Qualcomm Incorporated · NASDAQ:QCOM
Qualcomm — Proxy Contest (February 2018)
37 slides from Qualcomm's proxy contest presentation, Feb 9, 2018
Slide 1: Investor Presentation
February 2018 Investor Presentation
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: Discussion topics for today's meeting
Discussion topics for today’s meeting 11. Who is Qualcomm? 22. Our Plan to Create Near-Term and Long-Term Value 33. Our Evaluation Framework 44. Why Broadcom’s Proposal Materially Undervalues Qualcomm 55. Broadcom’s Proposal Poses Unacceptable Regulatory Risks 66. Qualcomm’s Board – Independent Busi
Slide 4: I. Who is Qualcomm?
I. Who is Qualcomm?
Slide 5: Qualcomm overview
Qualcomm overview Fiscal 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) (
Slide 6: 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 7: II. Our Plan to Create Near-Term and Long-Term Value
II. Our Plan to Create Near-Term and Long- Term Value
Slide 8: Near-term and long-term value creation
Near-term and long-term value creation 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 NXP or su
Slide 9: High confidence in $6.75 - $7.50 Non-GAAP FY19 EPS
High confidence in $6.75 - $7.50 Non-GAAP(1) FY19 EPS(2) Qualcomm has beaten consensus 14 out of the past 16 quarters 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 p
Slide 10: 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 11: 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 12: Resolving licensing disputes drives substantial value not reflected in Qualcomm's stock price
Resolving licensing disputes drives substantial value not reflected in Qualcomm’s stock price Our position on Apple / regulatory issues What is NOT in dispute Value at stake “On Qualcomm, I just want to make it very, very • Binding long-term agreements with Apple’s contract clear that we are accruin
Slide 13: 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 14: Technology transitions create significant returns for Qualcomm stockholders
Technology transitions create significant returns for Qualcomm stockholders 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
Slide 15: 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 16: III. Our Evaluation Framework
III. Our Evaluation Framework
Slide 17: Our process to review the Broadcom proposal
Our process to review the Broadcom proposal • Engagement history ◦ Qualcomm has a history of engaging with Broadcom ◦ We held two meetings with Silver Lake and Broadcom 18 months ago, but no pricing or material terms of an offer were presented; at the time, Broadcom indicated that the more attractiv
Slide 18: Board evaluation framework for key strategic alternatives
Board evaluation framework for key strategic alternatives Continuous Knowledge Beyond Best Practice Evaluate Against Oversee Building Process Design Alternatives Execution Regular and active Board Formation of special committees Objectively evaluate alternatives Utilize Board committees enga
Slide 19: Board process for evaluation of strategic options
Board process for evaluation of strategic options Special Committee Legal Support Financial Advisors Formed / # of Members Centerview Partners (Committee) Cravath, Swaine & Moore 2015 Evaluation of the 6 Directors Evercore Company’s Corporate and DLA Piper (Board / Committee) Goldman Sachs (5 Indepe
Slide 20: Setting the record straight
Setting the record straight • Broadcom Board member contacted Qualcomm CEO in July 2016 and offered an introduction to Hock Tan, which led to 2 meetings in August and September • Broadcom identified several potential transaction structures for combination of Qualcomm and Broadcom, with a preference
Slide 21: IV. Why Broadcom's Proposal Materially Undervalues Qualcomm
IV. Why Broadcom’s Proposal Materially Undervalues Qualcomm
Slide 22: Broadcom's proposal materially undervalues Qualcomm
Broadcom’s proposal materially undervalues Qualcomm • Broadcom’s opportunistic proposal does not reflect • At $82 / share Broadcom’s proposal reflects 11x - 12x our substantial value creation opportunity for Qualcomm estimated FY19 Non-GAAP EPS stockholders • The SOX index currently trades at 18x* a
Slide 23: V. Broadcom's Proposal Poses Unacceptable Regulatory Risks
V. Broadcom’s Proposal Poses Unacceptable Regulatory Risks
Slide 24: 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 • Challenging to find buyers that can “step into the shoes” (Qualcomm) and #2 (Broadcom) largest fabless and maintain competitiveness of assets while satisfying semiconductor companies*
Slide 25: 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 in Apple / contract Target completion of invest
Slide 26: VI. Qualcomm's Board – Independent Business Leaders with Track Records of Delivering Value
VI. Qualcomm’s Board – Independent Business Leaders with Track Records of Delivering Value
Slide 27: 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 • Qualcomm’s CEO and Chairman have led the Company through several mobile transitions • Strong mix of industry perspectives, operating expertise, sto
Slide 28: Qualcomm directors have the right mix of experience and expertise to lead the Company
Qualcomm directors have the right mix of experience and expertise to lead the Company • Extensive business, operational and management experience in the wireless telecommunications industry, including current Paul position as our Executive Chairman and his prior service as our Chief Executive Office
Slide 29: Qualcomm directors have the right mix of experience and expertise (Cont.)
Qualcomm directors have the right mix of experience and expertise to lead the Company (Cont.) • Substantial management experience involving international operations, particularly in Asia Harish • Executive management experience, particularly with respect to strategic planning and leadership of compl
Slide 30: Broadcom's slate of directors presents unacceptable execution risk
Broadcom’s slate of directors presents unacceptable execution risk Broadcom’s slate is tailored for a singular outcome: to sell - not run - one of the most complex technology companies in the world 8 Broadcom’s slate is not qualified to capture the significant near- and long-term value creation oppo
Slide 31: Conclusion
Conclusion
Slide 32: Broadcom's proposal: unacceptable risk, minimal reward
Broadcom’s proposal: unacceptable risk, minimal reward Standalone FY19 Non-GAAP(1) EPS(2) expected to be $6.75 – $7.50 Materially undervalues Broadcom proposing a P/E multiple of 11x–12x on estimated FY19 Non-GAAP EPS Qualcomm * SOX P/E multiple is 18x ; precedent transaction P/E multiple is 22x * N
Slide 33: 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 34: Reconciliations
Reconciliations
Slide 35: 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 36: 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 37: 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