096
Operating income			792				894				2,447				1,630
Investment income (loss), net (Note 5)			179				90				541				(296	)
Income before income taxes			971				984				2,988				1,334
Income tax expense			(204	)			(247	)			(606	)			(544	)
Net income		$	767			$	737			$	2,382			$	790
Basic earnings per common share		$	0.47			$	0.45			$	1.44			$	0.48
Diluted earnings per common share		$	0.47			$	0.44			$	1.43			$	0.47
Shares used in per share calculations:
Basic			1,629				1,656				1,654				1,653
Diluted			1,642				1,675				1,670				1,668
Dividends per share announced		$	0.19			$	0.17			$	0.53			$	0.49

See Notes to Condensed Consolidated Financial Statements.

QUALCOMM Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)
(Unaudited)

		Nine Months Ended
		June 27,				June 28,
		2010				2009
Operating Activities:
Net income		$	2,382			$	790
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			495				460
Revenues related to non-monetary exchanges			(99	)			(86	)
Income tax provision in excess of income tax payments			80				222
Non-cash portion of share-based compensation expense			453				436
Incremental tax benefit from stock options exercised			(34	)			(54	)
Net realized gains on marketable securities and other investments			(274	)			(57	)
Impairment losses on marketable securities and other investments			102				717
Other items, net			(70	)			(22	)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net			(91	)			2,691
Inventories			7				143
Other assets			(71	)			(17	)
Trade accounts payable			23				(8	)
Payroll, benefits and other liabilities			(161	)			737
Unearned revenues			241				(101	)
Net cash provided by operating activities			2,983				5,851
Investing Activities:
Capital expenditures			(313	)			(617	)
Advance payment on spectrum			(1,064	)			—
Purchases of available-for-sale securities			(7,049	)			(6,497	)
Proceeds from sale of available-for-sale securities			7,354				3,606
Cash received for partial settlement of investment receivables			33				349
Other investments and acquisitions, net of cash acquired			(45	)			(47	)
Change in collateral held under securities lending			—				173
Other items, net			88				6
Net cash used by investing activities			(996	)			(3,027	)
Financing Activities:
Borrowing under loan payable to banks			1,064				—
Proceeds from issuance of common stock			519				276
Incremental tax benefit from stock options exercised			34				54
Repurchase and retirement of common stock			(2,893	)			(285	)
Dividends paid			(872	)			(810	)
Change in obligations under securities lending			—				(173	)
Other items, net			(2	)			—
Net cash used by financing activities			(2,150	)			(938	)
Effect of exchange rate changes on cash			(13	)			(5	)
Net (decrease) increase in cash and cash equivalents			(176	)			1,881
Cash and cash equivalents at beginning of period			2,717				1,840
Cash and cash equivalents at end of period		$	2,541			$	3,721

See Notes to Condensed Consolidated Financial Statements.

QUALCOMM Incorporated

Note 1 – Basis of Presentation

     Financial Statement Preparation. The accompanying interim condensed consolidated financial statements have been prepared by QUALCOMM Incorporated and its subsidiaries (collectively the Company or QUALCOMM), without audit, in accordance with the instructions to Form 10-Q and, therefore, do not necessarily include all information and footnotes necessary for a fair presentation of its consolidated financial position, results of operations and cash flows in accordance with accounting principles generally accepted in the United States. The condensed consolidated balance sheet at September 27, 2009 was derived from the audited financial statements at that date but may not include all disclosures required by accounting principles generally accepted in the United States. The Company operates and reports using a 52-53 week fiscal year ending on the last Sunday in September. The three-month and nine-month periods ended June 27, 2010 and June 28, 2009 included 13 weeks and 39 weeks, respectively.

     In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, which are only normal and recurring, necessary for a fair statement of results of operations, financial position and cash flows. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 27, 2009. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s financial statements and the accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year presentation.

     Revenue Recognition. Beginning in the first quarter of fiscal 2010, the Company elected to early adopt the Financial Accounting Standards Board’s (FASB) amended accounting guidance for revenue recognition that (a) removes tangible products containing software components and non-software components that function together to deliver the product’s essential functionality from the scope of software revenue recognition guidance; and (b) eliminates the use of the residual method for arrangements with multiple deliverables and requires entities to allocate revenue using the relative selling price method. This new guidance applies to applicable transactions originating or arrangements materially modified after September 27, 2009. The adoption of this new guidance did not have a material impact on the timing or pattern of revenue recognition.

     Earnings Per Common Share. Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed by dividing net income by the combination of dilutive common share equivalents, comprised of shares issuable under the Company’s share-based compensation plans and the weighted-average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of share equivalents, which is calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of an option, the amount of compensation cost, if any, for future service that the Company has not yet recognized, and the estimated tax benefits that would be recorded in paid-in capital, if any, when the award is settled are assumed to be used to repurchase shares in the current period. Share-based awards with market conditions are included in the computation of earnings per share if they are dilutive and if the established conditions have been satisfied or would have been satisfied at the reporting date. The incremental dilutive common share equivalents, calculated using the treasury stock method, for the three months and nine months ended June 27, 2010 were 13,039,000 and 16,303,000, respectively. The incremental dilutive common share equivalents, calculated using the treasury stock method, for the three months and nine months ended June 28, 2009 were 18,781,000 and 15,114,000, respectively.

     Employee stock options to purchase approximately 163,146,000 and 145,464,000 shares of common stock during the three months and nine months ended June 27, 2010, respectively, and employee stock options to purchase approximately 134,515,000 and 149,528,000 shares of common stock during the three months and nine months ended June 28, 2009, were outstanding but not included in the computation of diluted earnings per common share because the effect on diluted earnings per share would be anti-dilutive. The computation of diluted earnings per share for the three months and nine months ended June 27, 2010 excluded 574,000 and 314,000 performance-

QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

based stock units issued during fiscal 2010, respectively, because the effect on diluted earnings per share would be anti-dilutive.

     Comprehensive Income. Total comprehensive income consisted of the following (in millions):

		Three Months Ended								Nine Months Ended
		June 27,				June 28,				June 27,				June 28,
		2010				2009				2010				2009
Net income		$	767			$	737			$	2,382			$	790
Other comprehensive income:
Foreign currency translation			(56	)			28				(58	)			(32	)
Noncredit other-than-temporary impairment losses and subsequent changes in fair value related to certain marketable debt securities, net of income taxes			(7	)			97				13				97
Net unrealized (losses) gains on other marketable securities and derivative instruments, net of income taxes			(180	)			665				151				(283	)
Reclassification of net realized gains on marketable securities and derivative instruments included in net income, net of income taxes			(64	)			(85	)			(228	)			(59	)
Reclassification of other-than-temporary losses on marketable securities included in net income, net of income taxes			16				97				63				587
Total other comprehensive (loss) income			(291	)			802				(59	)			310
Total comprehensive income		$	476			$	1,539			$	2,323			$	1,100

Components of accumulated other comprehensive income consisted of the following (in millions):

		June 27,				September 27,
		2010				2009
Noncredit other-than-temporary impairment losses and subsequent changes in fair value related to certain marketable debt securities, net of income taxes		$	65			$	71
Net unrealized gains on other marketable securities, net of income taxes			564				574
Net unrealized losses on derivative instruments, net of income taxes			(2	)			(17	)
Foreign currency translation			(98	)			(40	)
		$	529			$	588

     At June 27, 2010, the accumulated noncredit other-than-temporary impairment losses included $40 million of other-than-temporary losses on marketable debt securities related to factors other than credit, net of income taxes.

     Share-Based Payments. Total estimated share-based compensation expense was as follows (in millions):

QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

		Three Months Ended								Nine Months Ended
		June 27,				June 28,				June 27,				June 28,
		2010				2009				2010				2009
Cost of equipment and services revenues		$	10			$	11			$	30			$	30
Research and development			74				72				221				209
Selling, general and administrative			65				68				202				197
Share-based compensation expense before income taxes			149				151				453				436
Related income tax benefit			(38	)			(24	)			(131	)			(66	)
Share-based compensation expense, net of income taxes		$	111			$	127			$	322			$	370

     The Company recorded $73 million and $68 million in share-based compensation expense during the nine months ended June 27, 2010 and June 28, 2009, respectively, related to share-based awards granted during those periods. In addition, for the nine months ended June 27, 2010 and June 28, 2009, $34 million and $54 million, respectively, were reclassified to reduce net cash provided by operating activities with an offsetting increase in net cash used by financing activities to reflect the incremental tax benefits from stock options exercised in those periods. At June 27, 2010, total unrecognized compensation cost related to non-vested stock options granted prior to that date was $1.2 billion, which is expected to be recognized over a weighted-average period of 2.9 years. Net stock options, after forfeitures and cancellations, granted during the nine months ended June 27, 2010 and June 28, 2009 represented 1.3% and 2.2%, respectively, of outstanding shares as of the beginning of each fiscal period. Total stock options granted during the nine months ended June 27, 2010 and June 28, 2009 represented 1.8% and 2.4%, respectively, of outstanding shares as of the end of each fiscal period.

     During the three months ended June 27, 2010, the Company granted approximately 5,569,000 restricted stock units on a broad basis to employees. The awards include dividend-equivalent rights and generally vest three years from the date of grant. The weighted-average estimated fair value of the employee restricted stock units granted during fiscal 2010 was $35.59 per share, determined based on the fair value of the Company’s common stock on the grant date. At June 27, 2010, approximately 5,551,000 awards were unvested, and the total unrecognized estimated compensation cost related to non-vested restricted stock units granted prior to that date was $176 million, which is expected to be recognized over a weighted-average period of 2.9 years.

Note 2 – Fair Value Measurements

     Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

	•		Level 1 includes financial instruments for which quoted market prices for identical instruments are available in active markets.
	•		Level 2 includes financial instruments for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets with insufficient volume or infrequent transactions (less active markets) or model-driven valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
	•		Level 3 includes financial instruments for which fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including the Company’s own assumptions.

     Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the

QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

     The following table presents the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at June 27, 2010 (in millions):

		Level 1				Level 2				Level 3				Total
Assets
Cash equivalents		$	1,693			$	537			$	—			$	2,230
Marketable securities
U.S. Treasury securities and government-related securities			41				909				—				950
Corporate bonds and notes			—				5,228				—				5,228
Mortgage- and asset-backed securities			—				766				6				772
Auction rate securities			—				—				171				171
Non-investment-grade debt securities			—				3,146				13				3,159
Common and preferred stock			1,014				590				—				1,604
Equity mutual and exchange-traded funds			943				—				—				943
Debt mutual funds			—				2,218				—				2,218
Total marketable securities			1,998				12,857				190				15,045
Derivative instruments			—				15				—				15
Other investments (1)			133				—				—				133
Total assets measured at fair value		$	3,824			$	13,409			$	190			$	17,423
Liabilities
Derivative instruments		$	—			$	20			$	—			$	20
Other liabilities (1)			133				—				—				133
Total liabilities measured at fair value		$	133			$	20			$	—			$	153

     Marketable Securities. With the exception of auction rate securities, the Company obtains pricing information from quoted market prices, recognized independent pricing vendors or multiple pricing vendors, or quotes from brokers/dealers. The Company conducts reviews of its primary pricing vendors to validate that the inputs used in that vendor’s pricing process are deemed to be observable.

     The fair value of other government-related securities and investment- and non-investment-grade corporate bonds and notes is generally determined using standard observable inputs, including matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids and/or offers.

     The fair value of debt mutual funds is determined based on published net asset values. Debt mutual funds are included in Level 2 of the fair value hierarchy if the net asset values are reported other than daily or if the mutual funds are considered illiquid. The Company looks to the characteristics of the underlying collateral to assess the fund’s valuation and to determine whether fair value is determined using observable or unobservable inputs.

     The fair value of mortgage- and asset-backed securities is derived from the use of matrix pricing or cash flow pricing models in which inputs are observable, including contractual terms, maturity, prepayment speeds, credit rating and securitization structure, to determine the timing and amount of future cash flows. Certain mortgage- and asset-backed securities, principally those that are rated below AAA, require use of significant unobservable inputs to estimate fair value, including significant assumptions about prioritization of the payment schedule, default likelihood, recovery rates and prepayment speed.

     The fair value of auction rate securities is estimated by the Company using a discounted cash flow model that incorporates transaction details such as contractual terms, maturity and timing and amount of future cash flows, as well as assumptions related to liquidity and credit valuation adjustments of market participants. Though the vast majority of the securities are pools of student loans guaranteed by the U.S. government, prepayment speeds and

QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

illiquidity discounts are considered significant unobservable inputs. Therefore, auction rate securities are included in Level 3.

     Derivative Instruments. Derivative instruments include foreign currency option contracts to hedge certain foreign currency transactions. Derivative instruments are valued using standard calculations/models that are primarily based on observable inputs, including foreign currency exchange rates, volatilities and interest rates. Therefore, derivative instruments are included in Level 2.

     Activity between Levels of the Fair Value Hierarchy. There were no significant transfers between Level 1 and Level 2 during the nine months ended June 27, 2010 or June 28, 2009. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. The following table includes the activity for marketable securities classified within Level 3 of the valuation hierarchy (in millions):

		Nine Months Ended June 27, 2010
		Auction rate				Other marketable
		securities				securities				Total
Beginning balance of Level 3 marketable securities		$	174			$	31			$	205
Total realized and unrealized gains (losses):
Included in investment income (loss), net			—				5				5
Included in other comprehensive income			3				(2	)			1
Settlements			(6	)			(19	)			(25	)
Transfers into Level 3			—				4				4
Ending balance of Level 3 marketable securities		$	171			$	19			$	190

		Nine Months Ended June 28, 2009
		Auction rate				Other marketable
		securities				securities				Total
Beginning balance of Level 3 marketable securities		$	186			$	25			$	211
Total realized and unrealized (losses) gains:
Included in investment loss, net			(2	)			(7	)			(9	)
Included in other comprehensive income			2				7				9
Settlements			(5	)			(16	)			(21	)
Transfers into Level 3			—				18				18
Ending balance of Level 3 marketable securities		$	181			$	27			$	208

     The Company’s policy is to recognize transfers into and out of levels within the fair value hierarchy at the end of the fiscal month in which the actual event or change in circumstances that caused the transfer occurs. Transfers into Level 3 in the nine-month periods ended June 27, 2010 and June 28, 2009 primarily consisted of debt securities with significant inputs that became unobservable as a result of an increased likelihood of a shortfall in contractual cash flows or a significant downgrade in the credit ratings.

     Nonrecurring Fair Value Measurements. The Company measures certain assets at fair value on a nonrecurring basis. These assets include cost and equity method investments when they are deemed to be other-than-temporarily impaired, assets acquired and liabilities assumed in an acquisition or in a nonmonetary exchange, and property, plant and equipment and intangible assets that are written down to fair value when they are held for sale or determined to be impaired. During the nine months ended June 27, 2010 and June 28, 2009, the Company recorded $7 million and $13 million, respectively, in other-than-temporary impairments on cost and equity method investments, which had carrying values of $15 million and $5 million at June 27, 2010 and June 28, 2009, respectively. The fair value of these investments was measured using financial metrics, comparison to other private and public companies and analysis of the financial condition and near-term prospects of the issuer, including recent financing activities and their capital structure as well as other economic variables. These fair value measurements were classified as Level 3 because the Company used significant unobservable inputs to value them, principally because the issuers are non-public entities.

QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 3 – Marketable Securities

     Marketable securities were comprised as follows (in millions):

		Current								Noncurrent
		June 27,				September 27,				June 27,				September 27,
		2010				2009				2010				2009
Available-for-sale:
U.S. Treasury securities and government-related securities		$	950			$	1,407			$	—			$	—
Corporate bonds and notes			3,852				3,988				1,376				1,204
Mortgage- and asset-backed securities			733				821				39				36
Auction rate securities			—				—				171				174
Non-investment-grade debt securities			21				21				3,138				2,719
Common and preferred stock			54				140				1,550				1,377
Equity mutual and exchange-traded funds			—				—				943				948
Debt mutual funds			1,817				1,975				401				215
		$	7,427			$	8,352			$	7,618			$	6,673

     As of June 27, 2010, the contractual maturities of available-for-sale debt securities were as follows (in millions):

Years to Maturity

No Single

Less Than

One to

Five to

Greater Than

Maturity

One Year

Five Years

Ten Years

Ten Years

Date

Total

1,138

4,768

1,572

784

4,236

12,498

     Securities with no single maturity date included mortgage- and asset-backed securities, auction rate securities, non-investment-grade debt securities and debt mutual funds.

     The Company recorded realized gains and losses on sales of available-for-sale marketable securities as follows (in millions):

		Gross Realized				Gross Realized				Net Realized
		Gains				Losses				Gains
For the three months ended
June 27, 2010		$	96			$	(6	)			90
June 28, 2009			95				(5	)			90
For the nine months ended
June 27, 2010		$	289			$	(17	)			272
June 28, 2009			127				(70	)			57

     Available-for-sale securities were comprised as follows (in millions):

						Unrealized				Unrealized
		Cost				Gains				Losses				Fair Value
June 27, 2010
Equity securities		$	2,342			$	283			$	(78	)		$	2,547
Debt securities			12,061				487				(50	)			12,498
		$	14,403			$	770			$	(128	)		$	15,045
September 27, 2009
Equity securities		$	2,282			$	340			$	(157	)		$	2,465
Debt securities			12,069				530				(39	)			12,560
		$	14,351			$	870			$	(196	)		$	15,025

QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

     The following table shows the gross unrealized losses and fair values of the Company’s investments in individual securities that have been in a continuous unrealized loss position deemed to be temporary for less than 12 months and for more than 12 months, aggregated by investment category (in millions):

		June 27, 2010
		Less than 12 months								More than 12 months
						Unrealized								Unrealized
		Fair Value				Losses				Fair Value				Losses
Corporate bonds and notes		$	887			$	(11	)		$	19			$	—
Auction rate securities			—				—				171				(9	)
Non-investment-grade debt securities			592				(16	)			111				(13	)
Common and preferred stock			338				(31	)			10				(1	)
Equity mutual and exchange-traded funds			705				(46	)			—				—
Debt mutual funds			217				(1	)			1				—
		$	2,739			$	(105	)		$	312			$	(23	)

		September 27, 2009
		Less than 12 months								More than 12 months
						Unrealized								Unrealized
		Fair Value				Losses				Fair Value				Losses
Corporate bonds and notes		$	462			$	(1	)		$	183			$	(5	)
Mortgage- and asset-backed securities			56				(1	)			20				(1	)
Auction rate securities			23				(1	)			151				(10	)
Non-investment-grade debt securities			127				(5	)			263				(15	)
Common and preferred stock			155				(11	)			155				(16	)
Equity mutual and exchange-traded funds			44				(6	)			730				(124	)
		$	867			$	(25	)		$	1,502			$	(171	)

     At June 27, 2010, the Company concluded that the unrealized losses were temporary. Further, for common and preferred stock, equity mutual and exchange-traded funds and debt mutual funds with unrealized losses, the Company has the ability and the intent to hold such securities until they recover, which is expected to be within a reasonable period of time. For debt securities with unrealized losses, the Company does not have the intent to sell, nor is it more likely than not that the Company will be required to sell, such securities before recovery or maturity.

     The following table shows the activity for the credit loss portion of other-than-temporary impairments on debt securities held by the Company (in millions):

		Three Months				Nine Months
		Ended				Ended
		June 27,				June 27,
		2010				2010
Beginning balance of credit losses		$	134			$	170
Credit losses recognized on securities previously not impaired			—				1
Reductions in credit losses related to securities sold			(8	)			(26	)
Accretion of credit losses due to an increase in cash flows expected to be collected			(2	)			(21	)
Ending balance of credit losses		$	124			$	124

QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 4 – Composition of Certain Financial Statement Items

     Accounts Receivable.

		June 27,				September 27,
		2010				2009
		(In millions)
Trade, net of allowances for doubtful accounts of $2 and $4, respectively		$	762			$	639
Long-term contracts			27				38
Other			9				23
		$	798			$	700

     Inventories.

		June 27,				September 27,
		2010				2009
		(In millions)
Raw materials		$	14			$	15
Work-in-process			219				199
Finished goods			213				239
		$	446			$	453

     Intangible Assets. Gross technology-based intangible assets increased by $138 million during the nine months ended June 27, 2010 primarily due to the assignment of certain patents to the Company pursuant to a license agreement entered into in the first quarter of fiscal 2010. The estimated fair value of these patents was determined using the income approach.

     Other Current Liabilities.

		June 27,				September 27,
		2010				2009
		(In millions)
Customer-related liabilities, including incentives, rebates and other reserves		$	648			$	461
Current portion of payable to Broadcom (Note 8)			170				170
Accrued liability to KFTC (Note 8)			—				230
Payable for unsettled securities trades			258				101
Other			244				265
		$	1,320			$	1,227

Note 5 – Investment Income (Loss), Net

		Three Months Ended								Nine Months Ended
		June 27,				June 28,				June 27,				June 28,
		2010				2009				2010				2009
		(In millions)								(In millions)
Interest and dividend income		$	131			$	132			$	405			$	389
Interest expense			(14	)			(8	)			(30	)			(16	)
Net realized gains on marketable securities			90				90				272				57
Net realized gains on other investments			2				—				2				—
Impairment losses on marketable securities			(28	)			(112	)			(95	)			(704	)
Impairment losses on other investments			(1	)			(4	)			(7	)			(13	)
(Losses) gains on derivative instruments			(2	)			(7	)			(3	)			5
Equity in earnings (losses) of investees			1				(1	)			(3	)			(14	)
		$	179			$	90			$	541			$	(296	)

     Impairment losses on marketable securities for the nine months ended June 28, 2009 were comprised of total

QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

other-than-temporary impairment losses of $712 million less $8 million related to the noncredit portion of losses on debt securities recognized in other comprehensive income. The other-than-temporary losses on marketable securities were generally caused by a disruption in U.S. and foreign credit and financial markets that depressed securities values.

Note 6 – Income Taxes

     The Company currently estimates its annual effective income tax rate to be 20% for fiscal 2010, compared to the 23% effective income tax rate in fiscal 2009. The United States federal research and development credit expired on December 31, 2009. Therefore, the Company’s annual effective tax rate for fiscal 2010 only reflects federal research and development credits generated through December 31, 2009. The annual effective tax rate also includes tax expense of $130 million that arises because deferred revenue related to the Company’s 2008 license and settlement agreements with Nokia is taxable in fiscal 2010 but the resulting deferred tax asset will reverse in future years when the Company’s state tax rate will be lower as a result of California tax legislation enacted in fiscal 2009.

     The estimated annual effective tax rate for fiscal 2010 of 20% is less than the United States federal statutory rate primarily due to benefits of 22% related to foreign earnings taxed at less than the United States federal rate, partially offset by state taxes of 5% and tax expense of 4% related to the deferred revenue that is taxable in fiscal 2010, but for which the resulting deferred tax asset will reverse in future years when the Company’s state tax rate will be lower. The prior fiscal year rate was lower than the United States federal statutory rate primarily due to benefits related to foreign earnings taxed at less than the United States federal rate, adjustments to prior year estimates of uncertain tax positions as a result of tax audits during the year and the generation of research and development credits, partially offset by an increase in the valuation allowance related to capital losses, the revaluation of deferred items and state taxes.

     The Internal Revenue Service (IRS) completed its examination of the Company’s tax return for fiscal 2008 and issued a full acceptance letter for fiscal 2009 during the third quarter of fiscal 2010, resulting in an increase to the tax provision of $20 million. The Company is no longer subject to United States federal income tax examinations for years prior to fiscal 2009. The IRS is performing a limited post-filing review of the 2009 tax return to ensure compliance with the agreed tax return positions.

Note 7 – Stockholders’ Equity

     Changes in stockholders’ equity for the nine months ended June 27, 2010 were as follows (in millions):

Balance at September 27, 2009		$	20,316
Net income			2,382
Other comprehensive income			(59	)
Repurchase of common stock			(2,893	)
Net proceeds from the issuance of common stock			516
Share-based compensation			456
Tax benefit from exercise of stock options			29
Dividends			(872	)
Other			11
Balance at June 27, 2010		$	19,886

     Stock Repurchase Program. During the three months and nine months ended June 27, 2010, the Company repurchased and retired 32,388,000 and 76,259,000 shares of the Company’s common stock, respectively, for $1.2 billion and $2.9 billion, respectively. During the nine months ended June 28, 2009, the Company repurchased and retired 8,920,000 shares of the Company’s common stock for $284 million. The Company did not repurchase any shares during the three months ended June 28, 2009. On March 1, 2010, the Company announced that it had been authorized to repurchase up to $3.0 billion of the Company’s common stock, and $1.8 billion of that amount remained available at June 27, 2010. The stock repurchase program has no expiration date. Since June 27, 2010, the Company has repurchased and retired 3,529,000 shares of the Company’s common stock for $122 million.

     Dividends. On March 1, 2010, the Company announced an increase in its quarterly cash dividend per share of common stock from $0.17 to $0.19, which was effective for quarterly dividends payable after March 28, 2010. On

QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

July 8, 2010, the Company announced a cash dividend of $0.19 per share on the Company’s common stock, payable on September 24, 2010 to stockholders of record as of August 27, 2010. Cash dividends announced in the nine months ended June 27, 2010 and June 28, 2009 were as follows (in millions, except per share data):

		2010								2009
		Per Share				Total				Per Share				Total
First quarter		$	0.17			$	284			$	0.16			$	264
Second quarter			0.17				279				0.16				264
Third quarter			0.19				309				0.17				282
Total		$	0.53			$	872			$	0.49			$	810

Note 8 – Commitments and Contingencies

     Litigation. Tessera, Inc. v. QUALCOMM Incorporated: On April 17, 2007, Tessera filed a patent infringement lawsuit in the United States District Court for the Eastern Division of Texas and a complaint with the United States International Trade Commission (ITC) pursuant to Section 337 of the Tariff Act of 1930 against the Company and other companies, alleging infringement of two patents relating to semiconductor packaging structures and seeking monetary damages and injunctive and other relief. The District Court action is stayed pending resolution of the ITC proceeding, including appeals. The U.S. Patent and Trademark Office’s (USPTO) Central Reexamination Unit has issued office actions rejecting all of the asserted patent claims on the grounds that they are invalid in view of certain prior art and has made these rejections final. Tessera has appealed the rejections to the Board of Appeals and Interferences. On December 1, 2008, the Administrative Law Judge (ALJ) ruled that the patents are valid but not infringed. On May 20, 2009, however, the ITC reversed the ALJ’s determination that the patents were not infringed, and it issued the following remedial orders: (1) a limited exclusion order that bans the Company and the other named respondents from importing into the United States the accused chip packages (except to the extent those products are licensed) and (2) a cease and desist order that prohibits the Company from engaging in certain domestic activities respecting those products. The President declined to review the decision. The Company and other respondents have appealed. The ITC and the appeals court declined to stay the ITC’s decision pending appeal. The appellate briefing is complete and oral arguments were held on June 9, 2010. The appeals court decision is expected within the next several months. The Company has shifted supply of accused chips for the United States market to a licensed supplier, Amkor. A licensed source of supply permits the Company to continue to supply the United States market without interruption. The subject patents expire on September 24, 2010, at which time the ITC orders will cease to be operative.

     Korea Fair Trade Commission Complaint: Two U.S. companies (Texas Instruments and Broadcom) and two South Korean companies (Nextreaming and Thin Multimedia) filed complaints with the Korea Fair Trade Commission (KFTC) alleging that certain of the Company’s business practices violate South Korean antitrust regulations. As a result of its agreement with the Company, Broadcom withdrew its complaint to the KFTC in May 2009. After a hearing, the KFTC announced its ruling via press release in July 2009. On January 4, 2010, the KFTC issued its written decision, explaining its ruling that the Company violated South Korean law by offering certain discounts and rebates for purchases of its CDMA chips and for including in certain agreements language requiring the continued payment of royalties after all licensed patents have expired. The KFTC levied a fine of 273.2 billion Korean won, which was accrued in fiscal 2009 (Note 4) and paid in the second quarter of fiscal 2010, and ordered the Company to cease the practices at issue. In February 2010, the Company filed a complaint against the KFTC with the Seoul High Court appealing the KFTC’s written decision. The Company does not anticipate that the cease and desist remedies ordered will have a material effect on the results of its operations. In July 2009, the KFTC also announced that it would continue its review of the Company’s integration of multimedia functions into its chips, but it has not announced any decisions in that regard. The Company believes that its practices do not violate South Korean competition law, are grounded in sound business practice and are consistent with its customers’ desires.

     Japan Fair Trade Commission Complaint: The Japan Fair Trade Commission (JFTC) received unspecified complaints alleging that the Company’s business practices are, in some way, a violation of Japanese law. On September 29, 2009, the JFTC issued a cease and desist order (CDO) concluding that the Company’s Japanese licensees were forced to cross-license patents to the Company on a royalty-free basis and were forced to accept a

QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

provision under which they agreed not to assert their essential patents against the Company’s other licensees who made a similar commitment in their license agreements with the Company. The CDO seeks to require the Company to modify its existing license agreements with Japanese companies to eliminate these provisions while preserving the license of the Company’s patents to those companies. The Company disagrees with the conclusions that it forced its Japanese licensees to agree to any provision in the parties’ agreements and that those provisions violate Japan’s Anti-Monopoly Act. The Company has invoked its right under Japanese law to an administrative hearing before the JFTC. In February 2010, the Tokyo High Court granted the Company’s motion and issued a stay of the CDO pending the administrative hearing before the JFTC. The JFTC has had three hearing days to date, with additional hearing days scheduled for August and October 2010.

     Icera Complaint to the European Commission: On June 7, 2010, the European Commission (the Commission) notified and provided the Company with a redacted copy of a complaint filed with the Commission by Icera, Inc. alleging that the Company has engaged in anticompetitive activity. The Company has been asked by the Commission to submit a preliminary response to the portions of the Complaint disclosed to it, and the Company expects to submit its response in July 2010. The Company will cooperate fully with the Commission.

     Panasonic Arbitration: On August 5, 2009, Panasonic filed an arbitration demand alleging that it does not owe royalties, or owes less royalties, on its WCDMA subscriber devices sold on or after December 21, 2008, and that the Company breached the license agreement between the parties as well as certain commitments to standards setting organizations. On January 31, 2010, Panasonic amended the arbitration demand to include claims based on alleged misrepresentations and the Japanese Antimonopoly Act and increased its claim for damages to include royalties it has paid on its WCDMA subscriber devices sold prior to December 21, 2008. The arbitration demand seeks declaratory relief regarding the amount of royalties due and payable by Panasonic, as well as the return of certain royalties it had previously paid. The Company has responded to the arbitration demand, denying the allegations and requesting judgment in its favor on all claims. The arbitration hearing will proceed in phases. The first phase hearing began on July 12, 2010. Additional phases have not yet been scheduled. Although the Company believes Panasonic’s claims are without merit, it has deferred the recognition of revenue related to WCDMA subscriber unit royalties reported and paid by Panasonic in the fourth quarter of fiscal 2009 and the first nine months of fiscal 2010.

     Other: The Company has been named, along with many other manufacturers of wireless phones, wireless operators and industry-related organizations, as a defendant in purported class action lawsuits, and individually filed actions pending in federal court in Pennsylvania and Washington D.C. superior court, seeking monetary damages arising out of its sale of cellular phones.

     While there can be no assurance of favorable outcomes, the Company believes the claims made by other parties in the foregoing matters are without merit and will vigorously defend the actions. The Company has not recorded any accrual for contingent liabilities associated with the legal proceedings described above based on the Company’s belief that liabilities, while possible, are not probable. Further, any possible range of loss cannot be reasonably estimated at this time. The Company is engaged in numerous other legal actions not described above arising in the ordinary course of its business and, while there can be no assurance, believes that the ultimate outcome of these actions will not have a material adverse effect on its operating results, liquidity or financial position.

     Litigation Settlement, Patent License and Other Related Items. On April 26, 2009, the Company entered into a Settlement and Patent License and Non-Assert Agreement with Broadcom. The Company agreed to pay Broadcom $891 million, of which $373 million was paid through June 27, 2010, and the remainder will be paid ratably through April 2013. The Company recorded a pre-tax charge of $783 million related to this agreement during fiscal 2009, including $748 million recorded in the second quarter of fiscal 2009. At June 27, 2010, the carrying value of the liability was $495 million, which also approximated the fair value of the contractual liability, net of imputed interest.

     India Spectrum Acquisition and Related Debt. In June 2010, the Company won a 20 MHz slot of Broadband Wireless Access (BWA) spectrum in four telecom circles in India as a result of the completion of the BWA spectrum auction. The Company expects that licenses to operate wireless networks on this spectrum will be assigned to the Company by December 2010 with an initial license period of 20 years. At June 27, 2010, the Company had a $1.06 billion advance payment included in noncurrent other assets related to this spectrum. The Company will amortize the spectrum licenses over the remaining license period commencing upon the commercial launch of wireless services in India, which is expected to occur within five years of the assignment date. The Company’s goal

QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

is to attract one or more operator partners into a venture (or ventures) for construction of an LTE network in compliance with the Indian government’s rollout requirement for the BWA spectrum, and then to exit the venture(s). The manner and timing of such exit will be dependent upon a number of factors, such as market conditions and regulatory considerations, among others.

     In June 2010, in connection with the Indian BWA spectrum purchase, the Company entered into a bank loan agreement that is denominated in Indian rupees. The loan is payable in full in December 2010. The loan has a fixed interest rate of 6.75% per year with interest payments due monthly. At June 27, 2010, the carrying value of the loan was $1.06 billion, which approximated its fair value.

     Indemnifications. In general, the Company does not agree to indemnify its customers and licensees for losses sustained from infringement of third-party intellectual property. However, the Company is contingently liable under certain product sales, services, license and other agreements to indemnify certain customers against certain types of liability and/or damages arising from qualifying claims of patent infringement by products or services sold or provided by the Company. The Company’s obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments made by the Company. These indemnification arrangements are not initially measured and recognized at fair value because they are deemed to be similar to product warranties in that they relate to claims and/or other actions that could impair the ability of the Company’s direct or indirect customers to use the Company’s products or services. Accordingly, the Company records liabilities resulting from the arrangements when they are probable and can be reasonably estimated. Reimbursements under indemnification arrangements have not been material to the Company’s consolidated financial statements. The Company has not recorded any accrual for contingent liabilities at June 27, 2010 associated with these indemnification arrangements, other than negligible amounts for reimbursement of legal costs, based on the Company’s belief that additional liabilities, while possible, are not probable. Further, any possible range of loss cannot be estimated at this time.

     Purchase Obligations. The Company has agreements with suppliers and other parties to purchase inventory, other goods, services and long-lived assets. Noncancelable obligations under these agreements at June 27, 2010 for the remainder of fiscal 2010 and for each of the subsequent four years from fiscal 2011 through 2014 were $915 million, $365 million, $119 million, $42 million and $15 million, respectively, and $86 million thereafter. Of these amounts, for the remainder of fiscal 2010 and for fiscal 2011, commitments to purchase integrated circuit product inventories comprised $809 million and $136 million, respectively.

     Leases. The Company leases certain of its facilities and equipment under noncancelable operating leases, with terms ranging from less than one year to 35 years and with provisions in certain leases for cost-of-living increases. The Company leases certain property under capital lease agreements that expire at various dates through 2043. Capital lease obligations are included in other liabilities. The future minimum lease payments for all capital leases and operating leases at June 27, 2010 were as follows (in millions):

		Capital				Operating
		Leases				Leases				Total
Remainder of fiscal 2010		$	4			$	16			$	20
2011			16				91				107
2012			16				64				80
2013			16				35				51
2014			16				26				42
Thereafter			440				244				684
Total minimum lease payments		$	508			$	476			$	984
Deduct: Amounts representing interest			291
Present value of minimum lease payments			217
Deduct: Current portion of capital lease obligations			2
Long-term portion of capital lease obligations		$	215

QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 9 — Segment Information

     The Company is organized on the basis of products and services. The Company aggregates four of its divisions into the Qualcomm Wireless & Internet segment. Reportable segments are as follows:

	•		Qualcomm CDMA Technologies (QCT) — develops and supplies integrated circuits and system software for wireless voice and data communications, multimedia functions and global positioning system products based on its CDMA technology and other technologies;
	•		Qualcomm Technology Licensing (QTL) — grants licenses to use portions of the Company’s intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products, including, without limitation, products implementing cdmaOne, CDMA2000, WCDMA, CDMA TDD (including TD-SCDMA), GSM/GPRS/EDGE and/or OFDMA standards and their derivatives, and collects license fees and royalties in partial consideration for such licenses;
	•		Qualcomm Wireless & Internet (QWI) — comprised of:

	•		Qualcomm Internet Services (QIS) — provides content enablement services for the wireless industry and push-to-talk and other products and services for wireless network operators;
	•		Qualcomm Government Technologies (QGOV) — provides development, hardware and analytical expertise to United States government agencies involving wireless communications technologies;
	•		Qualcomm Enterprise Services (QES) — provides satellite- and terrestrial-based two-way data messaging, position reporting, wireless application services and managed data services to transportation and logistics companies and other enterprise companies; and
	•		Firethorn — builds and manages software applications that enable financial institutions and wireless operators to offer mobile commerce services.

•

Qualcomm Strategic Initiatives (QSI) — manages the Company’s strategic investment activities, including FLO TV Incorporated (FLO TV), the Company’s wholly-owned wireless multimedia operator subsidiary. QSI makes strategic investments in early stage companies and in wireless spectrum, such as the BWA spectrum recently won in the auction in India, that the Company believes will open new markets for CDMA and OFDMA technologies, support the design and introduction of new CDMA and OFDMA products or possess unique capabilities or technology.

     The Company evaluates the performance of its segments based on earnings (loss) before income taxes (EBT). EBT includes the allocation of certain corporate expenses to the segments, including depreciation and amortization expense related to unallocated corporate assets. Certain income and charges are not allocated to segments in the Company’s management reports because they are not considered in evaluating the segments’ operating performance. Unallocated income and charges include certain investment income (loss), certain share-based compensation and certain research and development expenses and marketing expenses that were deemed to be not directly related to the businesses of the segments. The table below presents revenues and EBT for reportable segments (in millions):

QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

																		Reconciling
		QCT				QTL				QWI				QSI				Items				Total
For the three months ended:
June 27, 2010
Revenues		$	1,691			$	847			$	162			$	6			$	—			$	2,706
EBT			404				673				6				(41	)			(71	)			971
June 28, 2009
Revenues		$	1,786			$	807			$	148			$	9			$	3			$	2,753
EBT			548				663				(3	)			(66	)			(158	)			984
For the nine months ended:
June 27, 2010
Revenues		$	4,835			$	2,738			$	456			$	9			$	1			$	8,039
EBT			1,173				2,266				14				(283	)			(182	)			2,988
June 28, 2009
Revenues		$	4,436			$	2,769			$	494			$	22			$	5			$	7,726
EBT			933				2,376				25				(266	)			(1,734	)			1,334

     Reconciling items in the previous table were as follows (in millions):

		Three Months Ended								Nine Months Ended
		June 27,				June 28,				June 27,				June 28,
		2010				2009				2010				2009
Revenues
Elimination of intersegment revenue		$	(1	)		$	(4	)		$	(7	)		$	(10	)
Other nonreportable segments			1				7				8				15
Reconciling items		$	—			$	3			$	1			$	5
Earnings (losses) before income taxes
Unallocated cost of equipment and services revenues		$	(10	)		$	(11	)		$	(30	)		$	(30	)
Unallocated research and development expenses			(95	)			(104	)			(300	)			(283	)
Unallocated selling, general and administrative expenses			(74	)			(70	)			(218	)			(220	)
Unallocated litigation settlement			—				—				—				(748	)
Unallocated investment income (loss), net			169				79				535				(297	)
Other nonreportable segments			(61	)			(50	)			(166	)			(152	)
Intracompany eliminations			—				(2	)			(3	)			(4	)
Reconciling items		$	(71	)		$	(158	)		$	(182	)		$	(1,734	)

     During the three months and nine months ended June 27, 2010, unallocated research and development expenses included $74 million and $221 million, respectively, and unallocated selling, general and administrative expenses included $65 million and $202 million, respectively, of share-based compensation expense. During the three months and nine months ended June 28, 2009, unallocated research and development expenses included $72 million and $209 million, respectively, and unallocated selling, general and administrative expenses included $68 million and $197 million, respectively, of share-based compensation expense. Unallocated cost of equipment and services revenues was comprised entirely of share-based compensation expense.

     Revenues from external customers and intersegment revenues were as follows (in millions):

QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

		QCT				QTL				QWI				QSI
For the three months ended:
June 27, 2010
Revenues from external customers		$	1,691			$	847			$	162			$	6
Intersegment revenues			—				—				—				—
June 28, 2009
Revenues from external customers		$	1,784			$	807			$	147			$	9
Intersegment revenues			2				—				1				—
For the nine months ended:
June 27, 2010
Revenues from external customers		$	4,828			$	2,738			$	456			$	9
Intersegment revenues			7				—				—				—
June 28, 2009
Revenues from external customers		$	4,430			$	2,767			$	491			$	22
Intersegment revenues			6				2				3				—