Qualcomm to Take Up to $175 Million in FLO TV Restructuring Expenses

Qualcomm will incur $125 million to $175 million in restructuring expenses in fiscal 2011 as it positions FLO TV for possible sale, joint venture or wholesale service, executives said on a conference call. Qualcomm suspended direct-to-consumer sales of FLO TV this fall (CED Oct 5 p8), but is in discussions with “several interested parties” about a future direction for the service, CEO Paul Jacobs said. Money budgeted for 2011 will fund FLO TV as it reduces expenses and “better position it for the strategic alternatives” Qualcomm is considering, Jacobs said. Qualcomm Strategic Initiatives (QSI), which includes FLO TV, had $132 million in operating expenses in Q4, the company said.

Qualcomm’s Mirasol display business posted a $180 million operating loss in the fiscal year ended Sept. 26, company executives said. They said operating loss will increase “significantly” as Qualcomm’s begins “limited” volume production of color 5.7-inch displays for e-readers, tablet PCs and other devices. Qualcomm postponed delivery of the displays to 2011 from late this year. Qualcomm and partner Foxconn’s Foxlink are gearing up to produce the displays in Taiwan. Qualcomm’s bi-stable display technology uses pixel elements composed of 10- to 100-micron micro-electromechanical systems with two conductive plates, a thin film stack on a glass substrate and a reflective membrane suspended below. When the membrane is open, the subpixel reflects a color. When applied voltage collapses the membrane, the element turns black. The technology reflects ambient light, is designed for low power consumption and doesn’t require a backlight. “We're very excited about the prospects for this technology,” Jacobs said.

An arbitration panel denied Panasonic’s claims that Qualcomm breached a licensing agreement, Jacobs said. The hearing began in July on Panasonic’s claim that it didn’t owe royalties on WCDMA devices sold after December 2008, or should pay lower ones. Qualcomm has made progress in seeking to resolve licensing disputes and is including some revenue from potential settlements in its forecast for $12.4 billion to $13 billion in revenue in fiscal 2011, Chief Financial Officer William Keitel said. It wasn’t clear if a potential settlement with Panasonic is included in Qualcomm’s projection. Qualcomm had $200 million in unrecognized licensing revenue at the end of the last fiscal year, but that is expected to be “substantially larger” by the end of fiscal 2011, Keitel said.

Qualcomm’s Q4 profit improved to $865 million from $803 million a year earlier as revenue jumped to $2.95 billion from $2.69 billion on strong sales of its CDMA cellphone modems. Qualcomm’s Q4 modem shipments jumped 22 percent to 111 million units as sales within Qualcomm CDMA Technologies increased to $1.86 billion from $1.69 billion. QCT’s earnings before taxes (EBT) grew to $519 million from $508 million. Qualcomm Licensing Technology EBT improved to $754 million from $693 million as revenue rose to $921 million from $837 million. Those from wireless and internet rose to $171 million from $146 million as its EBT loss narrowed to $2 million from $5 million. Total equipment and services revenue increased to $988 million from $824 million.

The company has benefitted from a sharp rise in demand for its Snapdragon processors that are increasingly gaining design wins in cellphones and tablet PCs. Qualcomm developed a dual-core version of the 1 GHz processor and has 10 customers working on tablet PCs “solutions” for them, Jacobs said. The products are expected to ship by mid-2011. Qualcomm also expected to start production of a 28-nanometer version of the Snapdragon next year, he said.