Qualcomm Incorporated · NASDAQ:QCOM
Qualcomm — Proxy Contest (January 2018)
44 slides from Qualcomm's proxy contest presentation, Jan 16, 2018
Slide 1: A Clear Roadmap for Value Creation
January 16, 2018 A Clear Roadmap for Value Creation
Slide 2: Additional information and safe harbor
Additional information and safe harbor ADDITIONAL INFORMATION CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Qualcomm has filed a definitive proxy statement and WHITE proxy card with the U.S. Securities and Exchange Any statements contained in this presentation that are not historical facts ar
Slide 3: Qualcomm drives stockholder value through technology and semiconductor leadership
Qualcomm drives stockholder value through technology and semiconductor leadership Robust technology and Innovation Leadership IP creation Enabled Ecosystem Standards QTL IP SoC leadership leadership Low Power Gigabit Camera Processing LTE modem Global Early deployment investment Connectivity RFFE GP
Slide 4: Qualcomm Overview
Qualcomm Overview Fiscal 2017 Key Metrics $23.2B QTL-Licensing Non-GAAP(1) revenues $6.4B(3) 300+ Revenues Global 3G/4G licensees $6.8B Non-GAAP operating cash flow QCT-Semiconductors $16.5B 804M $4.28 Non-GAAP diluted earnings per share Revenues MSM™ chip shipments (EPS)(2,4) (1) (2) (3) (4) See fo
Slide 5: Qualcomm committed to deliver compelling value
Qualcomm committed to deliver compelling value Organic growth driven by strength in Android, China, RFFE, Compute, IoT and Auto High confidence in $1B new cost reductions in addition to the $500M of NXP cost synergies $6.75 – $7.50 of FY19 Non-GAAP(1) EPS(2) Non-GAAP EPS $1.50/share accretion from N
Slide 6: High confidence in $6.75 - $7.50 Non-GAAP FY19 EPS
High confidence in $6.75 - $7.50 Non-GAAP(1) FY19 EPS(2) Non-GAAP EPS, Before $5.25 Includes $1B cost reduction program Impact of Licensing Includes accretion from NXP or share repurchase Resolutions Excludes royalty revenues and certain product revenues from Apple and other licensee in dispute Lice
Slide 7: Successfully executing strategy to address $150B SAM
Successfully executing strategy to address $150B SAM • First 5G modem and • RF360 joint venture • FY17 $3B Revenues • Shipping Datacenter Key data call • Leading in Android and completes portfolio • Tier 1 design wins >25% YoY Revenue growth • $3B+ FY17 Auto backlog 10nm product Milestones China OEM
Slide 8: Growing and diversifying Qualcomm's product revenues
Growing and diversifying Qualcomm’s product revenues 79% YoY average EBT growth last 6 quarters through FY17 QCT 52% YoY earnings growth in FY17 $6B product revenues, 25% growth YoY in FY17 China 2x our Apple product revenues today Expected to contribute $7B - $8B in revenues by FY19 New opportuniti
Slide 9: QCT: Strong business momentum and margin expansion
QCT: Strong business momentum and margin expansion Revenues EBT EBT Margin FY16 FY17 7% Q3 Q4 Q1 Q2 Q3 Q4 ~500bps 52% YoY EBT Growth Margin Expansion Avg. Qtr YoY EBT Growth: 79% $15B $16B $1.8B $2.7B 12% 17% Avg. Qtr YoY EBT Margin Growth: ~500 bps FY16 FY17 FY16 FY17 FY16 FY17 Growth drivers in pl
Slide 10: China: Qualcomm well positioned to benefit from favorable trends
China: Qualcomm well positioned to benefit from favorable trends 3G/4G/5G global OEM shipments China domestic handset price tiers QCT China OEM product revenues CAGR Low 17% $8B Non Unit Unit $6B China % OEMs % Mid $4B QCT High China QCT OEMs Premium FY15 FY17 FY22e FY15 FY17 FY15 FY17 FY19e • Chine
Slide 11: New opportunities: Gaining share with leading solutions
New opportunities: Gaining share with leading solutions Significant revenue growth pre-NXP acquisition RFFE Auto IoT* Compute Networking 9 RF360 JV 9 >$3B of FY17 backlog 9 Leader in advanced 9 Product launched 9 #1 Home and Enterprise 9 Tier 1 design wins 9 #1 Telematics computing and December 2017
Slide 12: Margin profile benefits from planned cost reductions
Margin profile benefits from planned cost reductions Strategic Realignment Plan Annual Run Rate Exiting FY17 FY19 Run Rate $1.1 Realignment of $ Billions $7.3 $0.6 M&A SG&A spend Non-product $6.2 SRP M&A related Cost goal of Revenues Refocus of spend 5G acceleration against new Apple litigation Non-
Slide 13: Resolving licensing disputes drives substantial value not reflected in stock price
Resolving licensing disputes drives substantial value not reflected in Qualcomm’s stock price Our position on Apple / regulatory issues Value at stake • Binding long-term agreements with Apple’s contract manufacturers $5B - $7B+ in catch-up royalties during • Apple/other licensee seeking terms below
Slide 14: Qualcomm model delivers significant long-term value
Qualcomm model delivers significant long-term value FY2019e Long-Term Targets Revenues $35B – $37B 6% - 8% annual growth Non-GAAP(1) 35% – 37% 40% Operating Margin % Non-GAAP EPS(2) $6.75 – $7.50 2x revenue growth Maintain dividend growth and anti-dilutive Continued commitment to dividend policy Cap
Slide 15: Broadcom's proposal: undervalues Qualcomm / very high risk
Broadcom’s proposal: undervalues Qualcomm / very high risk Standalone FY19 Non-GAAP(1) EPS(2) expected to be $6.75 – $7.50 Dramatically undervalues Broadcom proposing a P/E multiple of ~10x on estimated FY19 Non-GAAP EPS Qualcomm SOX P/E multiple is 19x*; precedent transaction P/E multiple is 22x* N
Slide 16: Catalysts to Sustained Growth
Catalysts to Sustained Growth 16
Slide 17: Qualcomm is the critical enabler to ecosystem partners
Qualcomm is the critical enabler to ecosystem partners China Android Windows 50% global 3G/4G handset shipments 80% of global handset shipments 80% of PC share growing 9% annually growing 6% annually (iOS growing 2%) Primary chip supplier for leading OEMs Primary chip supplier for leading OEMs Prima
Slide 18: Qualcomm is making 5G a reality in 2019
Qualcomm is making 5G a reality in 2019 China and U.S. driving hard to 5G, likely to accelerate ramp China driving early adoption of 5G as a priority U.S. names 5G as national security priority The world’s first announced 5G Qualcomm go-to partner connection on a mobile chipset for infrastructure ve
Slide 19: 5G is built upon Qualcomm's inventions
5G is built upon Qualcomm’s inventions Important Qualcomm contributions Why is this important? Scalable OFDM- • Dynamically and efficiently accesses diverse spectrum bands to deliver 5G data rates based air interface Flexible slot-based • Enables ultra-reliable communications with ultra low-latency
Slide 20: Technology transitions create significant returns for Qualcomm
Technology transitions create significant returns for Qualcomm 3G to 4G transition drove significant revenues and earnings During 3G to 4G transition, Qualcomm Captured 80%+ share of units 5G starting in 2019 revenues more than doubled during first 3 years of technology transition from 3G to 4G Reve
Slide 21: Qualcomm's mobile technology is core to a revolution driven by convergence
Qualcomm’s mobile technology is core to a revolution being driven by convergence and interconnection Advanced, Low Mobile Connectivity Security Power Computing Compute Automotive 5G IoT and Security Datacenter Note: SAM (Serviceable Addressable Market) excludes QTL; combination of third party and in
Slide 22: QTL
QTL Sustainable, High-Margin Business
Slide 23: QTL: Leading IP and licensing position
QTL: Leading IP and licensing position Global 3G/4G device sales(A) QTL revenues(3) and EBT 13% annual revenue growth, 12% annual EBT growth $8 $300B $68B $7 (3) Cumulative revenues $6 $5 $58B Cumulative EBT $4 $3 87% $1B $2 Average EBT margin $1B $30B $1 $0 Apple / 2004 2017 2004 2005 2006 2007 200
Slide 24: Why Qualcomm leads technology transitions
Why Qualcomm leads technology transitions Robust Global technology/ deployment IP creation Standards at scale • Chips + licensing make us a leader in standards leadership IP leadership • Drives foundational IP that is the basis for each Product generational technology strength • Creates robust licen
Slide 25: Proven track record of managing disputes and short-term disruptions
Proven track record of managing disputes and short-term disruptions while delivering long-term gains Successfully evolving the QTL licensing business model over time QTL quarterly revenues(3) China NDRC(B) New framework for IP Nokia(A) licensing in China Apple(C) $3000 Record 3G / 4G $2500 shipments
Slide 26: Key litigation milestones occur before potential Broadcom regulatory process is completed
Key litigation milestones occur before potential Broadcom regulatory process is completed Fall Late Early January 2018 2018 / 2019 2019 Key inflection points could lead to resolution through litigation or business negotiations. Patent infringement Trial Apple / CM case Target completion of investiga
Slide 27: Highly Qualified Board
Highly Qualified Board Depth and Breadth of Experience
Slide 28: Qualcomm has a world-class Board of Directors
Qualcomm has a world-class Board of Directors • Assembled to deliver requisite expertise to drive strategy into next period of growth Business leaders • Strong mix of industry perspectives, operating expertise, stockholder views, financial expertise, corporate restructuring experience, with track re
Slide 29: Qualcomm's board has highly relevant expertise
Board members Blue-chip experience M&A experience • Barbara T. Alexander • Jeffrey W. Henderson • Thomas W. Horton • Paul E. Jacobs • Ann M. Livermore • Harish Manwani • Mark D. McLaughlin • Steve Mollenkopf • Clark T. “Sandy” Randt, Jr. Investor perspectives • Francisco Ros • Anthony J. Vinciquerra
Slide 30: The right skills and experience to guide Qualcomm
The right skills and experience to guide Qualcomm Public Year added Financial/ CEO/CFO/COO PE/Investing to the Board Accounting Operational Experience Industry International Experience M&A Experience Barbara T. Alexander 2006 Jeffrey W. Henderson 2016 Thomas W. Horton 2008 Paul E. Jacobs 2005 Ann M.
Slide 31: Governance policies aligned with stockholders
Governance policies aligned with stockholders Annually-elected Four new independent directors directors added in past three years Lead independent 9 of 11 directors are director independent Adopted proxy Majority voting (in uncontested access in 2016 elections) Qualcomm Board is dedicated to creatin
Slide 32: Broadcom Proposal: Low Value and High Risk
Broadcom Proposal: Low Value and High Risk Substantial regulatory risk
Slide 33: Broadcom's proposal dramatically undervalues Qualcomm
Broadcom’s proposal dramatically undervalues Qualcomm • Broadcom’s opportunistic proposal does not reflect • At $70 / share Broadcom’s proposal reflects ~10x substantial value creation opportunity for Qualcomm our estimated FY19 Non-GAAP EPS stockholders (1) (2) • The SOX index currently trades at 1
Slide 34: Regulatory approval highly uncertain; at least 18 month process
Regulatory approval highly uncertain; at least 18 month process • Largest tech transaction ever, combining the #1 • Divestitures of embedded products within SOCs (Qualcomm) and #2 (Broadcom) largest fabless significantly more difficult semiconductor companies* • Challenging to find buyers that can “
Slide 35: Broadcom's attempt to install a conflicted Board slate
Broadcom’s attempt to install a conflicted Board slate to effect its Low Value, High Risk Proposal Important questions Important considerations • Why did Broadcom choose to launch a hostile takeover Broadcom seeking to get ahead of: with a dramatically undervalued and uncertain bid despite Qualcomm’
Slide 36: Conclusion
Conclusion
Slide 37: Broadcom's proposal: undervalues Qualcomm / very high risk
Broadcom’s proposal: undervalues Qualcomm / very high risk Standalone FY19 Non-GAAP(1) EPS(2) expected to be $6.75 – $7.50 Dramatically undervalues Broadcom proposing a P/E multiple of ~10x on estimated FY19 Non-GAAP EPS Qualcomm SOX P/E multiple is 19x*; precedent transaction P/E multiple is 22x* N
Slide 38: Footnotes
Footnotes (1) Non-GAAP results exclude the QSI (Qualcomm Strategic Initiatives) segment and certain share-based compensation, acquisition-related items, tax items and other items. Further discussion regarding the Company’s use of Non-GAAP financial measures and detailed reconciliations between GAAP
Slide 39: Reconciliations
Reconciliations
Slide 40: Note regarding use of Non-GAAP financial measures
Note regarding use of Non-GAAP financial measures The Non-GAAP financial information presented herein should be considered in addition to, not as a substitute for or superior to, financial measures calculated in accordance with GAAP. In addition, “Non-GAAP” is not a term defined by GAAP, and as a re
Slide 41: Revenues, Operating Cash Flows and Operating Margin
Revenues, Operating Cash Flows and Operating Margin $ in billions Net cash provided Fiscal 2017 Revenues by operating Operating Margin (estimate) Fiscal 2019 (3) Long-Term(4) activities GAAP $22.3 $4.7 GAAP operating income $8.4 - $9.1 Less: QSI $0.1 - Less: QSI - (1) Less: Share-based compensation
Slide 42: Earnings Per Share (EPS)
Earnings Per Share (EPS) Fiscal 2019 Accretion from Fiscal 2017 Fiscal 2019 Accretion from Share EPS EPS (est.)(2) NXP(2) Repurchase GAAP diluted EPS $1.65 $4.47 – $5.22 $0.08 $1.26 Less: Diluted EPS attributable to QSI $0.03 $0.02 N/A $0.01 Less: Diluted EPS attributable to share-based compensation
Slide 43: Combined R&D and SG&A Expenses
Combined R&D and SG&A Expenses $ in billions Fiscal 2019 Fiscal 2019 Q3 Fiscal 2015 (excl NXP) (incl NXP) (2) GAAP combined R&D and SG&A expenses $2.0 $7.1 - $7.4 $11.8 - $12.2 Less: QSI - - - Less: Share-based compensation allocated to R&D and SG&A $0.3 $0.9 $1.2 Less: Other items(1) - - $2.5 Non-G
Slide 44: Please Vote the WHITE Proxy Card Thank You for Your Support
Please Vote the WHITE Proxy Card Thank You for Your Support Follow us on: For more information, visit us at: www.qcomvalue.com Nothing in these materials is an offer to sell any of the References in this presentation to “Qualcomm” may mean Qualcomm components or devices referenced herein. Incorporat