UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_____________________

FORM 10-Q

_____________________

(Mark one)



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

For the quarterly period ended ~~June 26,~~December 25, 2011



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

For the transition period from to

Commission File Number 0-19528

QUALCOMM Incorporated

(Exact name of registrant as specified in its charter)



Delaware (State or other jurisdiction of incorporation or organization)		95-3685934 (I.R.S. Employer Identification No.)

5775 Morehouse Dr., San Diego, California (Address of principal executive offices)		92121-1714 (Zip Code)

(858) 587-1121

(Registrant’s telephone number, including area 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 12 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 90 days. Yes x 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 (§ 232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x 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 x	Accelerated filer o	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

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

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 18, 2011~~January 30, 2012, was as follows:



Class		Number of Shares
Common Stock, $0.0001 per share par value		~~1,679,739,316~~1,691,418,257

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	2523
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4240
Item 4.	Controls and Procedures	4341

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	4442
Item 1A.	Risk Factors	4442
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4442
Item 3.	Defaults Upon Senior Securities	4442
Item 4.	~~[Removed and Reserved]~~Mine Safety Disclosures	4443
Item 5.	Other Information	4443
Item 6.	Exhibits	4543

SIGNATURES		4644

PART I. FINANCIAL INFORMATION


ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

QUALCOMM Incorporated

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

(Unaudited)


	June 26, 2011		September 26, 2010		December 25, 2011		September 25, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	5,746	$	3,547	$	4,964	$	5,462
Marketable securities	4,982		6,732		6,576		6,190
Accounts receivable, net	832		730		1,035		993
Inventories	753		528		714		765
Deferred tax assets	310		321		509		537
Other current assets	210		275		236		346
Total current assets	12,833		12,133		14,034		14,293
Marketable securities	9,493		8,123		10,438		9,261
Deferred tax assets	1,884		1,922		1,626		1,703
Assets held for sale	746		—		746		746
Property, plant and equipment, net	2,267		2,373		2,607		2,414
Goodwill	3,195		1,488		3,624		3,432
Other intangible assets, net	3,098		3,022		3,093		3,099
Other assets	1,584		1,511		1,438		1,474
Total assets	$	35,100	$	30,572	$	37,606	$	36,422
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	761	$	764	$	974	$	969
Payroll and other benefits related liabilities	568		467		542		644
Unearned revenues	541		623		543		610
Loans payable	1,092		1,086		928		994
Income taxes payable	84		1,443		40		18
Other current liabilities	1,418		1,085		1,967		2,054
Total current liabilities	4,464		5,468		4,994		5,289
Unearned revenues	3,630		3,485		3,535		3,541
Other liabilities	705		761		580		620
Total liabilities	8,799		9,714		9,109		9,450

Commitments and contingencies (Note 8)
Commitments and contingencies (Note 6)

Stockholders’ equity:
QUALCOMM Incorporated (QUALCOMM) stockholders’ equity:
Preferred stock, $0.0001 par value; issuable in series; 8 shares authorized; none outstanding at
June 26, 2011 and September 26, 2010	—		—
Common stock, $0.0001 par value; 6,000 shares authorized; 1,677 and 1,612 shares issued and
outstanding at June 26, 2011 and September 26, 2010, respectively	—		—
Qualcomm stockholders’ equity:
Preferred stock, $0.0001 par value; 8 shares authorized; none outstanding					—		—
Common stock, $0.0001 par value; 6,000 shares authorized; 1,687 and 1,681 shares issued
and outstanding, respectively					—		—
Paid-in capital	10,011		6,856		10,749		10,394
Retained earnings	15,516		13,305		17,237		16,204
Accumulated other comprehensive income	744		697		495		353
Total QUALCOMM stockholders’ equity	26,271		20,858
Noncontrolling interests (Note 7)	30		—
Total Qualcomm stockholders’ equity					28,481		26,951
Noncontrolling interests					16		21
Total stockholders’ equity	26,301		20,858		28,497		26,972
Total liabilities and stockholders’ equity	$	35,100	$	30,572	$	37,606	$	36,422

See Accompanying Notes to Condensed Consolidated Financial Statements.

QUALCOMM Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended
	June 26, 2011			June 27, 2010*			June 26, 2011			June 27, 2010*			December 25, 2011			December 26, 2010*
Revenues:
Equipment and services	$	2,297		$	1,766		$	6,550		$	5,021		$	3,167		$	2,213
Licensing and royalty fees	1,326			934			4,290			3,009
Licensing													1,514			1,135
Total revenues	3,623			2,700			10,840			8,030			4,681			3,348

Operating expenses:
Cost of equipment and services revenues	1,278			852			3,380			2,375			1,754			1,043
Research and development	757			623			2,144			1,822			873			649
Selling, general and administrative	475			332			1,413			1,063			503			409
Goodwill impairment (Note 11)	—			—			114			—
Total operating expenses	2,510			1,807			7,051			5,260			3,130			2,101

Operating income	1,113			893			3,789			2,770			1,551			1,247

Investment income, net (Note 5)	161			183			574			552
Investment income, net (Note 3)													170			223
Income from continuing operations before income taxes	1,274			1,076			4,363			3,322			1,721			1,470
Income tax expense	(289		)	(244		)	(862		)	(740		)	(321		)	(218		)
Income from continuing operations	985			832			3,501			2,582			1,400			1,252
Discontinued operations, net of income taxes (Note 10)	44			(65		)	(307		)	(200		)
Discontinued operations, net of income taxes (Note 8)													(5		)	(82		)
Net income	1,029			767			3,194			2,382			1,395			1,170
Net loss attributable to noncontrolling interests (Note 7)	6			—			10			—
Net income attributable to QUALCOMM	$	1,035		$	767		$	3,204		$	2,382
Net loss attributable to noncontrolling interests													6			—
Net income attributable to Qualcomm													$	1,401		$	1,170

Basic earnings (loss) per share attributable to QUALCOMM:
Basic earnings (loss) per share attributable to Qualcomm:
Continuing operations	$	0.59		$	0.51		$	2.13		$	1.56		$	0.83		$	0.77
Discontinued operations	0.03			(0.04		)	(0.19		)	(0.12		)	—			(0.05		)
Net income	$	0.62		$	0.47		$	1.94		$	1.44		$	0.83		$	0.72
Diluted earnings (loss) per share attributable to QUALCOMM:
Diluted earnings (loss) per share attributable to Qualcomm:
Continuing operations	$	0.58		$	0.51		$	2.09		$	1.55		$	0.81		$	0.76
Discontinued operations	0.03			(0.04		)	(0.19		)	(0.12		)	—			(0.05		)
Net income	$	0.61		$	0.47		$	1.90		$	1.43		$	0.81		$	0.71
Shares used in per share calculations:
Basic	1,673			1,629			1,650			1,654			1,684			1,623
Diluted	1,709			1,642			1,682			1,670			1,721			1,648

Dividends per share announced	$	0.215		$	0.190		$	0.595		$	0.530		$	0.215		$	0.190

*As adjusted for discontinued operations (Note ~~10)~~8)

See Accompanying Notes to Condensed Consolidated Financial Statements.

QUALCOMM Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Nine Months Ended						Three Months Ended
	June 26, 2011			June 27, 2010			December 25, 2011			December 26, 2010
Operating Activities:
Net income	$	3,194		$	2,382		$	1,395		$	1,170
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	820			495			208			201
Goodwill impairment	114			—
Revenues related to non-monetary exchanges	(93		)	(99		)	(31		)	(31		)
Income tax provision (less than) in excess of income tax payments	(1,218		)	80
Income tax provision in excess of (less than) income tax payments							118			(1,474		)
Non-cash portion of share-based compensation expense	568			453			247			174
Incremental tax benefit from stock options exercised	(167		)	(34		)	(23		)	(45		)
Net realized gains on marketable securities and other investments	(304		)	(274		)	(44		)	(127		)
Gains on derivative instruments							(45		)	(1		)
Net impairment losses on marketable securities and other investments	26			102			20			11
Other items, net	23			(70		)	6			(1		)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net	21			(91		)	(38		)	76
Inventories	(43		)	7			50			(45		)
Other assets	(36		)	(71		)	(24		)	(23		)
Trade accounts payable	(191		)	23			26			(234		)
Payroll, benefits and other liabilities	210			(161		)	(43		)	21
Unearned revenues	156			241			(43		)	376
Net cash provided by operating activities	3,080			2,983			1,779			48
Investing Activities:
Capital expenditures	(400		)	(313		)	(359		)	(102		)
Advance payment on spectrum	—			(1,064		)
Purchases of available-for-sale securities	(8,271		)	(7,049		)	(2,027		)	(2,309		)
Proceeds from sale of available-for-sale securities	9,355			7,354			1,603			3,024
Atheros acquisition, net of cash acquired (Note 12)	(3,130		)	—
Other acquisitions and investments, net of cash acquired	(95		)	(45		)
Purchases of trading securities							(1,137		)	—
Proceeds from sale of trading securities							148			—
Acquisitions and other investments, net of cash acquired							(300		)	(66		)
Other items, net	(22		)	121			4			7
Net cash used by investing activities	(2,563		)	(996		)
Net cash (used) provided by investing activities							(2,068		)	554
Financing Activities:
Borrowing under loans payable	1,260			1,064			—			1,083
Repayment of loans payable	(1,260		)	—			—			(1,083		)
Proceeds from issuance of common stock	2,392			519			228			791
Proceeds from issuance of subsidiary shares to noncontrolling interests (Note 7)	62			—
Incremental tax benefit from stock options exercised	167			34			23			45
Repurchase and retirement of common stock	—			(2,893		)	(99		)	—
Dividends paid	(985		)	(872		)	(362		)	(309		)
Change in obligation under securities lending							20			38
Other items, net	36			(2		)	(1		)	(4		)
Net cash provided (used) by financing activities	1,672			(2,150		)
Net cash (used) provided by financing activities							(191		)	561
Effect of exchange rate changes on cash	10			(13		)	(18		)	1
Net increase (decrease) in cash and cash equivalents	2,199			(176		)
Net (decrease) increase in cash and cash equivalents							(498		)	1,164
Cash and cash equivalents at beginning of period	3,547			2,717			5,462			3,547
Cash and cash equivalents at end of period	$	5,746		$	2,541		$	4,964		$	4,711

See Accompanying Notes to Condensed Consolidated Financial Statements.

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Basis of Presentation

Financial Statement Preparation. ~~The accompanying interim~~These condensed consolidated financial statements have been prepared by QUALCOMM Incorporated (collectively with its subsidiaries, 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 flowsQualcomm) in accordance with accounting principles generally accepted in the United ~~States. The condensed consolidated balance sheet at~~ ~~September 26, 2010~~ ~~was derived from~~States of America (GAAP) for interim financial information and the ~~audited financial statements at that date but may~~instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all ~~disclosures~~of the information and footnotes required by ~~accounting principles generally accepted~~GAAP for complete financial statements. In the opinion of management, the interim data includes all normal recurring adjustments necessary for a fair statement of the results for the interim periods. These condensed consolidated financial statements are unaudited and should be read in conjunction with the ~~United States.~~Company’s Annual Report on Form 10-K for the fiscal year ended September 25, 2011. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. 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 26,~~December 25, 2011 and ~~June 27,~~December 26, 2010 both 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 26, 2010~~. ~~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 condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Certain prior period amounts have been adjusted to reflect the presentation of the FLO TV business as discontinued operations (Note ~~10)~~8).

Earnings Per Common Share. Basic earnings per common share is computed by dividing net income attributable to ~~QUALCOMM~~Qualcomm by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed by dividing net income attributable to ~~QUALCOMM~~Qualcomm by the combination of dilutive common share equivalents, comprised of shares issuable under the Company’s share-based compensation plans and shares subject to written put options, and the weighted-average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which are 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 award, if any, 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 an award is settled are assumed to be used to repurchase shares in the current period. The incremental dilutive common share equivalents, calculated using the treasury stock method, for the three months ~~and nine months~~ ended ~~June 26,~~December 25, 2011 ~~were~~ ~~35,820,000~~ and ~~32,094,000, respectively. The incremental dilutive common share equivalents, calculated using the treasury stock method, for the three months and nine months ended~~ ~~June 27,~~December 26, 2010 were ~~13,039,000~~37,052,000 and ~~16,303,000~~25,507,000, respectively.

Employee stock options to purchase approximately ~~4,492,000~~4,471,000 and ~~23,721,000~~60,792,000 shares of common stock during the three months ~~and nine months~~ ended ~~June 26,~~December 25, 2011~~, respectively, and 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, were outstanding but not included in the computation of diluted earnings per common share because the effect would be anti-dilutive. In addition,~~ ~~2,891,000~~ ~~and~~ ~~1,146,000~~ ~~shares of other share-based payment awards during the three months and nine months ended~~ ~~June~~December 26, ~~2011, respectively, and~~ ~~574,000~~ ~~and~~ ~~314,000~~ ~~shares of other common stock equivalents during the three months and nine months ended~~ ~~June 27,~~ 2010, respectively, were outstanding but not included in the computation of diluted earnings per common share because the effect would be anti-dilutive. Put options outstanding during the three months ended December 25, 2011 to purchase 11,800,000 shares of common stock were not included in the earnings per common share computation because the put options’ exercise prices were less than the average market price of the common stock while they were outstanding, and therefore, the effect on diluted earnings per common share would be anti-dilutive (Note 5). In addition, 675,000 and 467,000 shares of other common stock equivalents outstanding during the three months ended December 25, 2011 and December 26, 2010, respectively, were not included in the computation of diluted earnings per common share because either the effect would be anti-dilutive or certain performance conditions were not satisfied at the end of the period.

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

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Three Months Ended Nine Months Ended
June 26,
2011 June 27,
2010 June 26,
2011 June 27,
2010
Net income $ 1,029
$ 767
$ 3,194
$ 2,382
Other comprehensive income:
Foreign currency translation —
(56 ) 13
(58 )
Noncredit other-than-temporary impairment losses and subsequent changes in fair value related to certain marketable debt securities, net of income taxes (2 ) (7 ) (12 ) 13
Net unrealized gains (losses) on other marketable securities and derivative instruments, net of income taxes (7 ) (180 ) 215
151
Reclassification of net realized gains on marketable securities and derivative instruments included in net income, net of income taxes (45 ) (64 ) (179 ) (228 )
Reclassification of other-than-temporary losses on marketable securities included in net income, net of income taxes 3
16
10
63
Total other comprehensive (loss) income (51 ) (291 ) 47
(59 )
Total comprehensive income 978
476
3,241
2,323
Comprehensive loss attributable to noncontrolling interests 6
—
10
—
Comprehensive income attributable to QUALCOMM $ 984
$ 476
$ 3,251
$ 2,323



	Three Months Ended
	December 25, 2011			December 26, 2010
Net income	$	1,395		$	1,170
Other comprehensive income:
Foreign currency translation	(27		)	5
Noncredit other-than-temporary impairment losses and subsequent changes in fair value related to certain available-for-sale debt securities, net of income taxes	1			(4		)
Net unrealized gains on other available-for-sale securities and derivative instruments, net of income taxes	175			131
Reclassification of net realized gains on available-for-sale securities and derivative instruments included in net income, net of income taxes	(18		)	(76		)
Reclassification of other-than-temporary losses on available-for-sale securities included in net income, net of income taxes	9			4
Total other comprehensive income	140			60
Total comprehensive income	1,535			1,230
Comprehensive loss attributable to noncontrolling interests	8			—
Comprehensive income attributable to Qualcomm	$	1,543		$	1,230

Components of accumulated other comprehensive income in Qualcomm stockholders’ equity consisted of the following (in millions):


	June 26, 2011			September 26, 2010			December 25, 2011			September 25, 2011
Noncredit other-than-temporary impairment losses and subsequent changes in fair value related to certain marketable debt securities, net of income taxes	$	36		$	62
Net unrealized gains on marketable securities, net of income taxes	779			723
Noncredit other-than-temporary impairment losses and subsequent changes in fair value related to certain available-for-sale debt securities, net of income taxes							$	29		$	27
Net unrealized gains on other available-for-sale securities, net of income taxes							581			427
Net unrealized losses on derivative instruments, net of income taxes	(4		)	(8		)	(4		)	(15		)
Foreign currency translation	(67		)	(80		)	(111		)	(86		)
	$	744		$	697		$	495		$	353

At ~~June 26,~~December 25, 2011 and September 25, 2011, accumulated other comprehensive income included $1412 million and $13 million, respectively, of other-than-temporary losses on ~~marketable~~certain available-for-sale debt securities related to factors other than credit, net of income taxes.

Share-Based ~~Payments.~~Compensation. Total estimated share-based compensation expense, ~~net~~related to all of ~~income taxes~~the Company’s share-based awards, was comprised as follows (in millions):


	Three Months Ended						Nine Months Ended						Three Months Ended
	June 26, 2011			June 27, 2010*			June 26, 2011			June 27, 2010*			December 25, 2011			December 26, 2010*
Cost of equipment and services revenues	$	14		$	10		$	44		$	30		$	20		$	14
Research and development	95			72			277			216			126			85
Selling, general and administrative	84			63			240			195			101			70
Continuing operations	193			145			561			441			247			169
Related income tax benefit	(46		)	(37		)	(155		)	(127		)	(53		)	(55		)
Continuing operations, net of income taxes	147			108			406			314			194			114
Discontinued operations	1			4			7			12			—			3
Related income tax benefit	(1		)	(1		)	(3		)	(4		)	—			(1		)
Discontinued operations, net of income taxes	—			3			4			8			—			2
	$	147		$	111		$	410		$	322		$	194		$	116

*As adjusted for discontinued operations (Note ~~10)~~8)

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company recorded $9533 million and $7313 million in share-based compensation expense during the ~~nine~~three months ended ~~June 26,~~December 25, 2011 and ~~June 27,~~December 26, 2010, respectively, related to share-based awards granted during those periods. In addition, for the ~~nine~~three months ended ~~June 26,~~December 25, 2011 and ~~June 27,~~December 26, 2010, $~~167~~23 million and $3445 million, respectively, were reclassified to reduce net

~~QUALCOMM Incorporated~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

cash provided by operating activities with an offsetting increase in net cash provided by financing activities to reflect the incremental tax benefit from stock options exercised in those periods.

At ~~June 26,~~December 25, 2011, total unrecognized compensation costs related to non-vested stock options and restricted stock units granted prior to that date were $~~714~~537 million and $~~732 million~~1.1 billion, respectively, which are ~~each~~ expected to be recognized over a weighted-average period of ~~2.2~~1.8 years and ~~2.5~~2.3 years, respectively. Net share-based awards, after forfeitures and cancellations, granted during the ~~nine~~three months ended ~~June 26,~~December 25, 2011 and ~~June 27,~~December 26, 2010 represented ~~0.7%~~0.5% and ~~1.3%~~0.4%, respectively, of outstanding shares as of the beginning of each fiscal period. Total share-based awards granted during the ~~nine~~three months ended ~~June 26,~~December 25, 2011 and ~~June 27,~~December 26, 2010 each represented 0.5% ~~and~~ ~~1.8%, respectively,~~ of outstanding shares as of the end of each ~~fishcal~~fiscal period.

~~During the three months ended~~ ~~June 26, 2011, the Company assumed a total of approximately~~ ~~9,564,000~~ ~~outstanding share-based payment awards under various incentive plans as a result of the acquisition of Atheros (Note 12).~~

Note 2 — ~~Fair Value Measurements~~Composition of Certain Financial Statement Items

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:Inventories.



	December 25, 2011		September 25, 2011
	(In millions)
Raw materials	$	14	$	15
Work-in-process	235		384
Finished goods	465		366
	$	714	$	765

~~Level 1 includes financial instruments for which quoted market prices for identical instruments are available in active markets.~~Other Current Liabilities.

~~Level 2 includes financial instruments for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument.~~

~~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 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 26, 2011~~ ~~(in millions):~~



	December 25, 2011		September 25, 2011
	(In millions)
Customer incentives and other customer-related liabilities	$	1,401	$	1,180
Current portion of payable to Broadcom (Note 6)	170		170
Payable for unsettled securities trades	75		298
Other	321		406
	$	1,967	$	2,054

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Level 1 Level 2 Level 3 Total
Assets
Cash equivalents $ 2,520
$ 2,489
$ —
$ 5,009
Marketable securities
U.S. Treasury securities and government-related securities 15
198
—
213
Corporate bonds and notes —
5,068
—
5,068
Mortgage- and asset-backed securities —
656
9
665
Auction rate securities —
—
126
126
Non-investment-grade debt securities —
3,606
12
3,618
Common and preferred stock 1,186
766
—
1,952
Equity mutual and exchange-traded funds 1,021
—
—
1,021
Debt mutual funds 1,327
485
—
1,812
Total marketable securities 3,549
10,779
147
14,475
Derivative instruments —
19
—
19
Other investments ⁽¹⁾
162
—
—
162
Total assets measured at fair value $ 6,231
$ 13,287
$ 147
$ 19,665
Liabilities
Derivative instruments $ —
$ 23
$ —
$ 23
Other liabilities ⁽¹⁾
162
—
8
170
Total liabilities measured at fair value $ 162
$ 23
$ 8
$ 193

⁽¹⁾~~Level 1 measurements are comprised of the Company’s deferred compensation plan liability and related assets, which are invested in mutual funds.~~

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

The fair value of U.S. Treasury securities and government-related securities, corporate bonds and notes and common and preferred stock are generally determined using standard observable inputs, including reported trades, quoted market prices, matrix pricing, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets and/or benchmark securities.

The fair value of debt and equity mutual funds is reported as published net asset values. The Company assesses the daily frequency and size of transactions at published net asset values and/or the fund’s underlying holdings to determine whether fair value is based on observable or unobservable inputs.

The fair value of AAA mortgage- and asset-backed securities is derived from the use of matrix pricing (prices for similar securities) or, in some cases cash flow pricing models with observable inputs, such as contractual terms, maturity, credit rating and/or 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, may require use of significant unobservable inputs to estimate fair value, such as 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, default likelihood and recovery, the future state of the auction rate market and credit valuation adjustments of market participants. Though certain of the securities held by the Company are pools of student loans guaranteed by the U.S. government, prepayment speeds and illiquidity discounts are considered significant unobservable inputs. These additional inputs are generally unobservable and, therefore, auction rate securities are included in Level 3.

~~Derivative Instruments.~~ Derivative instruments include foreign currency option and forward contracts to manage foreign exchange risk for certain foreign currency transactions and certain balances denominated in a foreign currency. 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.

~~Other Liabilities.~~ Other liabilities included in Level 3 are comprised of put rights held by third parties representing interests in certain of the Company’s subsidiaries (Note 7). These put rights are valued with a standard option pricing model

~~QUALCOMM Incorporated~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~using significant unobservable inputs.~~

~~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 26, 2011~~ or ~~June 27, 2010~~. 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 and other liabilities classified within Level 3 of the valuation hierarchy (in millions):

Nine Months Ended June 26, 2011

Auction Rate
Securities

Other Marketable
Securities
Other Liabilities
Beginning balance of Level 3 $ 126
$ 18
$ 8
Total realized and unrealized gains:
Included in investment income, net —
1
—
Included in other comprehensive income 2
—
—
Purchases 4
—
—
Settlements (6 ) (4 ) —
Transfers into Level 3 —
6
—
Ending balance of Level 3 $ 126
$ 21
$ 8

Nine Months Ended June 27, 2010

Auction Rate
Securities

Other Marketable
Securities
Beginning balance of Level 3 $ 174
$ 31
Total realized and unrealized gains (losses):
Included in investment income, net —
5
Included in other comprehensive loss 3
(2 )
Settlements (6 ) (19 )
Transfers into Level 3 —
4
Ending balance of Level 3 $ 171
$ 19

~~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 during the nine months ended ~~June 26, 2011~~ ~~and~~ ~~June 27, 2010~~ 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 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 26, 2011, goodwill with a carrying amount of~~ ~~$154 million~~ ~~was written down to its implied fair value of~~ ~~$40 million, resulting in an impairment charge of~~ ~~$114 million~~ ~~(Note 11). The implied fair value was based on significant unobservable inputs, and as a result, the fair value measurement was classified as Level 3. During the nine months ended~~ ~~June 26, 2011~~ ~~and~~ ~~June 27, 2010, the Company did not have any other significant assets or liabilities that were measured at fair value on a nonrecurring basis in periods subsequent to initial recognition.~~

Note 3 — ~~Marketable Securities~~

~~Marketable securities were comprised as follows (in millions):~~

~~QUALCOMM Incorporated~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Current Noncurrent
June 26,
2011 September 26,
2010 June 26,
2011 September 26,
2010
Available-for-sale:
U.S. Treasury securities and government-related securities $ 209
$ 650
$ 4
$ 4
Corporate bonds and notes 2,764
3,504
2,304
1,495
Mortgage- and asset-backed securities 570
629
95
38
Auction rate securities —
—
126
126
Non-investment-grade debt securities 21
21
3,597
3,344
Common and preferred stock 91
52
1,861
1,670
Equity mutual and exchange-traded funds —
—
1,021
979
Debt mutual funds 1,327
1,476
—
—
Total available-for-sale 4,982
6,332
9,008
7,656
Fair value option:
Debt mutual fund —
—
485
467
Time deposits —
400
—
—
Total marketable securities $ 4,982
$ 6,732
$ 9,493
$ 8,123

The Company holds an investment in a debt mutual fund for which the Company elected the fair value option. The investment would have otherwise been recorded using the equity method. The debt mutual fund has no single maturity date. At ~~June 26, 2011, the Company had an effective ownership interest in the debt mutual fund of~~ ~~19.0%~~. Changes in fair value associated with this investment are recognized in net investment income. The Company believes that recording the investment at fair value and reporting the investment as a marketable security is preferable to applying the equity method because the Company is able to redeem its shares at net asset value, which is determined daily. At ~~September 26, 2010, marketable securities also included~~ ~~$400 million~~ ~~of time deposits that matured in~~ ~~December 2010~~.

At ~~June 26, 2011, the contractual maturities of available-for-sale debt securities were as follows (in millions):~~Investment Income, Net

Years to Maturity
Less Than
One Year

One to
Five Years

Five to
Ten Years

Greater Than
Ten Years

No Single
Maturity
Date
Total
$ 464
$ 4,016
$ 2,306
$ 966
$ 3,265
$ 11,017

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

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

Gross Realized Gains Gross Realized Losses Net Realized Gains
For the three months ended
June 26, 2011 $ 74
$ (2 ) $ 72
June 27, 2010 96
(6 ) 90
For the nine months ended
June 26, 2011 $ 297
$ (13 ) $ 284
June 27, 2010 289
(17 ) 272

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

~~QUALCOMM Incorporated~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
June 26, 2011
Equity securities $ 2,443
$ 545
$ (15 ) $ 2,973
Debt securities 10,616
423
(22 ) 11,017
$ 13,059
$ 968
$ (37 ) $ 13,990
September 26, 2010
Equity securities $ 2,309
$ 403
$ (11 ) $ 2,701
Debt securities 10,795
512
(20 ) 11,287
$ 13,104
$ 915
$ (31 ) $ 13,988

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 26, 2011
Less than 12 months More than 12 months
Fair Value Unrealized Losses Fair Value Unrealized Losses
Corporate bonds and notes $ 480
$ (4 ) $ 18
$ —
Auction rate securities 3
—
123
(2 )
Non-investment-grade debt securities 754
(14 ) 21
(2 )
Common and preferred stock 239
(15 ) 3
—
$ 1,476
$ (33 ) $ 165
$ (4 )

September 26, 2010
Less than 12 months More than 12 months
Fair Value Unrealized Losses Fair Value Unrealized Losses
Corporate bonds and notes $ 425
$ (1 ) $ 23
$ —
Auction rate securities —
—
126
(4 )
Non-investment-grade debt securities 296
(7 ) 90
(8 )
Common and preferred stock 133
(10 ) 3
—
Equity mutual and exchange-traded funds 277
(1 ) —
—
$ 1,131
$ (19 ) $ 242
$ (12 )

At ~~June 26, 2011~~, the Company concluded that the unrealized losses were temporary. Further, for common and preferred stock 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):~~

~~QUALCOMM Incorporated~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Three Months Ended Nine Months Ended
June 26,
2011 June 27,
2010 June 26,
2011 June 27,
2010
Beginning balance of credit losses $ 52
$ 134
$ 109
$ 170
Credit losses recognized on securities previously impaired —
—
(40 ) —
Credit losses recognized on securities previously not impaired —
—
—
1
Reductions in credit losses related to securities sold (3 ) (8 ) (15 ) (26 )
Accretion of credit losses due to an increase in cash flows expected to be collected —
(2 ) (5 ) (21 )
Ending balance of credit losses $ 49
$ 124
$ 49
$ 124

~~Note 4 — Composition of Certain Financial Statement Items~~

~~Accounts Receivable.~~

June 26,
2011 September 26,
2010
(In millions)
Trade, net of allowances for doubtful accounts of $2 and $3, respectively
$ 787
$ 697
Long-term contracts 38
25
Other 7
8
$ 832
$ 730

~~Inventories.~~

June 26,
2011 September 26,
2010
(In millions)
Raw materials $ 18
$ 15
Work-in-process 347
284
Finished goods 388
229
$ 753
$ 528

~~Other Current Liabilities.~~

June 26,
2011 September 26,
2010
(In millions)
Customer-related liabilities, including incentives, rebates and other accrued liabilities $ 873
$ 574
Current portion of payable to Broadcom for litigation settlement 170
170
Payable for unsettled securities trades 48
80
Other 327
261
$ 1,418
$ 1,085

~~Note 5 — Investment Income, Net~~

~~QUALCOMM Incorporated~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


	Three Months Ended						Nine Months Ended						Three Months Ended
	June 26, 2011			June 27, 2010*			June 26, 2011			June 27, 2010*			December 25, 2011			December 26, 2010*
	(In millions)
Interest and dividend income	$	127		$	131		$	384		$	405		$	130		$	131
Interest expense	(29		)	(10		)	(84		)	(19		)	(27		)	(24		)
Net realized gains on marketable securities	72			90			302			272			37			127
Net realized gains on other investments	1			2			2			2			7			—
Impairment losses on marketable securities	(5		)	(28		)	(16		)	(95		)	(14		)	(8		)
Impairment losses on other investments	(5		)	(1		)	(10		)	(7		)	(6		)	(3		)
(Losses) gains on derivative instruments	—			(2		)	1			(3		)
Equity in earnings (losses) of investees	—			1			(5		)	(3		)
Gains on derivative instruments													45			1
Equity in losses of investees													(2		)	(1		)
	$	161		$	183		$	574		$	552		$	170		$	223

*As adjusted for discontinued operations (Note ~~10)~~8)

Note 64 — Income Taxes

The Company estimates its annual effective income tax rate for continuing operations to be approximately ~~20%~~18% for fiscal ~~2011~~2012, compared to the ~~22%~~20% effective income tax rate for fiscal ~~2010~~2011. ~~During the first quarter of fiscal~~ ~~2011, the~~The United States ~~government extended the~~ federal research and development tax credit ~~to include qualified research expenditures paid or incurred after~~expired on December 31, ~~2009~~2011. Therefore, the annual effective rate for fiscal 2012 only reflects the federal research and ~~before January 1, 2012. The Company recorded a tax benefit of~~ ~~$32 million~~ ~~related to fiscal~~ ~~2010~~ ~~in the first quarter of fiscal~~ ~~2011~~ ~~for the retroactive extension of this credit.~~development credit generated through December 31, 2011. The annual effective ~~tax~~ rate for fiscal ~~2010~~ ~~included tax expense of approximately~~ ~~$137 million~~ ~~that arose because certain deferred revenue was taxable in fiscal~~ ~~2010, but the resulting deferred tax asset will reverse in future years when the Company’s~~2012 also reflects a lower state ~~tax~~ rate ~~will be lower~~ as a result of California tax legislation enacted in ~~2009~~.2009.

The estimated annual effective tax rate for continuing operations for fiscal ~~2011~~2012 of ~~20%~~18% is less than the United States federal statutory rate primarily due to benefits of approximately ~~18%~~17% related to foreign earnings taxed at less than the United States federal ~~rate and benefits of approximately~~ 2% ~~related to the research and development tax credit, partially offset by state taxes of approximately~~ 5%.rate. 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, partially offset by state taxes and tax expense related to the valuation of deferred tax assets to reflect changes in California law.

~~The Company had unrecognized tax benefits of~~ ~~$490 million~~ ~~and~~ ~~$353 million~~ at ~~June 26, 2011~~ ~~and~~ ~~September 26, 2010, respectively. The increase in unrecognized tax benefits during the nine months ended~~ ~~June 26, 2011~~ primarily resulted from the acquisition of Atheros Communications, Inc. (Note 12). The Company expects the total amount of unrecognized tax benefits to significantly decrease during the fourth quarter of fiscal 2011 due to agreement with the California Franchise Tax Board on a component of its fiscal 2006 through 2010 tax returns. As a result of this agreement, the Company expects to record a ~~$44 million~~ ~~tax benefit in the fourth quarter of fiscal 2011.~~

Note 75 — Stockholders’ Equity

Changes in stockholders’ equity for the ~~nine~~three months ended ~~June 26,~~December 25, 2011 were as follows (in millions):

~~QUALCOMM Incorporated~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

QUALCOMM Stockholders’ Equity Noncontrolling Interests Total Stockholders’ Equity
Balance at September 26, 2010 $ 20,858
$ —
$ 20,858
Issuance of subsidiary shares to noncontrolling interests 16
40
56
Net income (loss)⁽¹⁾
3,204
(10 ) 3,194
Other comprehensive income 47
—
47
Common stock issued under employee benefit plans 2,355
—
2,355
Share-based compensation 587
—
587
Tax benefit from exercise of stock options 110
—
110
Dividends (993 ) —
(993 )
Value of stock awards assumed in acquisition 106
—
106
Other (19 ) —
(19 )
Balance at June 26, 2011 $ 26,271
$ 30
$ 26,301



	Qualcomm Stockholders’ Equity			Noncontrolling Interests			Total Stockholders’ Equity
Balance at September 25, 2011	$	26,951		$	21		$	26,972
Net income (loss) ⁽¹⁾	1,401			(6		)	1,395
Other comprehensive income (loss)	142			(2		)	140
Common stock issued under employee benefit plans and the related tax benefits, net of shares withheld for tax	203			—			203
Share-based compensation	251			—			251
Dividends	(368		)	—			(368		)
Stock repurchases	(99		)	—			(99		)
Other	—			3			3
Balance at December 25, 2011	$	28,481		$	16		$	28,497

⁽¹⁾ Loss from discontinued operations, net of income taxes, (Note ~~10),~~8) was attributable to ~~QUALCOMM.~~Qualcomm.

~~Noncontrolling Interests.~~ 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. Assignment of licenses to operate wireless networks on this spectrum, with an initial license period of ~~20 years, is pending approval by the Indian government. At~~ ~~June 26, 2011~~ ~~and~~ ~~September 26, 2010, the Company had a~~ ~~$1.1 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 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.

During the second quarter of fiscal 2011, in connection with the India BWA spectrum purchase, certain of the Company’s subsidiaries in India issued noncontrolling interests to two third-party Indian investors for ~~$62 million, such that the Company now holds a~~ ~~74%~~ interest in each of those subsidiaries, the maximum interest permitted under applicable Indian Foreign Direct Investment regulations. In addition, the third parties representing the noncontrolling interests in the subsidiaries hold put rights that provide them with options to sell their ownership interests in the subsidiaries to 9

QUALCOMM Incorporated or its nominee (subject to applicable regulatory approvals) after July 29, 2014, or earlier if certain events occur, at a price equal to their original capital contribution. The aggregate fair value of these put rights, which are accounted for as freestanding financial instruments classified in other liabilities, was ~~$8 million~~ at ~~June 26, 2011~~.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Stock Repurchase Program. During the three months ended December 25, 2011, the Company repurchased and retired 2,046,000 shares of the Company’s common stock for $99 million, before commissions. The Company did not repurchase any shares during the three ~~and nine~~ months ended ~~June~~December 26, ~~2011~~2010. ~~During the three 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.~~ At ~~June 26,~~December 25, 2011, approximately $~~1.7 billion~~948 million remained authorized for repurchase under the Company’s stock repurchase ~~program. The~~program, net of put options outstanding.

In connection with the Company’s stock repurchase program, ~~has no expiration date.~~the Company sold three put options on its own stock during fiscal 2011. At December 25, 2011, the Company had three outstanding put options enabling holders to sell 11,800,000 shares of the Company’s common stock to the Company for approximately $511 million (net of the $75 million in put option premiums received). The put option liability of $35 million at December 25, 2011 was recorded in other current liabilities. During the three months ended December 25, 2011, the Company recognized gains of $45 million in net investment income due to a decrease in the fair value of the put options. No put options were outstanding during the three months ended December 26, 2010.

Dividends. ~~On March 8,~~Cash dividends announced in the three months ended December 25, 2011 ~~the Company announced an increase in its quarterly cash dividend per share of common stock from~~ and December 26, 2010 were $0.215 and $0.190 per share, respectively. During the three months ended December 25, 2011 and December 26, 2010, dividends charged to retained earnings were $~~0.215~~368 million and $314 million, ~~which is effective for dividends payable after March 25, 2011.~~respectively. On ~~July 13, 2011~~January 10, 2012, the Company announced a cash dividend of $0.215 per share on the Company’s common stock, payable on ~~September~~March 23, ~~2011~~2012 to stockholders of record as of ~~August 26, 2011~~March 2, 2012. ~~During the nine months ended~~ ~~June 26, 2011~~ ~~and~~ ~~June 27, 2010, dividends charged to retained earnings were as follows (in millions, except per share data):~~

2011 2010
Per Share Total Per Share Total
First Quarter $ 0.190
$ 314
$ 0.170
$ 284
Second Quarter 0.190
319
0.170
279
Third Quarter 0.215
360
0.190
309
$ 0.595
$ 993
$ 0.530
$ 872

~~QUALCOMM Incorporated~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Note 86 — Commitments and Contingencies

~~Litigation.~~Legal Proceedings. Tessera, Inc. v. QUALCOMM Incorporated: On April 17, 2007, Tessera filed a patent infringement lawsuit in the United States District Court for the Eastern District 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. The district court action is stayed pending resolution of the ITC proceeding, including all appeals. On May 20, 2009, the ITC issued a limited exclusion order and a cease and desist order, both of which were terminated when the patents expired on September 24, 2010. During the period of the exclusion order, the Company shifted supply of accused chips for customers who manufacture products that may be imported to the United States to a licensed supplier of Tessera, and the Company continued to supply those customers without interruption. ~~On December 21, 2010, the United States Court of Appeals for the Federal Circuit issued a decision affirming~~The appeals court affirmed the ITC’s orders, and on ~~March 29,~~November 28, 2011, ~~it declined~~the U.S. Supreme Court denied the Company’s petition for review. On January 18, 2012, pursuant to ~~reconsider that decision. The Company may appeal~~the parties’ stipulation, the district court in the Eastern District of Texas lifted the stay and ordered the case be moved to the United States ~~Supreme Court.~~District Court for the Northern District of California. Once the stay is lifted, Tessera may continue to seek back damages in the district court, but it may not seek injunctive relief due to the expiration of the patents.

MicroUnity Systems Engineering, Inc. v. QUALCOMM Incorporated, et al.: MicroUnity filed a total of three patent infringement complaints, on March 16, 2010, June 3, 2010 and January 27, 2011, against the Company and a number of other technology companies, including Texas Instruments, Samsung, Apple, Nokia, Google and HTC, in the United States District Court for the Eastern District of Texas. The complaints against the Company ~~allege~~alleged infringement of a total of 15 patents, ~~and~~ appear to accuse the Company’s Snapdragon ~~products.~~products and seek unspecified damages and other relief. The ~~district~~ court consolidated the actions in May 2011. ~~The claim construction hearing is set for August 12, 2012, and trial is scheduled for June 3, 2013. The Company has filed a~~On September 30, 2011, the court denied the Company’s motion to sever ~~the claims against it~~its case from the other defendants and to transfer the case to the Northern District of California. On January 6, 2012, MicroUnity filed a notice that it will no longer assert two of the patents against the Company and reduce the number of claims in the 13 remaining asserted patents. Trial is scheduled for June 3, 2013.

Broadcom Corporation et al. v. Commonwealth Scientific and Industrial Research Organisation (CSIRO): On November 10, 2009, Broadcom and Atheros (which was acquired by the Company in May 2011) filed a complaint for declaratory judgment against CSIRO in the United States District Court for the ~~Northern~~Eastern District of ~~California.~~Texas, requesting the court to declare, among other things, that United States patent number 5,487,069 (the ’069 Patent) assigned to CSIRO is invalid and unenforceable and that Atheros does not infringe any valid claims of the ’069 Patent. On October 14, 2010, CSIRO filed a complaint against Atheros and Broadcom (amended and consolidated with complaints against other third parties on April 6, 2011) alleging infringement of the ’069 Patent by Atheros’ 802.11/a/g/n products. A claim construction hearing was held on October 4, 2011, and trial is scheduled for April 9, 2012.

MOSAID Technologies Incorporated v. Dell, Inc. et al.: On March 16, 2011, MOSAID filed a complaint against Atheros and 32 other entities in the United States District Court for the Eastern District of Texas alleging that certain of

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Atheros’ WiFi products infringe United States patent numbers 5,131,006, 5,151,920, 5,422,887, 5,706,428, 6,563,786 and 6,992,972. MOSAID seeks unspecified damages and other relief. The case is early in the discovery phase. Trial is scheduled for August 4, 2014.

India BWA Spectrum: In connection with the BWA spectrum won in India in June 2010, the Company recorded a payment in noncurrent other assets, which was $928 million and $994 million at December 25, 2011 and September 25, 2011, respectively. In addition, the Company created four wholly-owned subsidiaries. On August 9, 2010, each subsidiary filed an application to obtain a license to operate a wireless network on this spectrum for one of the respective regions. Thereafter, two Indian companies each acquired 13% of each subsidiary. On September 21, 2011, the Company received a letter dated September 7, 2011 from the Government of India’s Department of Telecommunications (DoT) (the DoT Letter) notifying the Company that its applications had been rejected based on its conclusion that the applications were filed after the deadline and that the Company was restricted to filing one application rather than four. On September 27, 2011, the Company filed a petition with the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) seeking to overturn the DoT Letter. On September 28, 2011, the TDSAT issued an order granting the Company interim relief, pending a final determination of the case, directing the DoT to (i) not issue the spectrum that has been earmarked to the Company to anyone else and (ii) not forfeit or appropriate the payment that the Company made for the spectrum. On October 10, 2011, one of the Company’s subsidiaries received a letter from the DoT offering to issue it a license that would cover all of India, including the four regions for which the Company won spectrum at the June 2010 auction, assuming that the subsidiary met certain requirements by November 9, 2011. On October 18, 2011, the subsidiary submitted to the DoT a letter accepting the DoT’s offer, requesting issuance of a license as soon as possible after the requirements were met, and stating that upon issuance of the license, the Company’s three other subsidiaries would merge into the subsidiary that had been granted a license. On October 19, 2011, the DoT filed a reply to the Company’s September 27, 2011 petition with the TDSAT. In its reply, the DoT stated that upon issuance of a license, the Company’s subsidiary could apply for assignment of the spectrum, and at that time, the DoT would decide whether to grant the requested assignment and whether the Company’s applications for licenses were timely filed in accordance with its rules. On October 20, 2011, the TDSAT conducted a second hearing on the Company’s case. At the conclusion of the hearing, the TDSAT ordered the DoT to clarify the aforementioned statements in its October 19, 2011 reply in light of its October 10, 2011 offer. On November 2, 2011, the subsidiary made a filing with the DoT to meet the four requirements of the DoT Letter, which included certification by the Company’s subsidiary that no dues were payable to the DoT by either the subsidiary or its shareholders. The TDSAT conducted a hearing on November 8, 2011 and ordered that the subsidiary and the DoT meet to expedite the licensing process. The Company met with the DoT on November 14, 2011 and thereafter provided additional documentation to the DoT. At a December 2, 2011 hearing before the TDSAT, the DoT stated that it had served a provisional assessment on one of the subsidiary’s Indian partners in the amount of approximately $28 million (based on the applicable foreign currency exchange rate on December 25, 2011) in unpaid dues, including interest and penalties. The TDSAT conducted hearings on this matter on December 9, 2011, January 2, 2012 and January 31, 2012. The next hearing is scheduled for February 6, 2012. On January 22, 2012, the Company filed an application requesting that the TDSAT order the DoT to issue the license pursuant to the DoT's October 10, 2011 letter. In the application, the Company argued that the provisional assessment was not a legal basis for the DoT to delay issuing the license. The Company also offered to have its subsidiary execute an undertaking that would take effect upon issuance of the license. In the undertaking, the Company’s subsidiary would agree that if the Indian partner did not pay an amount ultimately found to be due (up to the amount of the assessment), the subsidiary would pay such amount. In addition, the Company offered to have the subsidiary provide a bank guarantee to cover the amount found to be payable if the DoT has any concern about the creditworthiness of the subsidiary. The DOT has been ordered to file a response to the Company’s application on February 3, 2012. If the Company does not ultimately prevail in this matter, the Company’s subsidiary may not receive a license or an assignment of the spectrum that the Company won in the auction; and in either of those events, the Company’s payment for the spectrum may not be returned.

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 submitted its response in July 2010. On October 19, 2011, the Commission notified the Company that it should provide to the Commission additional documents and information. The Company continues to cooperate fully with the Commission’s preliminary investigation.

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Korea Fair Trade Commission (KFTC) Complaint: On January 4, 2010, the KFTC issued a written decision, finding that the Company had 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, which the Company paid in the second quarter of fiscal 2010. The Company is appealing that decision in the Korean courts.

Japan Fair Trade Commission (JFTC) Complaint: The 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 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 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 cease and desist order 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 the Japanese Antimonopoly 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 cease and desist order pending the administrative hearing before the JFTC. The JFTC has ~~had nine hearing days to date,~~held hearings on eleven different dates, with an additional hearing day scheduled on ~~October 19, 2011,~~February 17, 2012 and additional hearing days yet to be scheduled.

~~Icera Complaint to the European~~Securities and Exchange 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 submitted its response in July 2010. The Company will cooperate fully with the Commission.

~~Broadcom Corporation et al. v. Commonwealth Scientific and Industrial Research Organisation~~: On November 10, 2009, Broadcom and Atheros (Note 12), which was acquired by the Company in May 2011, filed a complaint for declaratory judgment against Commonwealth Scientific and Industrial Research Organisation (CSIRO) in the United States District Court for the Eastern District of Texas, requesting the court to declare, among other things, that United States patent number 5,487,069 (the '069 Patent) assigned to CSIRO is invalid, unenforceable and that Atheros does not infringe any valid claims of the '069 Patent. On October 14, 2010, CSIRO filed a complaint against Atheros and Broadcom (amended and consolidated with complaints against other third parties on April 6, 2011) alleging infringement of the '069 Patent. Trial is scheduled for April 9, 2012.

~~MOSAID Technologies Incorporated v. Dell, Inc. et al.~~: On March 16, 2011, MOSAID filed a complaint against Atheros and 32 other entities in the United States District Court for the Eastern District of Texas. In its infringement contentions, MOSAID alleges that certain of Atheros’ products infringe United States patent numbers 5,131,006, 5,151,920, 5,422,887,

~~QUALCOMM Incorporated~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~5,706,428, 5,563,786 and 6,992,972. MOSAID seeks unspecified damages and other relief. Discovery has not yet begun.~~

(SEC) Formal Order of Private Investigation and Department of Justice (DOJ) Investigation: On September 8, 2010, the Company was notified by the ~~Securities and Exchange Commission’s~~SEC’s Los Angeles Regional office ~~(SEC)~~ of a formal order of private investigation. The Company understands that the investigation arose from a “whistleblower’s” allegations made in December 2009 to the audit committee of the Company’s Board of Directors and to the SEC. The audit committee completed an internal review of the allegations with the assistance of independent counsel and independent forensic accountants. This internal review into the whistleblower’s allegations and related accounting practices did not identify any errors in the ~~Company’s~~Company's financial statements. On January 27, 2012, the Company learned that the U.S. Attorney’s Office for the Southern District of California/DOJ has begun a preliminary investigation regarding the Company’s compliance with the Foreign Corrupt Practices Act (FCPA), a topic about which the SEC is also inquiring. The Company ~~continues~~believes that it is in compliance with the requirements of the FCPA and will continue to cooperate with ~~the SEC’s ongoing investigation.~~both agencies.

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~~three 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 at December 25, 2011for contingent liabilities or recognized any asset impairment charges 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 $~~546~~632 million was paid through ~~June 26,~~December 25, 2011, 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~~. At ~~June 26,~~December 25, 2011, the carrying value of the liability was $~~335~~253 million, which also approximated the fair value of the contractual liability net of imputed interest.

Loans Payable Related to India ~~Spectrum Acquisition.~~BWA Spectrum. In connection with the India BWA spectrum ~~purchase~~won in India in June 2010, certain of the Company’s subsidiaries in India entered into loan agreements with multiple lenders that are denominated in Indian rupees. The loans bear interest at an annual rate based on the highest rate among the bank lenders, which is reset quarterly, plus 0.25% (~~9.75%~~10.25% at ~~June 26,~~December 25, 2011) with interest payments due monthly. ~~The loans are due and payable in full in~~ ~~December 2012. However, each lender has the right to demand prepayment of its portion of the outstanding loans on~~ ~~December 15, 2011~~ ~~subject to sufficient prior written notice. As a result, the loans are classified as a component of current liabilities.~~ The loans can be prepaid without penalty on certain dates and are guaranteed by QUALCOMM Incorporated and one of its subsidiaries. In December 2011, the lender that could demand prepayment of its portion of the loans exercised its right requiring the Company to prepay the amount outstanding on February 28, 2012 ($142 million at December 25, 2011).

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company intends to refinance this amount with new loans. The remaining loans ($786 million at December 25, 2011) are due and payable in full in December 2012. The loan agreements also define certain events of default, including, among other things, if certain government authorizations are revoked, terminated, withdrawn, suspended, modified or withheld. If the DoT’s rejection of the Company’s license applications were to be considered an event of default, the bank lenders could have declared the loans due and payable immediately. The Company has received waivers from each of the bank lenders related to this matter until at least April 1, 2012, which are conditioned upon the Company continuing to pursue its legal rights in this matter. The lenders have agreed that any default will be deemed cured under certain circumstances, including if one of the relevant subsidiaries is granted the license and the other three are pursuing a merger into the subsidiary that has been offered a license. The loan agreements contain standard covenants, which, among other things, limit actions by the subsidiaries that are party to the loan agreements, including the incurrence of loans and equity investments, disposition of assets, mergers and consolidations and other matters customarily restricted in such agreements. At ~~June 26,~~December 25, 2011, the aggregate carrying value of the loans was $~~1.1 billion~~928 million, which approximated fair value.

Indemnifications. With the exception of the practices of Atheros, ~~(Note 12), which the Company acquired in May 2011,~~ the Company generally does not indemnify its customers and licensees for losses sustained from infringement of third-party intellectual property rights. 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. Under Atheros’ indemnification agreements, software license agreements and product sale agreements, including its standard software license agreements and standard terms and conditions of semiconductor sales, Atheros agrees, subject to restrictions and after certain conditions are met, to indemnify and defend its licensees and customers against third-party claims asserting infringement of certain intellectual property rights, which may include patents, copyrights, trademarks or trade secrets, and to pay any judgments entered on such claims against the licensees or customers. Through ~~June 26,~~December 25, 2011, Atheros has received a number of claims from its direct and indirect customers and other third parties for indemnification under such agreements with respect to alleged infringement of third-party intellectual property rights by Atheros’ products.

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

~~QUALCOMM Incorporated~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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 26,~~December 25, 2011 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 and services and long-lived assets. Noncancelable obligations under these agreements at ~~June 26,~~December 25, 2011 for the remainder of fiscal ~~2011~~2012 and for each of the subsequent four years from fiscal ~~2012~~2013 through ~~2015~~2016 were approximately $~~1.5~~2.1 billion, $~~336~~75 million, $3039 million, $436 million and $3325 million, respectively, and $248 million thereafter. Of these amounts, for the remainder of fiscal ~~2011~~2012 and for fiscal ~~2012,~~2013, commitments to purchase integrated circuit product inventories comprised $~~1.2~~1.7 billion and $343 million, respectively.

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Leases. The future minimum lease payments for all capital leases and operating leases at ~~June 26,~~December 25, 2011 were as follows (in millions):


	Capital Leases		Operating Leases		Total		Capital Leases		Operating Leases		Total
Remainder of fiscal 2011	$	2	$	23	$	25
2012	14		85		99
Remainder of fiscal 2012							$	8	$	100	$	108
2013	14		46		60		11		112		123
2014	14		37		51		11		92		103
2015	14		27		41		11		43		54
2016							12		28		40
Thereafter	370		206		576		293		164		457
Total minimum lease payments	$	428	$	424	$	852	$	346	$	539	$	885
Deduct: Amounts representing interest	243						196
Present value of minimum lease payments	185						150
Deduct: Current portion of capital lease obligations	1						1
Long-term portion of capital lease obligations	$	184					$	149

The Company leases certain of its land, 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 associated with its discontinued operations (Note ~~10)~~8), primarily related to site leases that have an initial term of five to seven years with renewal options of up to five additional renewal periods. In determining the capital lease classification for the site leases upon commencement of each lease, the Company included all renewal options. As a result of its restructuring plan, the Company does not intend to renew its existing site capital leases. At ~~June 26,~~December 25, 2011, the Company ~~expects to write off~~had $~~161~~130 million of site capital lease assets (which are included in buildings and improvements in property, plant and equipment) and $~~184~~149 million of ~~its~~ capital lease obligations (which are included in other liabilities) that pertain to lease optional renewal periods. The Company expects to write off these amounts at the end of the current contractual lease ~~terms related to lease renewal option periods thereafter.~~terms. Any early terminations may impact the amounts that are written off.

Note 97 — 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 (QWI) segment and three of its divisions into the Qualcomm Strategic Initiatives (QSI) segment. Reportable segments are as follows:

Qualcomm CDMA Technologies (QCT) — develops and supplies integrated circuits and system software based on CDMA, OFDMA and other technologies for use in voice and data communications, networking, application processing, multimedia and global positioning system ~~products.~~products;

Qualcomm Technology Licensing (QTL) — grants licenses or otherwise provides rights to use portions of the Company’s intellectual property portfolio, which, among other rights, 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 collects fixed license fees and royalties in partial consideration for such licenses;

Qualcomm Wireless & Internet (QWI) — comprised of:

~~QUALCOMM Incorporated~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

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 and services to United States government agencies involving wireless communications technologies;

Qualcomm Enterprise Services (QES) — provides satellite- and terrestrial-based two-way wireless ~~information~~connectivity and position ~~reporting~~location services and sells mobile information units to transportation and

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

logistics companies and other enterprise companies with fleet vehicles; and

Firethorn — builds and manages software applications that enable certain mobile commerce services.

Qualcomm Strategic Initiatives (QSI) — comprised of the Company’s Qualcomm Ventures, Structured Finance & Strategic Investments and FLO TV divisions. QSI makes strategic investments that the Company believes will open new opportunities for ~~CDMA and OFDMA~~its technologies, support the design and introduction of new ~~CDMA~~products or services for voice and ~~OFDMA products~~data communications or possess unique capabilities or technology. Many of these strategic investments are in early-stage ~~companies and in wireless spectrum, such as the BWA spectrum won in the auction in India.~~companies. QSI also ~~includes FLO TV Incorporated (FLO TV), the Company’s wholly-owned~~holds wireless ~~multimedia operator subsidiary. Since the shut down~~spectrum. The results of ~~the~~QSI’s FLO TV business and network on March 27, 2011, the Company has been working to sell its remaining assets and exit contracts. The 700 MHz spectrum was classified as held for sale, and all other FLO TV assets were considered disposed of, at ~~June 26, 2011. Accordingly, the results of operations related to the FLO TV business were~~are presented as discontinued operations at ~~June 26, 2011~~(Note ~~10). Share-based payments that had been~~8) and are therefore not included in ~~reconciling items and QSI~~QSI’s revenues ~~and earnings (loss) from continuing operations~~or loss before income ~~taxes (EBT) have been adjusted to conform for all prior periods presented.~~

taxes.

The Company evaluates the performance of its segments based on ~~EBT~~earnings (loss) before income taxes (EBT) from continuing operations. Segment 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;~~compensation (Note 1); and certain research and development expenses and other selling and marketing expenses that were deemed to be not directly related to the businesses of the segments. Additionally, starting with acquisitions in the third quarter of fiscal 2011, unallocated charges include recognition of the step-up of inventories to fair value and amortization of certain intangible assets. Such charges related to acquisitions that were completed prior to the third quarter of fiscal 2011 are allocated to the respective segments. The table below presents revenues and EBT for reportable segments (in millions):


	QCT		QTL		QWI			QSI*			Reconciling Items*			Total*		QCT		QTL		QWI		QSI*			Reconciling Items*			Total*
For the three months ended:
June 26, 2011
December 25, 2011
Revenues	$	2,194	$	1,257	$	164		$	—		$	8		$	3,623	$	3,085	$	1,440	$	152	$	—		$	4		$	4,681
EBT	430		1,092		(13		)	(30		)	(205		)	1,274		739		1,267		1		(34		)	(252		)	1,721
June 27, 2010
December 26, 2010
Revenues	$	1,691	$	847	$	162		$	—		$	—		$	2,700	$	2,116	$	1,057	$	172	$	—		$	3		$	3,348
EBT	404		673		6			60			(67		)	1,076		640		892		—		(21		)	(41		)	1,470

For the nine months ended:
June 26, 2011
Revenues	$	6,272	$	4,061	$	493		$	—		$	14		$	10,840
EBT	1,487		3,559		(147		)	(97		)	(439		)	4,363
June 27, 2010
Revenues	$	4,835	$	2,738	$	456		$	—		$	1		$	8,030
EBT	1,173		2,266		14			38			(169		)	3,322

*As adjusted for discontinued operations (Note ~~10)~~8)

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



	Three Months Ended
	December 25, 2011			December 26, 2010*
Revenues
Elimination of intersegment revenues	$	(1	)	$	(1	)
Other nonreportable segments	5			4
	$	4		$	3
EBT
Unallocated cost of equipment and services revenues	$	(70	)	$	(14	)
Unallocated research and development expenses	(162		)	(117		)
Unallocated selling, general and administrative expenses	(115		)	(85		)
Unallocated investment income, net	190			244
Other nonreportable segments	(95		)	(69		)
	$	(252	)	$	(41	)

*As adjusted for discontinued operations (Note 8)

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Three Months Ended Nine Months Ended
June 26,
2011 June 27, 2010* June 26,
2011 June 27, 2010*
Revenues
Elimination of intersegment revenues $ (1 ) $ (1 ) $ (3 ) $ (7 )
Other nonreportable segments 9
1
17
8
$ 8
$ —
$ 14
$ 1
EBT
Unallocated cost of equipment and services revenues $ (73 ) $ (10 ) $ (103 ) $ (30 )
Unallocated research and development expenses (129 ) (93 ) (400 ) (294 )
Unallocated selling, general and administrative expenses (106 ) (72 ) (353 ) (211 )
Unallocated investment income, net 181
169
642
535
Other nonreportable segments (78 ) (61 ) (225 ) (166 )
Intersegment eliminations —
—
—
(3 )
$ (205 ) $ (67 ) $ (439 ) $ (169 )

*As adjusted for discontinued operations (Note 10)

Reconciling items for ~~both~~ the three months ~~and nine months~~ ended ~~June 26,~~December 25, 2011 included $5951 million and $189 million of unallocated cost of equipment and services revenues and unallocated selling, general and administrative expenses, respectively, related to the ~~step-up of inventories to fair value and~~ amortization of intangible assets resulting from acquisitions. Other nonreportable segments’ losses before taxes during the ~~acquisition of Atheros (Note 12).~~three months ended December 25, 2011 and December 26, 2010 were primarily attributable to the Company’s QMT division, a nonreportable segment developing display technology for mobile devices and other applications.

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


	QCT		QTL		QWI		QCT		QTL		QWI
For the three months ended:
June 26, 2011
December 25, 2011
Revenues from external customers	$	2,193	$	1,257	$	164	$	3,084	$	1,440	$	152
Intersegment revenues	1		—		—		1		—		—
June 27, 2010
December 26, 2010
Revenues from external customers	$	1,691	$	847	$	162	$	2,115	$	1,057	$	172
Intersegment revenues	—		—		—		1		—		—

For the nine months ended:
June 26, 2011
Revenues from external customers	$	6,270	$	4,061	$	493
Intersegment revenues	2		—		—
June 27, 2010
Revenues from external customers	$	4,828	$	2,738	$	456
Intersegment revenues	7		—		—

Segment assets are comprised of accounts receivable and inventories for all reportable segments other than QSI. ~~QCT inventories at~~ ~~June 26, 2011~~ ~~excluded~~ ~~$37 million~~ ~~related to the step-up of inventories to fair value resulting from the acquisition of Atheros (Note 12); such amount was included in reconciling items.~~ QSI segment assets include certain marketable securities, notes receivable, spectrum licenses, other investments and all assets of QSI’s consolidated subsidiaries. QSI segment assets related to the discontinued FLO TV business totaled $~~926~~901 million and $~~1.3 billion~~913 million at ~~June 26,~~December 25, 2011 and September ~~26, 2010~~25, 2011, respectively. Reconciling items for total assets included $~~631 million~~1.0 billion and $~~384~~806 million at ~~June 26,~~December 25, 2011 and September ~~26, 2010~~25, 2011, respectively, of goodwill and other assets related to the Company’s QMT ~~division, a nonreportable segment developing display technology for mobile devices and other applications.~~division. Total segment assets also differ from total assets on a consolidated basis as a result of unallocated corporate assets primarily comprised of certain cash, cash equivalents, marketable securities, property, plant and equipment, deferred tax assets, goodwill, other intangible assets and assets of nonreportable segments. Segment assets and reconciling items were as follows (in millions):

~~QUALCOMM Incorporated~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~


	June 26, 2011		September 26, 2010		December 25, 2011		September 25, 2011
QCT	$	1,345	$	1,085	$	1,519	$	1,569
QTL	32		28		70		36
QWI	154		129		133		136
QSI	2,531		2,745		2,320		2,386
Reconciling items	31,038		26,585		33,564		32,295
Total consolidated assets	$	35,100	$	30,572	$	37,606	$	36,422

Note 108 — Discontinued Operations

On December ~~20, 2010~~27, 2011, after the close of the first fiscal quarter, the Company ~~agreed to sell~~completed the sale of substantially all of its 700 MHz spectrum for $1.9 billion~~, subject to~~. As a result, the ~~satisfaction~~Company will recognize a gain in discontinued operations of ~~customary closing conditions, including approval by~~$1.2 billion in the ~~U.S. Federal Communications Commission. The agreement followed the Company’s previously announced plan to restructure and evaluate strategic options~~second quarter of fiscal 2012 related to the ~~FLO TV business and network.~~close of this transaction. The FLO TV business and network were shut down on March 27, 2011. Since then, the Company has been working to sell the remaining assets and exit contracts. The 700 MHz spectrum ~~with a carrying value of~~ ~~$746 million~~ ~~that the Company has agreed to sell was~~is classified as held for ~~sale, and all~~sale. All other assets were considered disposed of at ~~June 26,~~December 25, 2011. Accordingly, the results of operations of the FLO TV business ~~were~~are presented as discontinued ~~operations at~~ ~~June 26, 2011. The Company’s statements of operations for all prior periods presented have been adjusted to conform.~~

~~Summarized results from discontinued operations were as follows (in millions):~~

Three Months Ended Nine Months Ended
June 26, 2011 June 27, 2010 June 26, 2011 June 27, 2010
Revenues $ 1
$ 5
$ 5
$ 9
Income (loss) from discontinued operations 1
(105 ) (502 ) (334 )
Income tax benefit 43
40
195
134
Discontinued operations, net of income taxes $ 44
$ (65 ) $ (307 ) $ (200 )

~~Income (loss)~~operations. Loss from discontinued operations includes share-based payments and excludes certain general corporate expenses allocated to the FLO TV business during the periods presented. During the third quarter of fiscal 2011, in connection with the presentation of the FLO TV business as discontinued operations and the requirement to compute the tax effect of discontinued operations on a discrete basis, the Company recorded a tax benefit of ~~$43 million~~ ~~for tax benefits related to losses incurred in the first and second quarter of fiscal 2011 that were previously included in the calculation of the estimated annual effective tax rate.~~

~~The carrying amounts of the major classes of assets and liabilities of discontinued operations in the condensed consolidated balance sheet were as follows (in millions):~~

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Summarized results from discontinued operations were as follows (in millions):

June 26, 2011
Assets
Current assets $ 8
Property, plant and equipment, net 170
Assets held for sale 746
Other assets 2
Total assets $ 926
Liabilities
Trade accounts payable $ 2
Payroll and other benefits related liabilities 2
Other current liabilities 88
Other noncurrent liabilities 198
Total liabilities $ 290



	Three Months Ended
	December 25, 2011			December 26, 2010
Revenues	$	—		$	—
Loss from discontinued operations	$	(8	)	$	(141	)
Income tax benefit	3			59
Discontinued operations, net of income taxes	$	(5	)	$	(82	)

At December 25, 2011, total assets and liabilities of the discontinued operations in the condensed consolidated balance sheet were $901 million and $225 million, respectively. The assets primarily consisted of the spectrum held for sale of $746 million and capital lease assets of $130 million. Liabilities primarily consisted of capital lease liabilities of $149 million. The Company has a significant number of site leases, and the Company has corresponding capital lease assets, capital lease liabilities and asset retirement obligations (Note 8)6). The capital lease assets, included in property, plant and equipment, net, were considered disposed of at March 27, 2011 when the Company shut down the FLO TV business.

Restructuring ~~and restructuring-related~~ activities under the Company’s plan related to discontinued operations were initiated in the fourth quarter of fiscal 2010 and are expected to be substantially complete by the end of fiscal 2012 as the Company continues to negotiate the exit of certain contracts and removes certain of its equipment from the network sites. ~~The Company estimates that it will incur future restructuring and restructuring-related~~Restructuring charges ~~of up to~~ ~~$40 million~~, primarily ~~related to lease exit costs. Restructuring charges~~ consist of lease exit and other contract termination costs and certain severance costs. ~~Restructuring-related~~The Company estimates that it will incur future restructuring charges ~~primarily consist~~ of ~~asset impairment and accelerated depreciation.~~up to $20 million. The Company may also realize certain gains, primarily due to the potential release of liabilities associated with ongoing efforts to exit certain contracts, the amount of which cannot be reasonably estimated at this time. The restructuring liability, which is reported as a component of other liabilities, consisted of contract termination costs of $37 million and other costs of $3 million at December 25, 2011. During the three months ended December 25, 2011, the Company made payments on amounts previously accrued of $3 million. Future cash expenditures are expected to be in the range of $~~100~~70 million to $~~140~~110 million. ~~As a result of exiting various contractual obligations on favorable terms, the Company recorded net reversals of~~ ~~$4 million~~ ~~and~~ ~~$8 million~~ in restructuring charges and restructuring-related charges, respectively, during the three months ended June 26, 2011. During the nine months ended June 26, 2011, the Company recorded net restructuring charges of ~~$58 million, including~~ ~~$48 million~~ ~~in contract termination costs, and net restructuring-related charges of~~ ~~$308 million, including~~ ~~$305 million~~ ~~in asset impairments and accelerated depreciation.~~

~~Changes in the restructuring accrual, which is reported as a component of other liabilities, for the nine months ended June 26, 2011 were as follows (in millions):~~

Balance at
September 26,
2010
Initial Costs Adjustments to Costs Cash Payments
Balance at
June 26,
2011
Contract termination costs $ —
$ 63
$ (2 ) $ (18 ) $ 43
Other costs —
16
(6 ) (6 ) 4
$ —
$ 79
$ (8 ) $ (24 ) $ 47

~~Note 11 — Goodwill Impairment~~

During the first quarter of fiscal 2011, the Firethorn division in the QWI segment introduced a new product application trademarked as SWAGG. The initial consumer adoption rate of SWAGG had fallen significantly short of the Company's expectations, and as a result, in the second quarter of fiscal 2011, the Company revised its internal forecasts to reflect lower than expected demand and reduced the Firethorn cost structure. Based on these adverse changes, in the second quarter of fiscal 2011, the Company performed a goodwill impairment test for the Firethorn division, which was determined to be a reporting unit for purposes of the goodwill impairment test. The goodwill impairment test is a two-step process. First, the Company estimated the fair value of the Firethorn reporting unit by considering both discounted future projected cash flows and prices of comparable businesses. The results of this analysis indicated that the carrying value of the reporting unit exceeded its fair value. Therefore, the Company measured the amount of impairment charge by determining the implied fair value of the goodwill as if the Firethorn reporting unit were being acquired in a business combination. The Company determined the fair value of the

~~assets and the liabilities, primarily using a cost approach. Based on the results of the goodwill impairment test, the Company recorded a pre-tax goodwill impairment charge of~~ ~~$114 million~~ ~~in the second quarter of fiscal 2011. Subsequent to the impairment,~~ ~~$40 million~~ ~~of goodwill remained for the Firethorn reporting unit.~~

Note 129 — ~~Acquisition~~Acquisitions

OnDuring the three months ended ~~May 24,~~December 25, 2011, the Company acquired ~~Atheros Communications, Inc., which was renamed Qualcomm Atheros, Inc. (Atheros),~~five businesses for total cash consideration of $~~3.1 billion~~288 million ~~(net~~. Technology-based intangible assets recognized in the amount of $~~233~~32 million ~~of cash acquired) and the exchange of vested and earned unvested share-based payment awards with an estimated fair value of~~ ~~$106 million~~. Atheros sells communication chipsets to manufacturers of networking, computing and consumer electronics products. The primary objective of the acquisition is to help accelerate the expansion of the Company’s technologies and platforms to new businesses beyond cellular, including home, enterprise and carrier networking. Atheros was integrated into the QCT segment.

~~The allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values was as follows (in millions):~~

Current assets $ 925
Amortizable intangible assets:
Technology-based intangible assets 692
Marketing-related intangible assets 50
Customer-related intangible assets 114
In-process research and development (IPR&D) 150
Goodwill 1,779
Other assets 75
Total assets 3,785
Liabilities (316 )
Total $ 3,469

Goodwill recognized in this transaction is not deductible for tax purposes and was allocated to the QCT segment for annual impairment testing purposes. Goodwill largely consists of expected revenue synergies resulting from the combination of product portfolios, cost synergies related to reduction in headcount growth and lower manufacturing costs, assembled workforce and access to additional sales and distribution channels. The intangible assets acquired will beare being amortized on a straight-line basis over a weighted-average useful ~~lives~~life of 4six ~~years,~~years. The Company recorded 6$46 million ~~years and~~ 3 years for technology-based, marketing-related and customer-related intangible assets, respectively. The estimated fair values of the intangible assets acquired were primarily determined using the income approach based on significant inputs that were not observable. IPR&D consists of 26 ~~projects, primarily~~ related to ~~wireless local-area network~~two in-process research and ~~powerline communications technologies. The~~development (IPR&D) projects, which are expected to be completed ~~over~~within the next 3two years. ~~The estimated remaining costs to complete the IPR&D projects were~~ ~~$36 million~~ ~~as of the acquisition date.~~ The acquired IPR&D will not be amortized until completion, ~~of the related products as it was determined that the underlying projects had not reached technological feasibility at the date of acquisition. Upon~~and upon completion, ~~each~~ IPR&D ~~project~~projects will be amortized over ~~its useful life;~~their useful lives, ~~for IPR&D~~which are expected to ~~range between~~be 2nine ~~years~~years. Goodwill recognized in these transactions, of which $61 million is expected to be deductible for tax purposes, was assigned to the Company’s reportable segments as follows: $39 million to QCT, $22 million to QTL and 6 ~~years. Acquisition costs related to the merger of~~ $23135 million ~~were recognized~~to a non-reportable segment.

Note 10 — Fair Value Measurements

Fair value is defined as ~~selling, general and administrative expenses as incurred~~the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in ~~fiscal 2011. The Company’s results of operations~~the principal or most advantageous market for the ~~three months ended June 26, 2011 included the operating results of Atheros since the date of acquisition, the amounts of which were not material.~~

~~The following table presents the unaudited pro forma results for the nine months ended~~ ~~June 26, 2011~~ ~~and~~ ~~June 27, 2010. The unaudited pro forma financial information combines the results of operations of QUALCOMM and Atheros as though the companies had been combined~~asset or liability in an orderly transaction between market participants as of the ~~beginning~~measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of ~~fiscal 2010,~~observable inputs and minimizes the ~~pro forma information is presented for informational purposes only~~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 ~~is not indicative~~are developed based on market data obtained from sources independent of the ~~results~~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 ~~operations~~inputs that ~~would have been achieved if the acquisition had taken place at such times. The unaudited pro forma results presented include amortization charges~~may be used to measure fair value:

Level 1 includes financial instruments for ~~acquired intangible assets, eliminations of intercompany transactions, adjustments~~which quoted market prices for ~~increased fair value of acquired inventory, adjustments~~identical instruments are available in active markets.

Level 2 includes financial instruments for incremental stock-based compensation expense related to the unearned portion of Atheros stock options and restricted stock units assumed, adjustments for depreciation expense for property, plant and equipment and related tax effects.which there are inputs other than quoted prices included within Level

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1 that are observable for the instrument.

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.

The following table presents the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at December 25, 2011 (in millions):



	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	1,192	$	2,857	$	—	$	4,049
Marketable securities
U.S. Treasury securities and government-related securities	371		792		—		1,163
Corporate bonds and notes	—		6,320		—		6,320
Mortgage- and asset-backed securities	—		671		23		694
Auction rate securities	—		—		122		122
Non-investment-grade debt securities	—		4,045		34		4,079
Common and preferred stock	1,212		694		—		1,906
Equity mutual and exchange-traded funds	922		—		—		922
Debt mutual funds	1,327		481		—		1,808
Total marketable securities	3,832		13,003		179		17,014
Derivative instruments	—		17		—		17
Other investments	175		—		—		175
Total assets measured at fair value	$	5,199	$	15,877	$	179	$	21,255
Liabilities
Derivative instruments	$	—	$	56	$	—	$	56
Other liabilities	175		—		6		181
Total liabilities measured at fair value	$	175	$	56	$	6	$	237

Cash Equivalents and Marketable Securities. The Company considers all highly liquid investments, including repurchase agreements, with original maturities of three months or less to be cash equivalents. Cash equivalents are comprised of money market funds, certificates of deposit, commercial paper, government agencies’ securities and repurchase agreements fully collateralized by government agencies’ securities.

With the exception of auction rate securities, the Company obtains pricing information from quoted market prices, pricing vendors or quotes from brokers/dealers. The Company conducts reviews of its primary pricing vendors to determine whether the inputs used in the vendor’s pricing processes are deemed to be observable.

The fair value of highly rated mortgage- and asset-backed securities is derived from the use of matrix pricing (prices for similar securities) or, in some cases, cash flow pricing models with observable inputs such as contractual terms, maturity, credit rating and/or securitization structure to determine the timing and amount of future cash flows. Certain

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

mortgage- and asset-backed securities, principally those rated below AAA, may require the use of significant unobservable inputs to estimate fair value, such as 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, default likelihood and recovery, the future state of the auction rate market and credit valuation adjustments of market participants. Though certain of the securities held by the Company are pools of student loans guaranteed by the U.S. government, prepayment speeds and illiquidity discounts are considered significant unobservable inputs. These additional inputs are generally unobservable, and therefore, auction rate securities are included in Level 3.

Derivative Instruments. Derivative instruments include foreign currency option and forward contracts to manage foreign exchange risk for certain foreign currency transactions and certain balances denominated in a foreign currency; option, forward and swap contracts to acquire or reduce foreign exchange risk and/or equity and credit risks for portfolios of marketable securities classified as trading; and written put options to repurchase shares of the Company’s common stock at fixed prices. Derivative instruments that are traded on an exchange are valued using quoted market prices and are included in Level 1. Derivative instruments that are not traded on an exchange are valued using standard calculations/models that are primarily based on observable inputs, such as foreign currency exchange rates, the Company’s stock price, volatilities and interest rates, and therefore, such derivative instruments are included in Level 2.

Other Investments and Other Liabilities. Other investments and other liabilities included in Level 1 are comprised of the Company’s deferred compensation plan liability and related assets, which are invested in mutual funds. Other liabilities included in Level 3 are comprised of put rights held by third parties representing interests in certain of the Company’s subsidiaries. These put rights are valued with a standard option pricing model using significant unobservable inputs.

Activity between Levels of the Fair Value Hierarchy. There were no significant transfers between Level 1 and Level 2 during the three months ended December 25, 2011 or December 26, 2010. 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 and other liabilities classified within Level 3 of the valuation hierarchy (in millions):



	Three Months Ended December 25, 2011
	Auction Rate Securities			Other Marketable Securities			Other Liabilities
Beginning balance of Level 3	$	124		$	27		$	7
Total realized and unrealized gains or losses:
Included in investment income, net	—			—			(1		)
Included in other comprehensive income	(1		)	—			—
Purchases	—			35			—
Settlements	(1		)	(5		)	—
Ending balance of Level 3	$	122		$	57		$	6



	Three Months Ended December 26, 2010
	Auction Rate Securities			Other Marketable Securities
Beginning balance of Level 3	$	126		$	18
Total realized and unrealized gains or losses:
Included in other comprehensive income	2			—
Settlements	(2		)	(1		)
Ending balance of Level 3	$	126		$	17

The Company recognizes 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. There were no transfers into or out

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

of Level 3 during the three months ended December 25, 2011 and December 26, 2010.

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 three months ended December 25, 2011 and December 26, 2010, the Company did not have any significant assets or liabilities that were measured at fair value on a nonrecurring basis in periods subsequent to initial recognition.

Note 11 — Marketable Securities

Marketable securities were comprised as follows (in millions):



	Current				Noncurrent
	December 25, 2011		September 25, 2011		December 25, 2011		September 25, 2011
Trading:
U.S. Treasury securities and government-related securities	$	230	$	—	$	330	$	—
Corporate bonds and notes	266		—		91		—
Mortgage- and asset-backed securities	—		—		35		—
Non-investment-grade debt securities	—		—		54		—
Total trading	496		—		510		—
Available-for-sale:
U.S. Treasury securities and government-related securities	573		516		30		6
Corporate bonds and notes	3,503		3,665		2,460		2,353
Mortgage- and asset-backed securities	527		587		132		91
Auction rate securities	—		—		122		124
Non-investment-grade debt securities	20		19		4,005		3,653
Common and preferred stock	130		76		1,776		1,713
Equity mutual and exchange-traded funds	—		—		922		845
Debt mutual funds	1,327		1,327		—		—
Total available-for-sale	6,080		6,190		9,447		8,785
Fair value option:
Debt mutual fund	—		—		481		476
Total marketable securities	$	6,576	$	6,190	$	10,438	$	9,261

The Company holds an investment in a debt mutual fund for which the Company elected the fair value option. The investment would have otherwise been recorded using the equity method. The debt mutual fund has no single maturity date. At December 25, 2011, the Company had an effective ownership interest in the debt mutual fund of 21%. Increases in fair value associated with this investment of $5 million were recognized in net investment income during each of the three months ended December 25, 2011 and December 26, 2010. The Company believes that recording the investment at fair value and reporting the investment as a marketable security is preferable to applying the equity method because the Company is able to redeem its shares at net asset value, which is determined daily.

The Company classifies portfolios of debt securities that involve the purchase or sale of derivative instruments to acquire or reduce foreign exchange and/or equity and credit risk as trading. Net losses recognized on debt securities classified as trading still held at December 25, 2011 were $2 million for the three months ended December 25, 2011. The Company did not hold any securities classified as trading at September 25, 2011.

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

At December 25, 2011, the contractual maturities of available-for-sale debt securities were as follows (in millions):



Years to Maturity
Less Than One Year		One to Five Years		Five to Ten Years		Greater Than Ten Years		No Single Maturity Date		Total
$	799	$	4,878	$	2,716	$	1,034	$	3,272	$	12,699

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

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



	Gross Realized Gains		Gross Realized Losses			Net Realized Gains
For the three months ended
December 25, 2011	$	36	$	(2	)	$	34
December 26, 2010	128		(5		)	123

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



	Cost		Unrealized Gains		Unrealized Losses			Fair Value
December 25, 2011
Equity securities	$	2,428	$	443	$	(43	)	$	2,828
Debt securities	12,500		322		(123		)	12,699
	$	14,928	$	765	$	(166	)	$	15,527
September 25, 2011
Equity securities	$	2,426	$	278	$	(70	)	$	2,634
Debt securities	12,179		294		(132		)	12,341
	$	14,605	$	572	$	(202	)	$	14,975

The following table shows the gross unrealized losses and fair values of the Company’s investments in individual securities that are classified as available-for-sale and 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):



	December 25, 2011
	Less than 12 months					More than 12 months
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities and government-related securities	$	419	$	(2	)	$	4	$	—
Corporate bonds and notes	1,930		(44		)	58		(5		)
Auction rate securities	3		—			119		(3		)
Non-investment-grade debt securities	1,396		(60		)	32		(4		)
Common and preferred stock	313		(27		)	4		—
Equity mutual and exchange-traded funds	153		(16		)	—		—
Debt mutual funds	1,320		(5		)	1		—
	$	5,534	$	(154	)	$	218	$	(12	)

QUALCOMM Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Nine Months Ended
June 26, 2011 June 27, 2010
(In millions)
Revenues $ 11,467
$ 8,868
Net income attributable to QUALCOMM 3,168
2,089



	September 25, 2011
	Less than 12 months					More than 12 months
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Corporate bonds and notes	$	1,862	$	(41	)	$	41	$	—
Auction rate securities	3		—			121		(2		)
Non-investment-grade debt securities	1,867		(86		)	19		(3		)
Common and preferred stock	750		(70		)	4		—
	$	4,482	$	(197	)	$	185	$	(5	)

At December 25, 2011, the Company concluded that the unrealized losses on its available-for-sale securities were temporary. Further, for common and preferred stock 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 Ended
	December 25, 2011			December 26, 2010
Beginning balance of credit losses	$	46		$	109
Reductions in credit losses related to securities the Company intends to sell	—			(11		)
Additional credit losses recognized on securities previously impaired	1			—
Reductions in credit losses related to securities sold	(1		)	(7		)
Accretion of credit losses due to an increase in cash flows expected to be collected	—			(2		)
Ending balance of credit losses	$	46		$	89

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This information should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended September ~~26, 2010~~25, 2011 contained in our ~~2010~~2011 Annual Report on Form 10-K.

~~In addition~~This Quarterly Report (including, but not limited to, ~~historical information,~~ the following ~~discussion~~section regarding Management's Discussion and Analysis of Financial Condition and Results of Operations) contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Quarterly Report. Additionally, statements concerning future matters such as the development of new products, enhancements or technologies, sales levels, expense levels and other statements regarding matters that are not historical are forward-looking statements.

Although forward-looking statements in this Quarterly Report reflect our good faith judgment, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and ~~uncertainties. Actual~~uncertainties and actual results and outcomes may differ ~~substantially~~materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation those ~~referred to herein due to a number of factors, including but not limited to risks described in~~discussed under the ~~section entitled Risk Factors and~~heading “Risk Factors” below, as well as those discussed elsewhere in this Quarterly Report. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

Overview

Recent Developments

Revenues for the ~~third~~first quarter of fiscal ~~2011~~2012 were ~~$3.6~~$4.7 billion, with net income of ~~$1.0~~$1.4 billion, which were impacted by the following key items:


•	We shipped approximately ~~120~~156 million ~~Mobile Station Modem (MSM)~~MSM integrated circuits for CDMA- and OFDMA-based wireless devices, an increase of ~~17%~~32% compared to approximately ~~103~~118 million MSM integrated circuits in the year ago quarter. ⁽¹⁾


•	Total reported device sales were approximately ~~$36.4~~$41.4 billion, an increase of approximately ~~44%~~22%, compared to approximately ~~$25.2~~$34.0 billion in the year ago quarter. ⁽²⁾

On May 24, 2011, we acquired Atheros Communications, Inc., which was renamed Qualcomm Atheros, Inc. (Atheros), for total cash consideration of $3.1 billion, net of cash acquired, and the exchange of equity awards. Atheros was integrated into the Qualcomm CDMA Technologies (QCT) segment.

~~Our results of operations reflect the presentation of the FLO TV business as discontinued operations, and all prior period amounts have been adjusted accordingly.~~

Against this backdrop, the following recent developments occurred during the ~~third~~first quarter of fiscal ~~2011~~2012 with respect to key elements of our business or our industry:


•	Worldwide wireless subscriptions grew by approximately 3% to reach approximately ~~5.7~~6.1 billion. ⁽³⁾


•	Worldwide 3G ~~subscriptions~~connections (all CDMA-based) grew to approximately ~~1.4~~1.6 billion, approximately ~~24%~~26% of total wireless subscriptions, including approximately ~~534~~546 million CDMA2000 1X/1xEV-DO subscriptions and approximately ~~865 million~~1.0 billion WCDMA/HSPA/TD-SCDMA subscriptions.⁽³⁾


•	~~Unit shipments of CDMA-based handsets grew an estimated 28% over the prior year quarter, compared to an estimated increase of 19% across all wireless technologies.~~⁽⁴⁾


(1)	~~During the~~ ~~third~~ ~~quarter of fiscal 2011, some~~Some customers built devices that incorporated two MSMs. In such cases, which represent ~~less than~~approximately 1% of our gross volume, we count only one MSM in reporting the MSM shipments.

(2)

Total reported device sales is the sum of all reported sales in U.S. dollars (as reported to us by our licensees) of all licensed CDMA-based, OFDMA-based and multimode CDMA/OFDMA subscriber devices (including handsets, modules, modem cards and other subscriber devices) by our licensees during a particular period. Not all licensees report sales the same way (e.g., some licensees report sales net of permitted deductions, such as transportation, insurance and packing costs, while other licensees report sales and then identify the amount of permitted deductions in their reports), and the way in which licensees report such information may change from time to time. Total reported device sales for a particular period may include prior period activity that was not reported by the licensee until such particular period.


(3)	According to Wireless Intelligence estimates as of ~~July 18, 2011,~~January 30, 2012, for the quarter ending ~~June 30,~~December 31, 2011. Wireless Intelligence estimates for CDMA2000 1X/1xEV-DO subscribers do not include Wireless Local Loop.


~~(4)~~	~~Based on current reports by Strategy Analytics, a global research and consulting firm, in their May 2011 Global Handset Market Share Update.~~

Our Business and Operating Segments

We design, manufacture, have manufactured on our behalf and market digital communications products and services based on CDMA, OFDMA and other technologies. We derive revenues principally from sales of integrated circuit products, fixed license fees (payable in one or more installments) and ongoing royalties for use of our intellectual property, messaging and other services and related hardware sales, software development and licensing and related services and software hosting services. Operating expenses primarily consist of cost of equipment and services, research and development and selling, general and administrative expenses.

We conduct business primarily through four reportable segments. These segments are: Qualcomm CDMA Technologies, or QCT; Qualcomm Technology Licensing, or QTL; Qualcomm Wireless & Internet, or QWI; and Qualcomm Strategic Initiatives, or QSI.

QCT is a leading developer and supplier of integrated circuits and system software based on CDMA, OFDMA and other technologies for use in voice and data communications, networking, application processing, multimedia and global positioning system products. QCT’s integrated circuit products and system software are sold to or licensed to manufacturers that use our products in wireless devices, particularly mobile phones, tablets, laptops, data modules, handheld wireless computers and gaming devices, access points and routers, data cards and infrastructure equipment, and in wired devices, particularly broadband gateway equipment, desktop computers, televisions and Blu-ray players. The MSM integrated circuits, ~~including~~which include the Mobile Data Modem, Qualcomm Single Chip and Qualcomm Snapdragon ~~for~~devices, perform the core baseband modem functionality in wireless devices ~~perform~~providing voice and data communications, ~~application processing,~~as well as multimedia applications and global positioning functions. In addition, our Snapdragon enabled integrated circuits provide advanced application processing capabilities. QCT’s system software enables the other device components to interface with the integrated circuit products and is the foundation software enabling manufacturers to develop devices utilizing the functionality within the integrated circuits. QCT revenues comprised ~~61%~~66% and 63% of total consolidated revenues in the ~~third~~first quarter of fiscal ~~2011~~2012 and ~~2010, respectively, and 58% and 60% of total consolidated revenues for the~~ ~~first nine months~~ ~~of fiscal~~ 2011 ~~and~~ ~~2010~~, respectively.

QCT utilizes a fabless production business model, which means that we do not own or operate foundries for the production of silicon wafers from which our integrated circuits are made. Integrated circuits are die, cut from silicon wafers, that have been assembled into packages or modules and have completed the ~~assembly and~~ final test manufacturing processes. We rely on independent third-party suppliers to perform the manufacturing and assembly, and most of the testing, of our integrated ~~circuits.~~circuits based primarily on our proprietary designs and test programs. Our suppliers are also responsible for the procurement of most of the raw materials used in the production of our integrated circuits. We employ both turnkey and two-stage manufacturing business models to purchase our integrated circuits. Turnkey is when our foundry suppliers are responsible for delivering fully assembled and tested integrated circuits. Under the two-stage manufacturing business model, we purchase wafers and die from semiconductor manufacturing foundries and contract with separate third-party manufacturers for ~~back-end~~probe, assembly and final test services. ~~We refer to this two-stage manufacturing business model as Integrated Fabless Manufacturing (IFM).~~

QTL grants licenses or otherwise provides rights to use portions of our intellectual property portfolio, which, among other rights, 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. QTL ~~receives~~licensing revenues are comprised of license fees as well as ~~ongoing~~ royalties based on ~~worldwide~~ sales by licensees of products incorporating or using our intellectual property. License fees are fixed amounts paid in one or more installments. ~~Ongoing royalties~~Royalties are generally based upon a percentage of the wholesale (i.e., licensee’s) selling price of licensed products, net of certain permissible deductions (e.g., certain shipping costs, packing costs, VAT, etc.). QTL revenues comprised ~~35%~~31% and ~~31%~~32% of total consolidated revenues in the ~~third~~first quarter of fiscal ~~2011~~2012 and ~~2010, respectively, and 37% and 34% of total consolidated revenues for the~~ ~~first nine months~~ ~~of fiscal~~ 2011 ~~and~~ ~~2010~~, respectively. The vast majority of such revenues were generated through our licensees’ sales of cdmaOne, CDMA2000 and WCDMA subscriber equipment products.

QWI, which includes Qualcomm Enterprise Services (QES), Qualcomm Internet Services (QIS), Qualcomm Government Technologies (QGOV) and Firethorn, generates revenues primarily through mobile information products and services and software and software development aimed at support and delivery of wireless applications. QES sells ~~equipment, software~~mobile information units and provides wireless connectivity and position location services used by transportation and other companies to ~~connect wirelessly with~~manage their assets and workforce. Through ~~June~~December 2011, QES has shipped approximately ~~1,491,000~~1,532,000 terrestrial-based and satellite-based mobile information units. QIS provides content enablement services for the wireless industry, including Brew, the Plaza suite and other services. QIS also provides QChat push-to-talk ~~QPoint~~ and other products for wireless ~~network~~ operators. QGOV provides development, hardware, ~~and~~ analytical expertise and services involving wireless communications technologies to United States government agencies. Firethorn builds and manages software applications that enable mobile commerce services. QWI revenues comprised 5%3% and 6%5% of total consolidated revenues in the ~~third~~first quarter of fiscal ~~2011~~2012 and ~~2010, and 5% and 6% of total consolidated revenues for the~~ ~~first nine months~~ ~~of fiscal~~ 2011 ~~and~~ ~~2010~~, respectively.

QSI makes strategic investments that we believe will open new opportunities for ~~CDMA- and OFDMA-based~~our technologies, support the design and introduction of new ~~CDMA and OFDMA~~ products and services for ~~wireless~~ voice and ~~internet~~ data communications or possess unique capabilities or technology. Many of these strategic investments are in early-stage ~~companies and in~~companies. QSI also holds wireless ~~spectrum, such as the BWA spectrum won~~spectrum. As part of our strategic investment activities, we intend to pursue various exit strategies at some point in the ~~auction in India. QSI also includes~~future. The results of QSI’s FLO TV ~~Incorporated (FLO TV), our wholly-owned wireless multimedia operator subsidiary, which is~~business are presented as discontinued ~~operations.~~operations and are therefore not included in QSI’s revenues or loss before income taxes. Since the shut down of the FLO TV business and network on March 27, 2011, we have been working to sell ~~our remaining~~FLO TV’s assets and exit contracts. ~~On December 20, 2010,~~In the second quarter of fiscal 2012, we ~~announced that we have agreed to sell~~completed our sale of substantially all of our 700 MHz spectrum for $1.9 ~~billion, subject to the satisfaction of customary closing conditions, including approval by the U.S. Federal Communications Commission.~~billion.

Nonreportable segments ~~include:~~include the Qualcomm MEMS Technologies division, which continues to develop an ~~interferometric modulator (IMOD)~~IMOD display technology based on micro-electro-mechanical-system (MEMS) structure combined with thin film ~~optics;~~optics, and other product initiatives. ~~The MediaFLO Technologies business is no longer being pursued.~~

Discontinued Operations

On December ~~20, 2010~~27, 2011, after the close of our first fiscal quarter, we ~~agreed to sell~~completed the sale of substantially all of our 700 MHz spectrum for $1.9 billion~~, subject to~~. As a result, we will recognize a gain in discontinued operations of $1.2 billion in the ~~satisfaction~~second quarter of ~~customary closing conditions, including approval by the U.S. Federal Communications Commission. The agreement followed our previously announced plan to restructure and evaluate strategic options~~fiscal 2012 related to the ~~FLO TV business and network.~~close of this transaction. The FLO TV business and network were shut down on March 27, 2011. Since then, we have been working to sell the remaining assets and exit contracts. The 700 MHz spectrum ~~with~~has a carrying value of $746 million ~~that we have agreed to sell was~~and is classified as held for ~~sale, and all~~sale. All other assets were considered disposed of at ~~June 26, 2011~~.December 25, 2011. Accordingly, the results of operations of the FLO TV business ~~were~~are presented as discontinued ~~operations at~~ ~~June 26, 2011. Our statements of operations for all prior periods have been adjusted to conform.~~

~~Summarized results from discontinued operations were as follows (in millions):~~

~~Income~~operations. Loss from discontinued operations includes share-based payments and excludes certain general corporate expenses allocated to the FLO TV business during the ~~periods~~period presented. ~~During the third quarter of fiscal 2011, in connection with the presentation of the FLO TV business as~~

Summarized results from discontinued operations ~~and the requirement to compute the tax effect of discontinued operations on a discrete basis, we recorded a tax benefit of~~ ~~$43 million~~ ~~for tax benefits related to losses incurred in the first and second quarter of fiscal 2011 that~~ were ~~previously included in the calculation of the estimated annual effective tax rate.~~as follows (in millions):



	Three Months Ended
	December 25, 2011			December 26, 2010
Revenues	$	—		$	—
Loss from discontinued operations	$	(8	)	$	(141	)
Income tax benefit	3			59
Discontinued operations, net of income taxes	$	(5	)	$	(82	)

Restructuring ~~and restructuring-related~~ activities under our plan related to discontinued operations were initiated in the fourth quarter of fiscal 2010 and are expected to be substantially complete by the end of fiscal 2012 as we continue to negotiate the exit of certain contracts and remove certain of our equipment from the network sites. We estimate that we will incur future restructuring ~~and restructuring-related~~ charges of up to $4020 million, primarily related to lease exit costs. Restructuring charges consist of lease exit and other contract termination costs and certain severance costs. Restructuring-related charges primarily consist of asset impairment and accelerated depreciation. We may also realize certain gains, primarily due to the potential release of liabilities associated with ongoing efforts to exit certain contracts, the amount of which cannot be reasonably estimated at this time. Future cash expenditures are expected to be in the range of $~~100~~70 million to $~~140~~110 million. ~~As a result of exiting various contractual obligations on favorable terms, the Company recorded net reversals of~~ ~~$4 million~~ ~~and~~ ~~$8 million~~ in restructuring charges and restructuring-related charges, respectively, during the three months ended June 26, 2011. During the nine months ended June 26, 2011, the Company recorded net restructuring charges of ~~$58 million, including~~ ~~$48 million~~ ~~in contract termination costs, and net restructuring-related charges of~~ ~~$308 million, including~~ ~~$305 million~~ ~~in asset impairments and accelerated depreciation.~~

Looking Forward

The deployment of 3G networks enables increased voice capacity and higher data rates than prior generation networks, thereby supporting more minutes of use and a wide range of mobile broadband data applications for handsets, 3G connected computing devices and other consumer electronics. Many wireless operators have or are planning to complement their existing 3G networks by deploying OFDMA-based technology, often called 4G, in new spectrum to gain additional capacity for data services. As a result, we expect continued growth in the coming years in consumer demand for 3G and 3G/4G multimode products and services around the world. In addition, we expect an increasing number of devices, such as computers, consumer electronics and networking equipment, to require multiple communications technologies to support a variety of connected applications.

As we look forward to the next several months, the following items are likely to have an impact on our business:

The worldwide transition from 2G to 3G ~~CDMA-based~~ networks is expected to continue, including the further expansion of 3G in China, India and other emerging regions.

We expect consumer demand for advanced ~~3G-based~~3G and 3G/4G multimode devices, including smartphones and data-centric devices, ~~and new device categories,~~ such as tablets and ~~eBook readers,~~e-readers, to continue at a strong pace. We also expect growth in lower-end

3G devices as 3G expands ~~in emerging regions. We still face significant competition in lower-end devices from GSM-based products, particularly~~ in emerging regions.

We expect that CDMA-based device prices will continue to vary broadly due to the increased penetration of smartphones ~~and the popularity of smartphone applications~~ combined with active competition throughout the world at

all price tiers. ~~This, along with~~Additionally, varying rates of economic growth by region and stronger than average growth of CDMA-based device shipments in emerging regions, isas compared to developed regions, are expected to continue to impact the average and range of selling prices of CDMA-based devices.

We continue to invest significant resources toward the development of ~~technology~~technologies and products for voice and data communications, primarily in the wireless industry, including advancements to ~~increase the data rates available with~~networks for 3G and 4G LTE (an OFDMA-based standard) networks, wireless baseband chips, our converged computing/~~communication~~communications (Snapdragon) chips, multimedia products, software and services, ~~for the wireless industry.~~

~~We continue to invest in the evolution of CDMA and a broad range of other technologies, such~~ as ~~LTE, WLAN,~~well as our IMOD display ~~technology and our Snapdragon platform, as part~~technology.

On December 27, 2011, after the close of our ~~vision to enable a wide range~~first fiscal quarter, we completed the sale of ~~products and technologies.~~

~~We have agreed to sell~~ substantially all of our 700 MHz spectrum for ~~$1.9~~$1.9 billion ~~subject to the satisfaction of customary closing conditions, including approval from the U.S. Federal Communications Commission. If the closing conditions are met,~~ As a result, we ~~expect to~~will recognize a gain in discontinued operations of ~~$1.2 billion.~~$1.2 billion in the second quarter of fiscal 2012 related to the close of this transaction.

In addition to the foregoing business and market-based matters, we continue to devote resources to working with and educating participants in the wireless value chain as to the benefits of our business model in promoting a highly competitive and innovative wireless ~~market.~~industry. However, we expect that certain companies may continue to be dissatisfied with the need to pay reasonable royalties for the use of our technology and not welcome the success of our business model in enabling new, highly cost-effective competitors to their products. We expect that such companies will continue to challenge our business model in various forums throughout the world.

Further discussion of risks related to our business is presented in the Risk Factors included in this Quarterly Report.

~~Third~~First Quarter of Fiscal ~~2011~~2012 Compared to ~~Third~~First Quarter of Fiscal ~~2010~~2011

Revenues. Total revenues for the ~~third~~first quarter of fiscal 2012 were $4.68 billion, compared to $3.35 billion for the first quarter of fiscal 2011 ~~were $3.62 billion, compared to $2.70 billion for the~~ ~~third~~ ~~quarter of fiscal~~ ~~2010~~. Revenues from sales of equipment and services for the ~~third~~first quarter of fiscal 2012 were $3.17 billion, compared to $2.21 billion for the first quarter of fiscal 2011 ~~were $2.30 billion, compared to $1.77 billion for the~~ ~~third~~ ~~quarter of fiscal~~ ~~2010~~. The increase in revenues from sales of equipment and services was primarily due to a ~~$512~~$962 million increase in QCT equipment and services revenues. Revenues from licensing and royalty fees for the ~~third~~first quarter of fiscal 2012 were $1.51 billion, compared to $1.14 billion for the first quarter of fiscal 2011 ~~were $1.33 billion, compared to $934 million for the~~ ~~third~~ ~~quarter of fiscal~~ ~~2010~~. The increase in revenues from licensing and royalty fees was primarily due to a ~~$410~~$383 million increase in QTL revenues.

Cost of Equipment and ~~Services.~~Services Revenues. Cost of equipment and services revenues for the ~~third~~first quarter of fiscal 2012 was $1.75 billion, compared to $1.04 billion for the first quarter of fiscal 2011 ~~was $1.28 billion, compared to $852 million for the~~ ~~third~~ ~~quarter of fiscal~~ ~~2010~~. Cost of equipment and services revenues as a percentage of equipment and services revenues was ~~56%~~55% for the ~~third~~first quarter of fiscal 2012, compared to 47% for the first quarter of fiscal 2011~~, compared to 48% for the~~ ~~third~~ ~~quarter of fiscal~~ ~~2010~~. The decrease in margin percentage in the ~~third~~first quarter of fiscal 2012 compared to the first quarter of fiscal 2011 ~~compared to the~~ ~~third~~ ~~quarter of fiscal~~ ~~2010~~ was primarily attributable to a decrease in QCT gross margin percentage and the effect of $59 million in charges from the recognition of the step-up of inventories to fair value and amortization of intangible assets related to the acquisition of Atheros in the third quarter of fiscal 2011.percentage. Cost of equipment and services revenues in the ~~third~~first quarter of fiscal 2012 included $20 million in share-based compensation, compared to $14 million in the first quarter of fiscal 2011 ~~included $14 million in share-based compensation, compared to $10 million in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2010~~. Cost of equipment and services revenues as a percentage of equipment and services revenues may fluctuate in future ~~quarters~~periods depending on the mix of products sold and services provided, competitive pricing, new product introduction costs and other factors.

Research and Development Expenses. Research and development expenses for the ~~third~~first quarter of fiscal 2012 were $873 million, compared to $649 million for the first quarter of fiscal 2011 ~~were $757 million~~, or ~~21%~~19% of revenues ~~compared to $623 million or 23% of revenues for the~~ ~~third~~ ~~quarter of fiscal~~ ~~2010~~.in both quarters. The dollar increase was primarily attributable to a ~~$114~~$178 million increase in costs related to the development of integrated circuit products (including connectivity products), next generation technologies and other initiatives to support the acceleration of advanced wireless products and services, including lower-cost devices, the integration of wireless with consumer electronics and computing, the convergence of multiband, multimode, multinetwork products and technologies, third-party operating systems and services platforms. ~~The percentage decrease was primarily attributable to the 34% increase in revenues relative to the 22% increase in costs.~~ Research and development expenses for the ~~third~~first quarter of fiscal 2012 included share-based compensation of $126 million, compared to $85 million in the first quarter of fiscal 2011 ~~included share-based compensation of $95 million, compared to $72 million in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2010~~.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for the ~~third~~first quarter of fiscal ~~2011~~2012were ~~$475~~$503 million or ~~13%~~11% of revenues, compared to ~~$332~~$409 million or 12% of revenues for the ~~third~~first quarter of fiscal ~~2010~~2011. ~~Selling, general and administrative expenses for the~~ ~~third~~ ~~quarter of fiscal~~ ~~2010~~ ~~included a $62 million gain on the sale of our Australia spectrum license.~~ The ~~remaining~~ dollar increase was primarily attributable to a ~~$31~~$21 million increase in employee-related expenses, a $12 million increase in foreign exchange transaction losses, an $11 million increase in marketing expenses and ~~$18~~an increase of $8 million in the amortization of intangible assets primarily related to the acquisition of Atheros in the third quarter of

fiscal 2011. Selling, general and administrative expenses for the ~~third~~first quarter of fiscal 2012 included share-based compensation of $101 million, compared to $70 million in the first quarter of fiscal 2011 ~~included share-based compensation of $84 million, compared to $63 million in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2010~~.

Net Investment Income. Net investment income was ~~$161~~$170 million for the ~~third~~first quarter of fiscal ~~2011,~~2012, compared to ~~$183~~$223 million for the ~~third~~first quarter of fiscal ~~2010.~~2011. The net decrease was comprised as follows (in millions):


	Three Months Ended									Three Months Ended
	June 26, 2011			June 27, 2010			Change			December 25, 2011			December 26, 2010			Change
Interest and dividend income:
Corporate and other segments	$	117		$	127		$	(10	)	$	126		$	130		$	(4	)
QSI	10			4			6			4			1			3
Interest expense	(29		)	(10		)	(19		)	(27		)	(24		)	(3		)
Net realized gains on investments:
Corporate and other segments	73			78			(5		)	37			127			(90		)
QSI	—			14			(14		)	7			—			7
Net impairment losses on investments:
Corporate and other segments	(5		)	(28		)	23			(14		)	(8		)	(6		)
QSI	(5		)	(1		)	(4		)	(6		)	(3		)	(3		)
Losses on derivative instruments	—			(2		)	2
Equity in earnings of investees	—			1			(1		)
Gains on derivative instruments										45			1			44
Equity in losses of investees										(2		)	(1		)	(1		)
	$	161		$	183		$	(22	)	$	170		$	223		$	(53	)

The net decrease in realized gains on investments in the first quarter of fiscal 2012 as compared to the first quarter of fiscal 2011 is primarily due to adjustments in the allocation of our marketable securities portfolios in fiscal 2011. The increase in ~~interest expense is primarily attributable to the bank loans related to the BWA spectrum purchased~~gains on derivative instruments resulted from a decrease in the ~~India auction~~fair value of put options sold in ~~June 2010.~~connection with our stock repurchase program.

Income Tax Expense. Income tax expense ~~from continuing operations~~ was ~~$289~~$321 million for the ~~third~~first quarter of fiscal ~~2011,~~2012, compared to ~~$244~~$218 million for the ~~third~~first quarter of fiscal ~~2010. The effective tax rates for the~~ ~~third~~2011 ~~quarter of fiscal 2011 and the~~ ~~third~~ ~~quarter of fiscal 2010 were 23%~~.

~~First Nine Months of Fiscal 2011 Compared to First Nine Months of Fiscal 2010~~

~~Revenues.~~ Total revenues for the first nine months of fiscal 2011 were $10.84 billion, compared to $8.03 billion for the first nine months of fiscal 2010. Revenues from sales of equipment and services for the first nine months of fiscal 2011 were $6.55 billion, compared to $5.02 billion for the first nine months of fiscal 2010. The increase in revenues from sales of equipment and services was primarily due to a $1.46 billion increase in QCT equipment and services revenues. Revenues from licensing and royalty fees for the first nine months of fiscal 2011 were $4.29 billion, compared to $3.01 billion for the first nine months of fiscal 2010. The increase in revenues from licensing and royalty fees was primarily due to a $1.32 billion increase in QTL revenues.

~~Cost of Equipment and Services.~~ Cost of equipment and services revenues for the first nine months of fiscal 2011 was $3.38 billion, compared to $2.38 billion for the first nine months of fiscal 2010. Cost of equipment and services revenues as a percentage of equipment and services revenues was 52% for the first nine months of fiscal 2011, compared to 47% for the first nine months of fiscal 2010. The decrease in margin percentage in the first nine months of fiscal 2011 compared to the first nine months of fiscal 2010 was primarily attributable to a decrease in QCT gross margin percentage and the effect of $59 million in charges from the recognition of the step-up of inventories to fair value and amortization of intangible assets related to the acquisition of Atheros in the third quarter of fiscal 2011. Cost of equipment and services revenues in the first nine months of fiscal 2011 included $44 million in share-based compensation, compared to $30 million in the first nine months of fiscal 2010.

~~Research and Development Expenses.~~ Research and development expenses for the first nine months of fiscal 2011 were $2.14 billion or 20% of revenues, compared to $1.82 billion or 23% of revenues for the first nine months of fiscal 2010. The dollar increase was primarily attributable to a $245 million increase in costs related to the development of integrated circuit products, next generation technologies and other initiatives to support the acceleration of advanced wireless products and services, including lower-cost devices, the integration of wireless with consumer electronics and computing, the convergence of multiband, multimode, multinetwork products and technologies, third-party operating systems and services platforms. The percentage decrease was primarily attributable to the 35% increase in revenues relative to the 18% increase in costs. Research and development expenses in the first nine months of fiscal 2011 included share-based compensation of $277 million, compared to $216 million in the first nine months of fiscal 2010.

~~Selling, General and Administrative Expenses.~~ Selling, general and administrative expenses for the first nine months of fiscal 2011 were $1.41 billion or 13% of revenues, compared to $1.06 billion or 13% of revenues for the first nine months of fiscal 2010. Selling, general and administrative expenses for the first nine months of fiscal 2010 included a $62 million gain on the sale of our Australia spectrum license. The remaining dollar increase was primarily attributable to a $104 million increase in employee-related expenses, a $54 million increase in charitable contributions, primarily resulting from the establishment of the Qualcomm Charitable Foundation in the second quarter of fiscal 2011, a $36 million increase in patent-related costs and other

professional fees, a $25 million increase in depreciation and amortization expense, primarily attributable to the acquisition of Atheros, and a $17 million increase in outside services. Selling, general and administrative expenses in the first nine months of fiscal 2011 included share-based compensation of $240 million, compared to $195 million in the first nine months of fiscal 2010.

~~Goodwill Impairment.~~ Operating expenses for the first nine months of fiscal 2011 included a $114 million goodwill impairment charge related to our Firethorn division due to the operating performance of a new product application falling significantly short of expectations.

~~Net Investment Income.~~ Net investment income was $574 million for the first nine months of fiscal 2011, compared to $552 million for the first nine months of fiscal 2010. The net increase was comprised as follows (in millions):

Nine Months Ended
June 26,
2011 June 27,
2010 Change
Interest and dividend income:
Corporate and other segments $ 369
$ 401
$ (32 )
QSI 15
4
11
Interest expense (84 ) (19 ) (65 )
Net realized gains on investments:
Corporate and other segments 303
249
54
QSI 1
25
(24 )
Net impairment losses on investments:
Corporate and other segments (16 ) (94 ) 78
QSI (10 ) (8 ) (2 )
Gains (losses) on derivative instruments 1
(3 ) 4
Equity in losses of investees (5 ) (3 ) (2 )
$ 574
$ 552
$ 22

During the first nine months of fiscal 2011, we recorded lower impairment losses and higher net realized gains on marketable securities as compared to the first nine months of fiscal 2010 due to improvements in financial market conditions. The increase in interest expense is primarily attributable to the bank loans related to the BWA spectrum purchased in the India auction in June 2010.

~~Income Tax Expense.~~ ~~Income tax expense from continuing operations was $862 million for the first nine months of fiscal 2011, compared to $740 million for the first nine months of fiscal 2010.~~ The effective tax rate for ~~continuing operations~~the first quarter of fiscal 2012 was 19%, compared to 15% for the first quarter of fiscal 2011. The effective tax rate for the first ~~nine months~~quarter of fiscal 2012 was higher than the effective tax rate for fiscal 2011 ~~was 20%, compared to 22%~~primarily because the effective tax rate for ~~the first nine months of fiscal 2010. During~~ the first quarter of fiscal 2011 the United States government extended the federal research and development tax credit to include qualified research expenditures paid or incurred after December 31, 2009 and before January 1, 2012. We recordedincluded a tax benefit of $32 million related to fiscal 2010 ~~in the first quarter of fiscal 2011~~resulting from the retroactive extension of ~~this~~the federal research and development tax credit. The ~~annual~~ effective tax rate for fiscal ~~2010 included tax expense of approximately $137 million that arose because certain deferred revenue was taxable in fiscal 2010, but~~2012 only reflects the ~~resulting deferred tax asset will reverse in future years when our state tax rate will be lower as a result of California tax legislation enacted in 2009.~~federal research and development credit generated through December 31, 2011, the date on which the credit expired.

The estimated annual effective tax rate for fiscal ~~2011~~2012 of ~~20%~~18% is less than the United States federal statutory rate primarily due to benefits of approximately ~~18%~~17% related to foreign earnings taxed at less than the United States federal rate.

In fiscal 2012, we plan to establish QCT’s non-United States headquarters in Singapore. We expect to obtain tax incentives in Singapore so that the location of the headquarters in Singapore will not result in an increase in foreign tax, as compared to tax that would be owed under the current structure of QCT’s non-United States operations, for the first five years as long as we meet specified employment and investment criteria in Singapore. Our Singapore tax rate is expected to increase in fiscal 2017 and ~~benefits~~again in fiscal 2027 as the result of ~~approximately 2% related to the research and development tax credit, partially offset by state taxes~~expiration of approximately 5%. 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, partially offset by state taxes and tax expense related to the valuation of deferred tax assets to reflect changes in California law.these incentives.

Our Segment Results for the ~~Third~~First Quarter of Fiscal ~~2011~~2012 Compared to the ~~Third~~First Quarter of Fiscal ~~2010~~2011

The following should be read in conjunction with the ~~third~~first quarter financial results of fiscal ~~2011~~2012 for each reporting segment. See “Notes to Condensed Consolidated Financial Statements, Note 97 - Segment Information.”

QCT Segment. QCT revenues for the ~~third~~first quarter of fiscal ~~2011~~2012 were ~~$2.19~~$3.09 billion, compared to ~~$1.69~~$2.12 billion for the ~~third~~first quarter of fiscal ~~2010.~~2011. Equipment and services revenues, mostly related to sales of MSM and accompanying RF and PM integrated circuits, were ~~$2.15~~$3.03 billion for the ~~third~~first quarter of fiscal ~~2011,~~2012, compared to ~~$1.64~~$2.07 billion for the ~~third~~first quarter of fiscal ~~2010.~~2011. The increase in equipment and services revenues resulted primarily from a ~~$271~~$783 million increase related to higher

unit shipments and a ~~$100~~$308 million increase related to sales of connectivity products, primarily resulting from the acquisition of Atheros, partially offset by a $154 million decrease related to the net effects of changes in product mix and lower average selling prices of such ~~products and a $95 million increase related to sales of connectivity products, primarily resulting from the acquisition of Atheros.~~products. Approximately ~~120~~156 million MSM integrated circuits for CDMA-

and OFDMA- based wireless devices were sold during the ~~third~~first quarter of fiscal ~~2011,~~2012, compared to approximately ~~103~~118 million ~~for~~during the ~~third~~first quarter of fiscal ~~2010.~~ ⁽¹⁾2011.

QCT earnings before taxes for the ~~third~~first quarter of fiscal ~~2011~~2012 were ~~$430~~$739 million, compared to ~~$404~~$640 million for the ~~third~~first quarter of fiscal ~~2010. QCT operating income as a percentage of revenues (operating margin percentage) was 20% in the~~ ~~third~~2011 ~~quarter of fiscal 2011, compared to 24% in the~~ ~~third~~ ~~quarter of fiscal 2010.~~. The increase in QCT earnings before taxes was primarily attributable to the increase in QCT revenues, partially offset by the impact of a ~~$107~~decrease in gross margin percentage, a $173 million increase in research and development expenses and a $42 million increase in selling, general and administrative expenses. QCT operating income as a percentage of revenues (operating margin percentage) was 24% in the first quarter of fiscal 2012, compared to 30% in the first quarter of fiscal 2011. The decrease in operating margin percentage was primarily due to a decrease in gross margin percentage, partially offset by a higher increase in QCT revenues relative to the increase in research and development expenses. QCT gross margin percentage decreased as a result of the net effects of lower average selling prices, unfavorable product mix and higher product support costs, partially offset by a decrease in average unit costs. Starting with acquisitions in the third quarter of fiscal 2011, expenses related to the step-up of acquired inventories to fair value and amortization of acquired intangible assets are not allocated to our operating segments. ~~Such expenses~~Expenses related to ~~the acquisition of Atheros~~acquisitions that were not included in QCT’s earnings before taxes were ~~$77~~$59 million in the first quarter of fiscal 2012.

QCT inventories decreased by 7% to $663 million in the ~~third~~first quarter of fiscal ~~2011.~~2012 from $714 million at September 25, 2011 primarily due to an increase in product shipments and a decrease in work-in-process related to the timing of inventory receipts and builds.

QTL Segment. QTL revenues for the ~~third~~first quarter of fiscal ~~2011~~2012 were ~~$1.26~~$1.44 billion, compared to ~~$847 million~~$1.06 billion for the ~~third~~first quarter of fiscal ~~2010.~~2011. The ~~$410~~$383 million increase in revenues was primarily due to an increase in sales of CDMA-based devices by licensees and higher average royalties per unit of CDMA-based ~~devices.~~devices as well as increased current period revenues from two licensees following settlement of disputes in the second quarter of fiscal 2011. QTL earnings before taxes for the ~~third~~first quarter of fiscal ~~2011~~2012 were ~~$1.09~~$1.27 billion, compared to ~~$673~~$892 million for the ~~third~~first quarter of fiscal ~~2010.~~2011. QTL operating margin percentage was ~~87%~~88% in the ~~third~~first quarter of fiscal ~~2011,~~2012, compared to ~~80%~~84% in the ~~third~~first quarter of fiscal ~~2010.~~2011. The ~~increases~~increase in QTL ~~earnings before taxes and~~ operating margin percentage ~~were~~was attributable to the ~~48%~~36% increase in revenues relative to the 5% increase in QTL ~~revenues.~~operating expenses.

QWI Segment. QWI revenues for the ~~third~~first quarter of fiscal ~~2011~~2012 were ~~$164~~$152 million, compared to ~~$162~~$172 million for the ~~third~~first quarter of fiscal ~~2010.~~2011. The decrease in QWI ~~loss~~revenues was primarily due to a $10 million decrease in QIS revenues and a $10 million decrease in QES revenues. The decrease in QIS revenues was primarily attributable to a decrease in Brew revenues resulting from lower customer demand. The decrease in QES revenues was primarily attributable to lower shipments of our mobile information units and lower messaging revenues. QWI earnings before taxes for the ~~third~~first quarter of fiscal ~~2011 was $13~~2012 were $1 million, compared to negligible earnings before taxes ~~of $6 million~~ for the ~~third~~first quarter of fiscal ~~2010.~~2011. QWI operating margin percentage ~~was negative~~remained consistent at less than 1% in the ~~third~~first quarter of both fiscal ~~2011, principally due to the operating losses of our QIS and Firethorn divisions, compared to a 2% operating margin in the~~ ~~third~~2012 ~~quarter of 2010.~~and 2011.

QSI Segment. QSI loss before taxes from continuing operations for the ~~third~~first quarter of fiscal ~~2011~~2012 was ~~$30~~$34 million, compared to ~~earnings before taxes from continuing operations of $60~~$21 million for the ~~third~~first quarter of fiscal ~~2010. QSI earnings before taxes from continuing operations for the third quarter of fiscal 2010 included a $62 million gain on the sale of our Australia spectrum license.~~2011. The ~~remaining $28~~$13 million increase in QSI loss before taxes from continuing operations ~~for the third quarter of fiscal 2011~~ was primarily due to a ~~$21~~$5 million increase in interest expense attributable to the loans related to the BWA spectrum won in the India auction in June 2010.

~~Our Segment Results for the First Nine Months of Fiscal~~ ~~2011~~ ~~Compared to the First Nine Months of Fiscal 2010~~

The following should be read in conjunction with the first nine months financial results of fiscal 2011 for each reporting segment. See “Notes to Condensed Consolidated Financial Statements, Note 9 - Segment Information.”

~~QCT Segment.~~ ~~QCT revenues for the~~ ~~first nine months~~ ~~of fiscal 2011 were $6.27 billion, compared to $4.84 billion for the~~ ~~first nine months~~ ~~of fiscal 2010. Equipment and services revenues, mostly related to sales of MSM and accompanying RF and PM integrated circuits, were $6.12 billion for the~~ ~~first nine months~~ ~~of fiscal 2011, compared to $4.66 billion for the~~ ~~first nine months~~ of fiscal 2010. The increase in equipment and services revenues resulted primarily from a $1.10 billion increase related to higher unit shipments, a $225 million increase related to the net effects of changes in product mix and lower average selling prices of such products and a $102 million increase related to sales of connectivity products, primarily resulting from the acquisition of Atheros. Approximately 356 million MSM integrated circuits were sold during the ~~first nine months~~ ~~of fiscal 2011, compared to approximately 288 million for the~~ ~~first nine months~~ ~~of fiscal 2010.~~ ⁽¹⁾

~~QCT earnings before taxes for the~~ ~~first nine months~~ ~~of fiscal 2011 were $1.49 billion, compared to $1.17 billion for the~~ ~~first nine months~~ ~~of fiscal 2010. QCT operating income as a percentage of revenues (operating margin percentage) was 24% in both the~~ ~~first nine months~~ of fiscal 2011 and 2010. The increase in QCT earnings before taxes was primarily attributable to the increase in QCT revenues, partially offset by a $209 million increase in research and development expenses and a $99 million increase in selling, general and administrative expenses.

~~QCT inventories increased by 37% to $659 million in the~~ ~~first nine months~~ of fiscal 2011 from $481 million at September 26, 2010 primarily due to the addition of inventories from the acquisition of Atheros, excluding the amount of step-up to fair value, and an increase in finished goods related to the timing of inventory builds and changes in product mix. The step-up to fair value in Atheros inventory of $37 million at June 26, 2011 is an unallocated corporate asset that is not included in QCT inventories.

~~QTL Segment.~~ ~~QTL revenues for the~~ ~~first nine months~~ ~~of fiscal 2011 were $4.06 billion, compared to $2.74 billion for the~~ ~~first nine months~~ of fiscal 2010. During the second quarter of fiscal 2011, we entered into agreements with two licensees to settle ongoing disputes, including the arbitration proceeding with Panasonic, and recorded $401 million in revenues related to prior quarters. The remaining $922 million increase in revenues during the ~~first nine months~~ of fiscal 2011 was primarily due to an increase in sales of CDMA-based devices by licensees and higher average royalties per unit of CDMA-based devices, partially offset by the effect of $71 million that was included in QTL revenues in the ~~first nine months~~ of fiscal 2010 but was attributable to fiscal 2009. The $71 million had not been previously recognized in fiscal 2009 due to discussions regarding a license agreement that was signed in the first quarter of fiscal 2010. QTL earnings before taxes for the ~~first nine months~~ ~~of fiscal 2011 were $3.56 billion, compared to $2.27 billion for the~~ ~~first nine months~~ ~~of fiscal 2010. QTL operating margin percentage was 88% in the~~ ~~first nine months~~ ~~of fiscal 2011, compared to 83% in the~~ ~~first nine months~~ of fiscal 2010. The increases in QTL earnings before taxes and operating margin percentage were attributable to the 48% increase in QTL revenues, partially offset by a 7% increase in QTL operating expenses.

~~QWI Segment.~~ ~~QWI revenues for the~~ ~~first nine months~~ ~~of fiscal 2011 were $493 million, compared to $456 million for the~~ ~~first nine months~~ of fiscal 2010. Revenues increased primarily due to a $33 million increase in QES equipment and services revenues resulting from higher unit shipments of our asset-tracking products. QWI loss before taxes for the ~~first nine months~~ ~~of fiscal 2011 was $147 million, compared to earnings before taxes of $14 million for the~~ ~~first nine months~~ ~~of fiscal 2010. QWI operating margin percentage was negative in the~~ ~~first nine months~~ ~~of fiscal 2011, compared to a 1% operating margin in the~~ ~~first nine months~~ of fiscal 2010. The decreases in QWI earnings before taxes and operating margin percentage were primarily attributable to $120 million in impairment charges related to certain assets of our Firethorn division, including $114 million in goodwill impairment, and the operating loss of our QIS division.

~~QSI Segment. QSI loss before taxes from continuing operations for the~~ ~~first nine months~~ ~~of fiscal 2011 was $97 million, compared to earnings before taxes from continuing operations of $38 million for the~~ ~~first nine months~~ of fiscal 2010. QSI earnings before taxes from continuing operations for the first nine months of fiscal 2010 included a $62 million gain on the sale of our Australia spectrum license. The remaining $73 million increase in QSI loss before taxes from continuing operations for the first nine months of fiscal 2011 was primarily due to a $67 million increase in interest expense attributable to the loans related to the BWA spectrum won in the India auction in June 2010.

~~(1) During the~~ ~~first nine months~~ ~~of fiscal 2011, some customers built devices that incorporated two MSMs. In such cases, which represent less than 1% of our gross volume, we count only one MSM in reporting the MSM shipments.~~

Liquidity and Capital Resources

Our principal sources of liquidity are our existing cash, cash equivalents and marketable securities, cash generated from operations and proceeds from the issuance of common stock under our stock option and employee stock purchase plans. Cash, cash equivalents and marketable securities were ~~$20.2~~$22.0 billion at ~~June 26,~~December 25, 2011, an increase of ~~$1.8~~$1.1 billion from September 26, 2010. This increase was primarily due to cash provided by operating activities of $3.1 billion and proceeds from the issuance of common stock under our equity compensation plans of $2.4 billion, partially offset by cash used to acquire Atheros of $3.1 billion, net of cash acquired.25, 2011. Our cash, cash equivalents and marketable securities at ~~June 26,~~December 25, 2011 consisted of ~~$5.6~~$6.1 billion held domestically and ~~$14.6~~$15.9 billion held by foreign subsidiaries. Of the amount of cash, cash equivalents and marketable securities held by our foreign subsidiaries at December 25, 2011, $14.5 billion is indefinitely reinvested and would be subject to material tax effects if repatriated. Due to tax and accounting considerations, we derive liquidity for operations primarily from domestic cash flow and investments held domestically. Total cash provided by operating activities increased to $1.8 billion during the first quarter of fiscal 2012, compared to $48 million during the first quarter of fiscal 2011. The increase was primarily due to the payment of $1.5 billion to the United States tax authorities in the first quarter of fiscal 2011 and an increase in net income in the first quarter of fiscal 2012, compared to the first quarter of fiscal 2011.

During the first quarter of fiscal 2012, we repurchased 2,046,000 shares of our common stock for $99 million. In connection with the stock repurchase program, we sold three put options in fiscal 2011 with expiration dates during fiscal 2012, that may require us to repurchase an aggregate of 11,800,000 shares of our common stock upon exercise for $586 million, which would result in an average price per share of $49.64. Any shares repurchased are retired. At ~~June 26,~~ December 25,

2011, approximately ~~$1.7 billion~~$948 million remained authorized for repurchase under our stock repurchase ~~program.~~program, net of put options outstanding. The stock repurchase program has no expiration date. ~~While we did not repurchase any of our common stock during the~~ ~~first nine months~~ ~~of fiscal~~ ~~2011, we~~We continue to evaluate repurchases under this program subject to capital availability and ~~periodic determinations~~our view that such repurchases are in the best interest of our stockholders.

We paid cash dividends totaling ~~$360~~$362 million, or $0.215 per share on ~~June 24,~~December 21, 2011. On ~~July 13, 2011~~January 10, 2012, we announced a cash dividend per share of $0.215 per share on our common stock, payable on ~~September~~March 23, ~~2011~~2012 to stockholders of record as of ~~August 26, 2011~~March 2, 2012. We intend to continue to use cash dividends as a means of returning capital to stockholders, subject to capital availability and ~~periodic determinations~~our view that cash dividends are in the best interests of our stockholders.

Accounts receivable increased ~~16%~~4% during the ~~third~~first quarter of fiscal ~~2011~~2012. Days sales outstanding, on a consolidated basis, were 20 days at ~~June 26,~~December 25, 2011 compared to 1722 days at ~~March 27,~~September 25, 2011. The increase in accounts receivable was primarily due to the ~~accounts receivable relating~~effects of increased revenues and the timing of licensee payments for receivables related to ~~Atheros, which were acquired~~the licensing business. The decrease in ~~the third quarter of fiscal 2011. The increase in the~~ days sales outstanding was primarily due to the ~~effect~~effects of increased revenues and the ~~decrease in QTL revenues in the third quarter~~timing of ~~fiscal 2011 as compared~~customer payments for receivables related to ~~the second quarter.~~integrated circuits.

We believe our current cash and cash equivalents, marketable securities and our expected cash flow generated from operations will provide us with flexibility and satisfy our working and other capital requirements over the next fiscal year and beyond based on our current business plans.

In the second quarter of fiscal 2012, we received $1.9 billion from the closing of the sale of substantially all of our 700 MHz spectrum.

Our research and development expenditures were ~~$2.1 billion~~$873 million in the first ~~nine months~~ quarter of fiscal ~~2011~~2012 and ~~$2.5~~$3.0 billion in

fiscal ~~2010~~2011, and we expect to continue to invest heavily in research and development for new technologies, applications and services for voice and data communications, primarily in the wireless industry.

Capital expenditures were ~~$400~~$359 million in the first ~~nine months~~ quarter of fiscal ~~2011~~2012 and ~~$426~~$593 million in fiscal ~~2010~~2011. We anticipate that capital expenditures will be higher in fiscal ~~2011~~2012 as compared to fiscal ~~2010~~2011, ~~excluding the fiscal~~ ~~2010~~ ~~$1.1 billion advance payment on the BWA spectrum in India,~~ primarily due to estimated capital expenditures of ~~$400~~more than $600 million in fiscal ~~2011~~2012 related to the continued construction of a new manufacturing facility in Taiwan for our QMT division. The ~~estimated cost for the~~ initial phase of the facility ~~of $975 million~~ is ~~expected to be~~primarily being funded using cash held by foreign subsidiaries, and the facility is expected to be operational in fiscal 2012. Future capital expenditures may also be impacted by transactions that are currently not forecasted.

Our purchase obligations for the ~~third~~ ~~quarter~~remainder of fiscal ~~2011~~2012, some of which relate to research and development activities and capital expenditures, totaled ~~$1.5~~$2.1 billion at ~~June 26,~~December 25, 2011.

The acquisition of Atheros in fiscal 2011 was more significant than others we have made in the past. We expect to continue making strategic investments and acquisitions, the amounts of which could vary significantly, to open new opportunities for our technologies, obtain development resources, grow our patent portfolio or pursue new business.

~~The $1.1 billion in~~At December 25, 2011, loans related to the BWA spectrum ~~purchase~~won in India in the aggregate of $142 million and $786 million, which are denominated in Indian rupees, are due and payable in full in February 2012 and December 2012, respectively, and bear interest at an annual rate ~~of 9.75% that is~~ based on the highest base rate among the bank lenders, which is reset quarterly, plus 0.25% (10.25% at December 25, 2011) with interest payments due ~~monthly~~monthly. We intend to refinance the amount due in February 2012 with new loans. In September 2011, we received a letter from the Government of India’s Department of Telecommunications (DoT) notifying us that our applications to obtain licenses to utilize the spectrum had been rejected. In response, we filed a petition with the Telecom Disputes Settlement and ~~are~~Appellate Tribunal seeking to overturn this letter. If the DoT’s rejection of such applications were to be considered an event of default, the bank lenders could have declared the loans due and payable ~~in full in December 2012. However,~~immediately. We have received waivers from each ~~lender has the right to demand prepayment of its portion~~ of the ~~outstanding loans on December 15, 2011 subject~~bank lenders related to ~~sufficient prior written notice. As a result, the loans are classified as a component of current liabilities.~~this matter until at least April 1, 2012, conditioned upon our continuing to pursue our legal rights in this matter, and agreeing that any default will be deemed cured under certain circumstances.

Contractual Obligations/Off-Balance Sheet Arrangements

We have no significant contractual obligations not fully recorded on our condensed consolidated balance sheets or fully disclosed in the notes to our condensed consolidated financial statements. Our consolidated balance sheet at ~~June 26,~~December 25, 2011 includes an aggregate of ~~$1.1 billion~~$142 million and $786 million in loans that are payable in full in Indian rupees in February 2012 and December ~~2012.~~2012, respectively. We have no material off-balance sheet arrangements as defined in S-K 303(a)(4)(ii).

Additional information regarding our financial commitments at ~~June 26,~~December 25, 2011 is provided in the notes to our condensed consolidated financial statements. See “Notes to Condensed Consolidated Financial Statements, Note 64 — Income Taxes,” “Note 86 — Commitments and ~~Contingencies,”~~Contingencies” and “Note 108 — Discontinued ~~Operations” and “Note 12 — Acquisitions.~~Operations.”

Risk Factors

You should consider each of the following factors as well as the other information in this Quarterly Report in evaluating our business and our prospects. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. If any of the following risks actually occur, our business and financial results could be harmed. In that case, the trading price of our common stock could decline. You should also refer to the other information set forth in this Quarterly Report and in our Annual Report on Form 10-K for the fiscal year ended September ~~26, 2010~~25, 2011, including our financial statements and the related notes.

Risks Related to Our Businesses

Our revenues are dependent on the commercial deployment of technologies based on CDMA and OFDMA, ~~and other technologies~~among others, and upgrades of 2G, 3G and 3G/4G multimode wireless communications equipment, products and services based on these technologies.

We develop, patent and commercialize technology and products based on CDMA and OFDMA, ~~and other technologies.~~among others. Our revenues are dependent upon the commercial deployment of these technologies and products and upgrades of 2G, 3G and 3G/4G multimode wireless communications equipment, products and services based on these technologies. Our business may be harmed, and our investments in these technologies may not provide us an adequate return if:

wireless operators delay moving 2G customers to 3G devices;

wireless operators delay 3G and/or 3G/4G multimode deployments, expansions or upgrades;

government regulators delay the reallocation of 2G spectrum to allow wireless operators to upgrade to 3G, which will restrict the expansion of 3G wireless connectivity, primarily outside of major population areas;

wireless operators are unable to drive improvements in 3G network performance and/or capacity;

LTE, an OFDMA-based wireless standard, is not widely deployed or commercial deployment is delayed; or

wireless operators and other industries using these technologies deploy other technologies.

Our business is dependent on our ability to increase our ~~market~~ share of components sold and to continue to drive the adoption of our products and services into 3G, 3G/4G multimode and 4G wireless ~~device markets.~~devices and networks. We are also dependent on the success of our customers, licensees and CDMA- and OFDMA-based wireless operators and other industries using our technologies, as well as the timing of their deployment of new services, and they may incur lower gross margins on products or services based on these technologies than on products using alternative technologies as a result of greater competition or other factors. If commercial

deployment of these technologies, upgrade of 2G subscribers to 3G devices and upgrades to 3G, 3G/4G multimode or 4G wireless communications equipment, products and services based on these technologies do not continue or are delayed, our revenues could be negatively impacted, and our business could suffer.

Our licensing revenues can be impacted by the deployment of other technologies in place of technologies based on CDMA, OFDMA and their derivatives or by the need to extend certain existing license agreements to cover additional later patents.

Although we own a very strong portfolio of issued and pending patents related to GSM, GPRS, EDGE, OFDM, OFDMA, WLAN ~~and/or~~and Multiple Input, Multiple Output (MIMO) technologies, our patent portfolio licensing program in these areas is less established and might not be as successful in generating licensing income as our CDMA ~~portfolio~~ licensing program. Many wireless operators are investigating or have selected LTE (or to a lesser extent ~~WiMax)~~WiMAX) as next-generation technologies for deployment in existing or future spectrum bands as complementary to their existing CDMA-based networks. Although we believe that our patented technology is essential and useful to implementation of the LTE and ~~WiMax~~WiMAX industry standards and have granted royalty-bearing licenses to 12more than 15 companies (including LG, Nokia and Samsung) to make and sell products implementing those standards but not implementing 3G standards, the royalty rates for such products are generally lower than our royalty rates for 3G products (whether or not such 3G products also incorporate a LTE or WiMAX mode of operation), and therefore, we might not achieve the same ~~royalty~~licensing revenues on such LTE or ~~WiMax~~WiMAX products as on CDMA-based or multimode CDMA/OFDMA-based products.

The licenses granted to and from us under a number of our license agreements include only patents that are either

filed or issued prior to a certain date and, in a small number of agreements, royalties are payable on those patents for a specified time period. As a result, there are agreements with some licensees where later patents are not licensed by or to us under our license agreements. In order to license any such later patents, we will need to extend or modify our license agreements or enter into new license agreements with such licensees. We might not be able to modify such license agreements in the future to license any such later patents or extend such date(s) to incorporate later patents without affecting the material terms and conditions of our license agreements with such licensees, and such modifications may impact our revenues.

Global economic conditions that impact the communications industry could negatively affect the demand for our products and our ~~customers’~~customers’ products, which may negatively affect our revenues.

~~Despite the improvements~~Continued volatility in ~~market conditions,~~capital markets or a future decline in global economic conditions, particularly in geographic regions with high customer concentrations, could have adverse, wide-ranging effects on demand for our products and for the products of our customers, particularly wireless communications equipment manufacturers or others in the wireless industry who buy their products, such as wireless operators. ~~Other unexpected negative events~~Any prolonged financial or economic crisis may ~~have adverse effects on the economy, on~~result in a downturn in demand for ~~wireless device~~our products or technology; the insolvency of key suppliers resulting in product delays; delays in reporting and/or payments from our licensees and/or customers; failures by counterparties; and negative effects on wireless device ~~inventories at equipment manufacturers and held by their customers.~~inventories. In addition, our direct and indirect customers’ ability to purchase or pay for our products and services, obtain financing and upgrade wireless networks could be adversely affected by economic conditions, leading to cancellation or delay of orders for our products.

Our industry is subject to competition in an environment of rapid technological change that could result in decreased demand for our products and the products of our customers and licensees, declining average selling prices for our ~~licensees’~~licensees’ products and our products and/or new specifications or requirements placed upon our products, each of which could negatively affect our revenues and operating results.

Our industry is subject to rapid technological change, and we must make substantial investments in new products, services and technologies to compete successfully. ~~New technological~~Technological innovations generally require a substantial investment before they are commercially viable. We intend to continue to make substantial investments in developing new products and technologies, and it is possible that our development efforts will not be successful and that our new technologies will not result in meaningful revenues. Our products, services and technologies face significant competition, and ~~we cannot assure you that~~ the revenues generated or the timing of their deployment, which may be dependent on the actions of others, ~~will~~may not meet our expectations. Competition in the communications industry is affected by various factors that include, among others: evolving industry ~~standards,~~standards; evolving methods of transmission for voice and data communications; networking; value-added features that drive replacement rates and selling prices; turnkey, integrated product offerings that incorporate hardware, software, user interface and applications; scalability and the ability of the system technology to meet customers’ immediate and future network requirements.

Our future success will depend on, among other factors, our ability to:

~~continue to keep pace with technological developments;~~

~~drive adoption of~~increase demand for our integrated circuit products and drive their adoption across a broad spectrum of devices, ~~sold by~~such as smartphones and tablets, and into new areas of wireless connectivity, including gaming, wireless charging and the connected home;

strengthen our ~~customers~~integrated circuit product roadmap for, and ~~licensees;~~

develop ~~and introduce new products, services, technologies and enhancements on a timely basis;~~

~~effectively develop and commercialize~~channel relationships in, emerging geographic regions requiring turnkey ~~integrated~~ product offerings ~~that incorporate our integrated circuits, software, user interface and applications;~~for low-end smartphones;

~~become~~be a preferred partner for operating system platforms, such as Android and Windows ~~Mobile;~~Phone, and effectively commercialize Windows 8 on ARM processor-equipped devices;

focus our service businesses on key ~~platforms~~opportunities, such as eHealth and machine-to-machine technologies (allowing both wireless and wired systems to communicate with other devices), among others, that create standalone value and/or contribute to the success of our other businesses;

be a leader in the 4G technology evolution, including expansion of our LTE (and WiMAX) single mode licensing program and timely introduction of 4G turnkey, integrated products and services; and

succeed in significant foreign ~~markets,~~regions, such as China, India and Europe.

Companies that promote WWAN ~~(wireless wide area network)~~(Wireless Wide Area Network) technologies that are neither CDMA- nor OFDMA-based (e.g., GSM) and companies that design integrated circuits based on CDMA, OFDMA or their derivatives are generally competitors or potential competitors. Examples (some of ~~whom~~which are strategic partners of ours in other areas) include Broadcom, CSR plc, Freescale, Fujitsu, Intel, Lantiq, Marvell Technology, Mediatek, nVidia, ~~RaLink Technology Corporation,~~ Renesas

Electronics, Spreadtrum Communications, ST-Ericsson (a joint venture between Ericsson Mobile Platforms and ST-NXP Wireless), Texas Instruments and VIA Telecom. Many of these current and potential competitors have advantages over us that include, among others: motivation by our customers in certain circumstances to find alternate suppliers; foreign government support of other technologies; and more extensive relationships with indigenous distribution and original equipment manufacturer ~~(OEM)~~ companies in developing territories (e.g., China).

~~In addition to the foregoing,~~Certain of our and our suppliers’ software may contain or may be derived from “open source” software, and we have seen, and believe we will continue to see, an increase in customers requesting that we develop products, including ~~chipsets and~~software associated ~~software,~~with our chipsets, that will incorporate ~~“open source”~~open source software elements and operate in an ~~“open source”~~open source environment, which, under certain open source licenses, may offer accessibility to a portion of a product’s source code and may expose related intellectual property to adverse licensing conditions. Licensing of such software may impose certain obligations on us if we were to distribute derivative works of the open source software. For example, these obligations may require us to make source code for the derivative works available to our customers in a manner that allows them to make such source code available to their customers, or license such derivative works under a particular type of license that is different than what we customarily use to license our software. Developing open source products, while adequately protecting the intellectual property rights upon which our licensing business depends, may prove burdensome and time-consuming under certain circumstances, thereby placing us at a competitive disadvantage for new product designs. Also, our use and our customers’ use of open source software may subject our products and our customers’ products to governmental scrutiny and delays in product certification, which could cause customers to view our products as less desirable than our competitors’ products. While we believe we have taken appropriate steps and employed adequate controls to protect our intellectual property rights, our use of open source software presents risks that could have an adverse effect on these rights and on our business.

Competition may reduce average selling prices for our chipset products and the products of our customers and licensees. Reductions in the average selling prices of our licensees’ products, unless offset by an increase in volumes, generally result in reduced total royalties payable to us. We anticipate that additional competitors will ~~enter our markets~~introduce products as a result of growth opportunities in wireless communications, the trend toward global expansion by foreign and domestic competitors, technological and public policy changes and relatively low barriers to entry in selected segments of the industry.

We derive a significant portion of our consolidated revenues from a small number of customers and licensees. If revenues derived from these customers or licensees decrease, our operating results could be negatively affected.

Our QCT segment derives a significant portion of revenues from a small number of customers. The loss of any one of our QCT segment’s significant customers or the delay, even if only temporary, or cancellation of significant orders from any of these customers would reduce our revenues in the period of the ~~deferral~~delay or cancellation and harm our ability to achieve or sustain expected ~~levels of~~ operating results. Accordingly, unless and until our QCT segment diversifies and expands its customer base, our future success will largely depend upon the timing and size of any future purchase orders from these customers.

Although we have more than ~~195~~205 licensees, our QTL segment derives a significant portion of ~~royalty~~licensing revenues from a limited number of licensees. Our future success depends upon the ability of our licensees to develop, introduce and deliver high-volume products that achieve and sustain ~~market~~customer acceptance. We have little or no control over the sales efforts of our licensees, and our licensees might not be successful. Reductions in the average selling price of wireless ~~communications~~ devices sold by our major licensees, without a sufficient increase in the volumes of such devices sold, could have ~~a material~~an adverse effect on our revenues.

Efforts by some ~~telecommunications~~communications equipment manufacturers or their customers to avoid paying fair and reasonable royalties for the use of our intellectual property may create uncertainty about our future business prospects, may require the investment of substantial management time and financial resources, and may result in legal decisions and/or actions by foreign governments, Standards Development Organizations (SDOs) or other industry groups that harm our business.

A small number of companies, in the past, have initiated various strategies in an attempt to renegotiate, mitigate and/or eliminate their need to pay royalties to us for the use of our intellectual property in order to negatively affect our business model and that of our other licensees. These strategies have included (i) litigation, often alleging infringement of patents held by such companies, patent misuse, patent exhaustion and patent and license unenforceability, or some form of unfair competition, (ii) taking positions contrary to our understanding of their contracts with us, (iii) appeals to governmental authorities, (iv) collective action, including working with wireless operators, standards bodies, other like-minded companies and other organizations, on both formal and informal bases, to adopt intellectual property policies and

practices that could have the effect of limiting returns on intellectual property innovations, and (v) lobbying with governmental regulators and elected officials for the purpose of seeking the imposition of some form of compulsory licensing and/or to weaken a patent holder’s ability to enforce its rights or obtain a fair return for such rights.

Some companies or entities have proposed significant changes to existing intellectual property policies for implementation by SDOs and other industry organizations, some of which would require a maximum aggregate intellectual property royalty rate for the use of all essential patents owned by all of the member companies to be applied to the selling price of any product implementing the relevant standard. They have further proposed that such

maximum aggregate royalty rate be apportioned to each member company with essential patents based upon the number of essential patents held by such company. A number of these strategies are purportedly based on interpretations of the policies of certain ~~standards development organizations~~SDOs concerning the licensing of patents that are or may be essential to industry standards and our alleged failure to abide by these policies. Others have made proposals that could severely limit damage awards and other remedies by courts for patent infringement. There is a risk that relevant courts or governmental agencies will interpret some or all of those ~~policies~~proposals in a manner adverse to our interests. If such proposals and strategies continue and are successful in the future, our business model would be harmed, either by artificially limiting our return on investment with respect to new technologies or forcing us to work outside of the SDOs or such other industry groups to promote our new technologies, and our results of operations could be negatively impacted. As well, the legal and other costs associated with defending our position have been and continue to be significant. We assume that such challenges, regardless of their merits, will continue into the foreseeable future and may require the investment of substantial management time and financial resources to explain and defend our position.

Other companies or entities have commenced, and may again commence, actions seeking to establish the invalidity of one or more of our patents. In the event that one or more of our patents are challenged, a court may invalidate the patent(s) or determine that the patent(s) is not enforceable, which could harm our competitive position. If our key patents are invalidated, or if the scope of the claims in any of these patents is limited by court decision, we could be prevented from licensing the invalidated or limited portion of such patents. Such adverse decisions, depending upon their extent, could negatively impact our revenues. Even if such a patent challenge is not successful, it could be expensive and time consuming to address, divert management attention from our business and harm our reputation.

The enforcement and protection of our intellectual property rights may be expensive, could fail to prevent misappropriation or unauthorized use of our proprietary intellectual property rights or could result in the loss of our ability to enforce one or more patents.

We rely primarily on patent, copyright, trademark and trade secret laws, as well as nondisclosure and confidentiality agreements and other methods, to protect our proprietary information, technologies and processes, including our patent portfolio. Policing unauthorized use of our products, technologies and ~~technologies~~proprietary information is difficult and time consuming. We cannot be certain that the steps we have taken, or may take in the future, will prevent the misappropriation or unauthorized use of our proprietary information and technologies, particularly in foreign countries where the laws may not protect our proprietary intellectual property rights as fully or as readily as United States laws. We cannot be certain that the laws and policies of any country, including the United States, or the practices of any of the standards bodies, foreign or domestic, with respect to intellectual property enforcement or licensing ~~issuance of spectrum licenses~~ or the adoption of standards, will not be changed in a way detrimental to our licensing program or to the sale or use of our products or technology. We may have difficulty in protecting or enforcing our intellectual property rights and/or contracts in a particular foreign jurisdiction, including: challenges to our licensing practices under such jurisdictions’ competition laws; adoption of mandatory licensing provisions by foreign jurisdictions (either with controlled/regulated royalties or royalty free); failure of foreign courts to recognize and enforce judgments of contract breach and damages issued by U.S. courts; and challenges pending before foreign competition agencies to the pricing and integration of additional features and functionality into our wireless chipset products.

A substantial portion of our patents and patent applications relate to our wireless communications technology and much of the remainder of our patents and patent applications relate to our other technologies and products. We may need to litigate in the United States or elsewhere in the world to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of proprietary rights of others. As a result of any such litigation, we could lose our ability to enforce one or more patents or incur substantial unexpected operating costs. Any action we take to enforce our intellectual property rights could be costly and could absorb significant management time and attention, which, in turn, could negatively impact our operating results.

Claims by other companies that we infringe their intellectual property ~~or that patents on which we rely are invalid~~ could adversely affect our business.

From time to time, companies have asserted, and may again assert, patent, copyright and other intellectual property

rights against our products or products using our technologies or other technologies used in our industry. These claims have resulted and may again result in our involvement in litigation. We may not prevail in such litigation given the complex technical issues and inherent uncertainties in intellectual property litigation. If any of our products were found to infringe on another company’s intellectual property rights, we could be subject to an injunction or required to redesign our products, which could be costly, or to license such rights and/or pay damages or other compensation to such other company. If we were unable to redesign our products, license such intellectual property rights used in our products or otherwise distribute our products through a licensed supplier, we could be prohibited from making and selling such products. In any potential dispute involving other companies’ patents or other intellectual property, our chipset foundries, semiconductor assembly and test providers and customers could also become the targets of litigation. We are 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 us. Reimbursements under indemnification arrangements could have ~~a material~~an adverse effect on our results of operations. Furthermore, any such litigation could severely disrupt the supply of our products and the ~~business~~businesses of our chipset customers and their wireless operator customers, which in turn could hurt our relationships with ~~our chipset customers and wireless operators~~them and could result in a decline in our chipset sales and/or ~~a reduction~~reductions in our licensees’ sales, ~~to wireless operators,~~ causing a corresponding decline in our chipset and/or licensing revenues. Any claims, regardless of their merit, could be time consuming to address, result in costly litigation, divert the efforts of our technical and management personnel or cause product release or shipment delays, any of which could have ~~a material~~an adverse effect upon our operating results.

We expect that we may continue to be involved in litigation and may have to appear in front of administrative bodies (such

as the U.S. International Trade Commission) to defend against patent assertions against our products by companies, some of whom are attempting to gain competitive advantage or leverage in licensing negotiations. We may not be successful in such proceedings, and if we are not, the range of possible outcomes includes everything from a royalty payment to an injunction on the sale of certain of our chipsets (and on the sale of our customers’ devices using our chipsets) ~~and the~~. Any imposition of royalty payments ~~that~~ might make purchases of our chipsets less economical for our customers. A negative outcome in any such proceeding could severely disrupt the business of our chipset customers and their wireless operator customers, which in turn could ~~hurt~~harm our relationships with ~~our chipset customers and wireless operators~~them and could result in a decline in our share of worldwide chipset sales and/or a reduction in our licensees’ sales to wireless operators, causing a corresponding ~~decline~~declines in our chipset and/or licensing revenues.

A number of other companies have claimed to own patents essential to various CDMA standards, GSM standards and OFDMA standards or implementations of ~~OFDM and OFDMA systems.~~systems based on such standards. If we or other product manufacturers are required to obtain additional licenses and/or pay royalties to one or more of such other patent holders, this could have ~~a material~~an adverse effect on the commercial implementation of our CDMA, GSM, OFDMA or multimode products and technologies, demand for our licensees’ products and our ~~profitability.~~

~~Other companies or entities also have commenced, and may again commence, actions seeking to establish the invalidity~~results of our patents. In the event that one or more of our patents are challenged, a court may invalidate the patent(s) or determine that the patent(s) is not enforceable, which could harm our competitive position. If our key patents are invalidated, or if the scope of the claims in any of these patents is limited by court decision, we could be prevented from licensing the invalidated or limited portion of such patents. Such adverse decisions could negatively impact our revenues. Even if such a patent challenge is not successful, it could be expensive and time consuming to address, divert management attention from our business and harm our reputation.operations.

Our earnings and stock price are subject to substantial quarterly and annual fluctuations and to market downturns.

The stock market in general, and the stock prices of technology-based and wireless communications companies in particular, have experienced volatility that often has been unrelated to the operating performance of any specific public company. The market price of our common stock has fluctuated in the past and is likely to fluctuate in the future as well. Factors that may have a significant impact on the market price of our stock include, among others:

volatility of the stock market in general and technology-based companies in particular that is often unrelated to the operating performance of any specific public company;

announcements concerning us or our competitors, including the selection of wireless communications technology by wireless operators and the timing of the roll-out of those systems;

international developments, such as technology mandates, political developments or changes in economic policies;

changes in recommendations of securities analysts;

proprietary rights or product or patent litigation against us or against our customers or licensees;

strategic transactions, such as spin-offs, acquisitions and divestitures;

unexpected and/or significant changes in the average selling price of our licensees’ products and our products;

unresolved disputes with licensees that result in non-payment and/or non-recognition of royalty revenues that may be owed to us; or

inquiries, rumors or allegations regarding our financial disclosures or practices.

In the past, securities class action litigation often has been brought against a company following periods of volatility

in the market price of its securities. Due to changes in the potential volatility of our stock price, we may be the target of securities litigation in the future. Securities litigation could result in substantial uninsured costs and divert management’s attention and resources.

~~Any prolonged~~Changes in financial ~~or economic crisis~~market volatility and liquidity may result in ~~a downturn~~declines in demand for our products or technology; the insolvency of key suppliers resulting in product delays; delays in reporting and/or payments from our licensees and/or customers; and counterparty failures negatively impacting our treasury operations.

~~Financial market volatility has impacted, and could continue to impact,~~ the value and performance of our significant portfolio of marketable securities. Net investment income could vary depending on the gains or losses realized on the sale or exchange of securities, impairment charges related to marketable securities and other investments, changes in interest rates and changes in fair values of derivative instruments. Our cash equivalent and marketable securities investments represent significant assets that may be subject to fluctuating or even negative returns depending upon interest rate movements and financial market conditions in fixed income and equity securities.

These factors affecting our future earnings are difficult to forecast and could harm our quarterly and/or annual operating results. If our earnings fail to meet the financial guidance we provide to investors, or the expectations of investment analysts or

investors in any period, securities class action litigation could be brought against us and/or the market price of our common stock could decline.

We depend ~~upon~~on a limited number of third-party suppliers tofor our procurement, manufacture and ~~test component parts, subassemblies and finished goods for our products.~~testing of product inventories. If these third-party suppliers ~~do not allocate adequate manufacturing and test capacity in their facilities~~fail to ~~produce products on~~meet our ~~behalf,~~needs, or if there are any disruptions in the operations of, or a loss of, any of these ~~third parties,~~third-party suppliers, it could harm our ability to meet our delivery obligations to our customers, reduce our revenues, increase our cost of sales and harm our business.

~~Our ability to meet customer demand depends, in part, on our ability to obtain timely~~We purchase raw materials, component parts, subassemblies and ~~adequate delivery of parts and components~~specialized manufacturing equipment from our ~~suppliers.~~suppliers and contract with separate suppliers for probe, assembly, test and other services in the manufacture of our product inventories. A reduction, interruption or ~~interruption~~delay in our product supply source, ~~an inability of~~a failure by our suppliers to allocate adequate manufacturing or test capacity to our products or their inability to react to shifts in product demand or an increase in raw material or component prices could have ~~a material~~an adverse effect on our ability to meet customer demands, our business and/or our profitability. The loss of a significant supplier or the inability of a supplier to meet performance and quality specifications or delivery schedules could harm our ability to meet our delivery obligations to our customers and negatively impact our revenues and business operations. In the event of a loss of, or a decision to change, a supplier, qualifying a new foundry supplier and commencing volume production or testing could ~~involve delay~~cause us to incur additional expense and ~~expense,~~production delays, resulting in possible loss of customers.

While our goal is to establish alternate suppliers for technologies that we consider critical, we rely on sole- or limited-source suppliers for some products, subjecting us to significant risks, including: possible shortages of raw materials or manufacturing capacity; poor product performance; and reduced control over delivery schedules, manufacturing capability and yields, quality assurance, quantity and costs. Our arrangements with our suppliers may oblige us to incur costs to manufacture and test our products that do not decrease at the same rate as decreases in pricing to our customers.

QCT Segment. Although we have entered into long-term contracts with our suppliers, these contracts generally do not provide for long-term capacity commitments, except as may be provided in a particular purchase order that has been accepted by our supplier. To the extent that we do not have firm commitments from our suppliers over a specific time period, or for any specific quantity, our suppliers may allocate, and in the past have allocated, capacity to the production and testing of products for their other customers while reducing capacity to manufacture or test our products. Accordingly, capacity for our products may not be available when we need it or ~~available~~ at reasonable prices. We have experienced capacity limitations from our suppliers, which resulted in supply constraints and our inability to meet certain customer demand. ~~There can be no assurance that we will not experience these or other supply constraints in the future, which could result in our failure to meet customer demand. In addition, the timely~~The readiness of our foundry suppliers to support transitions to smaller geometry process technologies could also impact our ability to meet customer demand ~~revenues~~ and ~~cost expectations. The timing of acceptance of technology design changes by our customers~~ may subject us to the risk of excess ~~inventories~~inventories. If we experience these or other supply constraints in the future, we may not be able to meet customer demand, and our revenues and results of ~~earlier designs.~~operations could suffer.

QMT Division. Our QMT division needs to ~~form and maintain reliable~~further develop its business relationships with raw materials and component supply partners to support the manufacture of ~~interferometric modulator (IMOD)~~IMOD displays and/or modules in commercial volumes. ~~All of~~We depend on certain raw materials, components, and specialized manufacturing equipment, primarily from suppliers in Taiwan, Japan and South Korea, to produce our ~~current relationships have been for the development and limited production of certain~~ IMOD display panels, ~~and/or modules. Some or all~~and we may not be able to obtain sufficient quantities and acceptable quality of raw materials, components and equipment in the future to support commercial production. The effect of these ~~relationships may not succeed or, even if they are successful, may not result in~~supplier-related risks could negatively impact the ~~component supply partners entering into material supply relationships with us.~~adoption of the IMOD technology.

Our suppliers may also be our competitors, putting us at a disadvantage for pricing and capacity allocation.

One or more of our suppliers may obtain rights from us to manufacture CDMA- or OFDMA-based integrated circuits that compete with our products. In this event, the supplier could elect to allocate raw materials and manufacturing capacity to their own products and reduce deliveries to us to our detriment. In addition, we may not receive reasonable

pricing, manufacturing or delivery terms. We cannot guarantee that the actions of our suppliers will not cause disruptions in our operations that could harm our ability to meet our delivery obligations to our customers or increase our cost of sales.

Currency fluctuations could negatively affect future product sales or royalty revenues, harm our ability to collect receivables or increase the U.S. dollar cost of the activities of our foreign subsidiaries and international strategic investments.

Our international customers sell their products throughout the world, including China, India, Japan, South Korea, North America, South America and Europe. Consolidated revenues from international customers as a percentage of total revenues were greater than 90% in the ~~first nine months~~ ~~of fiscal~~ ~~2011~~ and in the last three fiscal years. We are exposed to risk from fluctuations in currencies that could negatively affect our operating results. Adverse movements in currency exchange rates may negatively affect our business due to a number of situations, including the following, among others:

~~Our products and those of our customers and licensees that are sold outside the United States may become less price-competitive as a result of adverse currency fluctuations;~~

Certain of our revenues, such as royalty revenues, are derived from licensee or customer sales that are denominated in foreign currencies. Weakening of currency values versus the U.S. dollar in selected regions could adversely affect our revenues and cash flows;

We may engage in foreign exchange hedging transactions that could affect our cash flows and earnings because they may require the payment of structuring fees, limit the U.S. dollar value of royalties from licensees’ sales that are denominated in foreign currencies, cause earnings volatility if the hedges do not qualify for hedge accounting and expose us to counterparty risk if the counterparty fails to perform;

~~Our loans payable are denominated in Indian rupees. If the U.S. dollar weakens, additional cash will be required to settle this obligation and the related interest;~~

~~Currency exchange rate fluctuations may reduce the U.S. dollar value of our marketable securities that are denominated directly or indirectly in foreign currencies; and~~

~~Certain suppliers may price goods in currencies other than the U.S. dollar. A weakening dollar would result in higher than expected costs for these goods.~~

We may engage in acquisitions or strategic transactions or make investments that could result in significant changes or management disruption and fail to enhance stockholder value.

From time to time, we engage in acquisitions or strategic transactions or make investments with the goal of maximizing stockholder value. We acquire businesses and other assets, including spectrum licenses and other intangible assets, enter into joint ventures or other strategic transactions and purchase equity and debt securities, including minority interests in publicly-traded and private companies. Many of our strategic investments are in early-stage companies to expand the wireless industry and promote the global adoption of CDMA- or OFDMA-based technologies and related services. Most of our acquisitions or strategic investments entail a high degree of risk and will not become liquid until more than one year from the date of investment, if at all. Our acquisitions or strategic investments (either those we have completed or may undertake in the future) may not generate financial returns or result in increased adoption or continued use of our technologies. In some cases, we may be required to consolidate or record our share of the earnings or losses of companies in which we have acquired ownership interests. Our share of any losses will adversely affect our financial results until we exit from or reduce our exposure to these investments.

Achieving the anticipated benefits of business acquisitions, such as our recent acquisition of Atheros, depends in part upon our ability to integrate the acquired businesses in an efficient and effective manner. The integration of companies that have previously operated independently may result in significant challenges, ~~and we may be unable to accomplish the integration smoothly or successfully. The difficulties of integrating companies include,~~including, among others: retaining key employees; ~~maintaining important relationships between us~~successfully integrating new employees, business systems and technology; retaining customers and suppliers of the acquired business; minimizing the diversion of management’s attention from ongoing business matters; coordinating geographically separate organizations; consolidating research and development operations; and consolidating corporate and administrative infrastructures.

We may not derive any commercial value from acquired technology, products and intellectual property or from future technologies and products based on the acquired technology and/or intellectual property, and we may be subject to liabilities that are not covered by indemnification protection we may obtain. ~~We cannot ensure that the integration of acquired businesses with our business will result in the realization of the full benefits anticipated by us to result from the acquisitions. We~~Additionally, we may not be successful in expanding into ~~the markets~~geographic regions and/or categories of products served by or adjacent to an acquired business and in addressing potential new opportunities that may arise out of the combination. Due to our inexperience with ~~Atheros’ business,~~products and/or geographic regions served by acquired businesses, we may overestimate the ~~benefits.~~benefits, including product and other synergies and growth opportunities that we expect to realize, and we may fail to achieve them. For example, Atheros’ business has focused on LAN connectivity and products for WLAN (also referred to as WiFi)~~, Bluetooth, Ethernet, GPS, powerline communications~~ and other technologies primarily for networking, computing and other consumer electronic devices. ~~If we have overestimated the potential benefits of product synergies and growth opportunities, we~~We may not realize the expected return on our investment in ~~Atheros.~~

~~Defects or errors in our products~~Atheros if we do not effectively execute upon the product and services or in the products of our customers could harm our business. If we experience product liability claims or recalls, we may incur significant expenses and experience decreased demand for our products.

Our products are inherently complex and may contain defects and errors that are detected only when the products are in use. For example, as our chipset product complexities increase, we are required to migrate to integrated circuit technologies with smaller geometric feature sizes. The design process interface issues are more complex as we enter into these new domains of technology, which adds risk to yields and reliability. Because our products and services are responsible for critical functions in our customers’ productsbusiness strategies and/or networks, such defects or errors could have an adverse impact on our customers, which could damage our reputation, harm our customer relationships and expose us to liability. Defects or impurities in our components, materials or software or those usedother opportunities created by our customers or licensees, equipment failures or other difficulties could adversely affect our ability, and that of our customers and licensees, to ship products on a timely basis, customer or licensee demand for our products or the commitment of financial and/or engineering resources that could reduce operating margins and affect future product release schedules. Additionally, a defect or failure, including those related to security vulnerabilities, in our products or the products of our customers or licensees could lead to liability claims, harm our reputation and/or adversely affect the demand for 3G and 3G/4G multimode wireless products and components.

Manufacturing, testing, marketing and use of our products and those of our licensees and customers entail the risk of product liability. The use of wireless devices containing our products to access untrusted content creates a risk of exposing the system software in those devices to viral or malicious attacks. We continue to expand our focus on this issue and take measures to safeguard the software from this threat. However, this issue carries the risk of general product liability claims along with the associated impacts on reputation and demand. In addition, a product liability claim or recall, whether against our licensees, customers or us, could harm our reputation and result in decreased demand for our products.acquisition.

Our QMT division’s business does not currently generate operating income and may not succeed or its operating results may not meet our expectations.

While we continue to believe our QMT division’s IMOD displays will offer compelling advantages to users of displays, there can be no assurance that our IMOD product development efforts will be successful, that we will be able to cost-effectively manufacture these new products, that we will be able to successfully market these products or that other technologies ~~will not~~may continue to improve in ways that reduce the advantages we anticipate from our IMOD displays. Sales of flat panel displays are currently dominated, and we believe will likely continue to be dominated for some time, by displays based on liquid crystal display (LCD) technology. Numerous companies are making substantial investments in, and conducting research to improve characteristics of, LCDs. Additionally, several other flat panel display technologies have been, or are being, developed, including technologies for the production of organic light-emitting diode (OLED), field emission, inorganic electroluminescence, gas plasma and vacuum fluorescent displays. In each case, advances in LCD or other flat panel display technologies could result in technologies that are more cost effective, have fewer display limitations or can be brought to market faster than our IMOD technology. These advances in competing technologies might cause device manufacturers to avoid entering into commercial relationships with us or to not renew planned or existing relationships with us.

We may not evolve our QMT division into a successful display-based subsystem provider if we are unable to cost-effectively manufacture and commercialize our IMOD display product. We are constructing a new facility in Taiwan to manufacture our IMOD display product. We may experience unforeseen difficulties, delays or defects upon volume production and broad deployment of this product. Delays in volume production of our IMOD display product could result from delays in facility construction, delivery of specialized manufacturing equipment and numerous other factors. In addition, we have limited experience in the display business, and we may be unsuccessful in selling our IMOD display product. Our QMT division had ~~$631 million~~$1.02 billion in assets (including ~~$130~~$136 million in goodwill) at ~~June 26,~~December 25, 2011. If we do not expect to achieve or do not achieve adequate market penetration with our IMOD display technology, our assets

may become impaired, ~~which could~~ negatively ~~impact~~impacting our operating ~~results.~~

~~Our Firethorn business does not currently generate operating income~~results, and ~~may not succeed or its operating results~~we may not meet future earnings projections related to this business.

Currency fluctuations could negatively affect future product sales or royalty revenues, harm our ~~expectations.~~

~~While we continue~~ability to believe that our Firethorn division’s mCommerce products will offer advantages to consumers and merchants, there can be no assurance that our mCommerce efforts will be successful. If our Firethorn business does not succeed, our investment in its technology may not provide us an adequate return, and our business could be harmed. Consumer acceptancecollect receivables or increase the U.S. dollar cost of the activities of our ~~Firethorn service offerings will continue to be affected by competition, technology-based differences~~foreign subsidiaries and byinternational strategic investments.

Our international customers sell their products throughout the ~~operational performance, quality and reliability~~world in various currencies. Consolidated revenues from international customers as a percentage of ~~our services platforms. After $120 million~~total revenues were greater than 90% in ~~impairment charges recorded during~~ the ~~second quarter~~first three months of fiscal ~~2011, our Firethorn business had $60 million~~2012 and in ~~assets (including $40 million~~the last three fiscal years. We are exposed to risk from fluctuations in ~~goodwill) at~~ ~~June 26, 2011. If we do not expect to achieve adequate market penetration with our mobile commerce products, our remaining assets may become impaired, which~~currencies that could negatively affect our operating results. Adverse movements in currency exchange rates may negatively affect our business due to a number of situations, including the following, among others:

Our products and those of our customers and licensees that are sold outside the United States may become less price-competitive as a result of adverse currency fluctuations;

Certain of our revenues, such as royalties, are derived from licensee or customer sales that are denominated in foreign currencies. Weakening of currency values versus the U.S. dollar in selected regions could reduce our revenues and cash flows;

We may engage in foreign exchange hedging transactions that could affect our cash flows and results of operations because they may require the payment of structuring fees, limit the U.S. dollar value of royalties from licensees’ sales that are denominated in foreign currencies, cause earnings volatility if the hedges do not qualify for hedge accounting and expose us to counterparty risk if the counterparty fails to perform;

Our loans payable are denominated in Indian rupees. If the U.S. dollar weakens, additional cash may be required to settle this obligation and the related interest;

Currency exchange rate fluctuations may reduce the U.S. dollar value of our marketable securities that are denominated directly or indirectly in foreign currencies; and

Certain suppliers may price goods in currencies other than the U.S. dollar. A weakening dollar would result in higher than expected costs for these goods.

Failures in our products and services or in the products of our customers, including those resulting from security vulnerabilities, defects or errors, could harm our business.

The use of devices containing our products to access untrusted content creates a risk of exposing the system software in those devices to viral or malicious attacks. While we continue to expand our focus on this issue and are taking measures to safeguard our products from cybersecurity threats, device capabilities continue to evolve in a 3G/4G environment, enabling more data and processes, such as mobile computing, and increasing the risk that security failures will occur. Our products are inherently complex and may contain defects or errors that are detected only when the products are in use. For example, as our chipset product complexities increase, we are required to migrate to integrated circuit technologies with smaller geometric feature sizes. The design process interface issues are more complex as we enter into these new domains of technology, which adds risk to yields and reliability. Manufacturing, testing, marketing and use of our products and those of our customers and licensees entail the risk of product liability. Because our products and services are responsible for critical functions in our customers’ products and/or networks, security failures, defects or errors in our components, materials or software or those used by our customers could have an adverse impact on us, on our customers and on the end users of their products. Such adverse impact could include product liability claims or recalls, a decrease in demand for connected devices and wireless services, damage to our reputation and to our customer relationships, and other financial liability or harm to our business.

Our business and operations could suffer in the event of security breaches.

Attempts by others to gain unauthorized access to our information technology systems are becoming more sophisticated and are sometimes successful. These attempts, which might be related to industrial or other espionage, include covertly introducing malware to our computers and networks and impersonating authorized users, among others. We seek to detect and investigate all security incidents and to prevent their recurrence, but in some cases, we might be unaware of an incident or its magnitude and effects. The theft, unauthorized use or publication of our intellectual property and/or confidential business information could harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives or otherwise adversely affect our business. To the extent that any security breach results in inappropriate disclosure of our customers’ or licensees’ confidential information, we may incur liability as a result. In addition, we expect to devote additional resources to the security of our

information technology systems.

Potential tax liabilities could adversely affect our ~~results.~~results of operations.

We are subject to income taxes in the United States and in numerous foreign jurisdictions. Significant judgment is required in determining our provision for income taxes. Although we believe that our tax estimates are reasonable, the final determination of tax audits and any related litigation could materially differ from amounts reflected in historical income tax provisions and accruals. In such case, our income tax provision and ~~net income~~results of operations in the period or periods in which that determination is made could be negatively affected.

In ~~addition,~~fiscal 2012, we plan to establish QCT’s non-United States headquarters in Singapore. We expect to obtain tax incentives in Singapore so that the location of the headquarters in Singapore will not result in any increase in foreign tax, as compared to tax that would be owed under the current structure of QCT’s non-United States operations, for the first five years as long as we meet specified employment and investment criteria in Singapore. Our Singapore tax rate is expected to increase in fiscal 2017 and again in fiscal 2027 as the result of expiration of these incentives. If we fail to meet the criteria required to benefit from such incentives, our results of operations may be adversely affected.

Tax rules may change in a manner that ~~may~~ adversely ~~affect~~affects our future reported financial results or the way we conduct our business. For example, we consider the operating earnings of certain non-United States subsidiaries to be indefinitely invested outside the United States based on estimates that future domestic cash generation will be sufficient to meet future domestic cash ~~needs.~~needs for at least the next 12 months and the foreseeable future. No provision has been made for United States federal and state or foreign taxes that may result from future remittances of undistributed earnings of our foreign subsidiaries. Our future financial results and liquidity may be adversely affected if ~~accounting~~tax rules regarding unrepatriated earnings change, if domestic cash needs require us to repatriate foreign earnings, or if the United States international tax rules change as part of comprehensive tax reform or other tax legislation.

If wireless devices pose safety risks, we may be subject to new regulations, and demand for our products and those of our ~~licensees~~customers and ~~customers~~licensees may decrease.

Concerns over the effects of radio frequency emissions ~~may have the effect of discouraging the use of wireless devices, which may decrease demand for our products and those of our licensees and customers.~~continue. Interest groups have requested that the FCC investigate claims that wireless communications technologies pose health concerns and cause interference with airbags, hearing aids and medical devices. Concerns have also been expressed over, and state laws have been enacted to mitigate, the possibility of safety risks due to a lack of attention associated with the use of wireless devices while driving. ~~Any legislation~~Legislation that may be adopted in response to these concerns or adverse news or findings about safety risks could reduce demand for our products and those of our licensees and customers in the United States as well as in foreign countries.

~~Our business and operations would suffer in the event of system failures or security breaches.~~

Despite system redundancy, the implementation of security measures and the existence of a Disaster Recovery Plan for our internal information technology networking systems, our systems are vulnerable to damages from computer viruses, unauthorized access, energy blackouts and telecommunication failures, among other factors. As has been widely reported, attempts by others to gain unauthorized access to information technology systems are becoming more sophisticated and are sometimes successful. The theft or publication of our confidential business information could harm our competitive position, reduce the value of our strategic initiatives or otherwise adversely affect our business. Any system failure, accident or security breach that causes interruptions in our operations, or in our vendors’, customers’ or licensees’ operations, could result in a material disruption to our business. To the extent that any disruption or security breach results in a loss or damage to our customers’ data or applications, or inappropriate disclosure of their confidential information, we may incur liability as a result. In addition, we expect to devote additional resources to the security of our information technology systems, and we may incur additional costs to remedy any damages caused by disruptions or security breaches.

From time to time, we install new or upgraded business management systems. To the extent such systems fail or are not properly implemented, we may experience material disruptions to our business, delays in our external financial reporting or failures in our system of internal controls, that could have a material adverse effect on our results of operations.

We are subject to government ~~regulation pertaining~~regulations. Our business may suffer as a result of changes in laws or regulations, our failure or inability to ~~environmental and safety~~comply with laws ~~to our industry, products and services, to corporate governance and public disclosure and to health care.~~or regulations or adverse rulings in enforcement or other proceedings.

National, state and local environmental laws and regulations affect our operations around the world. These laws may make it more expensive to manufacture, have manufactured and sell products. It may also be difficult to comply with laws and regulations in a timely manner, and we may not have compliant products available in the quantities requested by our customers, which may have an adverse impact on our results of operations. There is also the potential for higher costs driven by ~~climate change~~environmental regulations. Our costs could increase if our vendors (e.g., third-party manufacturers or utility companies) pass on their costs to us.

As part of the development and commercialization of our IMOD display technology, we are operating both a development and a production fabrication facility. The development and commercialization of IMOD display prototypes is a complex and precise process involving restricted materials subject to environmental and safety regulations. Our failure or inability to comply with existing or future environmental and safety regulations could result in significant remediation liabilities, the imposition of fines and/or the suspension or termination of development and production activities.

Our products and services, and those of our customers and licensees, are subject to various regulations, including FCC regulations in the United States and other international regulations, as well as the specifications of international, national ~~regional~~ and ~~international~~regional standards bodies. The adoption of new laws or regulations, changes in the regulation of our activities, or exclusion or limitation of our technology or products by a government or standards body, could have ~~a material~~an adverse effect on our business, including, among other factors, changes in laws, policies, practices or enforcement affecting trade, foreign investments, licensing practices, spectrum license issuance, adoption of standards, the provision of wireless device subsidies by wireless operators to their customers, taxation, environmental protection, loans and employment.

~~We hold licenses to use~~

In June 2010, we won a 20 MHz slot of Broadband Wireless Access (BWA) spectrum in four regions (known as telecom circles) in India as a result of the ~~United States and the United Kingdom, and we are awaiting assignment~~completion of ~~licenses to use~~ the BWA spectrum auction for which we made a $1.1 billion payment ($928 million at December 25, 2011). We created four wholly-owned subsidiaries, and on August 9, 2010, each subsidiary filed an application to obtain a license to operate a wireless network on this spectrum for one of the respective regions. Thereafter, two Indian companies each acquired 13% of each subsidiary. On September 21, 2011, we received a letter dated September 7, 2011 from the Government of India’s Department of Telecommunications (DoT) (the DoT Letter) notifying us that our applications had been rejected based on its conclusion that the applications were filed after the deadline and that we were restricted to filing one application rather than four. On September 27, 2011, we filed a petition with the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) seeking to overturn the DoT Letter. On September 28, 2011, the TDSAT issued an order granting us interim relief, pending a final determination of our case, directing the DoT to (i) not issue the spectrum that has been earmarked to us to anyone else and (ii) not forfeit or appropriate the payment that we made for the spectrum. On October 10, 2011, one of our subsidiaries received a letter from the DoT offering to issue it a license that would cover all of India, including the four regions for which we won spectrum at the June 2010 auction, assuming that the subsidiary met certain requirements by November 9, 2011. On October 18, 2011, the subsidiary submitted to the DoT a letter accepting the DoT’s offer, requesting issuance of a license as soon as possible after certain requirements are met, and stating that upon issuance of the license, our three other subsidiaries would merge into the subsidiary that had been granted a license. On October 19, 2011, the DoT filed a reply to our September 27, 2011 petition with the TDSAT. In its reply, the DoT stated that upon issuance of a license, our subsidiary could apply for assignment of the spectrum, and at that time, the DoT would decide whether to grant the requested assignment and whether our applications for licenses were timely filed in accordance with its rules. On October 20, 2011, the TDSAT conducted a second hearing on our case. At the conclusion of the hearing, the TDSAT ordered the DoT to clarify the aforementioned statements in its October 19, 2011 reply in light of its October 10, 2011 offer. On November 2, 2011, the subsidiary made a filing with the DoT to meet the four requirements of the DoT Letter, which included certification by the subsidiary that no dues were payable to the DoT by either the subsidiary or its shareholders. The TDSAT conducted a hearing on November 8, 2011 and ordered that the subsidiary and the DoT meet to expedite the licensing process. We met with the DoT on November 14, 2011 and thereafter provided additional documentation to the DoT. At a December 2, 2011 hearing before the TDSAT, the DoT stated that it had served a provisional assessment on one of the subsidiary's Indian partners in the ~~auction~~amount of approximately $28 million (based on the applicable foreign currency exchange rate on December 25, 2011) in ~~India, which~~unpaid dues, including interest and penalties. The TDSAT conducted hearings on this matter on December 9, 2011, January 2, 2012 and January 31, 2012. The next hearing is ~~pending approval by~~scheduled for February 6, 2012. On January 22, 2012, we filed an application requesting that the TDSAT order the DoT to issue the license pursuant to the DoT's October 10, 2011 letter. In the application, we argued that the provisional assessment was not a legal basis for the DoT to delay issuing the license. We also offered to have the subsidiary execute an undertaking that would take effect upon issuance of the license. In the undertaking, the subsidiary would agree that if the Indian government. All of these licenses are subject to a variety of ongoing regulatory proceedings in these respective countries. Additionally, certain of our licenses in the United States are subject to minimum build-out requirementspartner did not pay an amount ultimately found to be ~~met at various dates beginning in June 2013. On December 20, 2010, we announced that we have agreed to sell substantially all of our licenses in the United States, subject~~due (up to the ~~satisfaction~~amount of ~~customary closing conditions, including approval by~~ the ~~FCC and clearance from~~assessment), the ~~U.S. Department~~subsidiary would pay such amount. In addition, we offered to have the subsidiary provide a bank guarantee to cover the amount found to be payable if the DoT has any concern about the creditworthiness of ~~Justice.~~the subsidiary. The DOT has been ordered to file a response to our application on February 3, 2012. If we do not ultimately prevail in this matter, our subsidiary may not receive ~~approval~~a license or an assignment of the spectrum that we won in the auction; and in either of those events, our payment for the spectrum may not be returned.

Also in connection with the BWA spectrum acquisition, each of the subsidiaries entered into loan agreements with multiple lenders, of which $142 million and $786 million are due and payable in February 2012 and December 2012, respectively. The loan agreements define certain events as events of default, including, among other things, if certain government authorizations are revoked, terminated, withdrawn, suspended, modified or withheld. If the DoT’s rejection of our license applications were to ~~sell these licenses pursuant~~be considered an event of default, the bank lenders could declare the loans due and payable immediately. We have received waivers from each of the bank lenders related to this ~~agreement, there is no assurance~~matter until at least April 1, 2012, conditioned upon our continuing to pursue our legal rights in this matter, and agreeing that ~~we would be able to obtain a comparable price from another party or that we would be able to meet the applicable build-out requirements for those licenses. The BWA spectrum licenses~~any default will be ~~subject to minimum build-out requirements to be met within five years~~deemed cured under certain circumstances, including if one of the ~~effective date of the license. If we do not meet these requirements, the~~ relevant ~~government authorities could impose a fine or could rescind~~subsidiaries is granted the license in the area(s) in which the build-out requirements are not met. Changes in the allocation of available spectrum by the countries in which we hold licenses could have a material adverse risk on our business and the ~~value of our assets.~~other three are pursuing a merger into the subsidiary that has been offered a license.

Changing laws, regulations and standards relating to corporate governance, public disclosure and health care may create uncertainty regarding compliance matters. New or changed laws, regulations and standards are subject to varying interpretations in many ~~cases. As a result,~~cases, and their application in practice may evolve over time. ~~We are committed~~As a result, our efforts to ~~maintaining high standards of corporate governance and public disclosure and complying with laws and regulations.~~comply may fail, particularly if there is ambiguity as to how they should be applied in practice. Evolving interpretations of new or changed legal requirements may cause us to incur higher costs as we revise current practices, policies ~~procedures,~~ and/or ~~health plans~~procedures and may divert management time and attention to compliance activities. ~~Our efforts to comply with new or changed laws, regulations and standards may fail, particularly if there is ambiguity as to how such new or changed~~

laws, regulations and standards should be applied in practice. Further, our board members, chief executive officer and chief financial officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified board members and executive officers, which could harm our business.

We may not be able to attract and retain qualified employees.

Our future success depends largely upon the continued service of our board members, executive officers and other key management and technical personnel. Our success also depends on our ability to continue to attract, retain and motivate qualified personnel. In addition, implementing our product and business strategy requires specialized engineering and other talent, and our revenues are highly dependent on technological and product innovations. The market for such specialized engineering and other talented employees in our industry is extremely competitive. In addition, existing immigration laws make it more difficult for us to recruit and retain highly skilled foreign national graduates of ~~U.S.~~ universities in the United States, making the pool of available talent even smaller. Key employees represent a significant asset, and the competition for these employees is intense in ~~the wireless communications~~our industry. We do not have employment agreements with our key management personnel. In the event of a labor shortage, or in the event of an unfavorable change in prevailing labor and/or immigration laws, we could experience difficulty attracting and retaining qualified employees. We continue to anticipate increases in human resource needs, particularly in engineering. If we are unable to attract and retain the qualified employees that we need, our business may be harmed.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Financial market risks related to interest rates, foreign currency exchange rates and equity prices are described in our ~~2010~~2011 Annual Report on Form 10-K. At ~~June 26,~~December 25, 2011, there have been no other material changes to the market risks described at September ~~26, 2010~~25, 2011 except as described below. Additionally, we do not anticipate any other near-term changes in the nature of our market risk exposures or in management’s objectives and strategies with respect to managing such exposures.

Interest Rate Risk. The following table provides information about our interest-bearing cash and cash equivalents, marketable securities and loans payable that are sensitive to changes in interest rates. The table presents principal cash flows, weighted-average yield at cost and contractual maturity dates. Additionally, we have assumed that the interest-bearing securities are similar enough within the specified categories to aggregate the securities for presentation purposes.

Interest Rate Sensitivity Principal Amount by Expected Maturity Average Interest Rates (Dollars in millions)	Interest Rate Sensitivity Principal Amount by Expected Maturity Average Interest Rates (Dollars in millions)																							Interest Rate Sensitivity Principal Amount by Expected Maturity Average Interest Rates (Dollars in millions)

	2011			2012			2013			2014			2015			Thereafter			No Single Maturity			Total		2012			2013			2014			2015			2016			Thereafter			No Single Maturity			Total
Fixed interest-bearing securities:
Cash and cash equivalents	$	3,046		$	—		$	—		$	—		$	—		$	—		$	—		$	3,046	$	1,835		$	—		$	—		$	—		$	—		$	—		$	—		$	1,835
Interest rate	0.1		%																					0.3		%
Available-for-sale securities:
Trading securities:
Investment grade																								$	302		$	104		$	416		$	16		$	11		$	56		$	26		$	931
Interest rate																								0.1		%	2.8		%	2.7		%	3.1		%	3.3		%	3.8		%	3.8		%
Non-investment grade																								$	—		$	2		$	8		$	11		$	19		$	5		$	7		$	52
Interest rate																											7.9		%	8.0		%	7.9		%	8.4		%	7.8		%	5.2		%
Other marketable securities:
Investment grade	$	316		$	692		$	762		$	687		$	234		$	819		$	1,575		$	5,085	$	995		$	1,375		$	792		$	380		$	414		$	605		$	2,019		$	6,580
Interest rate	0.6		%	2.4		%	2.3		%	3.4		%	3.2		%	4.8		%	0.9		%			1.2		%	1.5		%	3.0		%	2.5		%	3.0		%	5.5		%	1.8		%
Non-investment grade	$	4		$	7		$	9		$	35		$	87		$	834		$	13		$	989	$	2		$	12		$	29		$	103		$	140		$	933		$	19		$	1,238
Interest rate	13.7		%	10.3		%	8.6		%	9.5		%	10.2		%	8.1		%	0.8		%			7.2		%	7.7		%	9.2		%	8.9		%	8.0		%	7.9		%	2.2		%
Floating interest-bearing securities:
Cash and cash equivalents	$	1,963		$	—		$	—		$	—		$	—		$	—		$	—		$	1,963	$	2,214		$	—		$	—		$	—		$	—		$	—		$	—		$	2,214
Interest rate	0.0%																							0.1		%
Available-for-sale securities:
Trading securities:
Investment grade																								$	—		$	—		$	13		$	—		$	—		$	—		$	8		$	21
Interest rate																														1.8		%										2.7		%
Non-investment grade																								$	—		$	—		$	—		$	—		$	1		$	—		$	1		$	2
Interest rate																																				7.8		%				2.7		%
Other marketable securities:
Investment grade	$	102		$	352		$	429		$	434		$	11		$	443		$	543		$	2,314	$	288		$	613		$	664		$	10		$	25		$	405		$	570		$	2,575
Interest rate	1.0		%	0.6		%	0.8		%	1.0		%	5.5		%	8.7		%	1.9		%			0.9		%	0.9		%	1.2		%	5.3		%	2.8		%	8.8		%	2.2		%
Non-investment grade	$	—		$	12		$	73		$	229		$	151		$	1,030		$	1,134		$	2,629	$	8		$	52		$	195		$	133		$	190		$	1,064		$	1,145		$	2,787
Interest rate				7.8		%	5.9		%	6.4		%	6.0		%	5.7		%	4.1		%			6.3		%	5.1		%	5.0		%	5.0		%	3.6		%	4.5		%	4.2		%
Loans payable⁽¹⁾	$	—		$	1,092		$	—		$	—		$	—		$	—		$	—		$	1,092	$	142		$	786		$	—		$	—		$	—		$	—		$	—		$	928
Floating interest rate				9.8		%																		10.3		%	10.3		%

⁽¹⁾Denominated in Indian rupees.

Cash and cash equivalents and ~~available-for-sale~~marketable securities are recorded at fair value. The loans payable approximate fair value.

~~Foreign Exchange Risk.~~ At ~~June 26, 2011, we had floating-rate long-term~~ We intend to refinance the amount due in February 2012 with new loans. If the DOT’s rejection of our license applications were to be considered an event of default, the bank lenders could declare the loans indue and payable immediately. We have received conditional waivers from each of the ~~aggregate of $1.1 billion, which are payable in full in Indian rupees in December 2012; however, each lender has~~bank lenders until at least April 1, 2012. As a result, the ~~right to demand prepayment of its~~due date for all or a portion of the ~~outstanding~~ loans ~~on December 15, 2011 subject to sufficient prior written notice. The loans are~~ payable in the functional currency of our consolidated subsidiaries that are party to the loans; however, we are subject to foreign currency translation risk, which may impact our liability for principal repayment and interest expense that we will record in the future. If the foreign currency exchange rate were to change unfavorably by 20%, we would incur additional principal of $273 million and interest expense of $39 million through the remainder of the contractual terms of the loans. Our analysis methods used to assess and mitigate the risks discussed above should notcould be ~~considered projections of future risks.~~accelerated.


ITEM 4.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and our principal financial

officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report.

Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting during the ~~third~~first quarter of fiscal ~~2011~~2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

A review of our current litigation is disclosed in the notes to our condensed consolidated financial statements. See “Notes to Condensed Consolidated Financial Statements, Note 86 — Commitments and ~~Contingencies.~~Contingencies,” in Part I, Item 1. We are also engaged in numerous other legal actions arising in the ordinary course of our business and, while there can be no assurance, believe that the ultimate outcome of these actions will not have a material adverse effect on our results of operations, liquidity or financial position.


ITEM 1A.	RISK FACTORS

We have provided updated Risk Factors in the section labeled “Risk Factors” in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations. To reflect the ~~acquisition~~completion of ~~Atheros Communications, Inc.~~the sale of substantially all of our 700 MHz spectrum on December 27, 2011 (after the close of our first fiscal quarter), we revised the risk factor entitled:

“We are subject to government regulations. Our business may ~~engage~~suffer as a result of changes in ~~acquisitions~~laws or ~~strategic transactions~~regulations, our failure or ~~make investments that could result~~inability to comply with laws or regulations or adverse rulings in ~~significant changes~~enforcement or ~~management disruption and fail to enhance stockholder value.~~other proceedings.”

Other than with respect to ~~this~~that revision, we do not believe the updates to the Risk Factors have materially changed the type or magnitude of the risks we face in comparison to the disclosure provided in our most recent Annual Report on Form 10-K.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the first quarter of fiscal 2012, we repurchased shares of our common stock as follows (in thousands, except per share data):



	Total Number of Shares Purchased	Average Price Paid Per Share⁽¹⁾		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs⁽²⁾⁽³⁾
September 26, 2011 to October 23, 2011	2,045	$	48.30	2,045	$	1,459,056
October 24, 2011 to November 20, 2011	1	49.91		1	1,458,996
November 21, 2011 to December 25, 2011	—	—		—	1,458,996
Total	2,046	$	48.30	2,046	$	1,458,996

⁽¹⁾ Average Price Paid Per Share excludes cash paid for commissions.

⁽²⁾On March 1, 2010, we announced that we had been authorized to repurchase up to $3.0 billion of our common stock, ~~with~~and $948 million of that amount remained available at December 25, 2011, net of shares that may be repurchased subject to put options outstanding. The stock repurchase program has no expiration date. At

~~June 26, 2011, approximately $1.7 billion remained authorized for repurchase. While we did not repurchase any of our common stock during the~~ ~~first nine months~~⁽³⁾ The approximate dollar value of shares that may yet be purchased has not been reduced by the net cost of $511 million (net of the premiums received) of 11,800,000 shares that may be repurchased related to put options that we sold during fiscal ~~2011, we continue to evaluate repurchases under this program subject to capital availability and periodic determinations that such repurchases are in the best interest of our stockholders.~~2011.


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

Not applicable.


ITEM 4.	~~[REMOVED AND RESERVED]~~ MINE SAFETY DISCLOSURES

Not applicable.


ITEM 5.	OTHER INFORMATION

Not applicable.


ITEM 6.	EXHIBITS



Exhibit Number		Description
3.1		Restated Certificate of Incorporation. (1)
3.2		Certificate of Amendment of Certificate of ~~Designation.~~Designation of Series A Junior Participating Preferred Stock. (2)
3.4		Amended and Restated Bylaws. (3)
~~10.96~~4.1		~~Atheros Communications, Inc. 2004 Stock Incentive Plan, as amended (4)(5)~~
~~10.97~~		~~Atheros Communications, Inc. 2009 Inducement Grant Incentive Plan (4)(5)~~
~~10.98~~		~~Atheros Communications, Inc. (formerly T-Span Corporation) 1998 Stock Incentive Plan, as amended (4)(5)~~
~~10.99~~		~~Third~~ Amended and Restated ~~Intellon Corporation 2000 Employee Incentive Plan~~Rights Agreement dated as of September 26, 2005 between the Company and Computershare Trust Company, N.A., as successor Rights Agent to Computershare Investor Services LLC. (4)~~(5)~~
~~10.100~~4.2		~~Intellon Corporation 2007 Equity Incentive Plan (4)(5)~~
~~10.101~~		~~Resolutions Amending Atheros Communications, Inc. Equity Plans (4)~~Amendment dated as of December 7, 2006 to the Amended and Restated Rights Agreement dated as of September 26, 2005 between the Company and Computershare Trust Company, N.A., as successor Rights Agent to Computershare Investor Services LLC. (5)
31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Paul E. Jacobs.
31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for William E. Keitel.
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for Paul E. Jacobs.
32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for William E. Keitel.
101.INS		XBRL Instance Document. (6)
101.SCH		XBRL Taxonomy Extension Schema. (6)
101.CAL		XBRL Taxonomy Extension Calculation Linkbase. (6)
101.LAB		XBRL Taxonomy Extension Labels Linkbase. (6)
101.PRE		XBRL Taxonomy Extension Presentation Linkbase. (6)
101.DEF		XBRL Taxonomy Extension Definition Linkbase. (6)


(1)	Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 27, 2009.


(2)	Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on September 30, 2005.


(3)	Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed on September 25, 2009.


(4)	Filed as an exhibit to the Registrant’s ~~Registration Statement~~Current Report on Form ~~S-8~~8-K filed on ~~June 1, 2011.~~September 30, 2005.


(5)	~~Indicates management or compensatory plan or arrangement required~~Filed as an exhibit to ~~be identified pursuant to Item 15(a).~~the Registrant’s Current Report on Form 8-K filed on December 12, 2006.


(6)	Furnished, not filed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	QUALCOMM Incorporated
	/s/ William E. Keitel
	William E. Keitel
	Executive Vice President and Chief Financial Officer

Dated: ~~July 20, 2011~~February 1, 2012



	Nine Months Ended June 26, 2011
	Auction Rate Securities			Other Marketable Securities			Other Liabilities
Beginning balance of Level 3	$	126		$	18		$	8
Total realized and unrealized gains:
Included in investment income, net	—			1			—
Included in other comprehensive income	2			—			—
Purchases	4			—			—
Settlements	(6		)	(4		)	—
Transfers into Level 3	—			6			—
Ending balance of Level 3	$	126		$	21		$	8



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



	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 26, 2011
Equity securities	$	2,443	$	545	$	(15	)	$	2,973
Debt securities	10,616		423		(22		)	11,017
	$	13,059	$	968	$	(37	)	$	13,990
September 26, 2010
Equity securities	$	2,309	$	403	$	(11	)	$	2,701
Debt securities	10,795		512		(20		)	11,287
	$	13,104	$	915	$	(31	)	$	13,988



	2011				2010
	Per Share		Total		Per Share		Total
First Quarter	$	0.190	$	314	$	0.170	$	284
Second Quarter	0.190		319		0.170		279
Third Quarter	0.215		360		0.190		309
	$	0.595	$	993	$	0.530	$	872



	June 26, 2011
Assets
Current assets	$	8
Property, plant and equipment, net	170
Assets held for sale	746
Other assets	2
Total assets	$	926
Liabilities
Trade accounts payable	$	2
Payroll and other benefits related liabilities	2
Other current liabilities	88
Other noncurrent liabilities	198
Total liabilities	$	290



	Balance at September 26, 2010		Initial Costs		Adjustments to Costs			Cash Payments			Balance at June 26, 2011
Contract termination costs	$	—	$	63	$	(2	)	$	(18	)	$	43
Other costs	—		16		(6		)	(6		)	4
	$	—	$	79	$	(8	)	$	(24	)	$	47




Current assets	$	925
Amortizable intangible assets:
Technology-based intangible assets	692
Marketing-related intangible assets	50
Customer-related intangible assets	114
In-process research and development (IPR&D)	150
Goodwill	1,779
Other assets	75
Total assets	3,785
Liabilities	(316		)
Total	$	3,469