UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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 March ~~25, 2018~~31, 2019



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 ¨

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 ¨

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



Large accelerated filer	x	Accelerated filer	o	Non-accelerated filer ~~(Do not check if a smaller reporting company)~~	o	Smaller reporting company	o	Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ 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 April ~~23, 2018,~~29, 2019, was as follows:



Class		Number of Shares
Common Stock, $0.0001 per share par value		~~1,482,622,312~~1,215,698,926

QUALCOMM ~~INCORPORATED~~Incorporated

Form 10-Q

For the Quarter Ended March ~~25, 2018~~31, 2019



		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 Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Stockholders’ Equity	7
	Notes to Condensed Consolidated Financial Statements	78
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3034
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5965
Item 4.	Controls and Procedures	5965

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	5965
Item 1A.	Risk Factors	5965
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6065
Item 3.	Defaults Upon Senior Securities	6065
Item 4.	Mine Safety Disclosures	6065
Item 5.	Other Information	6065
Item 6.	Exhibits	6266

SIGNATURES		6568

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



QUALCOMM Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)


	March 25, 2018		September 24, 2017		March 31, 2019		September 30, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	37,946	$	35,029	$	10,135	$	11,777
Marketable securities	1,625		2,279		195		311
Accounts receivable, net	3,535		3,632		3,638		2,904
Inventories	1,797		2,035		1,725		1,693
Other current assets	641		618		631		699
Total current assets	45,544		43,593		16,324		17,384
Marketable securities	35		1,270
Deferred tax assets	1,126		2,900		3,832		936
Property, plant and equipment, net	3,224		3,216		2,945		2,975
Goodwill	6,676		6,623		6,299		6,498
Other intangible assets, net	3,435		3,737		2,510		2,955
Other assets	4,086		4,147		2,113		1,970
Total assets	$	64,126	$	65,486	$	34,023	$	32,718

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	1,454	$	1,971	$	1,667	$	1,825
Payroll and other benefits related liabilities	1,262		1,183		633		1,081
Unearned revenues	502		502		478		500
Short-term debt	3,733		2,495		998		1,005
Other current liabilities	5,709		4,756		6,741		6,978
Total current liabilities	12,660		10,907		10,517		11,389
Unearned revenues	1,803		2,003		1,330		1,620
Income taxes payable	3,277		—		1,849		2,312
Long-term debt	19,361		19,398		15,405		15,365
Other liabilities	3,206		2,432		1,056		1,225
Total liabilities	40,307		34,740		30,157		31,911

Commitments and contingencies (Note 6)

Stockholders’ equity:
Preferred stock, $0.0001 par value; 8 shares authorized; none outstanding	—		—		—		—
Common stock and paid-in capital, $0.0001 par value; 6,000 shares authorized; 1,482 and 1,474 shares issued and outstanding, respectively	495		274
Common stock and paid-in capital, $0.0001 par value; 6,000 shares authorized; 1,214 and 1,219 shares issued and outstanding, respectively					384		—
Retained earnings	22,779		30,088		3,309		542
Accumulated other comprehensive income	545		384		173		265
Total stockholders’ equity	23,819		30,746		3,866		807
Total liabilities and stockholders’ equity	$	64,126	$	65,486	$	34,023	$	32,718



See accompanying notes.



QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)

Three Months Ended Six Months Ended
March 25,
2018 March 26,
2017 March 25,
2018 March 26,
2017
Revenues:
Equipment and services $ 3,936
$ 3,689
$ 8,639
$ 7,828
Licensing 1,325
1,327
2,690
3,187
Total revenues 5,261
5,016
11,329
11,015
Costs and expenses:
Cost of revenues 2,239
2,208
4,902
4,651
Research and development 1,402
1,386
2,822
2,697
Selling, general and administrative 869
615
1,641
1,206
Other (Note 2) 310
78
1,493
954
Total costs and expenses 4,820
4,287
10,858
9,508
Operating income 441
729
471
1,507
Interest expense (179 ) (107 ) (350 ) (197 )
Investment and other income, net (Note 2) 96
235
211
417
Income before income taxes 358
857
332
1,727
Income tax benefit (expense) (Note 3) 5
(108 ) (5,922 ) (296 )
Net income (loss) $ 363
$ 749
$ (5,590 ) $ 1,431

Basic earnings (loss) per share $ 0.25
$ 0.51
$ (3.78 ) $ 0.97
Diluted earnings (loss) per share $ 0.24
$ 0.50
$ (3.78 ) $ 0.96
Shares used in per share calculations:
Basic 1,482
1,477
1,479
1,478
Diluted 1,494
1,489
1,479
1,492

Dividends per share announced $ 0.57
$ 0.53
$ 1.14
$ 1.06



	Three Months Ended						Six Months Ended
	March 31, 2019			March 25, 2018			March 31, 2019			March 25, 2018
Revenues:
Equipment and services	$	3,753		$	3,936		$	7,506		$	8,639
Licensing	1,229			1,284			2,318			2,616
Total revenues	4,982			5,220			9,824			11,255
Costs and expenses:
Cost of revenues	2,179			2,239			4,367			4,902
Research and development	1,308			1,402			2,577			2,822
Selling, general and administrative	573			869			1,100			1,641
Other	(18		)	310			130			1,493
Total costs and expenses	4,042			4,820			8,174			10,858
Operating income	940			400			1,650			397
Interest expense	(162		)	(179		)	(317		)	(350		)
Investment and other income, net	28			96			33			211
Income before income taxes	806			317			1,366			258
Income tax (expense) benefit	(143		)	13			365			(5,911		)
Net income (loss)	$	663		$	330		$	1,731		$	(5,653	)

Basic earnings (loss) per share	$	0.55		$	0.22		$	1.43		$	(3.82	)
Diluted earnings (loss) per share	$	0.55		$	0.22		$	1.42		$	(3.82	)
Shares used in per share calculations:
Basic	1,213			1,482			1,213			1,479
Diluted	1,217			1,494			1,220			1,479



See accompanying notes.



QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
(Unaudited)

Three Months Ended Six Months Ended
March 25,
2018 March 26,
2017 March 25,
2018 March 26,
2017
Net income (loss) $ 363
$ 749
$ (5,590 ) $ 1,431
Other comprehensive income (loss), net of income taxes:
Foreign currency translation gains (losses) 178
16
173
(10 )
Noncredit other-than-temporary impairment losses related to certain available-for-sale debt securities and subsequent changes in fair value —
—
—
6
Reclassification of net other-than-temporary losses on available-for-sale securities included in net income (loss) —
2
1
81
Net unrealized (losses) gains on other available-for-sale securities (5 ) 69
(1 ) (141 )
Reclassification of net realized gains on available-for-sale securities included in net income (loss) (8 ) (37 ) (9 ) (129 )
Net unrealized losses on derivative instruments (7 ) (5 ) (6 ) (3 )
Reclassification of net realized losses (gains) on derivative instruments included in net income (loss) 2
(2 ) 3
(2 )
Total other comprehensive income (loss) 160
43
161
(198 )
Comprehensive income (loss) $ 523
$ 792
$ (5,429 ) $ 1,233



	Three Months Ended						Six Months Ended
	March 31, 2019			March 25, 2018			March 31, 2019			March 25, 2018
Net income (loss)	$	663		$	330		$	1,731		$	(5,653	)
Other comprehensive (loss) income, net of income taxes:
Foreign currency translation (losses) gains	(17		)	178			(41		)	173
Reclassification of foreign currency translation (gains) losses included in net income (loss)	(2		)	—			1			—
Reclassification of net other-than-temporary losses on available-for-sale securities included in net income (loss)	—			—			—			1
Net unrealized losses on other available-for-sale securities	(1		)	(5		)	(6		)	(1		)
Reclassification of net realized gains on available-for-sale securities included in net income (loss)	—			(8		)	(1		)	(9		)
Net unrealized (losses) gains on derivative instruments	—			(7		)	16			(6		)
Reclassification of net realized (gains) losses on derivative instruments included in net income (loss)	(1		)	2			(2		)	3
Other losses	(8		)	—			(8		)	—
Total other comprehensive (loss) income	(29		)	160			(41		)	161
Comprehensive income (loss)	$	634		$	490		$	1,690		$	(5,492	)



See accompanying notes.



QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)


	Six Months Ended						Six Months Ended
	March 25, 2018			March 26, 2017			March 31, 2019			March 25, 2018
Operating Activities:
Net (loss) income	$	(5,590	)	$	1,431
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net income (loss)							$	1,731		$	(5,653	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense	751			671			698			751
Income tax provision in excess of (less than) income tax payments (Note 3)	5,477			(230		)
Interest expense in excess of interest payments	207			129
Income tax provision (less than) in excess of income tax payments							(958		)	5,466
Non-cash portion of share-based compensation expense	470			485			452			470
Net realized gains on marketable securities and other investments	(73		)	(236		)
Net gains on marketable securities and other investments							(9		)	(73		)
Indefinite and long-lived asset impairment charges	33			34			203			33
Impairment losses on marketable securities and other investments	20			148			69			20
Other items, net	46			(32		)	(190		)	52
Changes in assets and liabilities:
Accounts receivable, net	94			(1,691		)	200			94
Inventories	243			(245		)	(49		)	243
Other assets	70			107			25			58
Trade accounts payable	(511		)	(677		)	(173		)	(511		)
Payroll, benefits and other liabilities	1,166			2,592			(727		)	1,453
Unearned revenues	(125		)	(80		)	(122		)	(125		)
Net cash provided by operating activities	2,278			2,406			1,150			2,278
Investing Activities:
Capital expenditures	(411		)	(251		)	(322		)	(411		)
Purchases of available-for-sale marketable securities	(5,758		)	(8,802		)
Proceeds from sales and maturities of available-for-sale securities	7,659			13,146
Deposits of investments designated as collateral	—			(2,000		)
Purchases of debt and equity marketable securities							—			(5,758		)
Proceeds from sales and maturities of debt and equity marketable securities							92			7,659
Acquisitions and other investments, net of cash acquired	(170		)	(1,382		)	(118		)	(170		)
Proceeds from other investments	159			7			39			159
Other items, net	2			42			48			2
Net cash provided by investing activities	1,481			760
Net cash (used) provided by investing activities							(261		)	1,481
Financing Activities:
Proceeds from short-term debt	5,563			5,113			3,297			5,563
Repayment of short-term debt	(4,330		)	(4,864		)	(3,303		)	(4,330		)
Proceeds from issuance of common stock	335			290			177			335
Repurchases and retirements of common stock	(425		)	(727		)	(1,019		)	(425		)
Dividends paid	(1,689		)	(1,567		)	(1,502		)	(1,689		)
Payments of tax withholdings related to vesting of share-based awards	(196		)	(175		)	(143		)	(196		)
Payment of purchase consideration related to RF360 joint venture	(115		)	—			—			(115		)
Other items, net	(17		)	(52		)	(38		)	(17		)
Net cash used by financing activities	(874		)	(1,982		)	(2,531		)	(874		)
Effect of exchange rate changes on cash and cash equivalents	32			(6		)	—			32
Net increase in cash and cash equivalents	2,917			1,178
Cash and cash equivalents at beginning of period	35,029			5,946
Cash and cash equivalents at end of period	$	37,946		$	7,124
Net (decrease) increase in total cash and cash equivalents							(1,642		)	2,917
Total cash and cash equivalents at beginning of period							11,777			37,029
Total cash and cash equivalents at end of period							$	10,135		$	39,946

Reconciliation to the condensed consolidated balance sheets
Cash and cash equivalents							$	10,135		$	37,946
Restricted cash and restricted cash equivalents included in other assets							—			2,000
Total cash and cash equivalents at end of period							$	10,135		$	39,946

See accompanying notes.



QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except per share data)
(Unaudited)



	Three Months Ended						Six Months Ended
	March 31, 2019			March 25, 2018			March 31, 2019			March 25, 2018
Total stockholders’ equity, beginning balance	$	3,617		$	23,872		$	807		$	30,725

Common stock and paid-in capital:
Balance at beginning of period	—			265			—			274
Common stock issued under employee benefit plans and the related tax benefits	150			201			177			343
Repurchases and retirements of common stock	—			(200		)	(136		)	(425		)
Share-based compensation	237			233			486			499
Tax withholdings related to vesting of share-based payments	(3		)	(4		)	(143		)	(196		)
Balance at end of period	384			495			384			495

Retained earnings:
Balance at beginning of period	3,415			23,222			542			30,067
Cumulative effect of accounting changes (Note 1)	—			—			3,455			—
Net income (loss)	663			330			1,731			(5,653		)
Repurchases and retirements of common stock	—			—			(883		)	—
Dividends	(769		)	(857		)	(1,536		)	(1,719		)
Balance at end of period	3,309			22,695			3,309			22,695

Accumulated other comprehensive income:
Balance at beginning of period	202			385			265			384
Cumulative effect of accounting changes (Note 1)	—			—			(51		)	—
Other comprehensive (loss) income	(29		)	160			(41		)	161
Balance at end of period	173			545			173			545

Total stockholders’ equity, ending balance	$	3,866		$	23,735		$	3,866		$	23,735

Dividends per share announced	$	0.62		$	0.57		$	1.24		$	1.14

See accompanying notes.



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Basis of Presentation and Significant Accounting Policies Update

Financial Statement Preparation. These condensed consolidated financial statements have been prepared ~~by QUALCOMM Incorporated (collectively with its subsidiaries, the Company or Qualcomm)~~ in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the interim financial information 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 Company’s~~our Annual Report on Form 10-K for the fiscal year ended September ~~24, 2017.~~30, 2018. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. ~~The Company operates~~We operate and ~~reports~~report using a 52-53 week fiscal year ending on the last Sunday in September. Each of the three-month and six-month periods ended March ~~25, 2018~~31, 2019 and March ~~26, 2017~~25, 2018 included 13 weeks and 26 weeks, respectively.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in ~~the Company’s~~our condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year presentation.

Revision of Prior Period Financial Statements. As previously disclosed, in connection with the preparation of our condensed consolidated financial statements for the three months ended December 30, 2018, we identified an immaterial error related to the recognition of certain royalty revenues of our QTL (Qualcomm Technology Licensing) segment in the quarterly and annual periods in fiscal 2018 and third and fourth quarters and annual period in fiscal 2017. In accordance with SAB No. 99, “Materiality,” and SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” we evaluated the error and determined that the related impact was not material to our financial statements for any prior annual or interim period, but that correcting the cumulative impact of the error would be significant to our results of operations for the three months ended December 30, 2018. Accordingly, we have revised previously reported financial information for such immaterial error, as previously disclosed in our Quarterly Report on Form 10-Q for the fiscal quarter ended December 30, 2018. A summary of revisions to certain previously reported financial information presented herein for comparative purposes is included in Note 11. We will also correct previously reported financial information for such immaterial error in our future filings, as applicable.

Earnings (Loss) Per Common Share. Basic earnings (loss) per common share is computed by dividing net income (loss) ~~attributable to Qualcomm~~ by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share is computed by dividing net income ~~attributable to Qualcomm~~ by the combination of dilutive common share equivalents, comprised of shares issuable under ~~the Company’s~~our share-based compensation plans and shares subject to accelerated share repurchase agreements, if any, and the weighted-average number of common shares outstanding during the reporting period. Due to the net loss for the six months ended March 25, 2018, all of the common share equivalents issuable under share-based compensation plans had an anti-dilutive effect and were therefore excluded from the computation of diluted loss per share. The following table provides information about the diluted earnings (loss) per share calculation (in millions):


	Three Months Ended		Six Months Ended		Three Months Ended		Six Months Ended
	March 25, 2018	March 26, 2017	March 25, 2018	March 26, 2017	March 31, 2019	March 25, 2018	March 31, 2019	March 25, 2018
Dilutive common share equivalents included in diluted shares	12.2	11.3	—	14.2	3.8	12.2	7.0	—
Shares of common stock equivalents not included because the effect would be anti-dilutive or certain performance conditions were not satisfied at the end of the period	0.1	10.8	44.9	5.4	17.2	0.1	14.4	44.9

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

Three Months Ended Six Months Ended
March 25,
2018 March 26,
2017 March 25,
2018 March 26,
2017
Cost of revenues $ 10
$ 10
$ 21
$ 20
Research and development 151
155
307
308
Selling, general and administrative 61
81
142
157
Share-based compensation expense before income taxes 222
246
470
485
Related income tax benefit (29 ) (36 ) (77 ) (84 )
$ 193
$ 210
$ 393
$ 401

At March 25, 2018, total unrecognized compensation expense related to nonvested restricted stock units granted prior to that date was $1.3 billion, which is expected to be recognized over a weighted-average period of 1.9 years. At March 25, 2018, the Company had 28.4 million restricted stock units outstanding and 7.8 million stock options outstanding.



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

~~Recent~~Share-Based Compensation. Total share-based compensation expense, related to all of our share-based awards, was comprised as follows (in millions):



	Three Months Ended						Six Months Ended
	March 31, 2019			March 25, 2018			March 31, 2019			March 25, 2018
Cost of revenues	$	7		$	10		$	16		$	21
Research and development	157			151			315			307
Selling, general and administrative	57			61			121			142
Share-based compensation expense before income taxes	221			222			452			470
Related income tax benefit	(30		)	(29		)	(79		)	(77		)
	$	191		$	193		$	373		$	393

At March 31, 2019, total unrecognized compensation expense related to nonvested restricted stock units granted prior to that date was $1.4 billion, which is expected to be recognized over a weighted-average period of 2.2 years. At March 31, 2019, we had outstanding 30.4 million restricted stock units that contain only a service requirement and 3.1 million stock options that contain only a service requirement.

Recently Adopted Accounting Pronouncements.

~~Share-based Awards:~~Revenue Recognition: In ~~March 2016,~~May 2014, the Financial Accounting Standards Board (FASB) issued new ~~guidance that changed the~~ accounting for share-based awards, including income taxes, classification of awards and classification in the statement of cash flows. The Company adopted the new guidance in the first quarter of fiscal 2018. In accordance with the new guidance, excess tax benefits or deficiencies associated with share-based awards are recognized through earnings when the awards vest or settle, rather than in stockholders’ equity. In the six months ended March 25, 2018, net excess tax benefits associated with share-based awards of $21 million were recognized in the Company’s income tax provision. In addition, cash flows related to excess tax benefits are presented as an operating activity and cash payments made on an employee’s behalf for withheld shares are presented as financing activities, with the prior periods adjusted accordingly. As a result of these changes, amounts for the six months ended March 26, 2017 have been adjusted as follows: net cash provided by operating activities increased by $212 million with a corresponding offset to net cash used in financing activities. The new guidance also impacts the Company’s earnings per share calculation as the estimate of dilutive common share equivalents under the treasury stock method no longer assumes that the estimated tax benefits realized when an award is settled are used to repurchase shares. There was no impact of this change on the Company’s calculation of earnings per share as a result of the net loss for the six months ended March 25, 2018. The Company elected to continue its practice of estimating forfeitures expected to occur in determining the amount of compensation cost to be recognized each period.

~~Revenue Recognition:~~ ~~In May 2014, the FASB issued new~~ guidance related to revenue recognition (ASC 606), which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition ~~guidance.~~accounting guidance and requires increased disclosures. The new accounting guidance defines a five-step approach that requires a company to recognize revenue as control of goods or services transfers to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. It defines a five-step approach for recognizing revenue, which may require a company to use more judgment and make more estimates than under the current guidance. The Company will adopt the new guidanceWe adopted ASC 606 in the first quarter of fiscal 2019 using the modified retrospective ~~approach, with~~transition method only to those contracts that were not completed as of October 1, 2018. We recognized the cumulative effect of initially applying the new revenue accounting guidance ~~recognized~~ as an adjustment to ~~the~~ opening retained ~~earnings balance. Given~~earnings. Prior period results have not been restated and continue to be reported in accordance with the ~~scope of work required to implement the recognition~~accounting guidance in effect for those periods (ASC 605). We have implemented new accounting policies, systems, processes and ~~disclosure requirements under the new guidance, the Company has made progress in the identification of changes to policy, processes, systems and~~internal controls ~~and the Company continues to assess data availability and presentation~~ necessary to ~~meet~~support the ~~additional disclosure~~ requirements of ~~the guidance in the notes to the consolidated financial statements.~~ASC 606.

~~The Company currently expects the adoption~~Adoption of this new accounting guidance to most significantly ~~impact its licensing business. Specifically, the Company expects a change in~~impacts the timing of sales-based royalty revenues, which are the vast majority of our QTL segment’s revenues. Prior to adoption, we recognized ~~from sales-based royalties. The Company currently recognizes~~ sales-based royalties as revenues in the period in which such royalties ~~are~~were reported by licensees, which iswas after the conclusion of the quarter in which the licensees’ sales ~~occur~~occurred and when all other revenue recognition criteria ~~are~~had been met. Under the new accounting guidance, ~~the Company will be required to~~we estimate and recognize sales-based royalties in the period in which the associated sales occur, subject to certain constraints on our ability to estimate such amounts, resulting in an acceleration of revenue recognition compared to the ~~current~~historical method. ~~Upon~~Since we do not invoice for sales-based royalties estimated and recognized in any given quarter until after the conclusion of that quarter (which is generally the following quarter when such royalties are reported by licensees), revenues recognized from sales-based royalties results in unbilled receivables (included in accounts receivable, net on the consolidated balance sheet). The adoption of ASC 606 did not otherwise have a material impact.

The new accounting guidance also impacts the ~~new guidance, licenses~~timing of recognizing certain customer incentives, which are recorded as a reduction to ~~use portions of~~revenues in the ~~Company’s intellectual property portfolio will be considered one performance obligation, and license fees will be recognized as~~period that the related revenues ~~on a straight-line basis over the term of the license agreement, which is similar~~are earned. Prior to ~~the recognition of license revenues under the current guidance. The Company currently accounts~~adoption, we accounted for certain customer incentive arrangements, ~~in its licensing and semiconductor businesses,~~ including volume-related and other pricing rebates or cost reimbursements for marketing and other activities involving certain of ~~the Company’s~~our products and technologies, in part based on the maximum potential liability. Under the new accounting guidance, ~~the Company will~~we estimate the amount of all customer incentives. ~~The Company does not otherwise expect the adoption of the new guidance to have a material impact on its businesses.~~

~~Financial Assets:~~ In January 2016, the FASB issued new guidance on classifying and measuring financial instruments, which requires that (i) all equity investments, other than equity-method investments, in unconsolidated entities generally be measured at fair value through earnings and (ii) when the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk be recognized separately in other comprehensive income. Additionally, it changes the disclosure requirements for financial instruments. The Company will adopt the new guidance in the first quarter of fiscal 2019 and is in the process of determining the effects the adoption will have on its consolidated financial statements.

In June 2016, the FASB issued new guidance that changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. The new guidance will be effective for the Company starting in the first quarter of fiscal 2021. Early adoption is permitted starting in the first quarter of fiscal 2020. The Company is in the



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

~~process~~The following table summarizes the cumulative effects of ~~determining the effects the adoption will have on its consolidated financial statements and whether to adopt~~adopting the new revenue accounting guidance ~~early.~~(substantially all of which related to the impact to QTL’s sales-based royalties) on our condensed consolidated balance sheet at October 1, 2018 (in millions):



	Balance as of September 30, 2018		Adjustment			Opening Balance as of October 1, 2018
Assets
Accounts receivable, net	$	2,904	$	957		$	3,861
Other current assets	699		1			700
Deferred tax assets	936		(98		)	838
Other assets	1,970		1			1,971

Liabilities
Unearned revenues, current	$	500	$	6		$	506
Other current liabilities	6,978		125			7,103
Unearned revenues	1,620		(110		)	1,510

Stockholders’ equity
Retained earnings	$	542	$	840		$	1,382

The following tables summarize the impacts of adopting the new revenue accounting guidance on our condensed consolidated balance sheet and statements of operations (in millions):



	As of March 31, 2019
Balance Sheet	As Reported ASC 606		Adjustment			ASC 605
Assets
Accounts receivable, net	$	3,638	$	(851	)	$	2,787
Other current assets	631		(9		)	622
Deferred tax assets	3,832		45			3,877

Liabilities
Unearned revenues, current	$	478	$	304		$	782
Other current liabilities	6,741		(366		)	6,375
Unearned revenues	1,330		109			1,439

Stockholders’ equity
Retained earnings	$	3,309	$	(861	)	$	2,448



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



	Three Months Ended March 31, 2019									Six Months Ended March 31, 2019
Statements of Operations	As Reported ASC 606			Adjustment			ASC 605			As Reported ASC 606		Adjustment			ASC 605
Revenues
Equipment and services	$	3,753		$	(55	)	$	3,698		$	7,506	$	(70	)	$	7,436
Licensing	1,229			(8		)	1,221			2,318		43			2,361
Investment and other income, net	28			(1		)	27			33		1			34
Income tax (expense) benefit	(143		)	10			(133		)	365		4			369
Net income	663			(54		)	609			1,731		(22		)	1,709

Adoption of the new accounting guidance had no impact to net cash provided (used) by operating, financing or investing activities on our condensed consolidated statement of cash flows for the six months ended March 31, 2019.

~~Leases:~~Financial Assets: In ~~February~~January 2016, the FASB issued new accounting guidance ~~related to leases~~on classifying and measuring financial instruments, which requires that ~~outlines a comprehensive lease accounting model and supersedes~~all equity investments, other than equity-method investments, in unconsolidated entities generally be measured at fair value through earnings in the ~~current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms~~statement of ~~greater than 12 months. It also~~operations. Additionally, it changes ~~the definition of a lease and expands~~ the disclosure requirements ~~of lease arrangements. The Company will adopt~~for financial instruments. We adopted the new accounting guidance in the first quarter of fiscal ~~2020 and expects to use~~2019 using the modified retrospective ~~approach,~~transition method for investments in marketable securities, which have readily determinable fair values, with the cumulative effect of applying the new accounting guidance recognized as an adjustment to opening retained earnings. Upon adoption, we reclassified $50 million of unrealized gains, net of the associated tax effects, related to our investments in marketable securities from accumulated other comprehensive income to opening retained earnings. We have applied the prospective transition method for investments in non-marketable securities, which are investments in privately held companies that do not have readily determinable fair values and will recognize, through earnings, any unrealized gains that have accumulated in the ~~year of adoption. The Company~~period in which there is ~~in the process of determining the effects the adoption will have on its consolidated financial statements and whether to apply any of the optional practical expedients.~~an observable transaction, if any.

Hedge Instruments: In August 2017, the FASB issued new accounting guidance that expands and refines hedge accounting for both financial and non-financial risks, aligns the recognition and presentation of the effects of hedging instruments and hedged items in the financial statements, and includes targeted improvements related to the assessment of hedge effectiveness. The new accounting guidance also modifies disclosure requirements for hedging activities. ~~The Company plans to adopt~~We adopted the new accounting guidance in the first quarter of ~~fiscal~~ 2019 using the modified retrospective transition method and ~~does~~recorded a negligible adjustment to opening retained earnings. The new accounting guidance did not ~~expect the effects of the adoption to~~ have a material impact on ~~its~~our condensed consolidated financial statements.

~~Other:~~Statement of Cash Flows: In August 2016, the FASB issued new accounting guidance related to the classification of certain cash receipts and cash payments onin the statement of cash flows. ~~The Company will adopt~~We adopted the new accounting guidance in the first quarter of fiscal 2019 ~~and does~~using the retrospective transition method for each period presented, which did not ~~expect the effects of the adoption to~~ have a material impact on ~~its~~our condensed consolidated statements of cash flows.

In November 2016, the FASB issued new accounting guidance that requires companies to include restricted cash and cash equivalents as a component in total cash and cash equivalents on the statement of cash flows. As a result, the consolidated statement of cash flows no longer reflects transfers between cash and cash equivalents and restricted cash and cash equivalents. We adopted the new accounting guidance in the first quarter of fiscal 2019 using the retrospective transition method, which results in certain amounts in fiscal 2018 being adjusted to conform to the new accounting guidance. This includes restricted cash and cash equivalents held during fiscal 2018 related to funds deposited as collateral for outstanding letters of credit in connection with a then proposed acquisition. Restricted cash and cash equivalents related to the outstanding letters of credit totaled $2.0 billion at the end of the fourth quarter of fiscal 2017 and second quarter of fiscal 2018. There was no impact of this change on the activity presented on the condensed consolidated statement of cash flows for the six months ended March 25, 2018.

Income Taxes: In October 2016, the FASB issued new accounting guidance that changes the accounting for the income tax effects of intra-entity transfers of assets other than inventory. Under the new accounting guidance, the selling (transferring) entity is required to recognize a current tax expense or benefit upon transfer of the asset. Similarly, the purchasing (receiving) entity is required to recognize a deferred tax asset or deferred tax liability, as well as the related deferred tax benefit or expense, upon receipt of the asset. ~~The Company will adopt~~We adopted the new accounting guidance in the first quarter of fiscal 2019 using the modified retrospective transition method, with the cumulative effect of applying the new accounting



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

guidance recognized as an adjustment to opening retained earnings of $2.6 billion, primarily as the result of establishing a deferred tax asset on the basis difference of certain intellectual property distributed from one of our foreign subsidiaries to a subsidiary in the United States in fiscal 2018 (Note 3). The ongoing impact of this accounting guidance will be dependent on the facts and iscircumstances of any transactions within its scope.

Recent Accounting Pronouncements Not Yet Adopted.

Leases: In February 2016, the FASB issued new accounting guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease accounting guidance. The new accounting guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. We will adopt the new accounting guidance in the first quarter of fiscal 2020 and expect to use the modified retrospective approach and to elect certain practical expedients, with the cumulative effect of applying the new accounting guidance recognized as an adjustment to opening retained earnings as of the effective date. We are in the process of determining the effects the adoption will have on ~~its~~our consolidated financial statements.

Financial Assets: In June 2016, the FASB issued new accounting guidance that changes the accounting for recognizing impairments of financial assets. Under the new accounting guidance, credit losses for financial assets held at amortized cost will be estimated based on expected losses rather than the current incurred loss impairment model. The new accounting guidance also modifies the impairment model for available-for-sale debt securities. The new accounting guidance generally requires the modified retrospective transition method, with the cumulative effect of applying the new accounting guidance recognized as an adjustment to opening retained earnings in the year of adoption, except for certain financial assets where the prospective transition method is required, such as available-for-sale debt securities for which an other-than-temporary impairment has been recorded. We will adopt the new accounting guidance in the first quarter of fiscal 2021, and the impact of this new accounting guidance will largely depend on the composition and credit quality of our investment portfolio, as well as economic conditions at the time of adoption.

Accounting Policy Update.

Revenue Recognition: As a result of the adoption of ASC 606, we revised our revenue recognition policy beginning in fiscal 2019 as follows.

We derive revenues principally from sales of integrated circuit products and licensing of our intellectual property. We also generate revenues by performing software hosting, software development and other services and from other product sales. The timing of revenue recognition and the amount of revenue actually recognized in each case depends upon a variety of factors, including the specific terms of each arrangement and the nature of our performance obligations.

Revenues from sales of our products are recognized upon transfer of control to the customer, which is generally at the time of shipment. Revenues from providing services are typically recognized over time as our performance obligation is satisfied. Revenues from providing services were less than 5% of total revenues for all periods presented.

We grant licenses or otherwise provide 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. Licensees pay royalties based on their sales of products incorporating or using our licensed intellectual property and may also pay a fixed license fee in one or more installments. Sales-based royalties are generally based upon a percentage of the wholesale (i.e., licensee’s) selling price of complete licensed products, net of certain permissible deductions (including transportation, insurance, packing costs and other items). We broadly provide per unit royalty caps that apply to certain categories of complete wireless devices, namely smartphones, tablets and laptops, which in general, effectively provide for a maximum royalty amount per device. We estimate and recognize sales-based royalties on such licensed products in the period in which the associated sales occur, subject to certain constraints on our ability to estimate such royalties. Our estimates of sales-based royalties are based largely on an assessment of the volume of devices supplied into the market that incorporate or use our licensed intellectual property. We estimate sales-based royalties taking into consideration the mix of such sales on a licensee-by-licensee basis, as well as the licensees’ average wholesale prices of such products, and considers all information (historical, current and forecasted) that is reasonably available to us. Our licensees, however, do not report and pay royalties owed for sales in any given quarter until after the conclusion of that quarter, which is generally the following quarter. As a result of recognizing revenues in the period in which the licensees’ sales occur using estimates, adjustments to revenues are required in subsequent periods to reflect changes in estimates as new information becomes available, primarily resulting from actual amounts reported by our licensees.



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

License agreements that require payment of license fees contain a single performance obligation that represents ongoing access to a portfolio of intellectual property over the license term since such agreements provide the licensee the right to access a portfolio of intellectual property that exists at inception of the license agreement and to updates and new intellectual property that is added to the licensed portfolio during the term of the agreement that are highly interdependent or interrelated. Since we expect to expend efforts to develop and transfer updates to our licensed portfolio on an even basis, license fees are recognized as revenues on a straight-line basis over the estimated period of benefit of the license to the licensee.

We account for a contract with a customer/licensee when it is legally enforceable, the parties are committed to perform their respective obligations, the rights of the parties regarding the goods and/or services to be transferred are identified, payment terms are identified, the contract has commercial substance and collectability of substantially all of the consideration is probable.

From time to time, companies initiate various strategies to attempt to renegotiate, reduce and/or eliminate their need to pay royalties to us for the use of our intellectual property. Certain licensees have disputed, underreported, underpaid, not reported and/or not paid royalties owed to us under their license agreements with us or reported to us in a manner that is not in compliance with their contractual obligations, and such licensees may continue to do so in the future. In such cases, we estimate and recognize licensing revenues only when we have a contract, as defined in ASC 606, and to the extent it is probable that a significant reversal of cumulative revenues recognized will not occur. We analyze the risk of a significant revenue reversal considering both the likelihood and magnitude of the reversal and, if necessary, constrain the amount of estimated revenues recognized in order to mitigate this risk, which may result in recognizing revenues less than amounts contractually owed to us.

We measure revenues based on the amount of consideration we expect to receive in exchange for products or services. We record reductions to revenues for customer incentive arrangements, including volume-related and other pricing rebates and cost reimbursements for marketing and other activities involving certain of our products and technologies, in the period that the related revenues are earned. The charges for such arrangements are recorded as a reduction to accounts receivable, net or as other current liabilities based on whether we have the intent and contractual right of offset. Certain of these charges are considered variable consideration and are included in the transaction price primarily based on estimating the most likely amount expected to be provided to the customer/licensee.

Revenues recognized from sales of our products and sales-based royalties are generally included in accounts receivable, net (including unbilled receivables) based on our unconditional right to payment for satisfied or partially satisfied performance obligations.

We disaggregate our revenues by segment (Note 7) and type of product and services (as presented on our consolidated statement of operations), as we believe this best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors. Substantially all of QCT’s revenues consist of equipment revenues that are recognized at a point in time, and substantially all of QTL’s revenues represent licensing revenues that are recognized over time.

Revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods were $398 million and $394 million for the three and six months ended March 31, 2019, respectively, and primarily relate to certain customer incentives, QTL royalty revenues recognized related to devices sold in prior periods and revenues related to a development contract with one of our equity method investees.

Unearned revenues (which are considered contract liabilities) consist primarily of license fees for intellectual property with continuing performance obligations. In the six months ended March 31, 2019, we recognized revenues of $258 million that were recorded as unearned revenues at October 1, 2018.

Remaining performance obligations, substantially all of which are included in unearned revenues, represent the aggregate amount of the transaction price of certain customer contracts yet to be recognized as revenues as of the end of the reporting period and exclude revenues related to (a) contracts that have an original expected duration of one year or less and (b) sales-based royalties (i.e., future royalty revenues) pursuant to our license agreements. Our remaining performance obligations are primarily comprised of certain customer contracts for which QTL received license fees upfront. At March 31, 2019, we had $1.8 billion of remaining performance obligations, of which $235 million, $470 million, $423 million, $416 million and $193 million was expected to be recognized as revenues for the remainder of fiscal 2019 and each of the subsequent four years from fiscal 2020 through 2023, respectively, and $77 million thereafter.



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Marketable Securities and Non-Marketable Securities: Prior to the adoption of the new accounting guidance in the first quarter of fiscal 2019, investments in marketable equity securities were generally classified as available-for-sale equity investments, with net unrealized gains or losses recorded as a component of accumulated other comprehensive income, net of income taxes. Beginning in fiscal 2019, all gains and losses on investments in marketable equity securities, realized and unrealized, are recognized in investment and other income, net.

Prior to the adoption of the new accounting guidance in the first quarter of fiscal 2019, investments in non-marketable equity securities were recorded at cost less impairment, if any, with any losses resulting from an impairment recognized in investment and other income, net. Beginning in fiscal 2019, investments in non-marketable equity securities are recorded at cost, less impairments (if any), adjusted for observable price changes in orderly transactions for identical or similar securities (if any). All gains and losses on investments in non-marketable equity securities, realized and unrealized, are recognized in investment and other income, net.

Note 2. Composition of Certain Financial Statement Items

Inventories (in millions)
March 25,
2018 September 24,
2017
Raw materials $ 93
$ 103
Work-in-process 643
799
Finished goods 1,061
1,133
$ 1,797
$ 2,035



Accounts Receivable (in millions)
	March 31, 2019		September 30, 2018
Trade, net of allowances for doubtful accounts of $47 and $56, respectively	$	2,430	$	2,667
Unbilled receivables	1,196		201
Other	12		36
	$	3,638	$	2,904

Other Current Liabilities (in millions)
March 25,
2018 September 24,
2017
Customer incentives and other customer-related liabilities $ 2,882
$ 2,804
Accrual for EC fine (Note 6) 1,232
—
Income taxes payable 575
312
Accrual for TFTC fine (Note 6) 156
778
Other 864
862
$ 5,709
$ 4,756

~~Other Income, Costs~~The increase in unbilled receivables was primarily due to the adoption of ASC 606 (Note 1). Accounts receivable at March 31, 2019 and ~~Expenses.~~ ~~Other expenses in the three months ended March 25,~~September 30, 2018 ~~consisted of $310~~included approximately $960 million ~~in restructuring and restructuring-related charges~~ related to the ~~Company’s Cost Plan (Note 9). Other expenses~~short payment in the ~~six months ended March 25, 2018 also included a $1.2 billion charge related to the European Commission (EC) fine (Note 6).~~

Other expenses in the three months ended March 26, 2017 consisted of $53 million in foreign currency losses related to the fine imposed by the Korea Fair Trade Commission (KFTC), which was accrued in the firstsecond quarter of fiscal 2017 of royalties reported by and ~~$25~~deemed collectible from Apple’s contract manufacturers. This same amount was recorded in customer-related liabilities (in other current liabilities) for Apple, since we do not have the contractual right to offset these amounts. On April 16, 2019, we entered into settlement agreements with Apple and its contract manufacturers to dismiss all outstanding litigation between the parties, and as a result, these amounts were settled (Note 12).



Inventories (in millions)
	March 31, 2019		September 30, 2018
Raw materials	$	79	$	72
Work-in-process	820		715
Finished goods	826		906
	$	1,725	$	1,693

Equity Method and Non-marketable Equity Investments. The carrying values of our equity method and non-marketable equity investments are recorded in other noncurrent assets and were as follows (in millions):



	March 31, 2019		September 30, 2018
Equity method investments	$	354	$	402
Non-marketable equity investments	779		650
	$	1,133	$	1,052

In the second quarter of fiscal 2019, non-marketable debt and equity securities (non-cash consideration) with an aggregate fair value of $98 million ~~in restructuring and restructuring-related charges~~were received related to a development contract with one of our equity method investees. Since contract revenues were no longer constrained, such amount was recognized as revenues from a previously satisfied performance obligation in the ~~Company’s Strategic Realignment Plan. Other~~second quarter of fiscal 2019. In addition, in the second quarter of fiscal 2019, non-marketable equity securities (non-cash consideration) with a fair value of $53 million were received in connection with the sale of certain assets as part of the Cost Plan (Note 8).



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



Other Current Liabilities (in millions)
	March 31, 2019		September 30, 2018
Customer incentives and other customer-related liabilities	$	3,417	$	3,500
Accrual for EC fine (Note 6)	1,137		1,167
Income taxes payable	428		453
RF360 Holdings put and call option	1,145		1,137
Other	614		721
	$	6,741	$	6,978

Beginning on August 4, 2019, for a period of 60 days, we have the option to acquire (and the minority owner has the option to sell) the minority ownership interest in the RF360 Holdings joint venture for $1.15 billion, and we expect one of such options to be exercised during this period. At March 31, 2019 and September 30, 2018, the accreted value of such amount was included in other current liabilities.

Accumulated Other Comprehensive Income. Changes in the components of accumulated other comprehensive income, net of income taxes, in stockholders’ equity in the six months ended March 31, 2019 were as follows (in millions):



	Foreign Currency Translation Adjustment			Noncredit Other-than-Temporary Impairment Losses and Subsequent Changes in Fair Value for Certain Available-for-Sale Debt Securities		Net Unrealized Gain (Loss) on Other Available-for-Sale Securities			Net Unrealized (Loss) Gain on Derivative Instruments			Other Gains			Total Accumulated Other Comprehensive Income
Balance at September 30, 2018	$	11		$	23	$	243		$	(13	)	$	1		$	265
Other comprehensive (loss) income before reclassifications	(41		)	—		(6		)	16			(8		)	(39		)
Reclassifications from accumulated other comprehensive income	1			—		(51		)	(3		)	—			(53		)
Other comprehensive (loss) income	(40		)	—		(57		)	13			(8		)	(92		)
Balance at March 31, 2019	$	(29	)	$	23	$	186		$	—		$	(7	)	$	173

Reclassifications from accumulated other comprehensive income included adjustments of $51 million to the opening retained earnings balance as a result of the adoption of new accounting guidance in the first quarter of fiscal 2019 related to financial instruments and hedge instruments (Note 1).Reclassifications from accumulated other comprehensive income (excluding adjustments to opening retained earnings) related to available-for-sale securities were negligible in the three and six months ended March 31, 2019 and March 25, 2018 and were recorded in investment and other income, net.

Other Income, Costs and Expenses. Other income in the three months ended March 31, 2019 included a $43 million gain due to the partial recovery of a fine imposed in fiscal 2009 resulting from our appeal of the Korea Fair Trade Commission (KFTC) decision (Note 6), partially offset by $25 million in net restructuring and restructuring-related charges related to our Cost Plan (Note 8). Other expenses in the six months ended March ~~26, 2017 consisted~~31, 2019 included $204 million in net restructuring and restructuring-related charges related to our Cost Plan, partially offset by a $43 million gain due to the partial recovery of a ~~$921 million charge related~~fine we previously paid to the KFTC ~~fine, including~~and a $31 million gain related ~~foreign currency losses, and $33~~to a favorable legal settlement.

Other expenses in the three months ended March 25, 2018 consisted of $310 million in restructuring and restructuring-related charges related to ~~the Company’s Strategic Realignment~~our Cost Plan.

Investment and Other Income, Net (in millions)
Three Months Ended Six Months Ended
March 25,
2018 March 26,
2017 March 25,
2018 March 26,
2017
Interest and dividend income $ 154
$ 153
$ 280
$ 320
Net realized gains on marketable securities 3
67
13
206
Net realized gains on other investments 47
21
60
30
Impairment losses on marketable securities —
(3 ) (1 ) (125 )
Impairment losses on other investments (11 ) (2 ) (19 ) (23 )
Net gains on derivative investments 10
13
9
20
Equity in net losses of investees (17 ) (14 ) (38 ) (11 )
Net losses on foreign currency transactions (90 ) —
(93 ) —
$ 96
$ 235
$ 211
$ 417

~~Note 3. Income Taxes~~

~~On December 22, 2017, tax reform legislation known as the Tax Cuts and Jobs Act (the Tax Legislation) was enacted~~ Other expenses in the ~~United States (U.S.). The Tax Legislation significantly revises the U.S. corporate income tax by, among other things, lowering the corporate income tax rate to 21%, implementing~~six months ended March 25, 2018 also included a modified territorial tax system and imposing a one-time repatriation tax on deemed repatriated earnings and profits of U.S.-owned foreign subsidiaries (the Toll Charge). As a fiscal-year taxpayer, certain provisions of the Tax Legislation impacted the Company in fiscal 2018, including the change in the corporate income tax rate and the Toll Charge, while other provisions will be effective starting at the beginning of fiscal 2019, including the implementation of a modified territorial tax system. The U.S. federal income tax rate reduction was effective as of January 1, 2018. Accordingly, the Company’s federal statutory income tax rate for fiscal 2018 reflects a blended rate of approximately 25%.

Pursuant to the Securities and Exchange Commission Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), given the amount and complexity of the changes in tax law resulting from the Tax Legislation, the Company has not finalized the accounting for the income tax effects of the Tax Legislation. This includes the provisional amounts recorded$1.2 billion charge related to the Toll Charge, the remeasurement of deferred taxes and the change in the Company’s indefinite reinvestment assertion. Further, the Company is in the process of analyzing the effects of new taxes due on certain foreign income, such as GILTI (global intangible low-taxed income), BEAT (base-erosion anti-abuse tax) and FDII (foreign-derived intangible income), and limitations on interest expense deductions (if certain conditions apply), all of which are effective starting in fiscal 2019, as well as other provisions of the Tax Legislation. The Company has elected to account for GILTI as period costs if and when incurred. As a result of recognizing the impact of the Tax Legislation in income tax expense (benefit), certain tax effects, which were nominal, were stranded in accumulated other comprehensive income, and the Company will not reclassify such amounts to retained earnings. The impact of the Tax Legislation may differ from this estimate, possibly materially, during the one-year measurement period due to, among other things, further refinement of the Company’s calculations, changes in interpretations and assumptions the Company has made, guidance that may be issued and actions the Company may take as a result of the Tax Legislation.European Commission (EC) fine (Note 6).

The Company has preliminarily accounted for the effects of the Tax Legislation, which resulted in a charge of $5.87 billion to income tax expense recorded discretely in the first quarter of fiscal 2018, comprised of $5.3 billion related to the estimated Toll Charge and $562 million resulting from the estimated impact of remeasurement of U.S. deferred tax assets and liabilities that existed at the end of fiscal 2017 at a lower enacted corporate income tax rate. The Company recorded a $15 million net tax benefit discretely in the second quarter of fiscal 2018 related to refining estimates associated with the Toll Charge and impact of remeasurement of U.S. deferred tax assets and liabilities.

The Toll Charge is based on the Company’s post-1986 earnings and profits of U.S.-owned foreign subsidiaries through December 31, 2017 for which the Company had previously deferred U.S. income taxes. The total estimated Toll Charge of $5.3 billion was recorded discretely in the first six months of fiscal 2018. The Company has not yet finalized its calculation



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



Investment and Other Income, Net (in millions)
	Three Months Ended						Six Months Ended
	March 31, 2019			March 25, 2018			March 31, 2019			March 25, 2018
Interest and dividend income	$	80		$	154		$	155		$	280
Net gains (losses) on marketable securities	40			3			(33		)	13
Net gains on other investments	6			47			42			60
Impairment losses on marketable securities and other investments	(60		)	(11		)	(69		)	(20		)
Net (losses) gains on derivative investments	(1		)	10			(9		)	9
Equity in net losses of investees	(36		)	(17		)	(58		)	(38		)
Net (losses) gains on foreign currency transactions	(1		)	(90		)	5			(93		)
	$	28		$	96		$	33		$	211

Note 3. Income Taxes

The 2017 Tax Cuts and Jobs Act (the Tax Legislation) significantly revised the United States corporate income tax by, among other things, lowering the corporate income tax rate to 21% and imposing a one-time repatriation tax on deemed repatriated earnings and profits of U.S.-owned foreign subsidiaries (the Toll Charge). The Tax Legislation fundamentally changed the ~~total post-1986~~taxation of multinational entities, including a shift from a system of worldwide taxation with deferral to a hybrid territorial system, featuring a participation exemption regime with current taxation of certain foreign income, a minimum tax on low-taxed foreign earnings and ~~profits~~new measures to deter base erosion and promote U.S. production. As a fiscal-year taxpayer, certain provisions of the Tax Legislation became effective starting at the beginning of fiscal 2019, including new taxes due on certain foreign income, such as GILTI (global intangible low-taxed income), BEAT (base-erosion and anti-abuse tax) and FDII (foreign-derived intangible income). In response to the Tax Legislation, we implemented certain tax restructuring in fiscal 2018 and 2019. As a result, without considering the effects of the agreements with Apple and its contract manufacturers signed in April 2019 (Note 12), substantially all of our income is in the U.S. and qualifies for preferential treatment as FDII, and the ~~respective~~impact of GILTI and BEAT are negligible. Accordingly, our estimated annual effective tax rate for fiscal 2019 reflects the effects of these components of the Tax Legislation. Our annual effective tax rate for fiscal 2018 reflected a blended federal statutory rate of approximately 25%.

As a result of the Tax Legislation, in fiscal 2019, several of our foreign ~~subsidiaries. Further,~~subsidiaries made tax elections to be treated as U.S. branches for federal income tax purposes (commonly referred to as “check-the-box” elections) effective beginning in fiscal 2018 and 2019. We believe that by treating these foreign subsidiaries as U.S. branches for federal income taxes, rather than controlled foreign corporations, we will significantly reduce the ~~Toll Charge is based~~risk of being subject to GILTI and BEAT taxes. As a result of making these check-the-box elections in ~~part on~~ the ~~amount~~first quarter of ~~those earnings held in cash and other specific assets. The Company remeasured its~~fiscal 2019, we recorded a tax benefit of $570 million due to establishing new U.S. net deferred tax assets resulting from the difference between the GAAP basis and the U.S. federal tax carryover basis of the existing assets and liabilities of those foreign subsidiaries, primarily related to customer incentive liabilities that ~~existed at~~have not been deducted for tax purposes. Additionally, during fiscal 2018, one of our foreign subsidiaries distributed certain intellectual property to a U.S. subsidiary resulting in a difference between the ~~end~~GAAP basis and the U.S. federal tax basis of the distributed intellectual property. Upon adoption of new accounting guidance in the first quarter of fiscal ~~2017 based on~~2019, we recorded a deferred tax asset of approximately $2.6 billion, primarily related to the ~~income tax rate at which they are expected~~distributed intellectual property, with an adjustment to ~~reverse, which primarily assumes the reduced~~opening retained earnings (Note 1).

Our second quarter of fiscal 2019 results reflected an estimated annual effective income tax rate of ~~21% applicable in~~approximately 6% benefit for fiscal 2019, ~~resulting in a reduction to noncurrent deferred~~which included the impact of the tax ~~assets~~benefit of ~~$540~~$570 million ~~in the first six months of fiscal 2018.~~

As of December 24, 2017, the Company no longer considers available cash balances that existed at the end of fiscal 2017 related to undistributed pre-fiscal 2018 earnings and profits of certain U.S.-owned foreign subsidiaries to be indefinitely reinvested and recorded a tax expense of $93 million related to foreign withholding taxes during the first six months of fiscal 2018, of which $86 million(which was recorded discretely in the first ~~quarter of fiscal 2018. The Company otherwise continues~~quarter) due to ~~consider other undistributed earnings of certain U.S.-owned foreign subsidiaries to be indefinitely reinvested based on its current plans for use and/or investment outside of the~~establishing new U.S., and therefore, no liability has been recorded for such taxes. However, as a result of the Tax Legislation, the Company is reassessing its intentions related to its indefinite reinvestment assertion. Should the Company decide to no longer indefinitely reinvest such earnings outside the U.S., the Company would have to adjust the income tax provision in the period such determination is made.

As a result of the Toll Charge imposed by the Tax Legislation, the Company expects to fully utilize all of its unused federal tax credits that existed at the end of fiscal 2017 of $1.1 billion, which resulted in a reduction to noncurrent net deferred tax assets from making certain check-the-box elections and excluded the effects of the agreements with Apple and its contract manufacturers signed in the first quarter of fiscal 2018, and the federal tax credits that are expected to be generated in fiscal 2018. The Company will elect to pay the Toll Charge, interest free, over a period of eight years, with payments beginning on January 15,April 2019. The ~~Company did not discount the amount of the Toll Charge. The cash amount the Company currently estimates will be paid for the Toll Charge, net of tax credit carryforwards and expected tax credits~~ estimated to be generated in fiscal 2018, is $3.2 billion. The estimated first installment of $251 million is due on January 15, 2019 and was included in other current liabilities. The remaining liability was included in noncurrent income taxes payable.

~~The Company estimates its~~ annual effective ~~income tax rate to be approximately 438% for fiscal 2018, as compared to the 18% effective income~~ tax rate for fiscal ~~2017, primarily as a result of the estimated charge of $5.95 billion recorded to income~~2019 also reflected benefits from our FDII deduction and research and development tax ~~expense in the first six months of~~credits. The annual effective tax rate for fiscal 2018 ~~related to~~was impacted by the combined effect of the Toll Charge, the remeasurement of deferred tax assets and liabilities and ~~the Company’s~~our decision to no longer indefinitely reinvest certain foreign earnings, all of which resulted from the Tax Legislation. The ~~estimated~~ annual effective tax rate for fiscal 2018 was also impacted by the termination fee paid to NXP Semiconductors N.V. (NXP), the EC fine, ~~(Note 6) recorded in~~settlement with the ~~first quarter~~Taiwan Fair Trade Commission (TFTC), allocation of ~~fiscal 2018, which is not deductible for tax purposes~~expenses to our U.S. operations and is attributable to a foreign jurisdiction. Tax benefits from foreign income taxed at rates lower than rates in the U.S. are expected to be approximately 31% in fiscal 2018, compared to 32% in fiscal 2017, primarily due to the lower U.S. federal statutory income tax rate enacted by the Tax Legislation, partially offset by lower estimated U.S. revenues primarily related to decreased royalty revenues from Apple’s contract manufacturers and the other licensee in dispute. The estimated annual effective tax rate for fiscal 2018 also reflects a blended U.S. federal statutory income tax rate of 25% as a result of the Tax Legislation and the increase in the Company’snew Singapore tax ~~rate due to the expiration of certain of its tax incentives in March 2017.~~ incentives.



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The ~~annual~~ effective tax rate of 18% for ~~fiscal 2017 reflected the KFTC and TFTC fines (Note 6), which were not deductible for tax purposes and were each attributable to the U.S. and foreign jurisdictions.~~

~~The effective tax rate of 1% benefit for~~ the second quarter of fiscal ~~2018~~2019 was ~~lower~~higher than the estimated annual effective tax rate of 6% benefit primarily due to the ~~estimated charge~~tax benefit of $5.96 billion recorded discretely to income tax expense in the first quarter of fiscal 2018 related to the effects of certain components of the Tax Legislation and the EC fine recorded in the first quarter of fiscal 2018, as well as the $15$570 million, ~~tax benefit~~which was recorded discretely in the ~~second quarter of fiscal 2018 related to refining estimates associated with the Tax Legislation.~~first quarter.

Unrecognized tax benefits were ~~$347~~$228 million and ~~$372~~$217 million at March ~~25, 2018~~31, 2019 and September ~~24, 2017,~~30, 2018, respectively. ~~The Company believes~~We believe that it is reasonably possible that the total amounts of unrecognized tax benefits at March ~~25, 2018~~31, 2019 may increase or decrease in the next 12 months.

The ~~Company is~~United States Treasury Department has issued proposed regulations on several provisions of the Tax Legislation, including foreign tax credits, FDII, GILTI, BEAT and interest expense deduction limitations, which are expected to be finalized in the next several months. When finalized, these proposed regulations may adversely affect our provision for income taxes, results of operations and/or cash flows.

We are subject to income taxes in the ~~U.S.~~United States and numerous foreign jurisdictions and isare currently under examination by various tax authorities worldwide, most notably in countries where ~~the Company earns~~we earn a routine return and tax authorities believe substantial value-add activities are performed. These examinations are at various stages with respect to assessments, claims, deficiencies and refunds, many of which are open for periods after fiscal 2000. ~~The Company~~We continually ~~assesses~~assess the likelihood and amount of potential adjustments and ~~adjusts~~adjust the income tax provision, income taxes payable and deferred taxes in the period in which the facts give rise to a revision become known. As of March ~~25, 2018, the Company believes~~31, 2019, we believe that adequate amounts have been reserved for based on facts known. However, the final determination of



~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

tax audits and any related legal proceedings could materially differ from amounts reflected in ~~the Company’s~~our income tax provision and the related accruals.

Note 4. ~~Stockholders’ Equity~~

~~Changes in stockholders’ equity in the six months ended March 25, 2018 were as follows (in millions):~~

Total Stockholders’ Equity
Balance at September 24, 2017 $ 30,746
Net loss (5,590 )
Other comprehensive income 161
Common stock issued under employee benefit plans and related tax benefits 343
Share-based compensation 499
Tax withholdings related to vesting of share-based payments (196 )
Dividends (1,719 )
Stock repurchases (425 )
Balance at March 25, 2018 $ 23,819

~~Accumulated Other Comprehensive Income.~~ ~~Changes in the components of accumulated other comprehensive income, net of income taxes, in stockholders’ equity in the six months ended March 25, 2018 were as follows (in millions):~~

Foreign Currency Translation Adjustment Noncredit Other-than-Temporary Impairment Losses and Subsequent Changes in Fair Value for Certain Available-for-Sale Debt Securities Net Unrealized Gain (Loss) on Other Available-for-Sale Securities Net Unrealized (Loss) Gain on Derivative Instruments Other Gains Total Accumulated Other Comprehensive Income
Balance at September 24, 2017 $ 147
$ 23
$ 218
$ (8 ) $ 4
$ 384
Other comprehensive income (loss) before reclassifications 173
—
(1 ) (6 ) —
166
Reclassifications from accumulated other comprehensive income —
1
(9 ) 3
—
(5 )
Other comprehensive income (loss) 173
1
(10 ) (3 ) —
161
Balance at March 25, 2018 $ 320
$ 24
$ 208
$ (11 ) $ 4
$ 545

Reclassifications from accumulated other comprehensive income related to available-for-sale securities were negligible in both the three and six months ended March 25, 2018 and $35 million and $48 million in the three and six months ended March 26, 2017, respectively, and were recorded in investment and other income, net (Note 2).Capital Stock

Stock Repurchase Program. On ~~March 9, 2015, the Company~~July 26, 2018, we announced a stock repurchase program authorizing itus to repurchase up to ~~$15~~$30 billion of ~~the Company’s~~our common stock. The stock repurchase program has no expiration date.

In September 2018, we entered into three accelerated share repurchase agreements (ASR Agreements) with three financial institutions under which we paid an aggregate of $16.0 billion upfront and received an initial delivery of 178.4 million shares of our common stock, which were retired. The final number of shares to be repurchased will be based on the volume-weighted average stock price of our common stock during the terms of the transactions, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreements and will also be retired upon delivery to us. The ASR Agreements are scheduled to terminate in early September 2019, but may terminate earlier in certain circumstances. At settlement, one or more of the financial institutions may be required to deliver additional shares of common stock to us, or under certain circumstances, we may be required to deliver shares of common stock or make a cash payment to one or more of the financial institutions, with the method of settlement at our election.

In the six months ended March 31, 2019 and March 25, 2018, ~~and March 26, 2017, the Company~~we repurchased and retired ~~6.8~~16.8 million and ~~11.5~~6.8 million shares for ~~$425 million~~$1.0 billion and ~~$727~~$425 million, respectively, before commissions. To reflect share repurchases in the consolidated balance sheet, we (i) reduce common stock for the par value of the shares, (ii) reduce paid-in capital for the amount in excess of par to zero during the quarter in which the shares are repurchased and (iii) record the residual amount to retained earnings, if any. At March ~~25, 2018, $1.2~~31, 2019, $7.8 billion remained authorized for repurchase under ~~the Company’s~~our stock repurchase program.

~~Dividends.~~ On March 8, 2018, the Company announced a 9% increase in its quarterly dividend per share of common stock from $0.57 to $0.62, which is effective for dividends payable after March 21, 2018. On April 17, 2018, the Company announced a cash dividend of $0.62 per share on the Company’s common stock, payable on June 20, 2018 to stockholders of record as of the close of business on May 30, 2018. In the six months ended March 25, 2018 and March 26, 2017, dividends charged to retained earnings were as follows (in millions, except per share data):



~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

2018 2017
Per Share Total Per Share Total
First quarter $ 0.57
$ 862
$ 0.53
$ 801
Second quarter 0.57
857
0.53
798
$ 1.14
$ 1,719
$ 1.06
$ 1,599

~~Employee Benefit Plans.~~ On March 23, 2018, the Company’s stockholders approved an amendment to the Amended and Restated QUALCOMM Incorporated 2001 Employee Stock Purchase Plan to increase the share reserve by 30,000,000 shares to approximately 101,709,000.

Note 5. Debt

Revolving Credit ~~Facilities.~~Facility. ~~The Company has~~We have an Amended and Restated Revolving Credit Facility ~~(2016 Amended and Restated Revolving~~(Revolving Credit Facility) that provides for unsecured revolving facility loans, swing line loans and letters of credit in an aggregate amount of up to $5.0 billion, of which $530 million and $4.47 billion will expire in February 2020 and November 2021, respectively. Proceeds from the ~~2016 Amended and Restated~~ Revolving Credit Facility, if drawn, are expected to be used for general corporate purposes. ~~At March 25, 2018 and September 24, 2017, the Company had not borrowed any funds~~Loans under the ~~2016 Amended and Restated Revolving Credit Facility.~~

In March 2018, the Company entered into a credit agreement, which was amended on April 20, 2018 in connection with Amendment No. 2 to the NXP purchase agreement (Amendment No. 2) (Note 8), that provides for senior unsecured delayed-draw revolving facility loans in an aggregate amount of $3.0 billion (as amended, the 2018 Revolving Credit Facility). Proceeds from the 2018 Revolving Credit Facility, if drawn, will be used in part to finance the proposed acquisition of NXP (Note 8) and for general corporate purposes. Commitments under the 2018 Revolving Credit Facility will expire on the first to occur of (i) the termination of Qualcomm River Holdings’s obligation to consummate the proposed acquisition of NXP, (ii) if the closing date under the 2018 Revolving Credit Facility has not occurred, the date that is five business days following July 25, 2018 and (iii) the termination of the commitments in accordance with the provisions of the 2018 Revolving Credit Facility providing for voluntary and mandatory commitment reductions. Loans under the 2018 Revolving Credit Facility will mature on December 31, 2018 and will bear interest, at ~~the~~our option, ~~of the Company,~~ at either the reserve-adjusted Eurocurrency Rate (determined in accordance with the ~~2018~~ Revolving Credit Facility) or the Base Rate (determined in accordance with the ~~2018~~ Revolving Credit Facility), in each case plus an applicable margin based on ~~the Company’s~~our long-term unsecured senior, non-credit enhanced debt ratings. The ~~initial~~ margins over the reserve-adjusted Eurocurrency Rate and the Base Rate ~~based on Qualcomm’s debt ratings as of March 25, 2018~~ will be ~~0.75%~~0.805% and 0.00% per annum, respectively. The ~~2018~~ Revolving Credit Facility has a ~~ticking~~facility fee, which ~~is based on Qualcomm’s debt ratings and initially~~ accrues at a rate of ~~0.05%~~0.07% per ~~annum commencing on March 6, 2018.~~annum. At March ~~25,~~31, 2019 and September 30, 2018, ~~the Company~~we had not borrowed any funds under the ~~2018~~ Revolving Credit Facility.

Commercial Paper Program. ~~The Company has~~We have an unsecured commercial paper program, which provides for the issuance of up to $5.0 billion of commercial paper. Net proceeds from this program are used for general corporate purposes. Maturities of commercial paper can range from 1 day to up to 397 days. At March ~~25, 2018~~31, 2019 and September ~~24, 2017, the Company~~30, 2018, we had ~~$2.2~~$1.0 billion ~~and $999 million, respectively,~~ of outstanding commercial paper included in short-term debt with a weighted-average interest rate of ~~1.98%~~2.74% and ~~1.19%~~2.35%, respectively, which included fees paid to the commercial paper dealers, and weighted-average remaining days to maturity of ~~44 days and 45 days, respectively. The carrying value of the outstanding commercial paper approximated its estimated fair value at March 25, 2018 and September 24, 2017.~~

~~Term Loan Facilities.~~ The Company is party to a credit agreement, which was amended on April 20, 2018, in connection with Amendment No. 2, that provides for senior unsecured delayed-draw term facility loans in an aggregate amount of $4.0 billion (as amended, the 2016 Term Loan Facility). Proceeds from the 2016 Term Loan Facility, if drawn, will be used to finance the proposed acquisition of NXP. Commitments under the 2016 Term Loan Facility will expire on the first to occur of (i) the consummation of the proposed acquisition of NXP without using loans under the 2016 Term Loan Facility, (ii) the termination of Qualcomm River Holdings’s obligation to consummate the proposed acquisition of NXP and (iii) the date that is five business days following July 25, 2018. At March 25, 2018 and September 24, 2017, the Company had not borrowed any funds under the 2016 Term Loan Facility.

In March 2018, the Company entered into a credit agreement, which was amended on April 20, 2018 in connection with Amendment No. 2, that provides for senior unsecured delayed-draw term facility loans in an aggregate amount of $3.0 billion (as amended, the 2018 Term Loan Facility). Proceeds from the 2018 Term Loan Facility, if drawn, will be used in part to



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

~~finance the proposed acquisition of NXP~~29 days and ~~for general corporate purposes. Commitments under the 2018 Term Loan Facility will expire on the first to occur of (i) the consummation~~16 days, respectively. The carrying value of the proposed acquisition of NXP without using loans under the 2018 Term Loan Facility, (ii) the termination of Qualcomm River Holdings’s obligation to consummate the proposed acquisition of NXP, (iii) the date that is five business days following July 25, 2018outstanding commercial paper approximated its estimated fair value at March 31, 2019 and (iv) the termination of the commitments in accordance with the provisions of the 2018 Term Loan Facility providing for voluntary and mandatory commitment reductions. Loans under the 2018 Term Loan Facility will mature on December 31, 2018 and will bear interest, at the option of the Company, at either the reserve-adjusted Eurocurrency Rate (determined in accordance with the 2018 Term Loan Facility) or the Base Rate (determined in accordance with the 2018 Term Loan Facility), in each case plus an applicable margin based on the Company’s long-term unsecured senior, non-credit enhanced debt ratings. The initial margins over the reserve-adjusted Eurocurrency Rate and the Base Rate based on Qualcomm’s debt ratings as of March 25, 2018 will be 0.875% and 0.00% per annum, respectively. The 2018 Term Loan Facility has a ticking fee, which is based on Qualcomm’s debt ratings and initially accrues at a rate of 0.05% per annum commencing on March 6,September 30, 2018. ~~At March 25, 2018, the Company had not borrowed any funds under the 2018 Term Loan Facility.~~

Long-term Debt. The following table provides a summary of ~~the Company’s~~our long-term debt (in millions, except percentages):


		March 25, 2018				September 24, 2017					March 31, 2019				September 30, 2018
		Amount			Effective Rate	Amount			Effective Rate		Amount			Effective Rate	Amount			Effective Rate
May 2015 Notes	May 2015 Notes									May 2015 Notes
	Floating-rate three-month LIBOR plus 0.27% notes due May 18, 2018	$	250		2.21%	$	250		1.65%
	Floating-rate three-month LIBOR plus 0.55% notes due May 20, 2020	250			2.49%	250			1.92%
	Fixed-rate 1.40% notes due May 18, 2018	1,250			2.94%	1,250			1.93%	Floating-rate three-month LIBOR plus 0.55% notes due May 20, 2020	$	250		3.25%	$	250		2.93%
	Fixed-rate 2.25% notes due May 20, 2020	1,750			2.79%	1,750			2.20%	Fixed-rate 2.25% notes due May 20, 2020	1,750			3.09%	1,750			3.13%
	Fixed-rate 3.00% notes due May 20, 2022	2,000			3.34%	2,000			2.65%	Fixed-rate 3.00% notes due May 20, 2022	2,000			3.51%	2,000			3.73%
	Fixed-rate 3.45% notes due May 20, 2025	2,000			3.46%	2,000			3.46%	Fixed-rate 3.45% notes due May 20, 2025	2,000			3.46%	2,000			3.46%
	Fixed-rate 4.65% notes due May 20, 2035	1,000			4.74%	1,000			4.74%	Fixed-rate 4.65% notes due May 20, 2035	1,000			4.73%	1,000			4.73%
	Fixed-rate 4.80% notes due May 20, 2045	1,500			4.71%	1,500			4.71%	Fixed-rate 4.80% notes due May 20, 2045	1,500			4.72%	1,500			4.72%
May 2017 Notes	May 2017 Notes									May 2017 Notes
	Floating-rate three-month LIBOR plus 0.36% notes due May 20, 2019	750			2.37%	750			1.80%	Floating-rate three-month LIBOR plus 0.73% notes due January 30, 2023	500			3.55%	500			3.14%
	Floating-rate three-month LIBOR plus 0.45% notes due May 20, 2020	500			2.43%	500			1.86%	Fixed-rate 2.60% notes due January 30, 2023	1,500			2.70%	1,500			2.70%
	Floating-rate three-month LIBOR plus 0.73% notes due January 30, 2023	500			2.56%	500			2.11%	Fixed-rate 2.90% notes due May 20, 2024	1,500			3.01%	1,500			3.01%
	Fixed-rate 1.85% notes due May 20, 2019	1,250			2.00%	1,250			2.00%	Fixed-rate 3.25% notes due May 20, 2027	2,000			3.46%	2,000			3.46%
	Fixed-rate 2.10% notes due May 20, 2020	1,500			2.19%	1,500			2.19%	Fixed-rate 4.30% notes due May 20, 2047	1,500			4.47%	1,500			4.47%
	Fixed-rate 2.60% notes due January 30, 2023	1,500			2.70%	1,500			2.70%	Total principal	15,500				15,500
	Fixed-rate 2.90% notes due May 20, 2024	1,500			3.01%	1,500			3.01%	Unamortized discount, including debt issuance costs	(79		)		(85		)
	Fixed-rate 3.25% notes due May 20, 2027	2,000			3.46%	2,000			3.46%	Hedge accounting fair value adjustments	(16		)		(50		)
	Fixed-rate 4.30% notes due May 20, 2047	1,500			4.47%	1,500			4.47%	Total long-term debt	$	15,405			$	15,365
Total principal		21,000				21,000
	Unamortized discount, including debt issuance costs	(97		)		(106		)
	Hedge accounting fair value adjustments	(43		)		—
	Total	$	20,860			$	20,894
Reported as:	Reported as:									Reported as:
	Short-term debt	$	1,499			$	1,496			Short-term debt	$	—			$	—
	Long-term debt	19,361				19,398				Long-term debt	15,405				15,365
	Total	$	20,860			$	20,894			Total	$	15,405			$	15,365

~~The Company’s~~At March 31, 2019 ~~floating-rate notes, 2020 floating-rate notes, 2019 fixed-rate notes~~ and ~~2020 fixed-rate notes issued in May 2017 for an~~September 30, 2018, the aggregate ~~principal amount of $4.0 billion are subject to a special mandatory redemption at a price equal to 101%~~fair value of the ~~aggregate principal amount, plus accrued~~notes, based on Level 2 inputs, was approximately $15.4 billion and ~~unpaid interest to, but excluding, the date of such mandatory~~$15.1 billion, respectively.



~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

~~redemption. The redemption is required on the first to occur of (i) the termination of the NXP purchase agreement or (ii) if the NXP transaction has not closed, by June 1, 2018. The Company~~We may redeem the outstanding fixed-rate notes at any time in whole, or from time to time in part, at specified make-whole premiums as defined in the applicable form of note. ~~The Company~~We may not redeem the ~~other~~outstanding floating-rate notes prior to maturity. The obligations under the notes rank equally in right of payment with all of ~~the Company’s~~our other senior unsecured indebtedness and will effectively rank junior to all liabilities of ~~the Company’s~~our subsidiaries.

At March ~~25, 2018 and September 24, 2017, the aggregate fair value of the notes, based on Level 2 inputs, was approximately $20.5 billion and $21.5 billion, respectively.~~

~~In connection with issuance of the May 2015 Notes, the Company entered into~~31, 2019, we had outstanding interest rate swaps with an aggregate notional amount of ~~$3.0~~$1.8 billion related to the May 2015 Notes, which effectively converted ~~all of the fixed-rate notes due in 2018 and~~ approximately 43% and 50% of the fixed-rate notes due in 2020 and 2022, respectively, into floating-rate notes. The net gains and losses on the interest rate swaps, as well as the offsetting gains or losses on the related fixed-rate notes attributable to the hedged risks, are recorded ~~in earnings in~~as interest expense in the current period. ~~The Company~~We did not enter into ~~similar~~ interest rate swaps in connection with issuance of the May 2017 Notes.

The effective interest rates for the notes include the interest on the notes, amortization of the discount, which includes debt issuance costs, and if applicable, adjustments related to hedging. Interest is payable in arrears quarterly for the floating-rate notes and semi-annually for the fixed-rate notes. Cash interest paid related to ~~the Company’s~~our commercial paper program and long-term debt, net of cash received from the related interest rate swaps, was ~~$317~~$281 million and ~~$150~~$317 million in the six months ended March ~~25, 2018~~31, 2019 and March ~~26, 2017,~~25, 2018, respectively.

Debt Covenants. The ~~2016 Amended and Restated~~ Revolving Credit Facility ~~the 2016 Term Loan Facility, the 2018 Revolving Credit Facility and the 2018 Term Loan Facility require~~requires that ~~the Company~~we comply with certain covenants, including one financial covenant to maintain a ratio of consolidated earnings before interest, taxes, depreciation and amortization to consolidated interest expense, as defined in each of the respective agreements, of not less than three to one at the end of each fiscal quarter. ~~The Company is~~We are not subject to any financial covenants under the notes nor any covenants that would prohibit ~~the Company~~us from incurring



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

additional indebtedness ranking equal to the notes, paying dividends, issuing securities or repurchasing securities issued by itus or ~~its~~our subsidiaries. At March ~~25, 2018~~31, 2019 and September ~~24, 2017, the Company was~~30, 2018, we were in compliance with the applicable covenants under ~~each facility outstanding at such time.~~the Revolving Credit Facility.

Note 6. Commitments and Contingencies

Legal and Regulatory Proceedings.

~~ParkerVision, Inc. v. QUALCOMM Incorporated:~~ On May 1, 2014, ParkerVision filed a complaint against the Company in the United States District Court for the Middle District of Florida alleging that certain of the Company’s products infringe certain ParkerVision patents. On August 21, 2014, ParkerVision amended the complaint, now captioned ParkerVision, Inc. v. QUALCOMM Incorporated, Qualcomm Atheros, Inc., HTC Corporation, HTC America, Inc., Samsung Electronics Co., LTD., Samsung Electronics America, Inc. and Samsung Telecommunications America, LLC, broadening the allegations. ParkerVision alleged that the Company infringes 11 ParkerVision patents and seeks damages and injunctive and other relief. On December 3, 2015, ParkerVision dismissed six patents from the lawsuit and granted the Company and all other defendants a covenant not to assert those patents against any existing products. On February 2, 2016, after agreement among the parties, the District Court stayed the remainder of the case pending the resolution of the complaint filed by ParkerVision against the Company and other parties with the United States International Trade Commission (ITC) described below. Subsequently, ParkerVision announced that it had reached a settlement with Samsung which dismissed the Samsung entities from the District Court case. The Company had previously filed Inter-Partes Review petitions with the United States Patent and Trademark Office (USPTO) to invalidate all asserted claims of several of the remaining patents. On March 7, 2017, the USPTO decided in the Company’s favor with respect to all asserted claims of one such patent. After the ITC action described below was closed, and upon agreement among the parties, on May 24, 2017, the District Court further stayed the District Court case pending ParkerVision’s appeal of the USPTO’s invalidation decisions.

On December 14, 2015, ParkerVision filed another complaint against the Company in the United States District Court for the Middle District of Florida alleging patent infringement. Apple Inc., Samsung Electronics Co., LTD., Samsung Electronics America, Inc., Samsung Telecommunications America, LLC, Samsung Semiconductor, Inc., LG Electronics, Inc., LG Electronics U.S.A., Inc. and LG Electronics MobileComm U.S.A., Inc. are also named defendants. The complaint asserts that certain of the Company’s products infringe four additional ParkerVision patents and seeks damages and other relief. On December 15, 2015, ParkerVision filed a complaint with the ITC pursuant to Section 337 of the Tariff Act of 1930 against the same parties asserting the same four patents. The complaint seeks an exclusion order barring the importation of products that



~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

use either of two Company transceivers or one Samsung transceiver and a cease and desist order preventing the Company and the other defendants from carrying out commercial activities within the United States related to such products. On January 13, 2016, the Company served its answer to the District Court complaint. On January 15, 2016, the ITC instituted an investigation. On February 12, 2016, the District Court case was stayed pending completion of the ITC investigation. Subsequently, ParkerVision announced that it had reached a settlement with Samsung which dismissed the Samsung entities from the ITC investigation and related District Court case. On February 2, 2017, the ITC granted ParkerVision’s motion to drop all but one patent and one accused product from the ITC investigation. On March 12, 2017, one day before the ITC hearing was scheduled to begin, ParkerVision moved to withdraw its ITC complaint in its entirety. The Company and the other defendants did not oppose the withdrawal of the complaint. On April 28, 2017, the ITC formally closed the investigation. On May 4, 2017, ParkerVision filed a motion to reopen the related District Court Case, and on May 26, 2017, the District Court granted the motion. On March 16, 2018, the parties agreed to dismiss three of ParkerVision’s patents from the case without prejudice, leaving only one patent at issue. No trial date has been set.

Apple Inc. (Apple) v. QUALCOMM Incorporated: On January 20, 2017, Apple filed a complaint against ~~the Company~~us in the United States District Court for the Southern District of California seeking declarations with respect to several of ~~the Company’s~~our patents and alleging that ~~the Company~~we breached certain agreements and violated federal antitrust and California state unfair competition laws. In its initial complaint, Apple sought declaratory judgments of non-infringement by Apple of nine of ~~the Company’s~~our patents, or in the alternative, a declaration of royalties Apple must pay for the patents. Apple further sought a declaration that ~~the Company’s~~our sale of baseband processor chipsets exhausts ~~the Company’s~~our patent rights for patents embodied in those chipsets. Separately, Apple sought to enjoin ~~the Company~~us from seeking excessive royalties from Apple and to disgorge royalties paid by Apple’s contract manufacturers that the court finds were not fair, reasonable and non-discriminatory (FRAND). Apple also claimed that ~~the Company’s~~our refusal to make certain payments to Apple under a Business Cooperation and Patent Agreement (Cooperation Agreement) ~~constitutes~~constituted a breach of contract in violation of California law and sought damages in the amount of the unpaid payments, alleged to be approximately $1 billion. In addition, Apple claimed that ~~the Company has~~we have refused to deal with competitors in contravention of ~~the Company’s~~our agreements with applicable standard setting organizations, ~~has~~have used ~~its~~our market position to impose contractual obligations on Apple that prevented Apple from challenging ~~the Company’s~~our licensing practices, ~~has~~have tied the purchase of ~~the Company’s~~our CDMA-enabled and “premium” LTE-enabled chipsets to licensing certain of ~~the Company’s~~our patents and ~~has~~have required Apple to purchase baseband processor chipsets exclusively from ~~the Company~~us as a condition of ~~the Company’s~~our payment to Apple of certain rebates, in violation of Section 2 of the Sherman Act and the California Unfair Competition Law. Apple sought injunctive relief with respect to these claims and a judgment awarding its expenses, costs and attorneys’ fees.

On April 10, 2017, ~~the Company~~we filed ~~its~~our Answer and Counterclaims (amended on May 24, 2017) in response to Apple’s complaint denying Apple’s claims and asserting claims against Apple. The counterclaims against Apple include tortious interference with ~~the Company’s~~our long-standing Subscriber Unit License Agreements (SULAs) with third-party contract manufacturers of Apple devices, causing those contract manufacturers to withhold certain royalty payments owed to ~~the Company~~us and violate their audit obligations; breach of contract and the implied covenant of good faith and fair dealing relating to the ~~parties’~~ Cooperation Agreement; unjust enrichment and declaratory relief relating to the Cooperation Agreement; breach of contract based on Apple’s failure to pay amounts owed to ~~the Company~~us under a Statement of Work relating to a high-speed feature of ~~the Company’s~~our baseband processor chipsets; breach of the parties’ software agreement; and violation of California Unfair Competition Law based on Apple’s threatening ~~the Company~~us to prevent itus from promoting the superior performance of ~~the Company’s~~our own baseband processor chipsets. ~~The Company~~We also ~~seeks~~seek declaratory judgments that ~~the Company has~~we have satisfied ~~its~~our FRAND commitments with respect to Apple, and that ~~the Company’s~~our SULAs with the contract manufacturers do not violate either competition law or ~~the Company’s~~our FRAND commitments. On June 19, 2017, Apple filed a Partial Motion to Dismiss ~~the Company’s~~our counterclaim for violation of the California Unfair Competition Law. The court granted that motion on November 8, 2017. On June 20, 2017, Apple filed an Answer and Affirmative Defenses to the rest of ~~the Company’s~~our counterclaims, and also filed an Amended Complaint reiterating all of the original claims and adding claims for declaratory judgments of invalidity of the nine patents that are subject to declaratory judgment claims in the original complaint, adding new declaratory judgment claims for non-infringement, invalidity and a declaration of royalties for nine more patents. Apple also added claims for declaratory judgments that certain of ~~the Company’s~~our agreements are unenforceable. On July 21, 2017, ~~the Company~~we filed an Answer to Apple’s Amended Complaint as well as a motion to dismiss the new declaratory judgment claims for non-infringement, invalidity and a declaration of royalties for the nine additional patents. The court granted ~~the Company’s~~our motion on November 8, 2017. On July 18, 2017, Apple filed a motion to consolidate this action with QUALCOMM Incorporated v. Compal Electronics, Inc., et al., discussed below, and on September 13, 2017, the court granted that motion. Fact discovery is set to close in these cases on May 11, 2018. A final pretrial conference is scheduled for September 28, 2018. The trials have not been scheduled.



~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

On January 23, 2017, an Apple subsidiary in China filed two complaints against the Company in the Beijing Intellectual Property Court. On March 31, 2017, the court granted an application by Apple Inc. to join the actions as a plaintiff, and Apple amended the complaints. One of the complaints alleges a violation of China’s Anti-Monopoly Law (AML complaint); the other complaint requests a determination of the terms of a patent license between the Company and Apple (FRAND complaint). The AML complaint alleges that (i) the Company has abused its dominant position in communication standard-essential patents licensing markets and certain global baseband chipset markets by charging and offering royalty terms that were excessively high; (ii) the Company refused to license certain implementers of standardized technologies, including Apple and baseband chipset manufacturers; (iii) the Company forced Apple to use only the Company’s products and services; and (iv) the Company bundled licenses to standard-essential patents with licenses to non-standard-essential patents and imposed other unreasonable or discriminatory trading terms on Apple in violation of the AML. The AML complaint seeks a decree that the Company cease the alleged abuse of dominance, as well as damages in the amount of 1 billion Chinese Renminbi (approximately $158 million based on the exchange rate on March 25, 2018). The FRAND complaint makes allegations similar to the AML complaint and further alleges that the Company refused to offer licensing terms for the Company’s cellular standard-essential patents consistent with the Company’s FRAND licensing commitments and failed to provide to Apple certain information about the Company’s patents. The FRAND complaint seeks (i) a declaration that the license terms offered to Apple by the Company for its mobile communication standard essential patents are not compliant with FRAND; (ii) an order that the Company cease its actions that allegedly violate the Company’s FRAND obligations, including pricing on unfair, unreasonable and excessive terms, refusing to deal, imposing unreasonable trade conditions and failing to provide information on the Company’s patents; and (iii) a determination of FRAND-compliant license terms for the Company’s Chinese standard-essential patents. Apple also seeks its expenses in each of the cases. On August 3, 2017, the Company received three additional complaints filed by an Apple subsidiary and Apple Inc. against the Company in the Beijing Intellectual Property Court. The complaints seek declaratory judgments of non-infringement of three Qualcomm patents. The Company has filed jurisdictional and other objections to the complaints.

On February 16, 2017, Apple and one of its Japanese subsidiaries filed four complaints against the Company in the Tokyo District Court. In three of the complaints, Apple seeks declaratory judgment of non-infringement by Apple of three of the Company’s patents. Apple further seeks a declaration that the Company’s patent rights with respect to those three patents are exhausted by the Company’s SULAs with the contract manufacturers of Apple’s devices as well as the Company’s sale of baseband chipsets. Apple also seeks an award of fees. On January 30, 2018, the court dismissed one of the complaints, finding that Apple lacked standing based on the facts it alleged in that complaint. The court has yet to rule on whether Apple has standing in the remaining complaints. On May ~~15,~~17, 2017, the Company learned of the fourth complaint. In that complaint, Apple and one of its Japanese subsidiaries seek damages of 100 million Japanese Yen (approximately $1 million based on the exchange rate on March 25, 2018) from the Company, based on allegations that the Company violated the Japanese Antimonopoly Act and the Japanese Civil Code. In particular, the fourth complaint alleges that (i) the Company holds a monopoly position in the market for baseband processor chipsets that implement certain cellular standards; (ii) the Company collects double royalties through its license agreements and the sale of chipsets; (iii) the Company refused to grant Apple a license on FRAND terms and forced Apple to execute a rebate agreement under unreasonable conditions; (iv) the Company refused to grant Apple a direct license; and (v) the Company demanded a license fee based on the market value of the total device. The Company has filed jurisdictional and other objections to all four of the complaints.

On March 2, 2017, the Company learned that Apple and certain of its European subsidiaries issued a Claim Form against the Company in the UK High Court of Justice, Chancery Division, Patents Court on January 23, 2017. Apple subsequently filed an Amended Claim Form and Particulars of Claim. Both the Amended Claim Form and the Particulars of Claim allege several European competition law claims, including refusal to license competing chipmakers, failure to offer Apple a direct license to the Company’s standard-essential patents on FRAND terms, demanding excessive royalties for the Company’s standard-essential patents, and demanding excessive license fees for the use of the Company’s standard-essential patents in connection with chipsets purchased from the Company. Apple also seeks declarations that the Company is obliged to offer a direct patent license to Apple in respect of standard-essential patents actually practiced on fair, reasonable and non-discriminatory terms and that using the Company’s chipsets does not infringe any of the Company’s patents because the Company exhausted its patent rights. Finally, Apple seeks declarations that five of the Company’s European (UK) patents are invalid and not essential, and an order that each of those patents be revoked.

~~On April 18, 2017, Apple and one of its Taiwanese subsidiaries~~we filed a complaint against the Company in the Taiwan Intellectual Property Court alleging that the Company has abused a dominant market position in licensing wireless standard-essential patents and selling baseband chipsets, including improper pricing, refusal to deal, exclusive dealing, tying, imposing unreasonable trade terms and discriminatory treatment. The complaint seeks rulings that the Company not use the sales price



~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

of the terminal device as the royalty base for standard-essential patents; not leverage its cellular standard-essential patents to obtain licenses of its non-standard-essential patents or demand cross-licenses without proper compensation; not refuse, reduce, delay or take any other action to limit the supply of its baseband chipsets to non-licensees; that the Company must license its standard-essential patents on FRAND terms; and that the Company shall not, based on standard-essential patents, seek injunctions. The complaint also seeks damages of 10 million Taiwan Dollars (less than $1 million based on the exchange rate on March 25, 2018), among other relief.

On November 30, 2017, Apple and certain of its Chinese subsidiaries filed three patent infringement complaints against the Company in the Beijing Intellectual Property Court. Apple seeks damages and costs. The Company has filed jurisdictional objections to the complaints.

~~The Company believes Apple’s claims in the above matters are without merit.~~

(captioned QUALCOMM Incorporated v. Compal Electronics, Inc. et al.~~: On May 17, 2017, the Company filed a complaint~~) in the United States District Court for the Southern District of California against certain of Apple’s contract manufacturers, Compal Electronics, Inc. (Compal), FIH Mobile, Ltd., Hon Hai Precision Industry Co., Ltd. (together with FIH Mobile, Ltd., Foxconn), Pegatron Corporation (Pegatron) and Wistron Corporation (Wistron), asserting claims for injunctive relief, specific performance, declaratory relief and damages stemming from the defendants’ breach of contracts by ceasing the payment of royalties for iPhones and other devices which they manufacture for Apple. On July 17, 2017, Compal, Foxconn, Pegatron and Wistron each filed third-party complaints for contractual indemnity against Apple seeking to join Apple as a party to the action. On July 18, 2017, Apple filed an answer to these third-party complaints acknowledging its indemnity agreements and consenting to be joined. On ~~July 18, 2017,~~that same day, the defendants filed an Answer and Counterclaims to the complaint, asserting defenses and counterclaims similar to allegations previously made by Apple in the Apple Inc. v. QUALCOMM Incorporated



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

case ~~in the Southern District of California~~ discussed above. In addition, the defendants asserted certain new claims, including claims under Section 1 of the Sherman Act and California’s Cartwright Act. The defendants seek damages, declaratory relief, injunctive relief, restitution of certain royalties and other relief. OnAlso, on July 18, 2017, Apple filed a motion to consolidate this action with the Apple Inc. v. QUALCOMM Incorporated ~~case in the Southern District of California.~~case. On September 13, 2017, the court granted Apple’s consolidation motion. Fact discovery is ~~set to close~~closed in these ~~cases~~cases.

On August 31, 2018, Apple filed a motion for judgment on ~~May 11, 2018.~~ the pleadings that the court lacks subject matter jurisdiction over our counterclaim that our license offers to Apple have not violated our obligation to license standard-essential patents on FRAND terms. On March 20, 2019, the court denied Apple’s motion. Also, on August 31, 2018, Apple filed motions for partial summary judgment on the following issues: that part of our claim for Apple’s alleged tortious interference with its contract manufacturers’ agreements is barred by the statute of limitations; that our claim for damages under the Cooperation Agreement is unfounded; and that certain of our patent rights are exhausted by the sale of our baseband processor chipsets. On November 8, 2018, the court ruled on Apple’s motion regarding its alleged tortious interference, holding that Apple is not liable for tortious interference that occurred prior to January 20, 2015, but may be held liable for subsequent tortious interference. On December 18, 2018, the court denied Apple’s motion regarding patent exhaustion as moot in light of the dismissal of the claims at issue discussed below. On March 14, 2019, the court granted Apple’s motion for summary judgment against our claims for damages under the Cooperation Agreement. Amounts unpaid (and previously accrued) by us under the Cooperation Agreement were recorded in customer-related liabilities (in other current liabilities) at March 31, 2019 and September 30, 2018 (Note 2).

On September 14, 2018, we filed a motion to dismiss Apple’s declaratory judgment claims relating to the nine specific patents identified in its original complaint on the basis that we granted Apple and its contract manufacturers a covenant-not-to-sue on those patents. The judge granted our motion on November 20, 2018, which disposed of a total of 56 claims pled by Apple and its contract manufacturers, including non-infringement, validity, damages and patent exhaustion for each of the nine patents.

A ~~final pretrial conference is scheduled for September 28, 2018. No~~jury trial ~~date has been set.~~commenced on April 15, 2019, and on April 16, 2019, we entered into settlement agreements with Apple and its contract manufacturers to dismiss all outstanding litigation between the parties (Note 12).

~~The Company believes Compal’s, Foxconn’s, Pegatron’s and Wistron’s claims~~On January 23, 2017, an Apple subsidiary in China filed two complaints against us in the ~~above matter~~Beijing Intellectual Property Court. On March 31, 2017, the court granted an application by Apple Inc. to join the actions as a plaintiff, and Apple amended the complaints. One of the complaints alleges a violation of China’s Anti-Monopoly Law (AML complaint); the other complaint requests a determination of the terms of a patent license between us and Apple (FRAND complaint). The AML complaint alleges that (i) we have abused our dominant position in communication standard-essential patents licensing markets and certain global baseband processor chipset markets by charging and offering royalty terms that were excessively high; (ii) we refused to license certain implementers of standardized technologies, including Apple and baseband processor chipset manufacturers; (iii) we forced Apple to use only our products and services; and (iv) we bundled licenses to standard-essential patents with licenses to non-standard-essential patents and imposed other unreasonable or discriminatory trading terms on Apple in violation of the AML. The AML complaint seeks a decree that we cease the alleged abuse of dominance, as well as damages in the amount of 1 billion Chinese renminbi (approximately $149 million based on the exchange rate on March 31, 2019). The FRAND complaint makes allegations similar to the AML complaint and further alleges that we refused to offer licensing terms for our cellular standard-essential patents consistent with our FRAND licensing commitments and failed to provide to Apple certain information about our patents. The FRAND complaint seeks (i) a declaration that the license terms offered to Apple by us for our mobile communication standard-essential patents are not compliant with FRAND; (ii) an order that we cease our actions that allegedly violate our FRAND obligations, including pricing on unfair, unreasonable and excessive terms, refusing to deal, imposing unreasonable trade conditions and failing to provide information on our patents; and (iii) a determination of FRAND-compliant license terms for our Chinese standard-essential patents. Apple also seeks its expenses in each of the cases.

On August 3, 2017, we received three additional complaints filed by an Apple subsidiary in China and Apple Inc. against us in the Beijing Intellectual Property Court. The complaints seek declaratory judgments of non-infringement of three of our patents. We filed jurisdictional and other objections to the complaints.

On November 30, 2017, Apple and certain of its Chinese subsidiaries filed three patent infringement complaints against us in the Beijing Intellectual Property Court. Apple seeks damages and costs. We have filed jurisdictional objections to the complaints.



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

On February 16, 2017, Apple and one of its Japanese subsidiaries filed four complaints against us in the Tokyo District Court. In three of the complaints, Apple seeks declaratory judgment of non-infringement by Apple of three of our patents. Apple further seeks a declaration that our patent rights with respect to those three patents are exhausted by our SULAs with the contract manufacturers of Apple’s devices as well as our sale of baseband processor chipsets. Apple also seeks an award of fees. On January 30, 2018, April 27, 2018 and July 13, 2018, the court dismissed each of Apple’s three declaratory judgment complaints, finding that Apple lacked standing based on the facts it alleged in those complaints. Apple has appealed all three decisions. On December 12, 2018, February 19, 2019 and March 4, 2019, the Intellectual Property High Court ruled in our favor on each of Apple’s appeals, finding that the Tokyo District Courts were correct in dismissing Apple’s declaratory judgment complaints. The court has yet to rule on whether Apple has standing in the remaining complaint. On May 15, 2017, we learned of the fourth complaint. In that complaint, Apple and one of its Japanese subsidiaries seek damages of 100 million Japanese yen (approximately $1 million based on the exchange rate on March 31, 2019) from us, based on allegations that we violated the Japanese Antimonopoly Act and the Japanese Civil Code. In particular, the fourth complaint alleges that (i) we hold a monopoly position in the market for baseband processor chipsets that implement certain cellular standards; (ii) we collect double royalties through our license agreements and the sale of baseband processor chipsets which exhaust certain of our patent rights; (iii) we refused to grant Apple a license on FRAND terms and forced Apple to execute a rebate agreement under unreasonable conditions; (iv) we refused to grant Apple a direct license; and (v) we demanded a license fee based on the market value of the total device. We have filed jurisdictional and other objections to this complaint.

On March 2, 2017, we learned that Apple and certain of its European subsidiaries issued a Claim Form against us in the UK High Court of Justice, Chancery Division, Patents Court on January 23, 2017. Apple subsequently filed an Amended Claim Form and Particulars of Claim. Both the Amended Claim Form and the Particulars of Claim allege several European competition law claims, including our refusal to license competing chipmakers, failure to offer Apple a direct license to our standard-essential patents on FRAND terms, demanding excessive royalties for our standard-essential patents, and demanding excessive license fees for the use of our standard-essential patents in connection with baseband processor chipsets purchased from us. Apple also seeks declarations that we are obliged to offer a direct patent license to Apple in respect of standard-essential patents actually practiced on FRAND terms and that using our baseband processor chipsets does not infringe any of our patents because we exhausted our patent rights. Finally, Apple seeks declarations that five of our European (UK) patents are invalid and not essential, and an order that each of those patents be revoked.

On April 18, 2017, Apple and one of its Taiwanese subsidiaries filed a complaint against us in the Taiwan Intellectual Property Court alleging that we have abused a dominant market position in licensing wireless standard-essential patents and selling baseband processor chipsets, including improper pricing, refusal to deal, exclusive dealing, tying, imposing unreasonable trade terms and discriminatory treatment. The complaint seeks rulings that we not use the sales price of the terminal device as the royalty base for standard-essential patents; not leverage our cellular standard-essential patents to obtain licenses of our non-standard-essential patents or demand cross-licenses without ~~merit.~~proper compensation; not refuse, reduce, delay or take any other action to limit the supply of our baseband processor chipsets to non-licensees; that we must license our standard-essential patents on FRAND terms; and that we shall not, based on standard-essential patents, seek injunctions. The complaint also seeks damages of 10 million Taiwan dollars (less than $1 million based on the exchange rate on March 31, 2019), among other relief.

On April 16, 2019, we entered into settlement agreements with Apple and its contract manufacturers to dismiss all outstanding litigation between the parties (Note 12).

QUALCOMM Incorporated v. Apple Inc.: On July 6, 2017, ~~the Company~~we filed a complaint against Apple in the United States District Court for the Southern District of California asserting claims for damages and injunctive relief for infringement of six of ~~the Company’s~~our patents directed to a variety of features found in iPhone models. On July 7, 2017, ~~the Company~~we filed a complaint against Apple in the United States International Trade Commission (ITC) requesting that the ITC institute an investigation pursuant to Section 337 of the Tariff Act of 1930 based on Apple’s infringement of the same six patents. ~~The Company is seeking~~We sought a limited exclusion order and cease and desist order against importation of iPhone models that do not contain a Qualcomm brand baseband ~~processor.~~processor chipset. The patents have not been declared as essential to any standards organization and are not subject to commitments to license on FRAND terms. Apple filed an Answer and Counterclaims in the District Court case on September 26, 2017. On November 29, 2017, Apple filed a First Amended Answer and Counterclaims asserting that ~~the Company’s~~our Snapdragon processors infringe eight Apple patents. On August 8, 2017, the ITC issued a notice of institution of an investigation. On August 25, 2017, ~~the Company~~we withdrew allegations as to one patent in both the ITC investigation and the ~~District Court~~district court case. On April 25, 2018, ~~the Company~~we withdrew allegations as to two additional patents in the ITC investigation, but not the ~~district court~~District Court case, in order to satisfy certain briefing limitations and to narrow the issues for hearing. The ITC investigation ~~is scheduled for~~ evidentiary hearing by the



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Administrative Law Judge (ALJ) ~~from~~was held June 18-26, 2018. The ALJ’s Initial Determination on the merits ~~is due~~was issued on September ~~14,~~28, 2018. The ALJ found that we had established a violation of Section 337 by Apple due to the infringement of one of the three asserted patents. However, the ALJ recommended against an exclusion order on the grounds of public interest. On October 15, 2018, the parties each filed petitions for review of portions of the ALJ’s decision by the full ITC. On December 12, 2018, the ITC announced that it would review the ALJ’s determination of violation on one patent and requested public comments on the ~~target date for~~potential impact on the public interest if an exclusion order is issued. The ITC denied review of the ALJ’s findings of no violation as to the other two patents. On March 26, 2019, the ITC issued its final determination byand found the ~~ITC is set for January 14, 2019. A case management conference in~~remaining patent to be invalid. The ITC’s final determination did not take a position on the ~~district court case was held on January 26, 2018.~~public interest considerations of any potential exclusion order. On March 2, 2018, the ~~court~~District Court granted ~~the Company’s~~our motion to sever, for separate trial, Apple’s counterclaims for patent infringement against us. On February 5, 2019, the ~~Company. With respect~~District Court granted Apple’s motion for summary judgment of non-infringement as to one of our asserted patents. Trial on the ~~Company’s patent claims against Apple, fact discovery is scheduled to close on June 11, 2018 and trial is scheduled to begin~~remaining three of our asserted patents began on March 4, 2019 and has concluded. The jury returned a verdict in our favor on all three patents, awarding us over $31 million in damages. Post trial proceedings are ongoing, and as a result, we did not record a gain in the second quarter of fiscal 2019. In parallel, Apple has challenged the validity of four of our patents asserted in the first ITC action and corresponding District Court case via Inter Partes Review (IPR) petitions with the United States Patent and Trademark Office (USPTO) Patent Trial and Appeal Board (PTAB). The PTAB has instituted trials on three of those patents. With respect to Apple’s patent claims against ~~the Company, fact discovery is scheduled to close on December 3, 2018, and~~us, trial is scheduled to begin on July 15, 2019. We challenged the validity of all of Apple’s asserted patents with the PTAB. Those petitions are pending.

On November 1, 2017, ~~the Company~~we filed a complaint against Apple in San Diego Superior Court for breach of the Master Software Agreement between the companies. The complaint recounts instances when Apple failed to protect ~~the Company’s~~our software as required by the agreement and failed to provide sufficient information to which ~~the Company is~~we are entitled under the agreement in order to understand whether other breaches have occurred. The complaint seeks specific



~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

performance of Apple’s obligations to cooperate with an audit of its handling of ~~the Company’s~~our software, damages and injunctive relief. Apple filed its ~~Answer~~answer to the ~~Complaint~~complaint on December ~~29,~~19, 2017. ~~A case management conference~~On September 24, 2018, we filed a motion seeking to amend our complaint to add causes of action for additional contract breaches and misappropriation of trade secrets. On October 26, 2018, the court granted our motion. We filed an amended complaint on October 31, 2018 and further amended the complaint on November 15, 2018. On December 17, 2018, Apple filed a demurrer objecting to the sufficiency of the second amended complaint. On February 8, 2019, the court denied Apple’s demurrer. Trial is scheduled ~~for July 20, 2018. No trial date has been set.~~to begin on February 7, 2020.

On November 29, 2017, ~~the Company~~we filed three additional complaints against Apple in the United States District Court for the Southern District of California alleging infringement of a total of 16 of ~~the Company’s~~our patents. The patents have not been declared as essential to any standards organization and are not subject to commitments to license on FRAND terms. The complaints seek damages and injunctive relief. On January 22, 2018, Apple filed ~~Answers~~answers and ~~Counterclaims~~counterclaims in each of these cases seeking declaratory judgments that the asserted patents are invalid and/or not infringed. Case management conferences were held on February 7, 2018 and March 1, 2018. Tutorials and presentation of claim construction arguments for two of the cases are scheduled for September 10 and 11, 2018 and October 10 and 11, 2018, respectively. For the case relating to the November 30, 2017 ITC investigation described below, ~~a mandatory settlement conference is scheduled for October 19, 2018,~~ fact discovery ~~is scheduled to close~~closed on March 13, 2019, and trial is scheduled to begin on October 21, 2019. Apple has filed IPR petitions with the PTAB challenging the validity of four of our patents asserted in the November 30, 2017 ITC action and corresponding District Court action. The PTAB has granted the petition as to one of those patents. For the cases not related to the ITC investigation, Apple has challenged all of the asserted patents in IPR proceedings filed in the PTAB. No ~~trial date~~decisions have yet been issued by the PTAB. In total, Apple has ~~been set for~~filed 50 IPRs. The PTAB has initiated proceedings in 36 of the ~~other~~IPRs to date. As a result of the IPR proceedings, on August 29, 2018, the court stayed those two ~~cases.~~cases pending the outcome of the IPR proceedings.

On November 30, 2017, ~~the Company~~we filed a complaint in the ITC accusing certain Apple products of infringing five of ~~the Company’s~~our patents. The patents have not been declared as essential to any standards organization and are not subject to commitments to license on FRAND terms. ~~The Company seeks~~We seek a limited exclusion order and cease and desist order against importation of iPhone models that do not contain a Qualcomm brand baseband ~~processor.~~processor chipset. On January 2, 2018, the ITC instituted an investigation. The ~~ITC investigation is scheduled for~~ evidentiary hearing by the Administrative Law Judge (ALJ) took place from September ~~17 through 21, 2018. The~~17-24, 2018 and included three of our patents. On March 26, 2019, the ALJ’s Initial Determination ~~on the merits is due on January 22, 2019,~~was issued, found a violation as to one patent and ~~the~~recommended a limited exclusion order and cease and desist order against iPhones that do not contain a Qualcomm brand baseband processor chipset. The target date for final determination by the ITC is ~~set for May 22,~~July 26, 2019.

On July 17, 2017, ~~the Company~~we filed complaints against Apple and certain of its subsidiaries in the Federal Republic of Germany, asserting infringement of one of ~~the Company’s~~our patents in the Mannheim District Court and infringement of another patent in the Munich District Court. On October 2, 2017, ~~the Company~~we filed claim extensions in these actions against Apple and certain of its subsidiaries, asserting infringement of two additional patents in the Mannheim District Court and infringement of five additional patents in the Munich District Court. On May 28, 2018, we filed additional claim extensions in these actions against Apple and certain



QUALCOMM Incorporated
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of its subsidiaries, asserting infringement of three additional patents in the Mannheim District Court and infringement of one additional patent in the Munich District Court. The complaints seek remedies including, among other relief, declaratory relief confirming liability on the merits for damages and injunctive relief. The patents have not been declared as essential to any standards organization and are not subject to commitments to license on FRAND terms. Apple and/or its subsidiaries and, in some cases, also Intel have challenged the validity of the asserted patents in opposition proceedings before the European Patent Office or nullity actions before the Federal Patent Court. On October 11, 2018, the Munich District Court issued a judgment declaring one of the patents asserted on October 2, 2017 as not infringed. We have appealed that judgment. On December 20, 2018, the Munich District Court issued judgments declaring one of the patents asserted on July 17, 2017 as infringed and issued an injunction against the infringing Apple products, which would be effective following the posting of financial guarantees. On January 3, 2019, Qualcomm served the requisite financial guarantees to enforce the injunction in the amount of 1.3 billion Euro (approximately $1.5 billion based on the exchange rate at March 31, 2019). Apple and its subsidiaries appealed the judgments and requested a preliminary stay of enforcement pending the appeals. On April 9, 2019, the Munich Court of Appeals stayed the enforcement proceedings. On January 15, 2019, the Mannheim District Court issued a judgment declaring one of the patents asserted on October 2, 2017 as not infringed. On January 31, 2019, the Munich District Court issued judgments declaring two further patents (belonging to the same patent family) asserted on October 2, 2017 as not infringed. We have appealed all of these judgments. On February 25, 2019, the Mannheim District Court ordered a stay of infringement proceedings of another patent asserted on October 2, 2017, pending the decision of the Federal Patent Court on validity. On April 5, 2019, the Opposition Division of the European Patent Office revoked a patent that had been asserted on July 17, 2017 before the Mannheim District Court. We intend to appeal this decision. All other patents remain pending. Dates for the pronouncements of judgment and hearings are scheduled for various dates through September 2019.

On September 29, 2017, ~~the Company~~we filed three complaints against Apple and certain of its subsidiaries in the Beijing (China) Intellectual Property Court, asserting infringement of three of ~~the Company’s~~our patents. The complaints seek remedies including injunctive relief and costs. The patents have not been declared as essential to any standards organization and are not subject to commitments to license on FRAND terms. On May 10, 2018 and June 21, 2018, Apple filed invalidation requests with the Chinese Patent Review Board (PRB) for the three asserted patents. The PRB has issued orders upholding the validity of all three patents.

On November 13, 2017, ~~the Company~~we filed three complaints against certain of Apple’s subsidiaries in the Beijing (China) High People’s Court, asserting infringement of three of ~~the Company’s~~our patents. The complaints seek remedies including injunctive relief, damages and costs. The patents have not been declared as essential to any standards organization and are not subject to commitments to license on FRAND terms. On December 19, 2017, Apple’s subsidiaries filed invalidation requests with the ~~Chinese Patent Review Board (PRB)~~PRB for ~~each of~~ the three asserted patents. PRB hearings regarding the validity of the patents ~~are scheduled for~~were held in April and May 2018. The PRB issued rulings upholding the validity of all three patents. On May 22, 2018, Apple’s subsidiaries filed a second invalidation request with the PRB for one of the three asserted patents. The PRB held a hearing regarding this request on October 19, 2018. The PRB issued rulings on two of the second round invalidity petitions, upholding the validity of one patent based on amended claims and upholding the validity of the second patent again. The PRB has not ruled yet on Apple’s second invalidity challenge to the third patent. On November 30, 2018 and December 5, 2018, Apple appealed all three of the original validity rulings from the PRB to the Beijing IP Court.

On November 15, 2017, ~~the Company~~we filed three complaints against certain of Apple’s subsidiaries in the Fuzhou (China) Intermediate People’s Court, asserting infringement of three of ~~the Company’s~~our patents. The complaints seek remedies including injunctive relief and costs. The patents have not been declared as essential to any standards organization and are not subject to commitments to license on FRAND terms. ~~The court has set hearings on the merits of infringement to begin on August 16, 2018 for one of the cases and August 18, 2018 for the other two cases.~~ Apple’s subsidiaries filed invalidation requests with the ~~Chinese Patent Review Board (PRB)~~PRB on December 8, 2017 for one of the patents and December 11, 2017 for the other two patents. PRB hearings regarding the validity of the patents ~~are scheduled for~~were held in April and May 2018. The PRB issued orders upholding the validity of two of the patents subject to Apple’s invalidity challenges. The PRB ruled that the third patent was invalid. We subsequently withdrew the infringement action in Fuzhou with respect to the third patent. We have appealed the adverse PRB ruling to the Beijing IP Court. Infringement hearings were held from August through October 30, 2018. On November 30, 2018, the court granted our motions for preliminary injunctions with respect to two of the patents and enjoined Apple’s subsidiaries from importing, selling and offering to sell the iPhone 6S through X.

On January 12, 2018, ~~the Company~~we filed three additional complaints against Apple and certain of its subsidiaries in the Fuzhou (China) Intermediate People’s Court, asserting infringement of three additional ~~Company~~ patents. The complaints seek remedies including injunctive relief and costs. The patents have not been declared as essential to any standards organization and are not subject to commitments to license on FRAND terms.

Also on January 12, 2018, the Company filed three complaints against certain of Apple’s subsidiaries in the Jiangsu (China) High People’s Court, asserting infringement of three of the Company’s patents. The complaints seek remedies including injunctive relief, damages and costs. The patents have not been declared as essential to any standards organization



QUALCOMM Incorporated
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Also, on January 12, 2018, we filed three complaints against certain of Apple’s subsidiaries in the Jiangsu (China) High People’s Court, asserting infringement of three of our patents. The complaints seek remedies including injunctive relief, damages and costs. The patents have not been declared as essential to any standards organization and are not subject to commitments to license on FRAND terms. On February ~~5, 2018 and March~~ 5, 2018, Apple’s subsidiaries filed invalidation requests with the PRB. PRB hearings regarding the validity of the patents ~~are expected to begin~~were held in June 2018. The PRB issued orders upholding the validity of two of the patents and an order partially upholding the validity of another patent.

On February 2, 2018, ~~the Company~~we filed three ~~additional~~ complaints against certain of Apple’s subsidiaries in the Qingdao (China) Intermediate People’s Court, asserting infringement of three of ~~the Company’s~~our patents. The complaints seek remedies including injunctive relief and costs. The patents have not been declared as essential to any standards organization and are not subject to commitments to license on FRAND terms. On February 26, 2018, Apple’s subsidiaries filed invalidation requests with the PRB. PRB hearings regarding the validity of the patents ~~are expected to begin~~were held in June 2018. The PRB issued orders upholding the validity of two of the patents and invalidating the third patent. We subsequently withdrew the infringement action in Qingdao with respect to the third patent. We filed an appeal of the adverse PRB ruling, and Apple filed an appeal of the other two.

Also, on February 2, 2018, ~~the Company~~we filed three ~~additional~~ complaints against certain of Apple’s subsidiaries in the Guangzhou (China) Intermediate People’s Court, asserting infringement of three of ~~the Company’s~~our patents. The complaints seek remedies including injunctive relief and costs. The patents have not been declared as essential to any standards organization and are not subject to commitments to license on FRAND terms. On March 14, 2018, Apple’s subsidiaries filed invalidation requests with the PRB. PRB hearings regarding the validity of the patents ~~are expected to begin~~began in July 2018. The PRB issued orders upholding the validity of two of the patents and an order invalidating the third patent. Infringement hearings for all three of the patents were held in October through December 2018. We filed a motion withdrawing the infringement action pertaining to the patent that was invalidated. We have appealed the adverse PRB decision, and Apple has appealed the other two.

On June 14, 2018, we filed three complaints against certain of Apple’s subsidiaries in the Guangdong (China) High People’s Court, asserting infringement of three of our patents. The ~~Company believes~~complaints seek remedies including injunctive relief and costs. The patents have not been declared as essential to any standards organization and are not subject to commitments to license on FRAND terms. On August 13, 2018, Apple’s ~~counterclaims and~~subsidiaries filed invalidation requests inwith the ~~above matters are without merit.~~PRB. The PRB has held hearings regarding all three of the patents. The PRB issued an order invalidating one of the patents and has not ruled yet regarding Apple’s invalidity challenges of the other two patents.

On April 16, 2019, we entered into settlement agreements with Apple and its contract manufacturers to dismiss all outstanding litigation between the parties (Note 12).

3226701 Canada, Inc. v. QUALCOMM Incorporated et al: On November 30, 2015, ~~plaintiffs filed~~ a securities class action complaint ~~against the Company and certain~~was filed by purported stockholders of ~~its current and former officers~~us in the United States District Court for the Southern District of ~~California.~~California against us and certain of our current and former officers. On April 29, 2016, the plaintiffs filed an amended complaint. On January 27, 2017, the court dismissed the amended complaint in its entirety, granting leave to amend. On March 17, 2017, the plaintiffs filed a second amended complaint, alleging that ~~the Company~~we and certain of ~~its~~our current and former officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, by making false and misleading statements regarding ~~the Company’s~~our business outlook and product development between November 19, 2014 and July 22, 2015. The second amended complaint sought unspecified damages, interest, attorneys’ fees and other costs. On May 8, 2017, ~~the Company~~we filed a motion to dismiss the second amended complaint. On October 20, 2017, the court entered an order granting in part ~~the Company’s~~our motion to dismiss, and on November 29, 2017, the court entered an order granting the remaining portions of ~~the Company’s~~our motion to dismiss. On December 28, 2017, the plaintiffs filed ~~a notice of~~an appeal to the United States Court of Appeals for the Ninth Circuit. ~~The Company believes~~A hearing has been scheduled for July 11, 2019. We believe the plaintiffs’ claims are without merit.

Consolidated Securities Class Action Lawsuit: On January 23, 2017 and January 26, 2017, securities class action complaints were filed by purported stockholders of ~~the Company~~us in the United States District Court for the Southern District of California against ~~the Company~~us and certain of ~~its~~our current and former officers and directors. The complaints alleged, among other things, that ~~the defendants~~we violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, by making false and misleading statements and omissions of material fact in connection with certain allegations that ~~the Company is~~we are or ~~was~~were engaged in anticompetitive conduct. The complaints sought unspecified damages, interest, fees and costs. On May 4, 2017, the court consolidated the two actions and appointed lead plaintiffs. On July 3, 2017, the lead plaintiffs filed a consolidated amended complaint asserting the same basic theories of liability and requesting the same basic relief. On September 1, 2017, ~~the defendants~~we filed a motion to dismiss the consolidated amended complaint. On March 18, 2019, the court denied our motion to dismiss the complaint. Discovery will commence in the coming months. We believe the plaintiffs’ claims are without merit.



QUALCOMM Incorporated
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In re Qualcomm/Broadcom Merger Securities Litigation (formerly Camp v. Qualcomm Incorporated et al): On June 8, 2018 and June 26, 2018, securities class action complaints were filed by purported stockholders of us in the United States District Court for the Southern District of California against us and two of our current officers. The ~~court has not yet ruled~~complaints allege, among other things, that we violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, by failing to disclose that we had submitted a notice to the Committee on Foreign Investment in the ~~motion.~~United States (CFIUS) in January 2018. The ~~Company believes~~complaints seek unspecified damages, interest, fees and costs. On January 22, 2019, the Court appointed the lead plaintiff in the action and designated that the case be captioned “In re Qualcomm/Broadcom Merger Securities Litigation.” On March 18, 2019, the plaintiffs filed a consolidated complaint. We believe the plaintiffs’ claims are without merit.

Consumer Class Action Lawsuit: Since January 18, 2017, a number of consumer class action complaints have been filed against ~~the Company~~us in the United States District Courts for the Southern and Northern Districts of California, each on behalf of a putative class of purchasers of cellular phones and other cellular devices. Twenty-two such cases remain outstanding. In April 2017, the Judicial Panel on Multidistrict Litigation transferred the cases that had been filed in the Southern District of California to the Northern District of California. On May 15, 2017, the court entered an order appointing the plaintiffs’ co-lead ~~counsel, and on May 25, 2017, set a trial date of April 29, 2019.~~counsel. On July 11, 2017, the plaintiffs filed a consolidated amended complaint alleging that ~~the Company~~we violated California and federal antitrust and unfair competition laws by, among other things, refusing to license standard-essential patents to ~~its~~our competitors, conditioning the supply of certain of ~~its~~our baseband chipsets on the purchaser first agreeing to license ~~the Company’s~~our entire patent portfolio, entering into exclusive deals with companies, including Apple Inc., and charging unreasonably high royalties that do not comply with ~~the Company’s~~our commitments to standard setting organizations. The complaint seeks unspecified damages and disgorgement and/or restitution, as well as an order that ~~the Company~~we be enjoined from further unlawful conduct. On August 11, 2017, ~~the Company~~we filed a motion to dismiss the consolidated amended complaint. On November 10, 2017, the court denied ~~the Company’s~~our motion, ~~to dismiss the consolidated amended complaint,~~ except to the extent that certain claims seek damages under the Sherman Antitrust Act. ~~Trial is scheduled~~On July 5, 2018, the plaintiffs filed a motion for class certification, and the court granted that motion on September 27, 2018. On January 23, 2019, the Ninth Circuit Court of Appeals granted us permission to ~~begin on~~appeal the court’s class certification order. On January ~~19, 2019. The Company believes~~24, 2019, the court stayed the case pending our appeal. We believe the plaintiffs’ claims are without merit.



~~QUALCOMM Incorporated~~
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Canadian Consumer Class Action Lawsuits: Since November 9, 2017, ~~five~~eight consumer class action complaints have been filed against ~~the Company~~us in Canada (in the Ontario Superior Court of Justice, the Supreme Court of British Columbia, and the Quebec Superior Court), each on behalf of a putative class of purchasers of cellular phones and other cellular devices, alleging various violations of Canadian competition and consumer protection laws. The claims are similar to those in the FTC and U.S. consumer class action complaints. The complaints seek unspecified damages. ~~The Company~~One of the complaints in the Supreme Court of British Columbia has since been discontinued by the plaintiffs. We have not yet answered the complaints.

~~Hays v. Jacobs, et. al.~~: On ~~May 24, 2017,~~April 15, 2019, the ~~plaintiff filed~~Quebec Superior Court held a ~~complaint in the United States District Court for the District of Delaware asserting derivative claims~~class certification hearing, and on behalf of the Company against certain of the Company’s current and former directors and officers. On November 13, 2017, the plaintiff filed an amended derivative complaint alleging that certain current and former directors and officers (i) breached their fiduciary duties by failing to oversee the Company’s operations, (ii) breached their fiduciary duties and Section 14(a) of the Securities Exchange Act of 1934, as amended, by making false and misleading statements regarding the Company’s business outlook, business practices and product development between November 6, 2013 and January 21, 2016 and (iii) were unjustly enriched as a result of the foregoing conduct. The amended complaint sought unspecified damages, interest, attorneys’ fees and other costs. The defendants filed a Motion to Dismiss the amended complaint, which was scheduled for hearing byApril 30, 2019, the court ~~on March 14, 2018. The parties filed~~issued an order certifying a ~~Joint Stipulation for Voluntary Dismissal and Proposed Order (the Order), which~~class. We believe the ~~court granted on March 9, 2018. Accordingly, the case has been dismissed, and the Order required this disclosure in this filing.~~plaintiffs’ claims are without merit.

Japan Fair Trade Commission (JFTC) Complaint: The JFTC received unspecified complaints alleging that ~~the Company’s~~our 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~~our Japanese licensees were forced to cross-license patents to ~~the Company~~us 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~~our other licensees who made a similar commitment in their license agreements with ~~the Company.~~us. The cease and desist order seeks to require ~~the Company~~us to modify ~~its~~our existing license agreements with Japanese companies to eliminate these provisions while preserving the license of ~~the Company’s~~our patents to those companies. ~~The Company disagrees~~We disagree with the conclusions that itwe forced ~~its~~our Japanese licensees to agree to any provision in the parties’ agreements and that those provisions violate the Japanese Antimonopoly Act. ~~The Company has~~We invoked ~~its~~our right under Japanese law to an administrative hearing before the JFTC. In February 2010, the Tokyo High Court granted ~~the Company’s~~our motion and issued a stay of the cease and desist order pending the administrative hearing before the JFTC. The JFTC ~~has~~ held hearings on 37 different dates. ~~No further hearings are currently scheduled. Fines or other monetary remedies are not available~~On March 13, 2019, the JFTC issued a decision revoking the cease and desist order against us in ~~this matter.~~its entirety.

Korea Fair Trade Commission (KFTC) Complaint: On January 4, 2010, the KFTC issued a written decision finding that ~~the Company had~~we violated Korean law by offering certain discounts and rebates for purchases of ~~its~~our CDMA chipsets and for including in certain agreements language requiring the continued payment of royalties after all licensed patents ~~have~~ expired. The KFTC levied a fine of 273.2 billion Korean won (approximately $230 million), which ~~the Company paid and~~we recorded as an expense in fiscal 2009 and paid in fiscal 2010. ~~The Company~~We appealed to the Seoul High Court, and on June 19, 2013, the Seoul High Court affirmed the KFTC’s decision. On July 4, 2013, ~~the Company~~we filed an appeal with the Korea Supreme Court. ~~There have been no material developments since then~~On January 31, 2019, the Korea Supreme Court reversed in part the decision of the Seoul High Court and remanded the case for further proceedings consistent with ~~respect~~its decision. In March 2019, the KFTC refunded $56 million (including interest) to ~~this matter.~~us, representing a portion of the fine we previously paid to the KFTC. In the second quarter of fiscal 2019, we recorded a gain of $43 million in other income and interest income of



QUALCOMM Incorporated
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$13 million in investment and other income, net. In light of the Korea Supreme Court’s reversal in part of the decision of the Seoul High Court and the refund received from the KFTC, we expect to withdraw the case from the Seoul High Court.

Korea Fair Trade Commission (KFTC) Investigation: On March 17, 2015, the KFTC notified ~~the Company~~us that it was conducting an investigation of ~~the Company~~us relating to the Korean Monopoly Regulation and Fair Trade Act (MRFTA). On December 27, 2016, the KFTC announced that it had reached a decision in the investigation, finding that ~~the Company~~we violated provisions of the MRFTA. On January 22, 2017, ~~the Company~~we received the KFTC’s formal written decision, which found that the following conducts violate the MRFTA: (i) refusing to license, or imposing restrictions on licenses for, cellular communications standard-essential patents with competing modem chipset makers; (ii) conditioning the supply of modem chipsets to handset suppliers on their execution and performance of license agreements with ~~the Company;~~us; and (iii) coercing agreement terms including portfolio license terms, royalty terms and free cross-grant terms in executing patent license agreements with handset makers. The KFTC’s decision orders ~~the Company~~us to: (i) upon request by modem chipset companies, engage in good-faith negotiations for patent license agreements, without offering unjustifiable conditions, and if necessary submit to a determination of terms by an independent third party; (ii) not demand that handset companies execute and perform under patent license agreements as a precondition for purchasing modem ~~chips;~~chipsets; (iii) not demand unjustifiable conditions in ~~the Company’s~~our license agreements with handset companies, and upon request renegotiate existing patent license agreements; and (iv) notify modem chipset companies and handset companies of the decision and order imposed on ~~the Company~~us and report to the KFTC new or amended agreements. According to the KFTC’s decision, the foregoing will apply to transactions between ~~the Company~~us and the following enterprises: (i) handset manufacturers headquartered in Korea and their affiliate companies; (ii) enterprises that sell handsets in or to Korea and their affiliate companies; (iii) enterprises that supply handsets to companies referred to in (ii) above and the affiliate companies of such enterprises; (iv) modem chipset manufacturers headquartered in Korea and their affiliate companies; and (v) enterprises that supply modem chipsets to



~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

companies referred to in (i), (ii) or (iii) above and the affiliate companies of such enterprises. The KFTC’s decision also imposed a fine of ~~approximately~~ 1.03 trillion Korean Won (approximately $927 million), which ~~was~~we paid on March 30, 2017. ~~The Company believes~~We believe that ~~its~~our business practices do not violate the MRFTA, and on February 21, 2017, we filed an action in the Seoul High Court to cancel the KFTC’s decision. On the same day, ~~the Company~~we filed an application with the Seoul High Court to stay the decision’s remedial order pending the Seoul High Court’s final judgment on ~~the Company’s~~our action to cancel the KFTC’s decision. On September 4, 2017, the Seoul High Court denied ~~the Company’s~~our application to stay the remedial order, and on November 27, 2017, the Korea Supreme Court dismissed ~~the Company’s~~our appeal of the Seoul High Court’s decision on the application to stay. The Seoul High Court has not ruled on ~~the Company’s~~our action to cancel the KFTC’s decision.

Icera Complaint to the European Commission (EC): On June 7, 2010, the EC notified and provided ~~the Company~~us with a redacted copy of a complaint filed with the EC by Icera, Inc. (subsequently acquired by Nvidia Corporation) alleging that ~~the Company has~~we were engaged in anticompetitive activity. The Company was asked by the EC to submit a preliminary response to the portions of the complaint disclosed to it, and the Company submitted its response in July 2010. Subsequently, the Company provided additional documents and information as requested by the EC. On July 16, 2015, the EC announced that it had initiated formal proceedings in this matter. On December 8, 2015, the EC announced that it had issued a Statement of Objections expressing its preliminary view that between 2009 and 2011, ~~the Company~~we were engaged in predatory pricing by selling certain baseband chipsets to two customers at prices below cost, with the intention of hindering competition. A Statement of Objections informs the subject of the investigation of the allegations against it and provides an opportunity to respond to such allegations. It is not a determination of the final outcome of the investigation. On August 15, 2016, ~~the Company~~we submitted ~~its~~our response to the Statement of Objections. On July 19, 2018, the EC announced that it had issued a Supplementary Statement of Objections which focuses on certain elements of the “price-cost” test applied by the EC to assess the extent to which we sold certain baseband chipsets allegedly below cost. On October 22, 2018, we submitted our response to the Supplementary Statement of Objections. On January 10, 2019, the EC held a hearing regarding the Supplementary Statement of Objections and our response to it. If a violation is found, a broad range of remedies is potentially available to the EC, including imposing a fine (of up to 10% of our annual revenues) and/or injunctive relief prohibiting or restricting certain business practices. It is difficult to predict the outcome of this matter or what remedies, if any, may be imposed by the EC. ~~The Company believes~~We believe that ~~its~~our business practices do not violate the European Union (EU) competition rules.

European Commission (EC) Investigation: On October 15, 2014, the EC notified ~~the Company~~us that it was conducting an investigation of ~~the Company~~us relating to Articles 101 and/or 102 of the Treaty on the Functioning of the European Union (TFEU). On July 16, 2015, the EC announced that it had initiated formal proceedings in this matter. On December 8, 2015, the EC announced that it had issued a Statement of Objections expressing its preliminary view that, pursuant to an agreement with ~~a customer,~~Apple Inc., since 2011, ~~the Company~~we paid significant amounts to ~~that customer~~Apple on the condition that it exclusively use ~~the Company’s~~our baseband chipsets in its smartphones and tablets. This conduct allegedly reduced ~~the customer’s~~Apple’s incentives to source baseband chipsets from ~~the Company’s~~our competitors and harmed competition and innovation for certain baseband chipsets. On January 24, 2018, the EC issued a decision finding that certain terms of that agreement violate EU competition law and imposed a fine of ~~approximately~~ 997 million Euros. On April 6, 2018, the Company filed an appeal of the EC’s decision with the General Court of the European Union. The Company believes that its business practices do not violate the EU competition rules.

The Company recorded a charge of $1.18 billion to other expenses related to the EC fine in the first quarter of fiscal 2018. The Company intends to provide financial guarantees by April 30, 2018 to satisfy the obligation in lieu of cash payment while the Company appeals the EC’s decision. Beginning on April 30, 2018, the fine will accrue interest at a rate of 1.50% per annum until it has been paid or annulled. At March 25, 2018, the liability, including related foreign currency losses (which were recorded in investment and other income, net), was $1.23 billion and included in other current liabilities.

~~United States Federal Trade Commission (FTC) v. QUALCOMM Incorporated:~~ On September 17, 2014, the FTC notified the Company that it is conducting an investigation of the Company relating to Section 5 of the Federal Trade Commission Act (FTCA). On January 17, 2017, the FTC filed a complaint against the Company in the United States District Court for the Northern District of California alleging that the Company engaged in anticompetitive conduct and unfair methods of competition in violation of Section 5 of the FTCA by conditioning the supply of baseband processors on the purchaser first agreeing to a license to the Company’s standard-essential patents, paying incentives to purchasers of baseband processors to induce them to accept certain license terms, refusing to license its standard-essential patents to the Company’s competitors and entering into alleged exclusive dealing arrangements with Apple Inc. The complaint seeks a permanent injunction against the Company’s alleged violations of the FTCA and other unspecified ancillary equitable relief. A fine is not an available remedy in this matter, and the Company does not believe that other monetary remedies are likely in this matter. On April 19, 2017, the court set a trial date for January 4, 2019. The Company believes the FTC’s claims are without merit.

~~Taiwan Fair Trade Commission (TFTC) Investigation:~~ ~~On December 4, 2015, the TFTC notified the Company that it was conducting an investigation into whether the Company’s patent licensing practices violate the Taiwan Fair Trade Act~~



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

~~(TFTA). On~~ April 27, 2016, the TFTC specified that the allegations under investigation included whether: (i) the Company jointly licensed its patents rather than separately licensing standard-essential patents and non-standard-essential patents; (ii) the Company’s royalty charges are unreasonable; (iii) the Company unreasonably required licensees to grant it cross-licenses; (iv) the Company failed to provide lists of licensed patents to licensees; (v) the Company violated a FRAND licensing commitment by declining to grant licenses to chipset makers; (vi) the Company declined to sell chipsets to unlicensed potential customers; and (vii) the Company provided royalty rebates to certain companies in exchange for their exclusive use6, 2018, we filed an appeal of the ~~Company’s chipsets. On October 11, 2017,~~EC’s decision with the TFTC announced that it had reached a decision in the investigation, finding that the Company violated the TFTA. On October 23, 2017, the Company received TFTC’s formal written decision, which found that the following conducts violate the TFTA: (i) refusing to license and demanding restrictive covenants from chip competitors; (ii) refusing to supply baseband processors to companies that do not have an executed license; and (iii) providing a royalty discount to Apple in exchange for its exclusive useGeneral Court of the ~~Company’s chipsets.~~European Union. The TFTC’s decision orders the Company to: (1) cease the following conduct within 60 days of the day after receipt of the decision: (a) applying the clauses in an agreement entered into with a competing chip supplier requesting it to provide sensitive sales information such as chip prices, customers, sales volumes, product types and serial numbers; (b) applying clauses in component supply agreements entered into with handset manufacturers relating to the refusal to sell chips to unlicensed manufacturers; and (c) applying discount clauses in the exclusive agreement entered into with a relevant enterprise; (2) notify competing chip companies and handset manufacturers in writing within 30 days after receipt of the decisioncourt has not yet ruled on our appeal. We believe that those companies may request to amend or enter into patent license agreements and other relevant agreements within 60 days of the day following the day such notices are received, and upon receipt of such requests, the Company shall commence negotiation in good faith; (3) submit status reports to the TFTC on any such negotiations every six months beginning from the day after receipt of the decision, as well as to submit a report to the TFTC within 30 days after amendments to any license agreements or newly signed license agreements are executed. The TFTC’s decision also imposed a fine of 23.4 billion Taiwan Dollars. The Company believes that itsour business practices do not violate the TFTA, and on November 10, 2017, the Company filed an Application for Stay of Enforcement of the TFTC’s decision in the Taiwan Intellectual Property Court (IPC). The TFTC filed an opposition brief on December 8, 2017, and the IPC held a hearing on December 11, 2017. The IPC has not yet ruled on the Company’s Application. On December 22, 2017, the Company filed an Administrative Litigation Complaint in the IPC to revoke the TFTC’s decision. The TFTC has not yet filed its response.EU competition rules.

~~The Company~~We recorded a charge of ~~$778 million~~$1.2 billion to other expenses related to the ~~TFTC~~EC fine in the ~~fourth~~first quarter of fiscal ~~2017.~~2018. We provided financial guarantees in the third quarter of fiscal 2018 to satisfy the obligation in lieu of cash payment while we appeal the EC’s decision. The fine ~~will be paid~~is accruing interest at a rate of 1.50% per annum while it is outstanding. As of October 1, 2018, we have designated the liability as a hedge of our net investment in ~~monthly installments through December 2022.~~certain foreign subsidiaries, with gains and losses recorded in accumulated other comprehensive income as a component of the foreign currency translation adjustment. At March ~~25, 2018,~~31, 2019, the ~~remaining~~ liability, including related foreign currency ~~losses~~gains and accrued interest (which, to the extent they were not related to the net investment hedge, were recorded in investment and other income, net), was ~~approximately $771 million, of which $615 million was~~$1.14 billion and included in other ~~noncurrent~~current liabilities.

~~Contingent losses:~~United States Federal Trade Commission (FTC) v. QUALCOMM Incorporated: On September 17, 2014, the FTC notified us that it was conducting an investigation of us relating to Section 5 of the Federal Trade Commission Act (FTCA). On January 17, 2017, the FTC filed a complaint against us in the United States District Court for the Northern District of California alleging that we were engaged in anticompetitive conduct and unfair methods of competition in violation of Section 5 of the FTCA by conditioning the supply of cellular modem chipsets on the purchaser first agreeing to a license to our cellular standard-essential patents, paying incentives to purchasers of cellular modem chipsets to induce them to accept certain license terms, refusing to license our cellular standard-essential patents to our competitors, and entering into alleged exclusive dealing arrangements with Apple Inc. The ~~Company~~complaint seeks a permanent injunction against our alleged violations of the FTCA and other unspecified ancillary equitable relief. A fine is not an available remedy in this matter, and the FTC has not sought monetary remedies. On August 30, 2018, the FTC moved for partial summary judgment that our commitments to license our cellular standard-essential patents to the Alliance for Telecommunications Industry Solutions (ATIS) and the Telecommunications Industry Association (TIA) require us to make licenses available to rival sellers of cellular modem chipsets. On November 6, 2018, the District Court granted the FTC’s partial summary judgment motion. On November 29, 2018, we and the FTC filed a Joint Pretrial Statement in which the FTC indicated that at trial it would seek a declaration and adjudication that our conduct violates the FTCA and seek permanent injunctive and other equitable relief, including an order that would at least (i) require us to: negotiate or renegotiate license terms with licensees in good faith under conditions free from the threat of lack of access to or discriminatory provision of cellular modem chipset supply or associated technical, software or other support; submit to arbitral or judicial dispute resolution to determine reasonable royalties and other license terms should a licensee choose to pursue such a resolution; make exhaustive standard-essential patent licenses available to cellular modem chipset suppliers on FRAND terms and submit to arbitral or judicial dispute resolution to determine such terms; and adhere to certain compliance and monitoring procedures; and (ii) prohibit us from: conditioning the supply of cellular modem chipsets on a customer’s patent-license status; discriminating or retaliating against cellular modem chipset customers or cellular modem chipset suppliers because of a customer’s license status or a dispute over license terms; making payments or providing other value to a customer contingent on the customer’s agreement to license terms; entering into exclusive-dealing agreements for the supply of cellular modem chipsets; or interfering with the ability of customers to communicate with a government agency about a potential law enforcement or regulatory matter. Trial was held January 4-29, 2019. The FTC alleged at trial that we have monopoly power in the markets for both CDMA and premium-tier LTE cellular modem chipsets and have acted anticompetitively in violation of either Section 1 or Section 2 of the Sherman Act, or Section 5 of the FTCA to maintain our monopoly power in one or both of these alleged markets by employing four business practices. These practices include (i) our longstanding practice of requiring a license to our cellular standard-essential patents for a particular cellular standard before selling cellular modem chipsets that are used in cellular devices that implement such cellular standards; (ii) providing incentive payments to certain licensees in order to induce them to agree to our preferred license terms; (iii) not exhaustively licensing our cellular standard-essential patents to companies that make, use or sell cellular modem chipsets; and (iv) entering into a now-expired contract that conditioned certain payments to Apple on its not launching a new device that used a non-Qualcomm brand cellular modem chipset. In asserting that we have acted anticompetitively, the FTC asserts that our historical royalty rates are too high to be reasonable, and that amounts over a reasonable rate act as a surcharge on cellular modem chipset transactions taking place between OEMs and our competitors, and this surcharge weakens our competitors by raising the price OEMs must pay for such competitors’ cellular modem chipsets. We believe the FTC’s claims and request for injunctive relief are without merit.

Contingent losses and other considerations: We will continue to vigorously defend ~~itself~~ourself in the foregoing matters. However, litigation and investigations are inherently ~~uncertain. Accordingly, the Company cannot predict the outcome~~uncertain, and we face difficulties in evaluating or estimating likely outcomes or ranges of ~~these matters.~~possible loss in antitrust and trade regulation investigations in particular. Other than with respect to the ~~TFTC and~~ EC ~~fines, the Company has~~fine, we have not recorded any accrual at March ~~25, 2018~~31, 2019 for contingent losses associated with these matters based on ~~its~~ our



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

belief that losses, while possible, are not probable. Further, any possible range of loss cannot be reasonably estimated at this time. The unfavorable resolution of one or more of these matters could have a material adverse effect on ~~the Company’s~~our business, results of operations, financial condition or cash flows. ~~The Company is~~For example, if some or all of our license agreements are declared invalid or unenforceable and we are required to renegotiate these license agreements, or if as part of a settlement we agree to renegotiate certain of our license agreements, we may not receive, or may not be able to recognize, any licensing or royalty revenues on the impacted license agreements unless and until we enter into new license agreements. We are engaged in numerous other legal actions not described above arising in the ordinary course of ~~its~~our business and, while there can be no assurance, ~~believes~~believe that the ultimate outcome of these other legal actions will not have a material adverse effect on ~~its~~our business, results of operations, financial condition or cash flows.

Indemnifications. ~~The Company~~We generally ~~does~~do not indemnify ~~its~~our customers and licensees for losses sustained from infringement of third-party intellectual property rights. However, ~~the Company is~~we are contingently liable under certain product sales, services, license and other agreements to indemnify certain customers, chipset foundries and semiconductor assembly and test service providers against certain types of liability and/or damages arising from qualifying claims of patent, copyright, trademark or trade secret infringement by products or services sold or provided by ~~the Company,~~us, or by intellectual property provided by ~~the Company~~us to chipset foundries and semiconductor assembly and test service providers. ~~The Company’s~~Our obligations under these agreements may be limited in terms of time and/or amount, and in some instances, ~~the Company~~we may have recourse against third parties for certain payments made by ~~the Company.~~us.

Through March ~~25, 2018, the Company has~~31, 2019, we have received a number of claims from ~~its~~our 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 ~~its~~our products. Reimbursements under indemnification arrangements have not been material to ~~the Company’s~~our consolidated financial statements. ~~The Company has~~We have not recorded any accrual for contingent liabilities at



~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

March ~~25, 2018~~31, 2019 associated with these indemnification arrangements based on ~~the Company’s~~our belief that additional liabilities, while possible, are not probable. Further, any possible range of loss cannot be reasonably estimated at this time.

Purchase Obligations and Operating Leases. ~~The Company has~~We have agreements with suppliers and other parties to purchase inventory, other goods and services and long-lived assets. Integrated circuit product inventory obligations represent purchase commitments for raw materials, semiconductor die, finished goods and manufacturing services, such as wafer bump, probe, assembly and final test. Under ~~the Company’s~~our manufacturing relationships with ~~its~~our foundry suppliers and assembly and test service providers, cancelation of outstanding purchase commitments is generally allowed but requires payment of costs incurred through the date of cancelation, and in some cases, incremental fees related to capacity underutilization.

~~The Company leases~~ We lease certain of ~~its~~our land, facilities and equipment under noncancelable operating leases, with terms ranging from less than one year to 2115 years and with provisions in certain leases for cost-of-living increases.

Obligations under ~~these~~our purchase agreements, which primarily relate to integrated circuit product inventory obligations, and future minimum lease payments under ~~these~~our operating leases at March ~~25, 2018~~31, 2019 were as ~~follows:~~follows (in millions):


	Integrated Circuit Purchase Obligations		Other Purchase Obligations		Operating Leases		Purchase Obligations		Operating Leases
Remainder of fiscal 2018	$	2,277	$	894	$	63
2019	1,074		286		114
Remainder of fiscal 2019							$	2,948	$	74
2020	318		165		85		637		112
2021	63		60		64		326		84
2022	24		12		44		92		54
2023							52		25
Thereafter	—		4		57		17		38
Total	$	3,756	$	1,421	$	427	$	4,072	$	387

Other Commitments. At March ~~25, 2018, the Company was~~31, 2019, we committed to fund certain strategic investments up to ~~$414~~$226 million, of which ~~$77 million and $72~~$32 million is expected to be funded in ~~the remainder of~~ fiscal ~~2018 and in fiscal 2021, respectively.~~2020. The remaining commitments do not have fixed funding dates and are subject to certain conditions. Commitments represent the maximum amounts to be funded under these arrangements; actual funding may be in lesser amounts or not at all.

In March 2018, ~~the Company’s~~our RF360 Holdings joint venture entered into an agreement for a build-to-suit construction project with a third-party lessor for the development of a manufacturing facility located in Singapore. The agreement includes a long-term



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

lease commitment with a noncancelable 10-year term commencing upon completion of the construction ~~project and four optional renewal terms of five years each.~~project. At March ~~25, 2018,~~31, 2019, the minimum lease commitment under the agreement based on the noncancelable term was ~~approximately $90 million and the maximum lease commitment, including all optional renewal terms, was approximately $315~~$88 million.

Note 7. Segment Information

~~The Company is~~We are organized on the basis of products and services and ~~has~~have three reportable segments. ~~The Company conducts~~We conduct business primarily through ~~its~~our QCT (Qualcomm CDMA Technologies) semiconductor business and ~~its~~our QTL (Qualcomm Technology Licensing) licensing business. QCT develops and supplies integrated circuits and system software based on CDMA, OFDMA and other technologies for use in mobile devices, wireless networks, devices used in the Internet of Things (IoT), broadband gateway equipment, consumer electronic devices and automotive telematics and infotainment systems. QTL grants licenses to use portions of ~~its~~our intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products. ~~The Company’s~~Our QSI (Qualcomm Strategic Initiatives) reportable segment makes strategic investments and includes revenues and related costs associated with development contracts with an equity method investee. ~~The Company~~We also ~~has~~have nonreportable segments, including ~~its mobile health, data center, small cell~~Qualcomm Government Technologies or QGOV (formerly Qualcomm Cyber Security Solutions) and other wireless technology and service initiatives.

~~The Company evaluates~~We evaluate the performance of ~~its~~our segments based on earnings (loss) before income taxes (EBT). In fiscal 2018, all of the costs related to pre-commercial research and development of 5G ~~(fifth generation) technology,~~technologies, of which we recorded $115 million and $216 million ~~was recorded~~ in the ~~three~~second quarter and first six months ~~ended March 25,~~of fiscal 2018, respectively, ~~are~~were included in unallocated corporate research and development ~~expenses, whereas similar~~expenses. Beginning in the first quarter of fiscal 2019, all research and development costs associated with 5G technologies are included in segment results. Additionally, beginning in the first quarter of fiscal 2019, certain research and development costs associated with early research and development that were historically included in our QCT segment are allocated to our QTL segment. The net effect of these changes negatively impacted QTL’s EBT by $119 million and $241 million in the second quarter and first six months of fiscal 2019, respectively. QCT's EBT was positively impacted by $32 million and $44 million in the second quarter and first six months of fiscal 2019, respectively.

During the first quarter of fiscal 2019, we combined our Small Cells business, which sells products designed for the implementation of small cells to address the challenge of meeting the increased demand for mobile data, into our QCT segment. Revenues and operating results related to the ~~research~~Small Cells business were included in nonreportable segments through the end of fiscal 2018. Prior period segment information has not been adjusted to conform to the new segment presentation as such adjustments are insignificant.

The table below presents revenues, EBT and ~~development of~~

total assets for reportable segments (in millions):



	Three Months Ended						Six Months Ended
	March 31, 2019			March 25, 2018			March 31, 2019			March 25, 2018
Revenues
QCT	$	3,722		$	3,897		$	7,461		$	8,548
QTL	1,122			1,219			2,141			2,485
QSI	98			30			125			60
Reconciling items	40			74			97			162
Total	$	4,982		$	5,220		$	9,824		$	11,255
EBT
QCT	$	542		$	608		$	1,140		$	1,563
QTL	674			809			1,264			1,664
QSI	17			40			25			51
Reconciling items	(427		)	(1,140		)	(1,063		)	(3,020		)
Total	$	806		$	317		$	1,366		$	258



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

~~other technology, including 3G (third generation) and 4G (fourth generation) technology, were recorded in both the QCT and QTL segments.~~

~~The table below presents revenues, EBT and total assets for reportable segments (in millions):~~

Three Months Ended Six Months Ended
March 25,
2018 March 26,
2017 March 25,
2018 March 26,
2017
Revenues
QCT $ 3,897
$ 3,676
$ 8,548
$ 7,777
QTL 1,260
2,249
2,559
4,060
QSI 30
—
60
14
Reconciling items 74
(909 ) 162
(836 )
Total $ 5,261
$ 5,016
$ 11,329
$ 11,015
EBT
QCT $ 608
$ 475
$ 1,563
$ 1,199
QTL 850
1,959
1,738
3,492
QSI 40
—
51
(17 )
Reconciling items (1,140 ) (1,577 ) (3,020 ) (2,947 )
Total $ 358
$ 857
$ 332
$ 1,727


	March 25, 2018		September 24, 2017		March 31, 2019		September 30, 2018
Assets
QCT	$	3,336	$	3,830	$	2,948	$	3,041
QTL	1,907		1,735		2,405		1,472
QSI	1,193		1,037		1,393		1,279
Reconciling items	57,690		58,884		27,277		26,926
Total	$	64,126	$	65,486	$	34,023	$	32,718

Reconciling items for revenues and EBT in the previous table were as follows (in millions):


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	March 25, 2018			March 26, 2017			March 25, 2018			March 26, 2017			March 31, 2019			March 25, 2018			March 31, 2019			March 25, 2018
Revenues
Nonreportable segments	$	74		$	65		$	162		$	138		$	40		$	74		$	97		$	162
Reduction to revenues related to BlackBerry arbitration decision	—			(974		)	—			(974		)
	$	74		$	(909	)	$	162		$	(836	)	$	40		$	74		$	97		$	162
EBT
Reduction to revenues related to BlackBerry arbitration decision	$	—		$	(974	)	$	—		$	(974	)
Unallocated cost of revenues	(111		)	(119		)	(228		)	(213		)	$	(104	)	$	(111	)	$	(218	)	$	(228	)
Unallocated research and development expenses	(271		)	(277		)	(551		)	(546		)	(190		)	(271		)	(337		)	(551		)
Unallocated selling, general and administrative expenses	(258		)	(138		)	(420		)	(283		)	(84		)	(258		)	(148		)	(420		)
Unallocated other expenses (Note 2)	(310		)	(78		)	(1,493		)	(954		)
Unallocated other income (expenses) (Note 2)													18			(310		)	(130		)	(1,493		)
Unallocated interest expense	(179		)	(106		)	(348		)	(195		)	(159		)	(179		)	(313		)	(348		)
Unallocated investment and other income, net	82			223			206			407			109			82			130			206
Nonreportable segments	(93		)	(108		)	(186		)	(189		)	(17		)	(93		)	(47		)	(186		)
	$	(1,140	)	$	(1,577	)	$	(3,020	)	$	(2,947	)	$	(427	)	$	(1,140	)	$	(1,063	)	$	(3,020	)

Unallocated acquisition-related expenses were comprised as follows (in millions):



	Three Months Ended				Six Months Ended
	March 31, 2019		March 25, 2018		March 31, 2019		March 25, 2018
Cost of revenues	$	99	$	102	$	202	$	208
Research and development expenses	1		2		2		3
Selling, general and administrative expenses	7		214		14		290

Note 8. Cost Plan

In the second quarter of fiscal 2018, we announced a Cost Plan designed to align our cost structure to our long-term margin targets. As part of this plan, we initiated a series of targeted actions across our businesses with the objective to reduce annual costs by $1 billion, excluding incremental costs resulting from any future acquisition of a business. Actions taken under this plan have been completed and have resulted in us achieving substantially all of this target in fiscal 2019 based on our run rate exiting the second quarter of fiscal 2019, excluding litigation costs that are in excess of the baseline spend.

During the six months ended March 31, 2019, we recorded net restructuring and restructuring-related charges related to our Cost Plan of $204 million in other expenses. This consisted of restructuring-related charges of $156 million, primarily related to asset impairment charges (and included a $45 million net gain from the sale of certain assets related to wireless electric vehicle charging applications and the sale of our mobile health nonreportable segment), and restructuring charges of $48 million, primarily related to severance and consulting costs. Since inception of the Cost Plan, we have incurred a total of $892 million in net restructuring and restructuring-related charges. The remaining restructuring and restructuring-related charges to be incurred related to the plan are expected to be negligible.



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

~~Unallocated acquisition-related expenses were comprised as follows (in millions):~~

Three Months Ended Six Months Ended
March 25,
2018 March 26,
2017 March 25,
2018 March 26,
2017
Cost of revenues $ 102
$ 106
$ 208
$ 191
Research and development expenses 2
12
3
14
Selling, general and administrative expenses 214
57
290
118

~~Note 8. Acquisitions~~

~~On October 27, 2016, the Company announced~~The restructuring accrual, a ~~definitive agreement (the Purchase Agreement) under~~portion of which ~~Qualcomm River Holdings, B.V. (Qualcomm River Holdings), an indirect, wholly owned subsidiary of QUALCOMM Incorporated, will acquire NXP Semiconductors N.V. (NXP). NXP is a leader~~was included in high-performance, mixed-signal semiconductor electronics in automotive, broad-based microcontrollers, secure identification, network processing and RF power products. Pursuant to the Purchase Agreement, Qualcomm River Holdings has commenced a tender offer to acquire all of the issued and outstanding common shares of NXP. On February 20, 2018, Qualcomm River Holdings and NXP entered into Amendment No. 1 to the Purchase Agreement, which (i) increased the price payable in the tender offer from $110.00 per share in cash to $127.50 per share in cash, representing estimated total cash consideration to be paid to NXP’s shareholders of $44 billion, and (ii) reduced the Minimum Condition (as defined in the Purchase Agreement) from 80% of the issued and outstanding common shares of NXP to 70% of the issued and outstanding common shares of NXP. On April 19, 2018, Qualcomm River Holdings and NXP entered into Amendment No. 2 to the Purchase Agreement (Amendment No. 2), which, among other things, extended the End Date (as defined in the Purchase Agreement) from April 25, 2018 to July 25, 2018.

~~The transaction is subject to receipt of regulatory clearance from the Ministry of Commerce in the People’s Republic of China (MOFCOM)~~payroll and other ~~closing conditions, including~~benefits related liabilities with the ~~tender of at least 70% of the issued and outstanding common shares of NXP~~remainder included in the tender offer. At an Extraordinary General Meeting of NXP’s shareholders held on January 27, 2017, NXP’s shareholders approved certain matters relating to the transaction, including the appointment of designees of Qualcomm River Holdings to NXP’s board of directors (effective upon the closing of the transaction) and certain transactions that are intended to be consummated after the completion of the tender offer.

In May 2017, the Company issued an aggregate principal amount of $11.0 billion of unsecured floating- and fixed-rate notes with varying maturities, of which a portion will be used to fund the purchase price and other related transactions. In addition, the Company has secured $4.0 billion and $3.0 billion in committed financing through the 2016 Term Loan Facility and the 2018 Term Loan Facility, respectively, which arecurrent liabilities, is expected to be ~~drawn on at~~substantially paid within the close of the NXP transaction. The Company has also secured $3.0 billion in committed financing through the 2018 Revolving Credit Facility, which is available, in part, to finance the transaction (Note 5). The remaining amount will be funded with cash held by foreign entities.

~~Qualcomm River Holdings~~next 12 months. At March 31, 2019 and NXP may terminate the Purchase Agreement under certain circumstances. If the Purchase Agreement is terminated in certain circumstances, including termination by NXP to enter into a superior proposal for an alternative acquisition transaction or a termination following a change of recommendation by NXP’s board of directors, NXP will be required to pay Qualcomm River Holdings a termination fee of $1.25 billion. If the Purchase Agreement is terminated under certain circumstances involving the failure to obtain the required regulatory approvals or the failure of NXP to complete certain pre-closing reorganization steps in all material respects, Qualcomm River Holdings will be required to pay NXP a termination fee of $2.0 billion. Under Amendment No. 2, in addition to its existing rights, NXP will be entitled to receive the termination fee (i) if the Purchase Agreement is terminated in accordance with its terms for any reason (subject to certain exceptions) and, at the time of any such termination, approval by MOFCOM, or in any jurisdiction where the parties’ previously obtained clearance will expire or where the applicable antitrust authority has required or requested a resubmission for clearance, has not been received, or (ii) at any time after July 25, 2018 if, at such time, approval by MOFCOM, or in any jurisdiction where the parties’ previously obtained clearance will expire or where the applicable antitrust authority has required or requested a resubmission for clearance, has not been received.

In November 2016, as required by the Purchase Agreement, Qualcomm River Holdings entered into four letters of credit for an aggregate amount of $2.0 billion related to the potential termination fee payable to NXP. Pursuant to the terms of each letter of credit, NXP will have the right to draw amounts to fund certain termination compensation owed by Qualcomm River Holdings to NXP if the Purchase Agreement is terminated under certain circumstances, as described above. The letters of credit expire on JuneSeptember 30, 2018, ~~or if drawn on by NXP or surrendered by Qualcomm River Holdings, provided that under~~



~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

~~Amendment No. 2, Qualcomm River Holdings is required to cause~~ the letters of credit to be amended to, among other things, extend the expiration date. Each letter of credit is required to be fully cash collateralized in an amount equal to 100% of its face value through deposits with the issuers of the letters of credit. Qualcomm River Holdings is restricted from using the funds deposited as collateral while the letters of credit are outstanding. At March 25, 2018, the letters of credit were fully collateralized through bank timerestructuring accrual was $25 million and ~~demand deposits, which were included in other noncurrent assets.~~$83 million, respectively.

~~Note 9. Cost Plan~~

On January 16, 2018, the Company announced a Cost Plan designed to align the Company’s cost structure to its long-term margin targets. As part of this plan, the Company has initiated a series of targeted actions across the Company’s businesses to reduce annual costs by $1 billion, excluding incremental costs resulting from any future acquisition of a business. The Company expects these cost reductions to be fully captured in fiscal 2019.

In connection with this plan, the Company expects to incur total restructuring and restructuring-related charges of approximately $400 million to $525 million, which primarily consist of severance costs, and the majority of which are expected to be settled in cash. During the three months ended March 25, 2018, the Company recorded restructuring and restructuring-related charges of $310 million in other expenses (Note 2), which consisted of restructuring charges of $277 million, primarily related to severance costs, and restructuring-related charges of $33 million related to certain asset impairments. A negligible amount of cash payments was made related to this plan in the three months ended March 25, 2018.

Note ~~10.~~9. Fair Value Measurements

The following table presents ~~the Company’s~~our fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at March ~~25, 2018~~31, 2019 (in millions):


	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	26,328	$	10,573	$	—	$	36,901	$	4,830	$	3,560	$	—	$	8,390
Marketable securities:
U.S. Treasury securities and government-related securities	10		2		—		12
Corporate bonds and notes	—		1,498		—		1,498		—		51		—		51
Mortgage- and asset-backed and auction rate securities	—		73		35		108
Equity and preferred securities and equity funds	40		—		—		40
Auction rate securities									—		—		35		35
Equity securities									145		—		—		145
Total marketable securities	50		1,573		35		1,658		145		51		35		231
Derivative instruments	—		7		—		7		—		12		—		12
Other investments	408		—		13		421		398		—		63		461
Total assets measured at fair value	$	26,786	$	12,153	$	48	$	38,987	$	5,373	$	3,623	$	98	$	9,094
Liabilities
Derivative instruments	$	—	$	65	$	—	$	65	$	—	$	20	$	—	$	20
Other liabilities	408		—		194		602		399		—		76		475
Total liabilities measured at fair value	$	408	$	65	$	194	$	667	$	399	$	20	$	76	$	495

Activity between Levels of the Fair Value Hierarchy. ~~There were no transfers between Level 1 and Level 2 in the six months ended March 25, 2018 and March 26, 2017.~~ There were no transfers of marketable securities into or out of Level 3 during the six months ended March ~~25, 2018~~31, 2019 and March ~~26, 2017.~~25, 2018. Other investments and other liabilities included in Level 3 at March ~~25, 2018~~31, 2019 were comprised of ~~convertible~~ debt instruments issued by private companies and contingent consideration related to business combinations, respectively. There were no transfers of ~~convertible~~ debt instruments or contingent consideration amounts into or out of Level 3 during the six months ended March 31, 2019 and March 25, 2018.

Assets Measured and Recorded at Fair Value on a Nonrecurring Basis. During the six months ended March 31, 2019, certain intangible assets and goodwill were written down to their estimated fair values (Note 8). We also measured certain non-marketable equity securities received as non-cash consideration at fair value on a nonrecurring basis (Note 2). The estimation of fair value required the use of significant unobservable inputs, and as a result, the fair value measurements were classified as Level 3. During the six months ended March 31, 2019 and March 25, 2018, ~~and March 26, 2017.~~we did not have any other significant assets or liabilities that were measured at fair value on a nonrecurring basis.



~~QUALCOMM Incorporated~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(Unaudited)~~

Note ~~11.~~10. Marketable Securities

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

Current Noncurrent
March 25,
2018 September 24,
2017 March 25,
2018 September 24,
2017
Available-for-sale:
U.S. Treasury securities and government-related securities $ 12
$ 23
$ —
$ 959
Corporate bonds and notes 1,498
2,014
—
271
Mortgage- and asset-backed and auction rate securities 73
93
35
40
Equity and preferred securities and equity funds 40
36
—
—
Debt funds —
109
—
—
Total available-for-sale 1,623
2,275
35
1,270
Time deposits 2
4
—
—
Total marketable securities $ 1,625
$ 2,279
$ 35
$ 1,270



	Current				Noncurrent (1)
	March 31, 2019		September 30, 2018		March 31, 2019		September 30, 2018
Available-for-sale debt securities:
Corporate bonds and notes	$	51	$	144	$	—	$	—
Auction rate securities	—		—		35		35
Total available-for-sale debt securities	51		144		35		35
Equity securities	144		167		1		—
Total marketable securities	$	195	$	311	$	36	$	35

~~The contractual maturities of available-for-sale debt~~(1) Noncurrent marketable securities were ~~as follows (in millions):~~

March 25,
2018
Years to Maturity
Less than one year $ 610
One to five years 900
Five to ten years —
Greater than ten years —
No single maturity date 108
Total $ 1,618

~~Debt securities with no single maturity date~~ included ~~mortgage- and asset-backed securities and auction rate securities.~~in other assets.

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

For the three months ended For the six months ended
March 25,
2018 March 26,
2017 March 25,
2018 March 26,
2017
Gross realized gains $ 11
$ 57
$ 13
$ 303
Gross realized losses —
—
—
(107 )
Net realized gains $ 11
$ 57
$ 13
$ 196



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

~~Available-for-sale~~The contractual maturities of available-for-sale debt securities were ~~comprised~~ as follows (in millions):

March 25, 2018 September 24, 2017
Equity securities
Cost $ 8
$ 8
Unrealized gains 32
28
Fair value 40
36
Debt securities (including debt funds)
Cost 1,621
3,497
Unrealized gains 3
13
Unrealized losses (6 ) (1 )
Fair value 1,618
3,509
$ 1,658
$ 3,545



	March 31, 2019
Years to Maturity
Less than one year	$	51
No single maturity date	35
Total	$	86

~~In connection~~Debt securities with no single maturity date included auction rate securities.

During the ~~proposed NXP transaction (Note 8),~~three and six months ended March 31, 2019, there were no realized gains or losses on sales of available-for-sale debt securities, and during the Company divested a substantial portion of its marketable securities portfolio in order to finance, in part, that transaction. Marketable securities that are expected to be used to finance the NXP transaction were fully liquidatedthree and ~~classified as cash and cash equivalents at~~six months ended March 25, ~~2018. Given~~2018, gross realized gains were $11 million. As of March 31, 2019 and September 30, 2018, unrealized gains and losses on available for sale debt securities were negligible. As of September 30, 2018, available-for-sale securities also included equity securities with a fair value of $167 million, including an unrealized gain of $63 million.

Note 11. Revision of Prior Period Financial Statements

We revised certain prior period financial statements for an immaterial error related to the ~~Company’s intention~~recognition of certain royalty revenues of our QTL segment (Note 1). A summary of revisions to ~~sell certain marketable securities, the Company recorded other-than-temporary impairment losses in fiscal 2017~~our previously reported financial statements presented herein for ~~certain marketable securities and no additional losses were recorded in~~comparative purposes is included below (in millions, except per share data).

Revised Consolidated Balance Sheet.



	As of September 30, 2018
	As reported		Adjustment			As revised
Deferred tax assets (non-current)	$	904	$	32		$	936
Total assets	32,686		32			32,718
Other current liabilities	6,825		153			6,978
Total current liabilities	11,236		153			11,389
Total liabilities	31,758		153			31,911
Retained earnings	663		(121		)	542
Total stockholders’ equity	928		(121		)	807
Total liabilities and stockholders’ equity	32,686		32			32,718

Revised Consolidated Statements of Operations.



	Three Months Ended March 25, 2018							Six Months Ended March 25, 2018
	As reported		Adjustment			As revised		As reported			Adjustment			As revised
Licensing revenues	$	1,325	$	(41	)	$	1,284	$	2,690		$	(74	)	$	2,616
Total revenues	5,261		(41		)	5,220		11,329			(74		)	11,255
Operating income	441		(41		)	400		471			(74		)	397
Income before income taxes	358		(41		)	317		332			(74		)	258
Income tax benefit (expense)	5		8			13		(5,922		)	11			(5,911		)
Net income (loss)	363		(33		)	330		(5,590		)	(63		)	(5,653		)
Basic earnings (loss) per share	0.25		(0.03		)	0.22		(3.78		)	(0.04		)	(3.82		)
Diluted earnings (loss) per share	0.24		(0.02		)	0.22		(3.78		)	(0.04		)	(3.82		)



QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Revised Consolidated Statements of Comprehensive Income (Loss).



	Three Months Ended March 25, 2018							Six Months Ended March 25, 2018
	As reported		Adjustment			As revised		As reported			Adjustment			As revised
Net income (loss)	$	363	$	(33	)	$	330	$	(5,590	)	$	(63	)	$	(5,653	)
Total comprehensive income (loss)	523		(33		)	490		(5,429		)	(63		)	(5,492		)

Revised Consolidated Statement of Cash Flows.

We revised our condensed consolidated statement of cash flows for the six months ended March 25, 2018 for this correction, which had no impact to net cash provided by operating activities in the period.



	Six Months Ended March 25, 2018
	As reported			Reclassification adjustment (1)			Revision adjustment			As revised
Operating Activities:
Net loss	$	(5,590	)	$	—		$	(63	)	$	(5,653	)
Income tax provision in excess of (less than) income tax payments	5,477			—			(11		)	5,466
Interest expense in excess of interest payments	207			(207		)	—			—
Other items, net	46			6			—			52
Other assets	70			(12		)	—			58
Payroll, benefits and other liabilities	1,166			213			74			1,453
Net cash provided by operating activities	2,278			—			—			2,278

(1) Certain previously reported amounts have been reclassified to conform to the current year presentation.

Revised Segment Information.

QTL segment results were revised for this correction (Note ~~2). For~~7), which resulted in a decrease in QTL revenues and EBT (earnings before income taxes) of $41 million for the ~~available-for-sale securities that are not expected to be sold to finance the NXP transaction, the Company concluded that the unrealized losses were temporary at~~three months ended March 25, ~~2018. Further,~~2018 and $74 million for ~~debt securities~~the six months ended March 25, 2018.

Note 12. Subsequent Event

On April 16, 2019, we entered into settlement agreements with ~~unrealized losses,~~Apple and its contract manufacturers to dismiss all outstanding litigation between the ~~Company did not have~~parties. We also entered into a six-year global patent license agreement with Apple, effective as of April 1, 2019, which includes an option for Apple to extend for two additional years, and a multi-year chipset supply agreement with Apple. While we continue to assess the ~~intent~~accounting impacts of the agreements, we currently expect to ~~sell, nor was it more likely than not that~~record revenues from previously satisfied performance obligations in the ~~Company would be required~~third quarter of fiscal 2019 resulting from the settlement, consisting of a payment from Apple and the release of our obligations to ~~sell, such securities before recovery~~pay or ~~maturity.~~refund Apple and the contract manufacturers certain customer-related liabilities. Such event is considered a nonrecognized subsequent event.

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 “Part I, Item 1” of this Quarterly Report and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year ended September ~~24, 2017~~30, 2018 contained in our ~~2017~~2018 Annual Report on Form 10-K. We have revised our prior period financial statements to reflect the correction of an immaterial error as described in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 1, Basis of Presentation and Significant Accounting Policies Update” and “Note 11. Revision of Prior Period Financial Statements.”

This Quarterly Report (including, but not limited to, this section regarding Management’s Discussion and Analysis of Financial Condition and Results of Operations) contains forward-looking statements regarding our business, investments, financial condition, results of operations and prospects. Additionally, statements concerning future matters ~~such as the development of new products, enhancements of technologies, industry and market trends, sales levels, expense levels and other statements regarding matters~~ that are not historical are forward-looking ~~statements.~~statements, such as statements regarding our expectations concerning: industry, market, business, commercial, competitive or consumer trends; our businesses, growth potential or strategies, or factors that may impact them; attacks on our licensing business, including by licensees, customers, governments, governmental agencies or regulators, standards bodies or others; other legal or regulatory matters; competition; product or technology trends; new or expanded product areas, adjacent industry segments or applications; costs or expenditures including research and development, selling, general and administrative, restructuring or restructuring-related charges, working capital or information technology systems; our financing, stock repurchase or dividend programs; strategic investments or acquisitions; adoption and application of future accounting guidance; tax law changes; our tax structure or strategies; or the potential business or financial statement impacts of any of the above. 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.

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 and actual results and outcomes may differ 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 discussed under the 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.

Second Quarter of Fiscal ~~2018~~2019 Overview and Other Recent Events

Revenues for the second quarter of fiscal ~~2018~~2019 were ~~$5.3~~$5.0 billion, ~~an increase~~a decrease of 5% compared to the year ago quarter, with net income ~~attributable to Qualcomm~~ of ~~$363~~$663 million, ~~a decrease~~an increase of ~~52%~~101% compared to the year ago quarter. Highlights and other events from the second quarter of fiscal ~~2018~~2019 and other recent events included:

On April 16, 2019, we entered into settlement agreements with Apple and its contract manufacturers to dismiss all outstanding litigation between the parties. We also entered into a six-year global patent license agreement with Apple, effective as of April 1, 2019, which includes an option for Apple to extend for two additional years, and a multi-year chipset supply agreement with Apple.

•

The transition of wireless networks and devices to 3G/4G ~~(CDMA single-mode, OFDMA single-mode~~(CDMA-single mode, OFDMA-single mode and CDMA/OFDMA multi-mode) continued around the world. 3G/4G connections grew sequentially by approximately 3% to approximately ~~5.0~~5.7 billion, which was approximately ~~64%~~73% of total mobile connections at the end of the second quarter of fiscal ~~2018.~~2019.⁽¹⁾

We continue to invest significant resources toward advancements primarily in support of 4G- and 5G-based technologies as well as other technologies to extend the demand for our products and generate new or expanded licensing opportunities, including within adjacent industry segments outside traditional cellular industries, such as automotive, the Internet of Things (IoT) and networking.

QCT results ~~were positively impacted by results from our RF360 Holdings joint venture, which was formed~~ in the second quarter of fiscal ~~2017.~~2019 were negatively impacted by lower modem sales to Apple.

We adopted new revenue recognition accounting guidance in the first quarter of fiscal 2019 that requires us to estimate and recognize QTL royalties in the period in which the associated sales occur, resulting in an acceleration of royalty revenues by one quarter compared to the prior method. As a result of estimation, adjustments are recorded

in subsequent quarters to reflect changes in estimates as new information becomes available, primarily when actual amounts are reported by licensees. Prior period results have not been restated for the adoption of the new accounting guidance and continue to be reported in accordance with the accounting guidance in effect for those periods.

QTL results were negatively impacted by our ~~continued~~prior dispute with Apple and its contract ~~manufacturers (who are Qualcomm licensees), as well as~~manufacturers. Revenues in the ~~previously disclosed dispute with another licensee. We~~second quarter of fiscal 2019 did not ~~record any~~include royalties due on sales of Apple or other products by Apple’s contract manufacturers. QTL revenues in the second quarter of fiscal ~~2018~~2019 included $150 million of royalties due under an interim agreement with Huawei. This represents a minimum, non-refundable amount for royalties due ~~on sales of Apple’s or the other licensee’s products.~~

On November 6, 2017, Broadcom Limited (Broadcom) announced an unsolicited proposal to acquire all of the outstanding shares of our common stock (collectively with Broadcom’s subsequent proposal, the Proposed Transaction). On December 4, 2017, Broadcom delivered a Notice of Stockholder Proposal and Nomination of Candidates for Election to the Board of Qualcomm informing the Company, among other things, of Broadcom’s intent to nominate 11 directors (later reduced to 6) to Qualcomm’s Board, in opposition to the Board’s slate of director nominees. On January 5, 2018, Broadcom filed its definitive proxy statement. On March 4, 2018, the Committee on Foreign Investment in the United States (CFIUS) issued an Interim Order Regarding the Proposed Acquisition of Qualcomm, Inc. by Broadcom Limited stating that there were national security risks to the United States that arose as a result of, and in connection with, the Proposed Transaction, and prohibiting Qualcomm from accepting or taking any action in furtherance of accepting the Proposed Transaction or any other proposed merger, acquisition or takeover agreement with Broadcom. On March 12, 2018, the President of the United States of

America issued an Order Regarding the Proposed Takeover of Qualcomm Incorporated by Broadcom Limited (the Presidential Order) that prohibited the Proposed Transaction and any substantially equivalent merger, acquisition or takeover, disqualified all of Broadcom’s nominees from standing for election as directors to the Board of Qualcomm, and ordered Qualcomm and Broadcom to immediately and permanently abandon the Proposed Transaction. On March 14, 2018, in order to comply with the Presidential Order, Broadcom withdrew the Proposed Transaction and its slate of director nominees. Responding to the Proposed Transaction required us to devote significant resources and Board and management time and attention and incur expenses and costs in the second quarter of fiscal ~~2018.~~2019 by Huawei while negotiations continue. This payment does not reflect the full amount of royalties due under the underlying license agreement.

~~On January 16,~~In the second quarter of fiscal 2018, we announced a Cost Plan designed to align our cost structure to our long-term margin ~~targets. As part of this plan,~~targets, under which we ~~have~~ initiated a series of targeted actions across our businesses with the objective to reduce annual costs by $1 billion, excluding incremental costs resulting from any future acquisition of a business. ~~We expect these cost reductions to be fully captured~~Actions taken under this plan have been completed and have resulted in us achieving substantially all of this target in fiscal ~~2019. In~~2019 based on our run rate exiting the second quarter of fiscal ~~2018, we recorded restructuring and restructuring-related charges~~2019, excluding litigation costs that are in excess of ~~$310 million related to~~ the ~~plan.~~baseline spend.


(1)	According to GSMA Intelligence estimates as of April ~~23, 2018~~29, 2019 (estimates excluded Wireless Local Loop).

Our Business and Operating Segments

We develop and commercialize foundational technologies and products used in mobile devices and other wireless products, including network equipment, broadband gateway equipment and consumer electronics devices. We derive revenues principally from sales of integrated circuit products and licensing our intellectual property, including patents, software and other rights.

We are organized on the basis of products and services and have three reportable segments. We conduct business primarily through our QCT (Qualcomm CDMA Technologies) semiconductor business and our QTL (Qualcomm Technology Licensing) licensing business. QCT develops and supplies integrated circuits and system software based on CDMA, OFDMA and other technologies for use in mobile devices, wireless networks, devices used in IoT, broadband gateway equipment, consumer electronic devices and automotive telematics and infotainment systems. QTL grants licenses to use portions of its intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products. Our QSI (Qualcomm Strategic Initiatives) reportable segment makes strategic investments. We also have nonreportable segments, including ~~our mobile health, data center, small cell~~Qualcomm Government Technologies or QGOV (formerly Qualcomm Cyber Security Solutions) and other wireless technology and service initiatives.

Our reportable segments are operated by QUALCOMM Incorporated and its direct and indirect subsidiaries. ~~Substantially all~~All of our products and services businesses, including QCT, and ~~substantially~~ all of our engineering, research and development functions, are operated by Qualcomm Technologies, Inc. (QTI), a wholly-owned subsidiary of QUALCOMM Incorporated, and QTI’s subsidiaries. QTL is operated by QUALCOMM Incorporated, which owns the vast majority of our patent portfolio. Neither QTI nor any of its subsidiaries has any right, power or authority to grant any licenses or other rights under or to any patents owned by QUALCOMM Incorporated.

Seasonality. Many of our products and/or much of our intellectual property are incorporated into consumer wireless devices, which are subject to seasonality and other fluctuations in demand. As a result, QCT has historically tended ~~historically~~ to have stronger sales toward the end of the calendar year as manufacturers prepare for major holiday selling ~~seasons;~~seasons and due to the timing of Apple’s device launch in the fall. Similarly, because QTL ~~recognizes~~historically has recognized royalty revenues when royalties are reported by licensees, QTL has tended to record higher royalty revenues in the first calendar quarter when licensees report their sales made in the fourth calendar quarter. These trends did not occur in the first six months of fiscal 2019 due to QCT’s decline in share of modem sales for iPhone products and the lack of QTL royalty revenues recognized related to the sales of Apple’s products resulting from our prior dispute with Apple and its contract manufacturers. These trends may or may not continue in the future. Additionally, QTL’s revenues have been impacted by the adoption of the new revenue recognition guidance in fiscal 2019 pursuant to which we estimate and recognize sales-based royalties in the period in which the associated sales occur, resulting in an acceleration of royalty revenue recognition by one quarter compared to the prior method. The trends for QTL have been, and may be in the future be, impacted by disputes and/or resolutions with licensees.

We have also experienced fluctuations in revenues due to the timing of conversions and expansions of 3G and 4G networks by wireless operators and the timing of launches of flagship wireless devices and consumer demand for wireless

devices that incorporate our products and/or intellectual property. ~~The seasonal trends for QTL may be impacted by disputes and/or resolutions with licensees.~~ These trends may or may not continue in the ~~future.~~future, including as a result of 5G network deployments and flagship device launches.

Results of Operations


Revenues (in millions)	Revenues (in millions)														Revenues (in millions)
	Three Months Ended							Six Months Ended							Three Months Ended							Six Months Ended
	March 25, 2018		March 26, 2017		Change			March 25, 2018		March 26, 2017		Change			March 31, 2019		March 25, 2018		Change			March 31, 2019		March 25, 2018		Change
Equipment and services	$	3,936	$	3,689	$	247		$	8,639	$	7,828	$	811		$	3,753	$	3,936	$	(183	)	$	7,506	$	8,639	$	(1,133	)
Licensing	1,325		1,327		(2		)	2,690		3,187		(497		)	1,229		1,284		(55		)	2,318		2,616		(298		)
	$	5,261	$	5,016	$	245		$	11,329	$	11,015	$	314		$	4,982	$	5,220	$	(238	)	$	9,824	$	11,255	$	(1,431	)

Second quarter 2019 vs. 2018

The ~~increases~~decrease in ~~equipment and services~~ revenues in the second quarter and first six months of fiscal 2018 were primarily due to increases in QCT and QSI revenues. The decreases in licensing revenues in the second quarter and first six months of fiscal 2018 were primarily due to decreases in QTL revenues, partially offset by the reduction to licensing revenues of $974 million recorded in the second quarter of fiscal ~~2017 related to~~2019 was primarily due to:


-	$227 million in lower equipment and services revenues from our QCT segment


-	$97 million in lower licensing revenues from our QTL segment

First six months 2019 vs. 2018

The decrease in revenues in the ~~BlackBerry arbitration decision.~~first six months of fiscal 2019 was primarily due to:


-	$1.1 billion in lower equipment and services revenues from our QCT segment


-	$344 million in lower licensing revenues from our QTL segment


Costs and Expenses (in millions)	Costs and Expenses (in millions)																Costs and Expenses (in millions)
	Three Months Ended								Six Months Ended								Three Months Ended									Six Months Ended
	March 25, 2018			March 26, 2017			Change		March 25, 2018			March 26, 2017			Change		March 31, 2019			March 25, 2018			Change			March 31, 2019			March 25, 2018			Change
Cost of revenues	$	2,239		$	2,208		$	31	$	4,902		$	4,651		$	251	$	2,179		$	2,239		$	(60	)	$	4,367		$	4,902		$	(535	)
Gross margin	57		%	56		%			57		%	58		%			56		%	57		%				56		%	56		%

~~Excluding the reduction to licensing revenues recorded in the second~~Second quarter ~~of fiscal 2017 related to the BlackBerry arbitration decision, the~~2019 vs. 2018

Gross margin percentage decreased in the second quarter ~~and~~of fiscal 2019 primarily due to:

- decrease in QCT gross margin

First six months 2019 vs. 2018

Gross margin percentage remained flat in the first six months of fiscal ~~2018~~2019 primarily due ~~to decreases in higher margin QTL licensing revenues as a proportion of total revenues, partially offset by increases~~to:

- decrease in QCT gross margin ~~percentage. Our margin percentage may continue to fluctuate~~

+ increase in future periods depending on the mix of segment results as well as products sold, competitive pricing, new product introduction costs and other factors, including disputes and/or resolutions with licensees.QSI gross margin


	Three Months Ended								Six Months Ended								Three Months Ended									Six Months Ended
	March 25, 2018			March 26, 2017			Change		March 25, 2018			March 26, 2017			Change		March 31, 2019			March 25, 2018			Change			March 31, 2019			March 25, 2018			Change
Research and development	$	1,402		$	1,386		$	16	$	2,822		$	2,697		$	125	$	1,308		$	1,402		$	(94	)	$	2,577		$	2,822		$	(245	)
% of revenues	27		%	28		%			25		%	24		%			26		%	27		%				26		%	25		%
Selling, general and administrative	$	869		$	615		$	254	$	1,641		$	1,206		$	435
% of revenues	17		%	12		%			14		%	11		%
Other	$	310		$	78		$	232	$	1,493		$	954		$	539

Second quarter 2019 vs. 2018

The dollar ~~increases~~decrease in research and development expenses in the second quarter ~~and first~~of fiscal 2019 was primarily due to:


-	$92 million decrease primarily driven by actions under our Cost Plan, partially offset by higher costs related to the development of 5G wireless and integrated circuit technologies

First six months ~~of fiscal~~2019 vs. 2018 were primarily attributable to increases of $19 million and $160 million, respectively, in costs related to the development of integrated circuit technologies, including 5G technology and radio frequency front-end (RFFE) technologies from our RF360 Holdings joint venture, which was formed in the second quarter of fiscal 2017.

The ~~increase~~dollar decrease in research and development expenses in the first six months of fiscal 2019 was primarily due to:


-	$244 million decrease primarily driven by actions under our Cost Plan, partially offset by higher costs related to the development of 5G wireless and integrated circuit technologies

In fiscal 2018, ~~was partially offset by a $30 million impairment charge on certain intangible assets~~all of the costs related to pre-commercial research and development of 5G technologies, of which we recorded ~~in the first quarter of fiscal 2017.~~

~~Selling, general and administrative expenses included $145~~$115 million and ~~$250~~$216 million in the second quarter and first six months of fiscal 2018, respectively, ~~related~~were included in unallocated corporate research and development expenses. Beginning in the first quarter of fiscal 2019, all research and

development costs associated with 5G technologies are included in segment results. Additionally, beginning in the first quarter of fiscal 2019, certain research and development costs associated with early research and development that were historically included in our QCT segment are allocated to ~~litigation costs, an increase~~our QTL segment. The net effect of ~~$102~~these changes negatively impacted QTL’s EBT by $119 million and ~~$171~~$241 million in the second quarter and first six months of fiscal 2019, respectively. QCT's EBT was positively impacted by $32 million and $44 million in the second quarter and first six months of fiscal 2019, respectively.



	Three Months Ended									Six Months Ended
	March 31, 2019			March 25, 2018			Change			March 31, 2019			March 25, 2018			Change
Selling, general and administrative	$	573		$	869		$	(296	)	$	1,100		$	1,641		$	(541	)
% of revenues	12		%	17		%				11		%	15		%

Second quarter 2019 vs. 2018

The ~~remaining~~ dollar ~~increases~~decrease in selling, general and administrative expenses in the second quarter ~~and first~~of fiscal 2019 was primarily due to:


-	$217 million in lower professional fees and costs, primarily driven by Broadcom’s withdrawn takeover proposal in fiscal 2018


-	$24 million in lower sales and marketing expenses


-	$24 million in lower employee-related expenses, primarily driven by actions under our Cost Plan

First six months ~~of fiscal~~2019 vs. 2018 were primarily attributable to increases of $77 million in each period in other professional fees and $63 million and $65 million, respectively, in costs related to other legal matters, all of which were primarily driven by Broadcom’s withdrawn takeover proposal, and $14 million and $38 million, respectively, in employee-related expenses, which included our RF360 Holdings joint venture.

The dollar ~~increase~~decrease in selling, general and administrative expenses in the first six months of fiscal ~~2018~~2019 was ~~also attributable to increases of $45~~primarily due to:


-	$285 million in lower professional fees and costs, primarily driven by Broadcom’s withdrawn takeover proposal in fiscal 2018 and our proposed acquisition of NXP Semiconductors N.V. in fiscal 2018


-	$72 million in lower employee-related expenses, primarily driven by actions under our Cost Plan


-	$45 million in bad debt expense recorded in the first quarter of fiscal 2018


-	$45 million in lower sales and marketing expenses

Selling, general and administrative expenses included $126 million ~~in bad debt expenses~~ and ~~$35~~$223 million ~~in marketing expenses.~~

~~Other expenses~~ in the second quarter and first six months of fiscal 2019, respectively, related to litigation costs, a decrease compared to the second quarter and first six months fiscal 2018 ~~included $310~~of $20 million and $29 million, respectively.



	Three Months Ended								Six Months Ended
	March 31, 2019			March 25, 2018		Change			March 31, 2019		March 25, 2018		Change
Other	$	(18	)	$	310	$	(328	)	$	130	$	1,493	$	(1,363	)

Second quarter 2019

Other income in the second quarter of fiscal 2019 consisted of:


+	$43 million gain due to the partial recovery of a fine imposed in fiscal 2009 resulting from our appeal of the Korea Fair Trade Commission (KFTC) decision


-	$25 million in net charges related to our Cost Plan, which included $70 million in restructuring and restructuring-related charges, partially offset by a $45 million net gain from the sale of certain assets related to wireless electric vehicle charging applications and the sale of our mobile health nonreportable segment

Second quarter 2018

Other expenses in the second quarter of fiscal 2018 consisted of:

+ $310 million in restructuring and restructuring-related charges related to our Cost ~~Plan.~~ Plan

First six months 2019

Other expenses in the first six months of fiscal 2019 consisted of:


+	$204 million net charges related to our Cost Plan, which included $249 million in restructuring and restructuring-related charges, partially offset by a $45 million net gain from the sale of certain assets related to wireless electric vehicle charging applications and the sale of our mobile health nonreportable segment


-	$43 million gain due to the partial recovery of a fine imposed in fiscal 2009 resulting from our appeal of the KFTC decision

- $31 million gain related to a favorable legal settlement

First six months 2018

Other expenses in the first six months of fiscal 2018 ~~also included a $1.2~~consisted of:

+ $1.2 billion charge related to the ~~European Commission (EC) fine. Other expenses in the second quarter of fiscal 2017 consisted of $53 million in foreign currency losses related to the Korea Fair Trade Commission (KFTC)~~EC fine ~~which was accrued in the first quarter of fiscal 2017, and $25~~

+ $310 million in restructuring and restructuring-related charges related to our ~~Strategic Realignment Plan. Other expenses in the first six months of fiscal 2017 consisted of a~~ Cost Plan~~$921 million~~ ~~charge related to the KFTC fine, including related foreign currency losses, and~~ ~~$33 million~~ ~~in restructuring and restructuring-related charges related to our Strategic Realignment Plan.~~


Interest Expense and Investment and Other Income, Net (in millions)	Interest Expense and Investment and Other Income, Net (in millions)																		Interest Expense and Investment and Other Income, Net (in millions)
	Three Months Ended									Six Months Ended									Three Months Ended									Six Months Ended
	March 25, 2018			March 26, 2017			Change			March 25, 2018			March 26, 2017			Change			March 31, 2019			March 25, 2018			Change			March 31, 2019			March 25, 2018			Change
Interest expense	$	179		$	107		$	72		$	350		$	197		$	153		$	162		$	179		$	(17	)	$	317		$	350		$	(33	)

Investment and other income, net
Interest and dividend income	$	154		$	153		$	1		$	280		$	320		$	(40	)	$	80		$	154		$	(74	)	$	155		$	280		$	(125	)
Net realized gains on marketable securities	3			67			(64		)	13			206			(193		)
Net realized gains on other investments	47			21			26			60			30			30
Net gains (losses) on marketable securities																			40			3			37			(33		)	13			(46		)
Net gains on other investments																			6			47			(41		)	42			60			(18		)
Impairment losses on marketable securities and other investments	(11		)	(5		)	(6		)	(20		)	(148		)	128			(60		)	(11		)	(49		)	(69		)	(20		)	(49		)
Equity in net losses of investees	(17		)	(14		)	(3		)	(38		)	(11		)	(27		)	(36		)	(17		)	(19		)	(58		)	(38		)	(20		)
Net losses on foreign currency transactions	(90		)	—			(90		)	(93		)	—			(93		)
Net gains on derivative instruments	10			13			(3		)	9			20			(11		)
Net (losses) gains on foreign currency transactions																			(1		)	(90		)	89			5			(93		)	98
Net (losses) gains on derivative instruments																			(1		)	10			(11		)	(9		)	9			(18		)
	$	96		$	235		$	(139	)	$	211		$	417		$	(206	)	$	28		$	96		$	(68	)	$	33		$	211		$	(178	)

~~The increases in interest expense in~~In the ~~second~~fourth quarter ~~and first six months~~ of fiscal 2018, ~~were primarily attributable~~we implemented a stock repurchase program to ~~the issuance~~repurchase up to $30 billion of ~~an aggregate principal~~our outstanding common stock. Stock repurchases made under this program have significantly reduced the amount of ~~$11.0 billion of unsecured floating-~~our cash, cash equivalents and ~~fixed-rate notes in May 2017. In the first quarter of fiscal 2017, we began divesting a substantial portion of our~~ marketable securities, ~~portfolio~~resulting in ~~order~~a decrease to ~~finance, in part, the proposed acquisition of NXP. As a result, we recorded net realized gains~~interest and impairment losses on such marketable securities that we sold and expected to sell before their anticipated recovery, respectively, in fiscal 2017. The net losses on foreign currency transactions in the second quarter and first six months of fiscal 2018 were primarily attributable to currency exchange rate movements on amounts accrued for the EC and Taiwan Fair Trade Commission (TFTC) fines.dividend income.

Income Tax Expense (in millions)
Three Months Ended Six Months Ended
March 25, 2018 March 26, 2017 Change March 25, 2018 March 26, 2017 Change
Income tax (benefit) expense $ (5 ) $ 108
$ (113 ) $ 5,922
$ 296
$ 5,626
Effective tax rate (1 %) 13 % (14 %) N/M
17 % N/M



Income Tax Expense (Benefit) (in millions)
	Three Months Ended								Six Months Ended
	March 31, 2019			March 25, 2018			Change		March 31, 2019			March 25, 2018		Change
Income tax expense (benefit)	$	143		$	(13	)	$	156	$	(365	)	$	5,911	$	(6,276	)
Effective tax rate	18		%	N/M			N/M		(27		%)	N/M		N/M

N/M - Not meaningful

The following table summarizes the primary factors that caused our ~~effective~~income tax ~~rates for~~provision to differ from the ~~second quarter of fiscal 2018 and 2017 to be less than~~expected income tax provision at the ~~United States~~U.S. federal statutory rate:

Three Months Ended
March 25,
2018 March 26,
2017
Expected income tax provision at federal statutory tax rate 25 % 35 %
Benefits from foreign income taxed at other than U.S. rates (30 %) (25 %)
Benefits related to the research and development tax credit (8 %) (2 %)
Toll Charge measurement period adjustments 2 % —
Remeasurement of deferred tax assets due to changes in statutory tax rate (4 %) —
Foreign withholding taxes 2 % —
Nondeductible charges related to the KFTC, TFTC and EC investigations 5 % 3 %
Other 7 % 2 %
Effective Tax Rate (1 %) 13 %



	Three Months Ended						Six Months Ended
	March 31, 2019			March 25, 2018			March 31, 2019			March 25, 2018
Expected income tax provision at federal statutory tax rate	$	169		$	78		$	287		$	64
Benefits from establishing new U.S. net deferred tax assets	—			—			(570		)	—
Detriments (benefits) from foreign income taxed at other than U.S. rates	8			(107		)	12			(100		)
Benefits related to the research and development tax credit	(22		)	(29		)	(46		)	(28		)
Benefit from foreign-derived intangible income (FDII) deduction	(48		)	—			(88		)	—
Toll Charge from U.S. tax reform	—			7			—			5,314
Remeasurement of deferred taxes due to changes in statutory tax rate	—			(10		)	—			557
Foreign withholding taxes	—			7			—			93
Nondeductible charges related to the KFTC and EC investigations	—			16			—			15
Other	36			25			40			(4		)
Income tax expense (benefit)	$	143		$	(13	)	$	(365	)	$	5,911

The 2017 Tax Cuts and Jobs Act (the Tax Legislation) insignificantly revised the United States ~~(U.S.) enacted on December 22, 2017 significantly revises the U.S.~~ corporate income tax by, among other things, lowering the corporate income tax rate to 21% ~~effective~~

~~January 1, 2018, implementing a modified territorial tax system~~ and imposing a one-time repatriation tax on deemed repatriated earnings and profits of U.S.-owned foreign subsidiaries (the Toll Charge). The Tax Legislation fundamentally changed the taxation of multinational entities, including a shift from a system of worldwide taxation with deferral to a hybrid territorial system, featuring a participation exemption regime with current taxation of certain foreign income, a minimum tax on low-taxed foreign earnings and new measures to deter base erosion and promote U.S. production. As a fiscal-year taxpayer, certain provisions of the Tax Legislation ~~impacted us in fiscal 2018, including the change in the corporate income tax rate and the Toll Charge, while other provisions will be~~became effective starting at the beginning of fiscal 2019, including new taxes due on certain foreign income, such as GILTI (global intangible low-taxed income), BEAT (base-erosion and anti-abuse tax) and FDII (foreign-derived intangible income). In response to the ~~implementation~~Tax Legislation, we implemented certain tax restructuring in fiscal 2018 and 2019. As a result, without considering the effects of ~~a modified territorial tax system.~~the agreements with Apple and its contract manufacturers signed in April 2019, substantially all of our income is in the U.S. and qualifies for preferential treatment as FDII, and the impact of GILTI and BEAT are negligible. Accordingly, our estimated annual effective tax rate for fiscal 2019 reflects the effects of these components of the Tax Legislation. Our federal statutory income tax rate for fiscal 2018 ~~reflects~~reflected a blended rate of approximately 25%.

~~We have preliminarily accounted for the effects~~As a result of the Tax Legislation, ~~which resulted~~ in ~~a charge~~fiscal 2019, several of ~~$5.87 billion~~our foreign subsidiaries made tax elections to be treated as U.S. branches for federal income tax ~~expense recorded discretely~~purposes (commonly referred to as “check-the-box” elections) effective beginning in fiscal 2018 and 2019. We believe that by treating these foreign subsidiaries as U.S. branches for federal income taxes, rather than controlled foreign corporations, we will significantly reduce the risk of being subject to GILTI and BEAT taxes. As a result of making these check-the-box elections in the first quarter of fiscal ~~2018, comprised~~2019, we recorded a tax benefit of ~~$5.3 billion related~~$570 million due to ~~the estimated Toll Charge and $562 million~~establishing new U.S. net deferred tax assets resulting from the ~~estimated impact~~difference between the GAAP basis and the U.S. federal tax carryover basis of ~~remeasurement of U.S. deferred tax~~the existing assets and liabilities ~~that existed at the end~~ of fiscal 2017 at a lower enacted corporate income tax rate. We recorded a $15 million net tax benefit discretely in the second quarter of fiscal 2018 related to refining estimates associated with the estimated Toll Charge and the estimated impact of remeasurement of U.S. deferred tax assets and liabilities.

Our annual effective tax rate is estimated to be approximately 438% for fiscal 2018 as compared to the 18% effective income tax rate for fiscal 2017, primarily as a result of the estimated charge of $5.95 billion recorded to income tax expense in the first six months of fiscal 2018 related to the combined effect of the Toll Charge, the remeasurement of deferred tax assets and liabilities and our decision to no longer indefinitely reinvest certainthose foreign earnings. Our estimated annual effective tax rate for fiscal 2018 was also impacted by the EC fine recorded in the first quarter of fiscal 2018, which is not deductible for tax purposes and is attributable to a foreign jurisdiction. Tax benefits from foreign income taxed at rates lower than rates in the U.S. are expected to be approximately 31% in fiscal 2018, compared to 32% in fiscal 2017, primarily due to the lower U.S federal statutory income tax rate enacted by the Tax Legislation, partially offset by lower estimated U.S. revenuessubsidiaries, primarily related to ~~decreased royalty revenues from Apple’s contract manufacturers and the other licensee in dispute. The estimated annual effective~~customer incentive liabilities that have not been deducted for tax rate for fiscal 2018 also reflects a blended U.S federal statutory income tax rate of 25% as a result of the Tax Legislation and the increase in our Singapore tax rate due to the expiration of certain tax incentives in March 2017. purposes.

The ~~annual~~ effective tax rate of 18% for fiscal 2017 reflected the KFTC and TFTC fines (see “Notes to Condensed Consolidated Financial Statements, Note 6. Commitments and Contingencies” in this Quarterly Report), which were not deductible for tax purposes and were each attributable to both the U.S. and foreign jurisdictions.

~~The effective tax rate for~~ the second quarter of fiscal ~~2018~~2019 was ~~lower~~higher than the estimated annual effective tax rate ~~primarily resulting from the estimated charge~~ of ~~$5.96 billion recorded discretely to income tax expense in the first quarter of fiscal 2018 related to~~6% benefit (which excluded the effects of ~~certain components~~the agreements with Apple and its contract manufacturers signed in April 2019) primarily due to the tax benefit of ~~the Tax Legislation and the EC fine recorded in the first quarter of fiscal 2018, as well as the $15~~$570 million ~~net tax benefit~~described above, which was recorded discretely in the ~~second quarter of fiscal 2018 related to refining estimates associated with the Tax Legislation.~~

~~The effective tax rates of 13% and 17% for the second quarter and~~ first six months of fiscal 2017, respectively, reflected tax benefits from foreign income taxed at rates lower than rates in the U.S. of 25% and 20%, respectively, primarily resulting from the reduction to our United States revenues related to the BlackBerry arbitration decision, as well as the KFTC fine recorded in the first six months of fiscal 2017.quarter.

Unrecognized tax benefits were ~~$347~~$228 million and ~~$372~~$217 million at March ~~25, 2018~~31, 2019 and September ~~24, 2017,~~30, 2018, respectively. We believe that it is reasonably possible that the total amounts of unrecognized tax benefits at March ~~25, 2018~~31, 2019 may increase or decrease in the next 12 months.

WeThe United States Treasury Department has issued proposed regulations on several provisions of the Tax Legislation, including foreign tax credits, FDII, GILTI, BEAT and interest expense deduction limitations, which are ~~subject~~expected to be finalized in the next several months. When finalized, these proposed regulations may adversely affect our provision for income taxes, in the U.S. and numerous foreign jurisdictions, and are currently under examination by various tax authorities worldwide, most notably in countries where we earn a routine return and tax authorities believe substantial value-add activities are performed. These examinations are at various stages with respect to assessments, claims, deficiencies and refunds, manyresults of which are open for periods after fiscal 2000. We continually assess the likelihood and amount of potential adjustments and adjusts the income tax provision, income taxes payable and deferred taxes in the period in which the facts give rise to a revision become known. As of March 25, 2018, we believe that adequate amounts have been reserved for based on facts known. However, the final determination of tax audits and any related legal proceedings could materially differ from amounts reflected in our income tax provision and the related accruals.operations and/or cash flows.

Segment Results

The following should be read in conjunction with the financial results for the second quarter and first six months of fiscal ~~2018~~2019 for each reportable segment included in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 7. Segment Information.”

QCT Segment

Three Months Ended Six Months Ended
(in millions) March 25,
2018 March 26,
2017 Change March 25,
2018 March 26,
2017 Change
Revenues
QCT $ 3,897
$ 3,676
$ 221
$ 8,548
$ 7,777
$ 771
QTL 1,260
2,249
(989 ) 2,559
4,060
(1,501 )
QSI 30
—
30
60
14
46
EBT (1)
QCT $ 608
$ 475
$ 133
$ 1,563
$ 1,199
$ 364
QTL 850
1,959
(1,109 ) 1,738
3,492
(1,754 )
QSI 40
—
40
51
(17 ) 68
EBT as a % of revenues
QCT 16 % 13 % 3 % 18 % 15 % 3 %
QTL 67 % 87 % (20 %) 68 % 86 % (18 %)



	Three Months Ended									Six Months Ended
(in millions)	March 31, 2019			March 25, 2018			Change			March 31, 2019			March 25, 2018			Change
Revenues
Equipment and services	$	3,622		$	3,849		$	(227	)	$	7,300		$	8,447		$	(1,147	)
Licensing	100			48			52			161			101			60
Total revenues	$	3,722		$	3,897		$	(175	)	$	7,461		$	8,548		$	(1,087	)
EBT (1)	$	542		$	608		$	(66	)	$	1,140		$	1,563		$	(423	)
EBT as a % of revenues	15		%	16		%	(1		%)	15		%	18		%	(3		%)


(1)	Earnings (loss) before taxes.

~~QCT Segment.~~ ~~The increases in QCT revenues in~~During the ~~second~~first quarter ~~and first six months~~ of fiscal ~~2018~~2019, we combined our Small Cells business, which sells products designed for the implementation of small cells to address the challenge of meeting the increased demand for mobile data, into our QCT segment. Revenues and operating results related to the Small Cells business were ~~primarily due~~included in nonreportable segments through the end of fiscal 2018. Prior period segment information has not been adjusted to ~~increases in equipment and services revenues.~~ conform to the new segment presentation as such adjustments are insignificant.

Equipment and services revenues mostly ~~related~~relate to sales of Mobile Station Modem (MSM) and accompanying Radio Frequency (RF), Power Management (PM) and wireless connectivity integrated circuits, were $3.85 billion and $3.63 billion in the second quarter of fiscal 2018 and 2017, respectively, and $8.45 billion and $7.70 billion in the first six months of fiscal 2018 and 2017, respectively.circuits. Approximately ~~187~~155 million and ~~179~~187 million MSM integrated circuits were sold in the second quarter of fiscal ~~2018~~2019 and ~~2017,~~2018, respectively, and approximately 341 million and 424 million ~~and~~ ~~397 million~~ MSM integrated circuits were sold in the first six months of fiscal ~~2018~~2019 and ~~2017,~~2018, respectively.

Second quarter 2019 vs. 2018

The ~~increases~~decrease in QCT equipment and services revenues in the second quarter ~~and first six months~~ of fiscal ~~2018 were~~2019 was primarily due to increases in RFFE product revenues of $314 million and $748 million, respectively, primarily driven by revenues from our RF360 Holdings joint venture, which was formed in the second quarter of fiscal 2017, and increases of $99 million and $374 million, respectively, related to higher MSM and accompanying PM unit shipments. The increases in equipment and services revenues in the second quarter and first six months of fiscal 2018 were partially offset by decreases of $51 million and $179 million, respectively, resulting from the net impact of lower average selling prices and favorable product mix, and decreases in connectivity product revenues of $97 million and $100 million, respectively.to:


-	$424 million in lower MSM and accompanying unit shipments, primarily due to a decline in share at Apple


-	$223 million decrease due to lower average selling prices


+	$453 million due to favorable product mix

QCT EBT as a percentage of revenues decreased in the second quarter ~~and first~~of fiscal 2019 primarily due to:


-	decrease in QCT revenues


-	decrease in gross margin percentage, primarily driven by lower average selling prices, partially offset by higher-margin product mix and lower average unit costs


+	decrease in operating expenses, primarily driven by actions under our Cost Plan

First six months ~~of fiscal~~2019 vs. 2018 ~~increased primarily due to increases in gross margin percentage and the favorable impact of higher revenues relative to operating expenses.~~

The ~~increases~~decrease in QCT ~~gross margin percentage were primarily due to lower average unit costs~~equipment and ~~favorable product mix, partially offset by lower average selling prices.~~

~~QCT accounts receivable decreased by 14%~~services revenues in the first six months of fiscal ~~2018~~2019 was primarily due to:


-	$1.12 billion in lower MSM and accompanying unit shipments, primarily due to a decline in share at Apple


-	$454 million decrease due to lower average selling prices


-	$239 million in lower RFFE product revenues, primarily due to a decline in share at Apple


+	$659 million increase due to favorable product mix

QCT EBT as a percentage of revenues decreased in the first six months of fiscal 2019 primarily due to:


-	decrease in QCT revenues


-	decrease in gross margin percentage, primarily driven by lower average selling prices, partially offset by higher-margin product mix and lower average unit costs


+	decrease in operating expenses, primarily driven by actions under our Cost Plan

QCT accounts receivable decreased by 10% in the first six months of fiscal 2019 from ~~$1.81~~$1.36 billion to ~~$1.56~~$1.22 billion, primarily due to an increase in the portion of customer incentive arrangements that are included in accounts receivable and a ~~16% decline~~decrease in revenues, ~~in the second quarter of fiscal 2018 compared to the fourth quarter of fiscal 2017,~~ partially offset by the timing of integrated circuit shipments. QCT inventories ~~decreased~~increased by ~~12%~~3% in the

first six months of fiscal ~~2018~~2019 from ~~$2.02~~$1.68 billion to ~~$1.77~~$1.72 billion, primarily due to ~~a decrease~~an increase in the overall quantity of units on hand.

QTL ~~Segment.~~Segment



	Three Months Ended									Six Months Ended
(in millions)	March 31, 2019			March 25, 2018			Change			March 31, 2019			March 25, 2018			Change
Licensing revenues	$	1,122		$	1,219		$	(97	)	$	2,141		$	2,485		$	(344	)
EBT	$	674		$	809		$	(135	)	$	1,264		$	1,664		$	(400	)
EBT as a % of revenues	60		%	66		%	(6		%)	59		%	67		%	(8		%)

QTL results in the second quarter and first six months of fiscal 2019 reflected the adoption of the new accounting guidance that requires us to estimate and recognize QTL royalties in the period in which the associated sales occur, resulting in an acceleration of royalty revenues by one quarter as compared to fiscal 2018. Fiscal 2018 results have not been adjusted for the adoption of the new accounting guidance.

QTL results in the first six months of fiscal 2019 and 2018 were negatively impacted by our ~~continued~~prior dispute with Apple and its contract manufacturers. Revenues in the first six months of fiscal 2019 and 2018 did not include royalties due on sales of Apple or other products by Apple’s contract manufacturers. In April 2019, we entered into settlement agreements with Apple and its contract manufacturers ~~(who are Qualcomm licensees), as well as~~to dismiss all outstanding litigation between the ~~previously disclosed dispute~~parties. Further information is provided in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 12. Subsequent Event.”

QTL revenues in the second quarter and first six months of fiscal 2019 included $150 million and $300 million, respectively, of royalties due under an interim agreement with ~~another licensee.~~Huawei. These payments represent minimum, non-refundable amounts for royalties due while negotiations continue. These payments do not reflect the full amount of royalties due under the underlying license agreement. We did not record any revenues in the first six months of fiscal 2018 for royalties due on sales of ~~Apple’s or the other licensee’s~~Huawei’s products. ~~Royalty~~

Second quarter 2019 vs. 2018

QTL licensing revenues ~~related to the products of Apple’s contract manufacturers and the other licensee in dispute were approximately $970 million and $1.7 billion~~ in the second quarter of fiscal 2019, which primarily related to royalties due on sales made by our licensees in the March 2019 quarter, decreased compared to licensing revenues in the second quarter of fiscal 2018, which primarily related to royalties due on sales made by our licensees in the December 2017 quarter, primarily due to:


-	$216 million in lower estimated revenues per unit compared to revenues per reported unit


-	$122 million decrease in estimated sales of CDMA-based products (including multi-mode products that also implement OFDMA) compared to reported sales of CDMA-based products


+	$150 million under an interim agreement with Huawei


+	$91 million increase in royalty revenues recognized related to devices sold in prior periods

QTL EBT as a percentage of revenues decreased in the second quarter of fiscal 2019 primarily due to:


-	higher research and development costs due to an increase in the amount of research and development expense allocated to QTL in fiscal 2019


-	lower QTL revenues


+	lower selling, general and administrative expenses, primarily from lower litigation costs

First six months 2019 vs. 2018

QTL licensing revenues in the first six months of fiscal ~~2017, respectively. The decreases in QTL revenues~~2019, which primarily related to royalties due on sales made by our licensees in the ~~second quarter~~December 2018 and ~~first six months of fiscal 2018 were also attributable~~March 2019 quarters, decreased compared to ~~lower royalty~~licensing revenues ~~recognized related to devices sold~~ in prior periods. Excluding the impact of these items, QTL revenues in the second quarter and first six months of fiscal 2018 increased primarily due to increases in revenues per reported unit. QTL revenues for the first six months of fiscal 2018, ~~were also positively impacted~~which primarily related to royalties due on sales made by ~~an increase~~our licensees in ~~reported sales of CDMA-based products (including multi-mode products that also implement OFDMA).~~the September and December 2017 quarters, primarily due to:


-	$404 million in lower estimated revenues per unit compared to revenues per reported unit


-	$285 million decrease in estimated sales of CDMA-based products (including multi-mode products that also implement OFDMA) compared to reported sales of CDMA-based products


+	$300 million under an interim agreement with Huawei


+	$44 million increase in royalty revenues recognized related to devices sold in prior periods

QTL EBT as a percentage of revenues decreased in the ~~second quarter and~~ first six months of fiscal ~~2018 decreased~~2019 primarily due ~~decreases~~to:


-	higher research and development costs due to an increase in the amount of research and development expense allocated to QTL in fiscal 2019


-	lower QTL revenues


+	lower selling, general and administrative expenses, primarily from lower bad debt expense and lower litigation costs

QTL accounts receivable increased by 63% in QTL revenues and increases in selling, general and administrative expenses resulting from higher litigation costs. QTL revenues and EBT also continued to be impacted negatively by units that we believe are not being reported by

certain other licensees and sales of certain unlicensed products. While we have reached agreements with many licensees, negotiations with certain other licensees and unlicensed companies are ongoing, particularly in emerging regions, including China, and additional litigation may become necessary if negotiations fail to resolve the ~~relevant issues.~~

~~QSI Segment. The increases in QSI EBT in the second quarter and~~ first six months of fiscal ~~2018 were~~2019 from $1.47 billion to $2.41 billion, primarily due to the ~~impact~~adoption of ~~$26 million and $36 million, respectively, resulting from~~ the net impact of higher revenues and higher costs associated with certain development contracts with one of our equity method investees and increases of $25 million and $37 million, respectively, in net realized gains on investments. new accounting guidance.

QSI Segment



	Three Months Ended							Six Months Ended
(in millions)	March 31, 2019		March 25, 2018		Change			March 31, 2019		March 25, 2018		Change
Equipment and services revenues	$	98	$	30	$	68		$	125	$	60	$	65
EBT	17		40		(23		)	25		51		(26		)

Second quarter 2019 vs. 2018

The ~~increase~~decrease in QSI EBT in the second quarter of fiscal ~~2018~~2019 was ~~partially offset by an~~primarily due to:


-	$49 million increase in impairment losses on investments, primarily related to an equity method investee


-	$36 million decrease in net gains on investments, primarily driven by a decrease in gains on non-marketable equity investments


-	$19 million increase in our share of equity method investee losses


+	$78 million increase resulting from higher revenues and lower costs associated with certain development contracts with an equity method investee

First six months 2019 vs. 2018

The decrease in QSI EBT in the first six months of ~~$10 million in impairment losses on investments.~~fiscal 2019 was primarily due to:


-	$52 million increase in impairment losses on investments, primarily related to an equity method investee


-	$37 million decrease in net gains on investments, primarily driven by a decrease in gains on non-marketable equity investments


-	$20 million increase in our share of equity method investee losses


+	$82 million increase resulting from higher revenues and lower costs associated with certain development contracts with an equity method investee

Looking Forward

In the coming years, we expect ~~continued growth in~~ consumer demand for ~~3G,~~ 3G/4G multi-mode and 4G products and services ~~and~~to decline as new consumer demand for 3G/4G/5G multi-mode and 5G products and services ramp around the ~~world, driven primarily by smartphones.~~world. We ~~also~~ expect growth in new device categories and industries, ~~driven by~~resulting from the expanding adoption of certain technologies that are already commonly used in smartphones by industry segments outside traditional cellular industries, such as automotive, IoT and networking.

As we look forward to the next several months and beyond, we expect our business to be impacted by the following key items:

On ~~October 27, 2016,~~April 16, 2019, we ~~announced~~entered into settlement agreements with Apple and its contract manufacturers to dismiss all outstanding litigation between the parties. We also entered into a ~~definitive~~six-year global patent license agreement ~~(the Purchase Agreement) under~~with Apple, effective as of April 1, 2019, which ~~Qualcomm River Holdings, B.V. (Qualcomm River Holdings),~~includes an ~~indirect, wholly owned subsidiary of QUALCOMM Incorporated, will acquire NXP Semiconductors N.V. (NXP). NXP is~~option for Apple to extend for two additional years, and a ~~leader in high-performance, mixed-signal semiconductor electronics in automotive, broad-based microcontrollers, secure identification, network processing and RF power products. Pursuant~~multi-year chipset supply agreement with Apple. While we continue to assess the ~~Purchase Agreement, Qualcomm River Holdings has commenced a tender offer to acquire all~~accounting impacts of the ~~issued and outstanding common shares~~agreements, we currently expect to record revenues of ~~NXP. On February 20, 2018, Qualcomm River Holdings and NXP entered into Amendment No. 1~~$4.5 billion to ~~the Purchase Agreement, which (i) increased the price payable~~$4.7 billion in the tender offer from $110.00 per share in cash to $127.50 per share in cash, representing estimated total cash consideration to be paid to NXP’s shareholders of $44 billion, and (ii) reduced the Minimum Condition (as defined in the Purchase Agreement) from 80% of the issued and outstanding common shares of NXP to 70% of the issued and outstanding common shares of NXP. On April 19, 2018, Qualcomm River Holdings and NXP entered into Amendment No. 2 to the Purchase Agreement, which, among other things, extended the End Date (as defined in the Purchase Agreement) from April 25, 2018 to July 25, 2018. The transaction is subject to receipt of regulatory clearance from the Ministry of Commerce in the People’s Republic of China (MOFCOM), which we believe is being impacted by the current state of U.S./China trade relations, and other closing conditions. We intend to fund the transaction with cash generated from our May 2017 debt offering as well as cash and cash equivalents held by our foreign entities and use of our term loans, which we expect to draw on at close. We expect that this acquisition will continue to require us to devote significant resources and management time and attention and utilize a substantial portion of our cash and cash equivalents.

On January 16, 2018, we announced a cost plan designed to align our cost structure to our long-term margin targets. As part of this plan, we have initiated a series of targeted actions across our businesses to reduce annual costs by $1 billion, excluding incremental costs resulting from any future acquisition of a business. We expect these cost reductions to be fully captured in fiscal 2019. In connection with this plan, we expect to incur approximately $400 million to $525 million in restructuring and restructuring-related charges, of which $310 million was incurred in the secondthird quarter of fiscal ~~2018.~~2019 resulting from the settlement, consisting of a payment from Apple and the release of our obligations to pay or refund Apple and the contract manufacturers certain customer-related liabilities. In addition, we will begin recording royalty revenues in the third quarter of fiscal 2019 for sales made by Apple and its contract manufacturers on or after April 1, 2019. For the remainder of fiscal 2019, we expect operating expenses to increase primarily as a result of higher employee cash incentive program costs as a result of the settlement, partially offset by lower litigation costs. Further, we expect our engineering costs will increase over time to support the multi-year chipset supply agreement.

Regulatory authorities in certain jurisdictions continue to investigate our business practices and institute proceedings against us, including the lawsuit filed against us by the United States Federal Trade Commission (FTC), which trial took place in January 2019, and other regulatory authorities may do so in the future. Unfavorable resolutions of one or more of these matters have had and could in the future have a material adverse effect on our business with remedies that include, among others, injunctions, monetary damages or fines or other orders to pay money, and the issuance of orders to cease certain conduct and/or modify our business practices. Additionally, certain of our

direct and indirect customers and licensees ~~including Apple,~~ have pursued, and others may in the future pursue, litigation or arbitration against us related to our business. Unfavorable resolutions of one or more of these matters have ~~in the past~~ had ~~a material adverse effect on our business,~~ and could in the future have a material adverse effect on our business, ~~including,~~revenues, results of operations, financial condition and cash flows. Depending on the type of matter, various remedies that could result from an unfavorable resolution include, among others, ~~monetary damages,~~ the loss of our ability to enforce one or more of our ~~patents, and/~~patents; injunctions; monetary damages or ~~portions~~fines or other orders to pay money; the issuance of orders to cease certain conduct or modify our business practices, such as requiring us to reduce our royalty rates, reduce the base on which our royalties are calculated, grant patent licenses to chipset manufacturers, or modify or renegotiate some or all of our existing license agreements; and determinations that some or all of our license agreements ~~could be determined to be~~are invalid or unenforceable. These activities have required, and we expect that they will continue to require, the investment of significant management time and attention and have resulted, and we expect

that they will continue to result, in increased legal ~~costs.~~costs until the respective matters are resolved. See “Notes to Condensed Consolidated Financial Statements, Note 6. Commitments and Contingencies” and “Risk Factors” ~~included~~ in this Quarterly ~~Report.~~

~~We are currently in dispute with Apple surrounding what we believe is an attempt~~Report, including the Risk Factors entitled “Efforts by ~~Apple~~some communications equipment manufacturers or their customers to ~~reduce~~avoid paying fair and reasonable royalties for the ~~amount of royalties that its contract manufacturers (who are Qualcomm licensees) are required to pay to us for~~ use of our intellectual ~~property.~~ property may require the investment of substantial management time and financial resources and may result in legal decisions or actions by governments, courts, regulators or agencies, Standards Development Organizations (SDOs) or other industry organizations that harm our business,” “Our business, particularly our licensing business, may suffer as a result of adverse rulings in government investigations or proceedings” and “Changes in our patent licensing practices, whether due to governmental investigations, private legal proceedings challenging those practices or otherwise, could adversely impact our business and results of operations.”

In the first ~~six months~~quarter of fiscal ~~2018, such contract manufacturers did not fully report, and did not pay,~~2019, we entered into a second interim agreement with Huawei in which Huawei agreed to make three quarterly payments of $150 million (for sales made in consecutive calendar quarters beginning with the quarter ended December 2018) as minimum, non-refundable payments for royalties due onfor sales of ~~Apple products.~~licensed products by Huawei during the relevant quarter while negotiations continue. We have taken action against Apple’s contract manufacturers to compel such licensees to pay the required royalties, and against Apple, as described more fully elsewhere in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 6. Commitments and Contingencies.” Additionally, the other licensee in dispute did not report or pay royalties due in the first six monthsrecognized $300 million of ~~fiscal 2018. We did not record any~~royalty revenues in the first six months of fiscal ~~2018 for~~2019 under the second interim agreement. These payments do not reflect the full amount of royalties due ~~on sales~~under the underlying license agreement. If we do not reach a final agreement with Huawei prior to the conclusion of ~~Apple’s~~the second interim agreement, Huawei may not make any other payments or may not make full payments under the ~~other licensee’s products, and as a~~underlying license agreement, which may result ~~QTL revenues and EBT were negatively impacted by these continued disputes. We expect these companies will continue~~in significant legal costs, due to ~~take such actions~~exercising the dispute resolution provision in the ~~future, resulting in increased legal costs~~license agreement, and will negatively ~~impacting~~impact our future revenues, as well as our financial condition, results of operations and cash flows until the ~~respective disputes are resolved~~.

We continue to believe that certain licensees, particularly in China, are not fully complying with their contractual obligations to report their sales of licensed products to us, and certain companies, including unlicensed companies, particularly in emerging regions, including China, are delaying execution of new license agreements. We have made substantial progress in reaching agreements with many companies, primarily in China. However, negotiations with certain licensees and unlicensed companies are ongoing. We believe that the conclusion of new agreements with these companies will result in improved reporting. Additionally, we believe our increased efforts in the area of compliance will improve reporting but will also result in increased costs to the business. Litigation and/or other actions, such as those recently taken against Apple and its contract manufacturers, may be necessary to compel licensees to report and pay the required royalties for sales they have not previously reported and/or to compel unlicensed companies to execute licenses. Such litigation or other actions would result in increased legal costs.

To position QTL for stability on a long-term basis, we have announced that our standard essential patent (SEP) only licensing terms through 5G, Release 15 will remain at the same rate, consistent with our licensing program established in China for 3G and 4G devices. We expect that more of our licensees may enter into SEP-only agreements on a worldwide basis as existing agreements come up for renewal and/ or renegotiation. In addition, we are reducing the per unit cap on smartphones, whichdispute is ~~the base on which our royalties are calculated. While we expect these developments to enhance stability for the long term, they may impact QTL royalty revenues in the shorter term.~~resolved.

We expect our business, particularly QCT, to continue to be impacted by industry dynamics, including:

Concentration of device share among a few companies within the premium tier, resulting in significant supply chain leverage for those ~~companies;~~companies, and exacerbating the negative impact to our business and financial results if any of those companies do not utilize our chipsets;

Decisions by companies to utilize their own internally-developed integrated circuit products and/or sell such products to others, including by bundling with other ~~products, increasing competition;~~products;

Decisions by certain companies to utilize our competitors’ integrated circuit products in all or a portion of their devices. For example, ~~commencing with the iPhone 7 (which was released in September 2016),~~ we ~~are no longer~~have not been the sole supplier of modems for ~~new~~ iPhone ~~product launches,~~products beginning with products that launched in September 2016, as Apple utilizes modems from one of our competitors in a portion of such devices. ~~We expect that in the future~~ Apple ~~will utilize~~began solely using one or more of our competitors’ modems, rather than our modems, in its 2018 iPhone release and is expected to do so in its upcoming 2019 iPhone release. As a ~~portion of or potentially all iPhones. Accordingly,~~result, QCT revenues from modem sales for iPhones have declined in the first six months of fiscal ~~2017 and may continue~~2019. For new chipset models, QCT does not expect to ~~decline in~~begin recording revenues under our recently announced multi-year chipset agreement with Apple until the ~~future, in part depending on the extent~~second half of Apple’s utilization of competitors’ modems and the mix of the various versions of its products that are sold. Overall QCT revenues, as well as profitability, may similarly decline unless offset by sales of integrated circuit products to other customers, including those outside of traditional cellular industries, such as the Internet of Things (IoT), automotive and networking.fiscal 2020. Apple’s sourcing of integrated circuit products does not impact our licensing revenues since our licensing revenues from Apple products are not dependent upon whether such products include our chipsets;

Intense competition, particularly in China, as our competitors expand their product offerings and/or reduce the prices of their products as part of a strategy to attract new and/or retain existing customers;

~~Lengthening~~Further lengthening of replacement cycles ~~in developed regions, where the~~as smartphone ~~industry is mature, premium-tier smartphones are common~~penetration increases and consumer demand is increasingly driven by new product launches and/or innovation cycles;

~~Lengthening replacement cycles~~Continued growth of device share by Chinese OEMs in ~~emerging~~China and in regions ~~as smartphone penetration increases;~~outside of China; and

Increasing consumer demand for 3G/4G smartphone products in emerging regions driven by availability of lower-tier 3G/4G ~~devices.~~devices, partially offset by lengthening replacement cycles in China.

Current U.S./China trade relations may negatively impact our business, growth prospects and results of operations.

We expect the ongoing rollout of 4G services in emerging regions will encourage competition and growth, bringing the benefits of 3G/4G LTE multi-mode to consumers.

Initial commercial 5G network deployments and device launches have begun and will continue in calendar 2019 and beyond. We believe that 5G technologies will empower a new era of smartphones and connected devices. We also believe that 5G will drive transformation across industries beyond traditional cellular communications that will create new business models and new services. We believe it is important that we remain a leader in 5G technology development, standardization, intellectual property creation and licensing of 5G technologies, and to be a leading developer and supplier of 5G integrated circuit products and services in order to sustain and grow our business long term.

We continue to invest significant resources ~~toward~~to develop our wireless baseband chipsets, and our converged computing/communications (Snapdragon) chipsets, which incorporate technologies in the following areas, among others: advancements in 4G and 5G, ~~technologies,~~ OFDM-based ~~WLAN technologies, wireless baseband chips, our converged computing/communications (Snapdragon) chips, radio frequency front-end (RFFE),~~Wi-Fi, RFFE, connectivity, power management, graphics, audio and video codecs, multimedia, ~~products~~artificial intelligence (AI) and ~~software,~~virtual/augmented reality, and all of which contribute to the expansion of our intellectual property portfolio. We are also investing in targeted opportunities that leverage our existing technical and business expertise to deploy new business models and enter and/or expand into new industry segments and applications, such as products for automotive, IoT (including the connected home, smart cities, wearables, voice and music and robotics), ~~data center,~~ networking, computing and AI, such as machine learning, among others.

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 and governments as to the benefits of our ~~business model~~licensing program and our extensive technology investments in promoting a highly competitive and innovative wireless 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~~licensing program in enabling new, highly cost-effective competitors to their products. We expect that such companies, and/or governments or regulators, 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.

Liquidity and Capital Resources

On February 20, 2018, we announced that Qualcomm River Holdings reached an agreement with NXP to increase to $127.50 per share its previously announced cash tender offer to acquire all of the issued and outstanding common shares of NXP, for estimated total cash consideration to be paid to NXP’s shareholders of $44 billion. The transaction is subject to receipt of regulatory approvals from the Ministry of Commerce in the People’s Republic of China (MOFCOM) and other closing conditions. In May 2017, we issued an aggregate principal amount of $11.0 billion of unsecured floating- and fixed-rate notes with varying maturities, of which a portion will be used to fund the purchase price and other related transactions. In addition, we have secured $4.0 billion and $3.0 billion through a 2016 Term Loan Facility and a 2018 Term Loan Facility respectively, which are expected to be drawn on at the close of the NXP transaction. We have also secured $3.0 billion in committed financing through a 2018 Revolving Credit Facility, which is available to, in part, finance the transaction. The remaining amount will be funded with cash held by our foreign entities, which will result in the use of a substantial portion of our cash and cash equivalents.

Qualcomm River Holdings and NXP may terminate the Purchase Agreement under certain circumstances. If the Purchase Agreement is terminated in certain circumstances, including termination by NXP to enter into a superior proposal for an alternative acquisition transaction or a termination following a change of recommendation by NXP’s board of directors, NXP will be required to pay Qualcomm River Holdings a termination fee of $1.25 billion. If the Purchase Agreement is terminated under certain circumstances involving the failure to obtain the required regulatory approvals or the failure of NXP to complete certain pre-closing reorganization steps in all material respects, Qualcomm River Holdings will be required to pay NXP a termination fee of $2.0 billion. Under Amendment No. 2, in addition to its existing rights, NXP will be entitled to receive the termination fee (i) if the Purchase Agreement is terminated in accordance with its terms for any reason (subject to certain exceptions) and, at the time of any such termination, approval by MOFCOM, or in any jurisdiction where the parties’ previously obtained clearance will expire or where the applicable antitrust authority has required or requested a resubmission for clearance, has not been received, or (ii) at any time after July 25, 2018 if, at such time, approval by MOFCOM, or in any jurisdiction where the parties’ previously obtained clearance will expire or where the applicable antitrust authority has required or requested a resubmission for clearance, has not been received.

In November 2016, as required by the Purchase Agreement, we entered into four letters of credit for an aggregate amount of $2.0 billion pursuant to which NXP will have the right to draw amounts to fund the potential termination fee payable to NXP. Each letter of credit is required to be fully cash collateralized in an amount equal to 100% of its face value through deposits with the issuers of the letters of credit. We are restricted from using the funds deposited as collateral while the letters of credit are outstanding. At March 25, 2018, the letters of credit were fully collateralized through bank time and demand deposits.

Our principal sources of liquidity are our existing cash, cash equivalents and marketable securities, cash generated from operations, cash provided by our debt programs and proceeds from the issuance of common stock under our stock option and employee stock purchase plans. The following table presents selected financial information related to our liquidity as of March ~~25, 2018~~31, 2019 and September ~~24, 2017~~30, 2018 and for the first six months of fiscal ~~2018~~2019 and ~~2017~~2018 (in millions):

March 25,
2018 September 24,
2017 $ Change % Change
Cash, cash equivalents and marketable securities $ 39,606
$ 38,578
$ 1,028
3 %
Accounts receivable, net 3,535
3,632
(97 ) (3 %)
Inventories 1,797
2,035
(238 ) (12 %)
Short-term debt 3,733
2,495
1,238
50 %
Long-term debt 19,361
19,398
(37 ) — %
Noncurrent income taxes payable 3,277
—
3,277
N/M

~~N/M - Not meaningful~~



	March 31, 2019		September 30, 2018		$ Change			% Change
Cash, cash equivalents and marketable securities	$	10,366	$	12,123	$	(1,757	)	(14	%)
Accounts receivable, net	3,638		2,904		734			25	%
Inventories	1,725		1,693		32			2	%
Short-term debt	998		1,005		(7		)	(1	%)
Long-term debt	15,405		15,365		40			—	%
Noncurrent income taxes payable	1,849		2,312		(463		)	(20	%)


	Six Months Ended											Six Months Ended
	March 25, 2018			March 26, 2017			$ Change			% Change		March 31, 2019			March 25, 2018			$ Change			% Change
Net cash provided by operating activities	$	2,278		$	2,406		$	(128	)	(5	%)	$	1,150		$	2,278		$	(1,128	)	(50	%)
Net cash provided by investing activities	1,481			760			721			95	%
Net cash (used) provided by investing activities												(261		)	1,481			(1,742		)	(118	%)
Net cash used by financing activities	(874		)	(1,982		)	1,108			(56	%)	(2,531		)	(874		)	(1,657		)	190	%

The net ~~increase~~decrease in cash, cash equivalents and marketable securities was primarily due to ~~net cash provided by operating activities and $1.2 billion of net issuances of our outstanding commercial paper debt, partially offset by $1.7~~$1.5 billion in cash dividends paid, ~~$425 million~~$1.0 billion in payments to repurchase shares of our common stock, ~~and $411~~$322 million in capital ~~expenditures.~~expenditures and $143 million in payments of tax withholdings related to the vesting of share-based awards, partially offset by net cash provided by operating activities. Total cash provided by operating activities decreased primarily due to lower revenues. Total cash provided by operating activities was also negatively impacted by ~~continued~~ actions taken by Apple and its contract manufacturers ~~as well as the previously disclosed dispute with another licensee,~~ who did not report or pay royalties due on sales of Apple products in the first six months of fiscal 2019 and the first six months of fiscal 2018.

Our days sales outstanding, on a consolidated basis, increased to ~~61 days~~67 at March ~~25, 2018~~31, 2019, as compared to ~~56 days~~49 at September ~~24, 2017~~30, 2018. The increase in accounts receivable and the related days sales outstanding were primarily due to the ~~timing~~adoption of the ~~collection of payments from certain of our licensees. The decrease in inventories was primarily due to a decrease~~new revenue recognition accounting guidance in the ~~overall quantity~~first quarter of ~~units~~fiscal 2019. Inventories remained largely flat in the first six-months of fiscal 2019.

As a result of the agreements signed with Apple and its contract manufacturers in April 2019, we expect our liquidity to be positively impacted by the settlement payment due from Apple, royalties to be paid by Apple for sales made on ~~hand.~~or after April 1, 2019 and lower litigation costs, partially offset by higher employee cash incentive program costs as a result of the settlement. Further, we expect our engineering costs will increase over time to support the multi-year chipset supply agreement.

Debt. Our ~~2016 Amended and Restated~~ Revolving Credit Facility provides for unsecured revolving facility loans, swing line loans and letters of credit in the aggregate amount of up to $5.0 billion, of which $530 million and $4.47 billion will expire in February 2020 and November 2021, respectively. Our 2018 Revolving Credit Facility provides for unsecured delayed-draw revolving facility loans in the aggregate amount of $3.0 billion. Proceeds from the 2018 Revolving Credit Facility, if drawn, will be used to finance, in part, the proposed acquisition of NXP. At March ~~25, 2018,~~31, 2019, no amounts were outstanding under the ~~revolving credit facilities.~~Revolving Credit Facility.

We have an unsecured commercial paper program, which provides for the issuance of up to $5.0 billion of commercial paper. Net proceeds from this program are used for general corporate purposes. At March ~~25, 2018,~~31, 2019, we had ~~$2.2~~$1.0 billion of commercial paper outstanding with a weighted-average ~~net~~ interest ~~rates~~rate of ~~1.98%~~2.74% and weighted-average remaining days to maturity of 4429 days.

Our 2016 Term Loan Facility provides for senior unsecured delayed-draw term facility loans in an aggregate amount of $4.0 billion, and our 2018 Term Loan Facility provides for senior unsecured delayed-draw term facility loans in an aggregate amount of $3.0 billion. Proceeds from the term loan facilities, if drawn, will be used to finance, in part, the proposed acquisition of NXP. At March 25, 2018, no amounts were outstanding under the term loan facilities.

In May 2017, we issued an aggregate principal amount of $11.0 billion in nine tranches of unsecured floating- and fixed-rate notes, of which $7.0 billion remains outstanding with maturity dates ~~starting~~ in ~~2019~~2023 through 2047. Effective interest rates were between ~~2.00%~~2.70% and 4.47% at March ~~25, 2018. Net proceeds from~~31, 2019. Interest is payable in arrears quarterly for the issuance of the notes of $10.95 billion are intended to be used to fund a portion of the purchase price of our planned acquisition of NXP and other related transactions and also for general corporate purposes. Our 2019 floating-rate notes ~~2020 floating-rate notes, 2019~~and semi-annually for the fixed-rate notes and 2020 fixed-rate notes issued in May 2017 for an aggregate principal amount of $4.0 billion are subject to a special mandatory redemption at a price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest to, but excluding, the date of such mandatory redemption. The redemption is required on the first to occur of (i) the termination of the NXP purchase agreement or (ii) if the NXP transaction has not closed, by June 1, 2018.notes.

In May 2015, we issued an aggregate principal amount of $10.0 billion in eight tranches of unsecured floating- and fixed-rate notes, ~~with $1.5~~of which $8.5 billion ~~maturing in 2018 and the remaining~~remains outstanding with maturity dates in 2020 through 2045. Effective interest rates were between ~~2.21%~~3.09% and ~~4.74%~~4.73% at March ~~25, 2018.~~31, 2019. Interest is payable in arrears quarterly for the floating-rate notes and semi-annually for the fixed-rate notes.

We may issue additional debt in the future. The amount and timing of such additional borrowings will be subject to a number of factors, including ~~the cash flow generated by United States-based entities,~~ acquisitions and strategic investments, acceptable interest rates and changes in corporate income tax law, among other factors.

Additional information regarding our outstanding debt at March ~~25, 2018~~31, 2019 is provided in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 5. Debt.”

Income Taxes. ~~The~~ Tax Legislation, which was signed into law during the first quarter of fiscal 2018, resulted in ~~an estimated $5.3~~a $5.2 billion charge recognized in fiscal 2018 related to the Toll Charge. ~~We currently estimate that~~The first payment was made on January 15, 2019. At March 31, 2019, we ~~will pay $3.2~~estimated remaining future payments of $1.8 billion for the Toll Charge, after application of certain tax credits (including ~~those~~excess tax credits that are expected to be generated in fiscal ~~2018)~~2019), which is payable in installments over ~~eight~~the next seven years (8% in each of the ~~first five~~next four years, 15% in year ~~six,~~five, 20% in year ~~seven~~six and 25% in year ~~eight) beginning on January 15, 2019.~~seven).

Our cash, cash equivalents and marketable securities at March 25, 2018 consisted of $8.0 billion held by our United States-based entities and $31.6 billion held by our foreign entities. The Tax Legislation eliminated certain material tax effects on the repatriation of cash to the United States. As of March 25, 2018, we no longer consider available cash balances that existed at the end of fiscal 2017 related to undistributed pre-fiscal 2018 earnings and profits of certain U.S.-owned foreign subsidiaries to be indefinitely reinvested. We otherwise continue to consider other undistributed earnings of certain U.S.-owned foreign subsidiaries to be indefinitely reinvested based on our current plans for use and/or investment outside of the U.S., and therefore, no liability has been recorded for such taxes. However, as a result of the Tax Legislation, we are reassessing our intentions related to our indefinite reinvestment assertion. Should we decide to no longer indefinitely reinvest such earnings outside the U.S., we would have to adjust the income tax provision in the period such determination is made.

Additional information regarding our income taxes is provided in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 3. Income Taxes.”

Capital Return Program. In the fourth quarter of fiscal 2018, we announced a stock repurchase program authorizing us to repurchase up to $30 billion of our common stock. In fiscal 2018, we entered into three accelerated share repurchase agreements (ASR Agreements) to repurchase an aggregate of $16.0 billion of our common stock, with 178.4 million shares initially delivered to us under the ASR Agreements and retired. Pursuant to the terms of the ASR Agreements, the final number of shares and the average purchase price will be determined at the end of the applicable purchase periods, which are scheduled to occur in early September 2019 but may occur earlier in certain circumstances. In the first six months of fiscal ~~2018,~~2019, we repurchased and retired ~~6.8~~16.8 million shares of our common stock for ~~$425 million,~~$1.0 billion, before commissions. At March ~~25, 2018, $1.2~~31, 2019, $7.8 billion remained authorized for repurchase under ~~our~~the stock repurchase program. As

Our stock repurchase program has significantly reduced and will continue to reduce the amount of cash that we have available to fund our operations including research and development, working capital, capital expenditures, acquisitions, investments, dividends and other corporate purposes; and increases our exposure to adverse economic, market, industry and competitive conditions and developments, and other changes in our business and our industry. This stock repurchase program has no expiration date. However, we periodically evaluate repurchases as a ~~result~~means of returning capital to stockholders to determine when and if repurchases are in the best interests of our ~~proposed acquisition of NXP~~stockholders and the pending use of our cash and marketable securities, we currently expect to repurchase shares in the next few years to offset dilution from the issuance of common stock under our employee benefit plans.may accelerate, suspend, delay or discontinue repurchases at any time.

In the first six months of fiscal ~~2018,~~2019, we paid cash dividends totaling ~~$1.7~~$1.5 billion, or ~~$1.14~~$1.24 per share. ~~On April 17, 2018, we announced a cash dividend of $0.62 per share on our common stock, payable on June 20, 2018 to stockholders of record as of the close of business on May 30, 2018.~~ We intend to continue to use cash dividends as a means of returning capital to stockholders, subject to capital availability and our view that cash dividends are in the best interests of our ~~stockholders.~~stockholders, among other factors.

Additional Capital Requirements. We believe our ~~current~~ cash, cash equivalents and marketable securities, our expected cash flow generated from operations and our expected financing activities will satisfy our working and other capital requirements for at least the next 12 months based on our current business plans. Recent and expected working and other capital requirements, in addition to the above matters, also include the items described below.

In connection with our Cost Plan announced on January 16, 2018, we expect to incur approximately $400 million to $525 million in restructuring and restructuring-related charges, the majority of which are expected to result in cash payments.

Our purchase obligations at March ~~25, 2018,~~31, 2019, some of which relate to research and development activities and capital expenditures, totaled ~~$3.2~~$2.9 billion and ~~$1.4 billion~~$637 million for fiscal ~~2018~~2019 and ~~2019,~~2020, respectively, and ~~$646~~$487 million thereafter.

Our research and development expenditures were ~~$2.8~~$2.6 billion in the first six months of fiscal ~~2018~~2019 and ~~$5.5~~$5.6 billion in fiscal ~~2017,~~2018, and we expect to continue to invest heavily in research and development for new technologies, applications and services for voice and data communications.

Cash outflows for capital expenditures were ~~$411~~$322 million in the first six months of fiscal ~~2018~~2019 and ~~$690~~$784 million in fiscal ~~2017.~~2018. We expect to continue to incur capital expenditures in the future to support our business, including research and development activities. ~~Future capital expenditures may be impacted by transactions that are currently not forecasted.~~

The TFTC imposed a fine on us, of which $771 million remained outstanding at March 25, 2018 (based on the exchange rate at March 25, 2018), which will be paid in monthly installments through December 2022.

The EC imposed a fine on us, of ~~approximately 997 million Euros (approximately $1.2~~which $1.1 billion ~~based~~was accrued at March 31, 2019 (based on the exchange rate at March ~~25, 2018)~~31, 2019, including related foreign currency gains and accrued interest). ~~We intend to provide~~In the third quarter of 2018, we provided financial guarantees ~~by April 30, 2018~~ in lieu of cash payment to satisfy the ~~obligation. Beginning on April 30, 2018,~~obligation while we appeal the EU’s decision. The fine ~~will accrue~~is accruing interest at a rate of 1.50% per annum ~~until~~while it is outstanding.

Beginning on August 4, 2019, for a period of 60 days, we have the option to acquire (and the minority owner has ~~been paid or annulled.~~the option to sell) the minority ownership interest in the RF360 Holdings joint venture for $1.15 billion, and we expect one of such options to be exercised during this period. At March 31, 2019 and September 30, 2018, the accreted value of such amount was included in other current liabilities.

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 businesses.

Further, regulatory authorities in certain jurisdictions continue to investigate our business practices and institute proceedings against us, including the lawsuit filed against us by the United States Federal Trade Commission (FTC), which trial took place in January 2019, and other regulatory authorities may do so in the future. Additionally, certain of our direct and indirect customers and licensees, have pursued, and others may in the future pursue, litigation or arbitration against us related to our business. Unfavorable resolutions of one or more of these matters have had and could in the future have a material adverse effect on our business, revenues, results of operations, financial condition and cash flows. See “Notes to Condensed Consolidated Financial Statements, Note 6. Commitments and Contingencies” and “Risk Factors” in this Quarterly Report.

Contractual Obligations/Off-Balance Sheet Arrangements

We have no significant contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the notes to our condensed consolidated financial statements. We have no material off-balance sheet arrangements as defined in Regulation S-K 303(a)(4)(ii).

Additional information regarding our financial commitments at March ~~25, 2018~~31, 2019 is provided in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 3. Income Taxes,” “Note 5. ~~Debt,”~~Debt” and “Note 6. Commitments and ~~Contingencies”~~Contingencies.”

Critical Accounting Estimates

Revenue Recognition. As a result of the adoption of ASC 606, we revised our critical accounting estimates beginning in fiscal 2019 as follows.

We derive revenues principally from sales of integrated circuit products and ~~“Note 8. Acquisitions.”~~licensing of our intellectual property. We grant licenses or otherwise provide 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. Licensees pay royalties based on their sales of products incorporating or using our licensed intellectual property and may also pay a fixed license fee in one or more installments. Sales-based royalties are generally based upon a percentage of the wholesale (i.e., licensee’s) selling price of complete licensed products, net of certain permissible deductions (including transportation, insurance, packing costs and other items). We broadly provide per unit royalty caps that apply to certain categories of complete wireless devices, namely smartphones, tablets and laptops, which in general, effectively provide for a maximum royalty amount per device. We estimate and recognize sales-based royalties on such licensed products in the period in which the associated sales occur, subject to certain constraints on our ability to estimate such royalties. Our estimates of sales-based royalties are based largely on an assessment of the volume of devices supplied into the market that incorporate or use our licensed intellectual property. We estimate sales-based royalties taking into consideration the mix of such sales on a licensee-by-licensee basis, as well as the licensees’ average wholesale prices of such products, and considers all information (historical, current and forecasted) that is reasonably available to us. Our licensees, however, do not report and pay royalties owed for sales in any given quarter until after the conclusion of that quarter, which is generally the following quarter. As a result of recognizing revenues in the period in which the licensees’ sales occur using estimates, adjustments to revenues are required in subsequent periods to reflect changes in estimates as new information becomes available, primarily resulting from actual amounts reported by our licensees.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements and the impact of those pronouncements ~~if any,~~ on our consolidated financial statements is provided in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 1. Basis of ~~Presentation.~~Presentation and Significant Accounting Policies Update.”

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 negatively impact our business and results of operations and require significant management time and attention. In that case, the trading price of our common stock could decline. You should also consider the other information set forth in this Quarterly Report ~~and in our Annual Report on Form 10-K for the fiscal year ended September 24, 2017~~ in evaluating our business and our prospects, including but not limited to our financial statements and the related notes, and “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” References to “and” and “or” should be read to include the other as well as “and/or,” as appropriate.

Risks Related to Our Businesses

Our proposed acquisition of NXP Semiconductors N.V. involves a number of risks, including, among others, the risk that we fail to complete the acquisition, regulatory risks, risks associated with our use of a significant portion of our cash and our taking on significant indebtedness, other financial risks, integration risks, and risk associated with the reactions of customers, suppliers and employees.

Our and NXP’s obligations to consummate the proposed transaction are subject to the satisfaction or waiver of certain conditions, including, among others: (i) the tender of a minimum number of NXP’s outstanding common shares in the tender offer commenced by a subsidiary of QUALCOMM Incorporated; (ii) the receipt of regulatory clearance from the Ministry of Commerce of the People’s Republic of China (MOFCOM), which we believe is being impacted by the current state of U.S./China trade relations; (iii) the absence of any law or order prohibiting the proposed transaction; (iv) there being no event that would have a material adverse effect on NXP; (v) the accuracy of the representations and warranties of NXP, subject to

certain exceptions, and NXP’s material compliance with its covenants, in the Purchase Agreement; and (vi) the completion of certain internal reorganization steps with respect to NXP and the disposition of certain non-core assets of NXP. We cannot provide assurance that the conditions to the completion of the proposed transaction will be satisfied, and if the proposed transaction is not completed, we would not realize any of the expected benefits.

The final regulatory approval required in connection with the proposed transaction may not be obtained or may contain materially burdensome conditions. If any conditions or changes to the structure of the proposed transaction are required to obtain this regulatory approval, they may have the effect of jeopardizing or delaying completion of the proposed transaction or reducing our anticipated benefits. If we agree to any material conditions in order to obtain this approval, our business and results of operations may be adversely affected.

In addition, the use of a significant portion of our cash and the incurrence of substantial indebtedness in connection with the financing of the proposed transaction will reduce our liquidity, and may limit our flexibility in responding to other business opportunities and increase our vulnerability to adverse economic and industry conditions. See the Risk Factor entitled “There are risks associated with our indebtedness.”

If the proposed transaction is not completed, our stock price could fall to the extent that our current price reflects an assumption that we will complete it. Furthermore, if the proposed transaction is not completed and the Purchase Agreement is terminated, we would not realize any of the expected benefits of the proposed transaction, and we may suffer other consequences that could adversely affect our business, results of operations and stock price, including, among others:

~~we could be required to pay a termination fee to NXP of $2.0 billion;~~

~~we will have incurred and may continue to incur costs relating to the proposed transaction, many of which are payable by us whether or not the proposed transaction is completed;~~

matters relating to the proposed transaction (including integration planning) require substantial commitments of time and resources by our management team and numerous others throughout our organization, which could otherwise have been devoted to other opportunities;

~~we may be subject to legal proceedings related to the proposed transaction or the failure to complete the proposed transaction;~~

~~the failure to consummate the proposed transaction may result in negative publicity and a negative perception of us in the investment community; and~~

any disruptions to our business resulting from the announcement and pendency of the proposed transaction, including any adverse changes in our relationships with our customers, suppliers, partners or employees, may continue or intensify in the event the proposed transaction is not consummated.

The proposed transaction will be our largest acquisition to date, by a significant margin. The benefits we expect to realize from the proposed transaction will depend, in part, on our ability to integrate the businesses successfully and efficiently. See the Risk Factor entitled “We may engage in strategic acquisitions, transactions or make investments that could adversely affect our results of operations or fail to enhance stockholder value.”

Furthermore, uncertainties about the proposed transaction may cause our and/or NXP’s current and prospective employees to experience uncertainty about their futures. These uncertainties may impair our and/or NXP’s ability to retain, recruit or motivate key management, engineering, technical and other personnel. Similarly, our and/or NXP’s existing or prospective customers, licensees, suppliers and/or partners may delay, defer or cease purchasing products or services from or providing products or services to us or NXP; delay or defer other decisions concerning us or NXP; or otherwise seek to change the terms on which they do business with us or NXP. Any of the above could harm us and/or NXP, and thus decrease the benefits we expect to receive from the proposed transaction.

The proposed transaction may also result in significant charges or other liabilities that could adversely affect our results of operations, such as cash expenses and non-cash accounting charges incurred in connection with our acquisition and/or integration of the business and operations of NXP. Further, our failure to identify or accurately assess the magnitude of certain liabilities we are assuming in the proposed transaction could result in unexpected litigation or regulatory exposure, unfavorable accounting charges, unexpected increases in taxes due, a loss of anticipated tax benefits or other adverse effects on our business, results of operations, financial condition or cash flows.

Our revenues depend on commercial network deployments, expansions and upgrades of CDMA, OFDMA and other communications ~~technologies;~~technologies, including 5G; our customers’ and licensees’ sales of products and services based on these technologies; and customers’ demand for our products and services.

We develop, patent and commercialize technology and products based on CDMA, OFDMA and other communications technologies, which are primarily wireless. We depend on operators of wireless networks and our customers and licensees to adopt ~~and/or~~and implement the latest generation of these technologies for use in their networks, devices and services. We also depend on our customers and licensees to develop devices and services based on these technologies with value-added features

to drive consumer demand for new ~~3G,~~ 3G/4G ~~multi-mode~~ and ~~4G devices, and in the future~~ 3G/4G/5G multi-mode devices, as well as ~~establishing~~3G, 4G and 5G single-mode devices, and to establish the selling prices for such devices. Further, we depend on the timing of our customers’ and licensees’ deployments of new devices and services based on these technologies. Increasingly, we also depend on operators of wireless networks, our customers and licensees and other third parties to incorporate these technologies into new device types and into industries and applications beyond traditional cellular communications, such as automotive, ~~the internet of things (IoT)~~IoT (including the connected home, smart cities, wearables, voice and music and robotics), ~~data center,~~ networking, computing and artificial intelligence (AI), such as machine learning, among others.

We ~~are also impacted by consumers’ rates~~have historically been successful during wireless technology transitions. The next generation of ~~replacement~~wireless technologies is 5G, which we expect will empower a new era of ~~smartphones~~connected devices and ~~other computing devices.~~will be utilized not only in handsets but in new device types, industries and applications beyond traditional cellular communications. Initial commercial deployments of 5G networks and devices have begun and will continue in 2019 and beyond. We believe it is important that we be a leader in 5G technology development, standardization, intellectual property creation and licensing, and that we develop, commercialize and be a leading supplier of 5G integrated circuit products and services, in order to sustain and grow our business long-term.

Our revenues ~~and/or~~and growth in revenues could be negatively impacted, our business may be harmed and our substantial investments in these technologies may not provide us an adequate return, if:

wireless operators and industries beyond traditional cellular communications deploy alternative technologies;

wireless operators delay next-generation network deployments, ~~such as 5G,~~ expansions or upgrades ~~and/~~or delay moving 2G customers to ~~3G,~~ 3G/4G and 3G/4G/5G multi-mode ordevices, as well as 3G, 4G ~~wireless~~and 5G single-mode devices;

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

government regulators delay making sufficient spectrum available for 3G, 4G ~~new~~and 5G wireless technologies, including unlicensed spectrum ~~sharing~~and shared spectrum technologies, ~~that we are developing in conjunction with 3G and 4G, as well as for 5G,~~ thereby restricting the ability of wireless operators to deploy or expand the use of these technologies;

wireless operators delay or do not drive improvements in 3G, 4G or 3G/4G multi-mode network performance ~~and/or~~and capacity;

our customers’ and licensees’ revenues and sales of products, particularly premium-tier products, and services using these technologies, and average selling prices (ASPs) of such products, decline, do not grow or do not grow ~~as quickly~~ as anticipated due to, for example, the maturity of smartphone penetration in developed regions;

our intellectual property and technical leadership included in the 5G standardization effort is different than in 3G and 4G standards;

the standardization ~~and/or~~and deployment of 5G ~~technology~~technologies is delayed; ~~and/or~~

we are unable to drive the adoption of our products and services into networks and devices, including devices beyond traditional cellular applications, based on CDMA, OFDMA and other communications ~~technologies.~~technologies; or

consumers’ rates of replacement of smartphones and other computing devices decline, do not grow or do not grow as anticipated.

Our industry is subject to competition in an environment of rapid technological change that could result in decreased demand ~~and/~~or declining average selling prices for our products ~~and/~~or those of our customers ~~and/~~or licensees.

Our products, services and technologies face significant competition. We expect competition to increase as our current competitors expand their product offerings or reduce the prices of their products as part of a strategy to attract new business ~~and/or~~and customers, as new opportunities develop, and as new competitors enter the industry. Competition in wireless communications is affected by various factors that include, among others: device manufacturer ~~concentrations and~~concentrations; vertical integration; growth in demand, consumption and competition in certain geographic regions; government intervention ~~and/~~or support of national industries ~~and/~~or competitors; evolving industry standards and business models; evolving methods of transmission of voice and data communications; increasing data traffic and densification of wireless networks; convergence and aggregation of connectivity technologies (including Wi-Fi and LTE) in both devices and access points; consolidation of wireless technologies and infrastructure at the network edge; networking and connectivity trends (including cloud services); use of ~~both~~ licensed, shared and unlicensed spectrum; the evolving nature of computing (including demand for always on, always connected capabilities); the speed of technological change (including the transition to smaller geometry process technologies); value-added features that drive selling prices ~~as well as~~and consumer demand for new ~~3G,~~ 3G/4G and 3G/4G/5G multi-mode devices, as well as 3G, 4G and 4G5G single-mode devices; turnkey, integrated products that incorporate hardware, software, user interface, applications and reference

designs; scalability; and the ability of the system technology to meet customers’ immediate and future network requirements. We anticipate that additional competitors will 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 certain segments of the industry.

Additionally, the semiconductor industry has experienced and may continue to experience consolidation, which could result in significant changes to the competitive landscape.

We expect that our future success will depend on, among other factors, our ability to:

differentiate our integrated circuit products with innovative technologies across multiple products and features (e.g., modem, radio frequency front-end (RFFE), graphics ~~and/or~~and other processors, camera and connectivity) and with smaller geometry process technologies that drive performance;

develop and offer integrated circuit products at competitive cost and price points to effectively cover both emerging and developed geographic regions and all device tiers;

~~continue to~~ drive the adoption of our integrated circuit products into the most popular device models and across a broad spectrum of devices, such as smartphones, tablets, laptops and other computing devices, automobiles, wearables and voice and music and other connected devices and infrastructure products;

maintain ~~and/~~or accelerate demand for our integrated circuit products at the premium device tier, while increasing the adoption of our products in mid- and low-tier devices, in part by strengthening our integrated circuit product roadmap for, and developing channel relationships in, emerging regions, such as China and India, and by providing turnkey products, which incorporate our integrated circuits, for low- and mid-tier smartphones, tablets and laptops;

continue to be a leader in 4G and 5G technology evolution, including expansion of our LTE-based single-mode licensing program in areas where single-mode products are commercialized, and continue to innovate and introduce 4G and 5G turnkey, integrated products and services that differentiate us from our competition;

be a leader in 5G technology development, standardization, intellectual property creation and licensing, and develop, commercialize and be a leading supplier of 5G integrated circuit products and services;

increase or accelerate demand for our semiconductor component products, including RFFE, and our wired and wireless connectivity products, including networking products for consumers, carriers and enterprise equipment and connected devices;

become a leading supplier of RFFE products, which are designed to address cellular radio frequency band fragmentation while improving radio frequency performance and assist original equipment manufacturers in developing multiband, multi-mode mobile devices;

create standalone value and contribute to the success of our existing businesses through acquisitions, joint ventures and other transactions, and by developing customer, licensee, vendor, distributor and other channel relationships in new industry segments and with disruptive technologies, products and services, such as products for automotive, IoT (including the connected home, smart cities, wearables, voice and music and robotics), networking, computing and AI, such as machine learning, among others;

be a leader serving original equipment manufacturers, high level operating systems (HLOS) providers, operators, cloud providers and other industry participants as competitors, new industry entrants and other factors continue to affect the industry landscape;

be a preferred partner ~~(and~~and sustain preferred ~~relationships)~~relationships providing integrated circuit products that support multiple operating system and infrastructure platforms to industry participants that effectively commercialize new devices using these platforms;

increase and/or accelerate demand for our semiconductor component products, including RFFE, and our wired and wireless connectivity products, including networking products for consumers, carriers and enterprise equipment and connected devices;

identify potential acquisition targets that will grow or sustain our business or address strategic needs, reach agreement on terms acceptable to us, close the transactions and effectively integrate these new businesses, ~~and/or technologies;~~

create standalone value and/or contribute to the success of our existing businesses through acquisitions, joint ventures and other transactions (and/or by developing customer, licensee and/or vendor relationships) in new industry segments and/or disruptive technologies, products and/or services (such as products for automotive, IoT (including the connected home, smart cities, wearables, voice and music and robotics), data center, networking, computing, and machine learning, among others);

~~be a leader in 5G technology development, standardization, intellectual property creation and licensing, and develop and commercialize 5G integrated circuit~~ products and ~~services; and/or~~technologies; and

continue to develop brand recognition to effectively compete against better known companies in computing and other consumer driven segments and to deepen our presence in significant emerging regions.

Competition in any or all product tiers may result in the loss of certain business or customers, which would negatively impact our revenues, results of operations and cash flows. Such competition may also reduce average selling prices for our chipset products ~~and/~~or the products of our customers and licensees. Certain of these dynamics are particularly pronounced in

emerging regions where competitors may have lower cost structures ~~and/~~or may have a willingness and ability to accept lower prices ~~and/or~~and lower or negative margins on their products (particularly in China). Reductions in the average selling prices of our chipset products, without a corresponding increase in volumes, would negatively impact our revenues, and without corresponding decreases in average unit costs, would negatively impact our margins. In addition, reductions in the average selling prices of our licensees’ products, unless offset by an increase in volumes, would generally decrease total royalties payable to us, negatively impacting our licensing revenues.

We compete with many different semiconductor companies, ranging from multinational companies with integrated research and development, manufacturing, sales and marketing organizations across a broad spectrum of product lines, to companies that are focused on a single application market segment or standard product, including those that produce products for automotive, IoT and networking applications. Most of these competitors compete with us with respect to some, but not

all, of our businesses. Companies that promote standards that are neither CDMA- nor OFDMA-based (e.g., GSM) as well as companies that design integrated circuits based on CDMA, OFDMA, Wi-Fi or their derivatives are generally competitors or potential competitors. Examples (some of which are strategic partners of ours in other areas) include Actions (Zhuhai) Technology Co., LTD, Advanced Micro Devices, Inc., Altair Engineering, Inc., Ambarella, Inc., AMLogic Co., Inc., Broadcom ~~Limited, Cirrus Logic,~~Inc., Cypress Semiconductor Corporation, Fuzhou Rockchip Electronics Co., LTD., HiSilicon Technologies, Intel, Marvell Technology, ~~Maxim Integrated Products,~~ MediaTek, ~~Microchip Technology Inc.,~~ Murata Manufacturing Co., Ltd., ~~Nordic Semiconductor,~~ Nvidia, NXP Semiconductors N.V., Qorvo Inc., ~~Realtek Semiconductor,~~ Renesas Electronics Corporation, Samsung Electronics, ~~Sequans Communications S.A.,~~ Skyworks Solutions Inc., ~~Sony Corporation and~~ Spreadtrum Communications (which is controlled by Tsinghua Unigroup)., STMicroelectronics International N.V., Texas Instruments Incorporated and Quantenna Communications, Inc. Some of these current and potential competitors may have advantages over us that include, among others: motivation by our customers in certain circumstances to use our competitors’ integrated circuit products, to utilize their own internally-developed integrated circuit products ~~to use our competitors’ integrated circuit products and/~~or sell such products to others, including by bundling with other products, or to choose alternative technologies; lower cost structures ~~and/~~or a willingness and ability to accept lower prices and lower or negative margins for their products, particularly in China; foreign government support of other technologies or ~~competitors;~~competitors or original equipment manufacturers (OEMs) that sell devices that do not contain our chipsets; better known brand names; ownership and control of manufacturing facilities and greater expertise in manufacturing processes; more extensive relationships with local distribution companies and ~~original equipment manufacturers~~OEMs in certain geographic regions (such as China) ~~and/or~~; more experience in adjacent industry segments outside traditional cellular industries (such as automotive, IoT and ~~IoT)~~computing); ~~and/or~~and a more established presence in certain regions.

We derive a significant portion of our consolidated revenues from a small number of customers and ~~licensees.~~licensees, which increasingly includes a small number of Chinese OEMs. If revenues derived from these customers or licensees decrease or the timing of such revenues fluctuates, our business and results of operations could be negatively affected.

Our QCT segment derives a significant portion of its revenues from a small number of customers, and we expect this trend to continue in the foreseeable future. Our industry is experiencing and may continue to experience concentration of device share among a few companies, particularly at the premium tier, contributing to this trend. Chinese OEMs continue to grow their device share in China and are increasing their device share in regions outside of China, and we derive a significant and increasing portion of our revenues from a small number of these OEMs.

In addition, certain of our largest integrated circuit customers develop their own integrated circuit products, which they have in the past chosen to utilize in certain of their devices ~~rather than our products,~~ and may in the future choose to utilize in certain (or all) of their devices, rather than our products ~~(and/or~~(and may sell their integrated circuit products to third parties in competition with us). Also, Apple, which has historically been one of our largest ~~integrated circuit~~ customers, ~~has utilized~~now utilizes products of one of our competitors in ~~certain~~many of their devices rather than our products, is solely utilizing one or more of our competitor’s products in its most recent smartphone launch and may ~~in the future~~continue to use our competitors’ products, and may develop and utilize ~~products of our competitors in certain (or all) of~~ their ~~devices~~own modem products, rather than our ~~products.~~products in their future devices.

The loss of any one of our significant customers, a reduction in the purchases of our products by such customers or the cancelation of significant purchases by any of these customers, whether due to the use of their own integrated circuit products, our competitors’ integrated circuit products or otherwise, would reduce our revenues and could harm our ability to achieve or sustain expected results of operations, and a delay of significant purchases, even if only temporary, would reduce our revenues in the period of the delay. Any such reduction in revenues would also impact our cash resources available for other purposes, such as research and development. Further, the concentration of device share among a few companies, and the corresponding purchasing power of these companies, may result in lower prices for our products which, if not accompanied by a sufficient increase in the volume of purchases of our products, could have an adverse effect on our revenues and margins. In addition, the timing and size of purchases by our significant customers may be impacted by the timing of such customers’ new or next generation product introductions, over which we have no control, and the timing ~~and/or~~and success of such introductions may cause our revenues and results of operations to fluctuate. Accordingly, if current industry dynamics and concentrations continue, our QCT segment’s revenues will continue to depend largely upon, and be impacted by, future purchases, and the timing and size of any such future purchases, by these significant customers.

~~One of~~Further, to the extent Apple purchases our ~~largest customers~~modem products, it purchases our Mobile Data Modem (MDM) products, which do not include our integrated application processor technology, and which have lower revenue and margin contributions than our combined modem and application processor products. To the extent ~~such customer~~Apple takes device share from our ~~other~~ customers who purchase our integrated modem and application processor products, our revenues and margins may be negatively impacted.

Further, companies that develop HLOS for devices, including leading technology companies, now sell their own devices. If we fail to effectively partner or continue partnering with these companies, or with their partners or customers, they may

decide not to purchase (either directly or through their contract manufacturers), or to reduce or discontinue their purchases of, our integrated circuit products.

In addition, there has been and continues to be litigation among certain of our customers and other industry participants, and the potential outcomes of such litigation, including but not limited to injunctions against devices that incorporate our products ~~and/~~or intellectual property, orand rulings on certain patent law or patent licensing issues that create new legal precedent, could impact our business, particularly if such action impacts one of our larger customers.

Although we have ~~several hundred~~more than 300 licensees, our QTL segment derives a significant portion of its ~~licensing~~ revenues from a limited number of ~~licensees.~~licensees, which increasingly includes a small number of Chinese OEMs. In the event that one or more of our significant licensees fail to meet their reporting ~~and/or~~and payment obligations, or we are unable to renew or modify one or more of such license agreements, including standard-essential patent only license agreements, under similar terms, our revenues, results of operations and cash flows would be adversely impacted. Moreover, the future growth and success of our core licensing business will depend in part on the ability of our licensees to develop, introduce and deliver high-volume products that achieve and sustain customer acceptance. We have no control over the product development, sales efforts or pricing of products by our licensees, and our licensees might not be successful. Reductions in the average selling prices of wireless devices sold by our ~~significant~~ licensees, without a sufficient increase in the volumes of such devices sold, would generally have an adverse effect on our licensing revenues. Such adverse impact may be mitigated by the per unit royalty caps that apply to certain categories of complete wireless devices, namely smartphones, tablets and laptops.

We derive a significant portion of our consolidated revenues from the premium-tier device segment. If sales of premium-tier devices decrease, ~~and/~~or sales of our premium-tier integrated circuit products decrease, our results of operations could be negatively affected.

We derive a significant portion of our revenues from the premium-tier device segment, and we expect this trend to continue in the foreseeable future. We have experienced, and expect to continue to experience, slowing growth in the premium-tier device segment due to, among other factors, lengthening replacement cycles in developed regions, where premium-tier smartphones are common; increasing consumer demand in emerging regions, particularly China and India, where premium-tier smartphones are less common and replacement cycles are on average longer than in developed ~~regions; lengthening replacement cycles in emerging regions; and/or~~regions and are continuing to lengthen; and a maturing premium-tier smartphone industry in which demand is increasingly driven by new product launches ~~and/or~~and innovation cycles.

In addition, as discussed in the prior risk factor, our industry is experiencing concentration of device share at the premium tier among a few companies, ~~at the premium tier,~~ which gives them significant supply chain leverage. Further, those companies may utilize their own internally-developed integrated circuit products, or our competitors’ integrated circuit products, rather than our products in all or a portion of their devices. These dynamics may result in lower prices for ~~and/~~or reduced sales of our premium-tier integrated circuit products.

A reduction in sales of premium-tier devices, or a reduction in sales of our premium-tier integrated circuit products (which have a higher revenue and margin contribution than our lower-tier integrated circuit products), may reduce our revenues and margins and may harm our ability to achieve or sustain expected financial results. Any such reduction in revenues would also impact our cash resources available for other purposes, such as research and development.

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

From time to time, companies initiate various strategies to attempt to renegotiate, ~~mitigate and/~~reduce or eliminate their need to pay royalties to us for the use of our intellectual property. These strategies have included: (i) litigation, often alleging infringement of patents held by such companies, patent misuse, patent exhaustion, patent invalidity ~~and/~~or unenforceability of our patents ~~and/~~or licenses, that we do not license our patents on fair, reasonable and nondiscriminatory (FRAND) terms, or some form of unfair competition or competition law violation; (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; (v) lobbying governmental regulators and elected officials for the purpose of seeking the reduction of royalty rates or the base on which royalties are calculated, ~~the imposition~~ of seeking to impose some form of compulsory licensing ~~and/~~or ~~to weaken~~of weakening a patent holder’s ability to enforce its rights or obtain a fair return for such rights; and (vi) licensees using various strategies to attempt to shift their royalty obligation to their suppliers that results in lowering the wholesale (i.e., licensee’s) selling price on which the royalty is calculated.

In addition, certain licensees have disputed, underreported, underpaid, not reported ~~and/~~or not paid royalties owed to us under their license agreements or reported to us in a manner that is not in compliance with their contractual obligations, and certain companies have yet to enter into or have delayed entering into or renewing license agreements

with us for their use of our intellectual property, and licensees ~~and/or~~and companies may continue to do so in the future. The fact that one or more licensees dispute, underreport, underpay, do not report ~~and/~~or do not pay royalties owed to us may encourage other licensees to take similar actions and may encourage other licensees or unlicensed companies to delay entering into, or not enter into, new license agreements. Further, to the extent such licensees ~~and/or~~and companies increase their device share, the negative impact of their underreporting, underpayment, non-payment ~~and/~~or non-reporting on our business, revenues, results of operations, financial condition ~~and/or~~and cash flows will be exacerbated.

We are currently subject to various litigation and governmental investigations ~~and/or~~and proceedings, including the lawsuit filed against us by the United States Federal Trade Commission (FTC), which trial took place in January 2019, some of which have arisen and may continue to arise out of the strategies described above. Certain legal matters are described more fully in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 6. Commitments and Contingencies.” ~~The unfavorable resolution~~Additionally, certain of our direct and indirect customers and licensees have pursued, and others may in the future pursue, litigation or arbitration against us related to our business. Unfavorable resolutions of one or more of these matters have had and could in the future have a material adverse effect on our business, revenues, results of operations, financial condition ~~and/or~~and cash flows. Depending on the type of matter, various remedies that could result from an unfavorable resolution include, among others, ~~injunctions,~~the loss of our ability to enforce one or more of our patents; injunctions; monetary damages or fines or other orders to pay ~~money and/or~~money; the issuance of orders to cease certain conduct ~~and/~~or modify our business ~~practices. In addition, decisions or orders arising out of governmental investigations or proceedings could require~~practices, such as requiring us to reduce our royalty rates, reduce the base on which our royalties are calculated, grant patent licenses to chipset manufacturers, or modify or renegotiate some or ~~could encourage~~all of our existing license agreements; and determinations that some or ~~embolden~~all of our license agreements are invalid or unenforceable. If some or all of our license agreements are declared invalid or unenforceable and we are required to renegotiate these license agreements, or if as part of a settlement we agree to renegotiate certain of our license agreements, we may not receive, or may not be able to recognize, any licensing or royalty revenues on the impacted license agreements unless and until we enter into new license agreements; and even licensees towhose license agreements are not impacted may demand to renegotiate their agreements or invoke the dispute resolution provision in their agreements, and we may not be able to recognize some or any licensing or royalty revenues on such agreements. The renegotiation of new license agreements ~~with us~~could lead to arbitration or litigation to resolve the licensing terms (which could be ~~on terms that are~~ less favorable to us than existing terms), ~~and such licensees~~each of which could take several months or possibly years. Licensees may underreport, underpay, not report or not pay royalties owed to us pending the conclusion of such ~~negotiations.~~negotiations, arbitration or litigation. In addition to these issues concerning future licensing and royalty revenues, we may be sued for alleged overpayments of past royalties paid to us, including private antitrust actions seeking treble damages under U.S. antitrust laws. Such events could result in a materially negative impact on our financial condition, in which case we would have to significantly cut costs and other uses of cash, including in research and development, significantly impairing our ability to maintain product and technology leadership and invest in next generation technologies such as 5G. Further, depending on the breadth and severity of the circumstances above, we may have to reduce or eliminate our capital return programs, and our ability to timely pay our indebtedness may be impacted. If these events occur, our financial outlook and stock price would decline, possibly significantly. Further, a governmental body in a particular country or region may assert, and may be successful in imposing, remedies with effects that extend beyond the borders of that country or region. ~~See also~~These activities have required, and we expect that they will continue to require, the ~~Risk Factor entitled “Changes~~investment of significant management time and attention and have resulted, and we expect that they will continue to result, in ~~our patent licensing practices, whether due to governmental investigations, private~~increased legal ~~proceedings challenging those practices or otherwise, could adversely impact our business and results of operations.”~~costs until the respective matters are resolved.

In addition, in connection with our participation in SDOs, we, like other patent owners, generally have made contractual commitments to such organizations to license those of our patents that would necessarily be infringed by standard-compliant products as set forth in those commitments. Some manufacturers and users of standard-compliant products advance interpretations of these commitments that are adverse to our licensing business, including interpretations that would limit the amount of royalties that we could collect on the licensing of our patent portfolio.

Further, some companies or entities have proposed significant changes to existing intellectual property policies for implementation by SDOs and other industry organizations with the goal of significantly devaluing standard-essential patents. For example, some have put forth proposals which would require a maximum aggregate intellectual property royalty rate for the use of all standard-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 standard-essential patents based upon the number of standard-essential patents held by such company. Others have proposed that injunctions not be an available remedy for infringement of standard-essential patents ~~and/or~~and have made proposals that could severely limit damage awards and other remedies by courts for patent

infringement (e.g., by severely limiting the base upon which the royalty percentage may be applied). A number of these strategies are purportedly based on interpretations of the policies of certain SDOs concerning the licensing of patents that are or may be essential to industry standards and on our ~~(and/or~~(or other companies’) alleged failure to abide by these policies.

Some SDOs, courts and governmental agencies have adopted and may in the future adopt some or all of these interpretations or proposals in a manner adverse to our interests, including in litigation to which we may not be a party.

We expect that such proposals, interpretations and strategies will continue in the future, and if successful, our business model would be harmed, either by limiting or eliminating our ability to collect royalties (or by reducing the royalties we can collect) on all or a portion of our patent portfolio, limiting our return on investment with respect to new technologies, limiting our ability to seek injunctions against infringers of our standard-essential patents, constraining our ability to make licensing commitments when submitting our technology for inclusion in future standards (which could make our technology less likely to be included in such standards) or forcing us to work outside of SDOs or other industry groups to promote our new technologies, and our revenues, results of operations ~~and/or~~and cash flows could be negatively impacted. In addition, the legal and other costs associated with asserting or defending our positions have been and continue to be significant. We assume that such challenges, regardless of their merits, will continue into the foreseeable future and ~~may~~will require the investment of substantial management time and financial resources.

Our business, particularly our licensing business, may suffer as a result of adverse rulings in government investigations or proceedings.

We are currently subject to various governmental investigations ~~and/or~~and proceedings, particularly with respect to our licensing business, including the lawsuit filed against us by the United States Federal Trade Commission (FTC), which trial took place in January 2019, and certain such matters are described more fully in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 6. Commitments and Contingencies.” Key allegations in those matters include,

among others, that we do not license our cellular standard-essential patents separately from our other patents, that we violate FRAND licensing commitments by refusing to grant licenses to chipset makers, that our royalty rates are too high, ~~and/or~~ that the base on which our royalties are calculated should be something less than the wholesale (i.e., licensee’s) selling price of the applicable device (minus certain permitted deductions)~~. The unfavorable resolution~~, that we unlawfully require customers to execute a patent license before we sell them cellular modem chipsets, that we have entered into exclusive agreements with chipset customers that foreclose competition, and that we violate antitrust laws, engage in anticompetitive conduct and unfair methods of competition. Unfavorable resolutions of one or more of these matters have had and could in the future have a material adverse effect on our business, revenues, results of operations, financial condition ~~and/or~~and cash flows. Depending on the type of matter, various remedies that could result from an unfavorable resolution include, among others, ~~injunctions,~~the loss of our ability to enforce one or more of our patents; injunctions; monetary damages or fines or other orders to pay ~~money, and/or~~money; the issuance of orders to cease certain conduct ~~and/~~or modify our business ~~practices. In addition, decisions or orders arising out of~~practices, such ~~governmental investigations or proceedings could require~~as requiring us to reduce our royalty rates, reduce the base on which our royalties are calculated, grant patent licenses to chipset manufacturers, or modify or renegotiate some or ~~could encourage~~all of our existing license agreements; and determinations that some or ~~embolden~~all of our license agreements are invalid or unenforceable. If some or all of our license agreements are declared invalid or unenforceable and we are required to renegotiate these license agreements, or if as part of a settlement we agree to renegotiate certain of our license agreements, we may not receive, or may not be able to recognize, any licensing or royalty revenues on the impacted license agreements unless and until we enter into new license agreements; and even licensees towhose license agreements are not impacted may demand to renegotiate their agreements or invoke the dispute resolution provision in their agreements, and we may not be able to recognize some or any licensing or royalty revenues on such agreements. The renegotiation of new license agreements ~~with us~~could lead to arbitration or litigation to resolve the licensing terms (which could be ~~on terms that are~~ less favorable to us than existing terms), ~~and such licensees~~each of which could take several months or possibly years. Licensees may underreport, underpay, not report or not pay royalties owed to us pending the conclusion of such ~~negotiations.~~negotiations, arbitration or litigation. In addition to these issues concerning future licensing and royalty revenues, we may be sued for alleged overpayments of past royalties paid to us, including private antitrust actions seeking treble damages under U.S. antitrust laws. Such events could result in a materially negative impact on our financial condition, in which case we would have to significantly cut costs and other uses of cash, including in research and development, significantly impairing our ability to maintain product and technology leadership and invest in next generation technologies such as 5G. Further, depending on the breadth and severity of the circumstances above, we may have to reduce or eliminate our capital return programs, and our ability to timely pay our indebtedness may be impacted. If these events occur, our financial outlook and stock price would decline, possibly significantly. Further, a governmental body in a particular country or region may assert, and may be successful in imposing, remedies with effects that extend beyond the borders of that country or region. ~~See also~~These activities have required, and we expect that they will continue to require, the ~~Risk Factor entitled “Changes~~investment of significant management time and attention and have resulted, and we expect that they will continue to result, in ~~our patent licensing practices, whether due to governmental investigations, private~~increased legal ~~proceedings challenging those practices or otherwise, could adversely impact our business and results of operations.”~~costs until the respective matters are resolved.

Changes in our patent licensing practices, whether due to governmental investigations, private legal proceedings challenging those practices or otherwise, could adversely impact our business and results of operations.

We are currently subject to various governmental investigations and proceedings and private legal proceedings challenging our patent licensing and chipset sales practices, including the lawsuit filed against us by the United States Federal Trade Commission (FTC),which trial took place in January 2019, as described more fully in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 6. Commitments and Contingencies.” Key allegations in those matters include, among others, that we do not license our cellular standard-essential patents separately from our other patents, that we violate FRAND licensing commitments by refusing to grant licenses to chipset makers, that our royalty rates are too high, ~~and/or~~ that the base on which our royalties are calculated should be something less than the wholesale (i.e., licensee’s) selling price of the applicable device (minus certain permitted deductions)., that we unlawfully require customers to execute a patent license before we sell them cellular modem chipsets, that we have entered into exclusive agreements with chipset customers that foreclose competition, and that we violate antitrust laws, engage in anticompetitive conduct and unfair methods of competition. We believe that ~~the ultimate~~one intent of these investigations and legal proceedings is to reduce the amount of royalties that licensees are required to pay to us for their use of our intellectual property.

We have historically licensed our cellular standard-essential patents together with our other patents that may be useful to licensed products because licensees typically have desired to obtain the commercial benefits of receiving such broad patent rights from us. However, we also have licensed only our cellular standard-essential patents to certain licensees who have requested such licenses. In addition, in connection with our resolution with the China National Development and Reform Commission (NDRC), our standard practice in China since 2015 is to offer licenses to our 3G and 4G standard-essential Chinese patents for devices sold for use in China separately from our other patents.

In ~~connection with our recent 5G royalty rate announcement,~~addition, we offer licenses to only our cellular standard-essential patents (including 3G, 4G and 5G) for both single mode and multi-mode ~~devices.~~devices worldwide. A number of our licensees have entered into standard-essential patent only agreements on a worldwide basis, and we expect more of our licensees will do so in the future. Our royalty rates for licenses to only our cellular standard-essential patents are lower than our royalty rates for licenses to substantially all of our patent portfolio. If more licensees choose a license to only our cellular standard-essential patents instead of a portfolio license than has historically been the case, our licensing revenues and earnings would be negatively impacted unless we were able to license our other patents at rates that offset all or a portion of any difference between the royalties previously received for licenses of substantially all of our patent portfolio as compared to licenses of only our cellular standard-essential patents ~~and/~~or there was a sufficient increase in the overall volume of sales of devices upon which royalties are paid.

If we were required to grant patent licenses to chipset manufacturers (i.e., to implement a more complex, tiered licensing structure in which we license certain portions of our patent portfolio to chipset manufacturers and other portions to device manufacturers), we would incur additional transaction costs, which may be significant, and we ~~may~~could incur delays in recognizing revenues until license negotiations were completed. In addition, our licensing revenues and earnings would be negatively impacted if we were not able to obtain, in the aggregate, equivalent revenues under such a multi-level licensing structure.

If we were required to reduce the royalty rates we charge under our patent license agreements, our revenues, earnings and ~~earnings~~cash flows would be negatively impacted absent a sufficient increase in the volume of sales of devices upon which royalties are paid. Similarly, if we were required to reduce the base on which our royalties are calculated, our revenues, results of operations ~~and/or~~and cash flows would be negatively impacted unless there was a sufficient increase in the volume of sales of devices upon which royalties are paid ~~and/~~or we were able to increase our royalty rates to offset the decrease in revenues resulting from such lower royalty base (assuming the absolute royalty dollars were below any relevant royalty caps).

To the extent that we were required to implement any of these new licensing practices by modifying or renegotiating our existing license agreements, we would incur additional transaction costs, which may be significant, and we ~~may~~could incur delays in recognizing revenues until license negotiations were completed. The impact of any such changes to our licensing practices

could vary widely and by jurisdiction, depending on the specific outcomes and the geographic scope of such outcomes. In addition, if we were required to make modifications to our licensing practices in one jurisdiction, licensees ~~and/~~or governmental agencies in other jurisdictions may attempt to obtain similar outcomes for themselves ~~and/~~or for such other jurisdictions, as applicable.

The enforcement and protection of our intellectual property rights may be expensive, could fail to prevent misappropriation or unauthorized use of our intellectual property rights, could result in the loss of our ability to enforce one or more patents, ~~and/or~~and could be adversely affected by changes in patent laws, by laws in certain foreign jurisdictions that may not effectively protect our intellectual property rights ~~and/or~~and by ineffective enforcement of laws in such jurisdictions.

We rely primarily on patent, copyright, trademark and trade secret laws, as well as nondisclosure and confidentiality agreements, international treaties and other methods, to protect our proprietary information, technologies and processes, including our patent portfolio. Policing unauthorized use of our products, technologies and proprietary information is difficult and time consuming. The steps we have taken have not always prevented, and we cannot be certain the steps we will 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~~U.S. laws or where the enforcement of such laws may be lacking or ineffective. Some industry participants who have a vested interest in devaluing patents in general, or standard-essential patents in particular, have mounted attacks on certain patent systems, increasing the likelihood of changes to established patent laws. In the United States, there is continued discussion regarding potential patent law changes and current and potential future litigation regarding patents, the outcomes of which could be detrimental to our licensing business. The laws in certain foreign countries in which our products are or may be manufactured or sold, including certain countries in Asia, may not protect our intellectual property rights to the same extent as the laws in the United States. We expect that the European Union will adopt a unitary patent system in the next few years that may broadly impact that region’s patent regime. We cannot predict with certainty the long-term effects of any potential changes. In addition, we cannot be certain that the laws and policies of any country or the practices of any standards bodies, foreign or domestic, with respect to intellectual property enforcement or licensing or the adoption of standards, will not be changed in the future in a way detrimental to our licensing program or to the sale or use of our products or technologies.

We have had, and may in the future have, difficulty in certain circumstances in protecting or enforcing our intellectual property rights ~~and/or~~and contracts, including collecting royalties for use of our patent portfolio due to, among others: refusal by certain licensees to report ~~and/or~~and pay all or a portion of the royalties they owe to us; policies of foreign governments; challenges to our licensing practices under 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 courts in the United States; ~~and/or~~and challenges before competition agencies to our licensing business ~~and/or~~and the pricing and integration of additional features and functionality into our chipset products. Certain licensees have disputed, underreported, underpaid, not reported ~~and/or~~and not paid royalties owed to us under their license agreements with us or reported to us in a manner that is not in compliance with their contractual obligations, and certain companies have yet to enter into or have delayed entering into or renewing license agreements for their use of our intellectual property, and such licensees ~~and/or~~and companies may continue to do so in the future. The fact that one or more licensees dispute, underreport, underpay, do not report ~~and/or~~and do not pay royalties owed to us may encourage other licensees to take similar actions and may encourage other licensees or unlicensed companies to delay entering into, or not enter into, new license agreements. Additionally, although our license agreements provide us with the right to audit the books and records of licensees, audits can be expensive, time consuming, incomplete and subject to dispute. Further, certain licensees may not comply with the obligation to provide full access to their books and records. To the extent we do not aggressively enforce our rights under our license agreements, licensees may not comply with their existing license agreements, and to the extent we do not aggressively pursue unlicensed companies to enter into license agreements with us for their use of our intellectual property, other unlicensed companies may not enter into license agreements. Similarly, we provide access to certain of our intellectual property ~~and/or~~and proprietary ~~and/or~~and confidential business information to our direct and indirect customers and licensees, who may wrongfully use such intellectual property ~~and/or~~and information ~~and/~~or wrongfully disclose such intellectual property ~~and/or~~and information to third parties, including our competitors.

We have ~~entered into~~engaged in litigation and arbitration in the past and may need to further litigate or arbitrate in the future to enforce our contract ~~and/or~~and intellectual property rights, protect our trade secrets or determine the validity and scope of proprietary rights of others. We are currently engaged in litigation matters related to protecting or enforcing our contract ~~and/or~~and intellectual property rights, and certain such matters are described more fully in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 6. Commitments and Contingencies.” As a result of any such litigation or arbitration, we could lose our ability to enforce one or more patents, portions of our license agreements could be determined to be invalid or unenforceable (which may in

turn result in other licensees either not complying with their existing license agreements ~~and/~~or initiating litigation) ~~and/or~~and we could incur substantial costs. Any action we take to enforce our contract or intellectual property rights could be costly and could absorb significant management time and attention, which, in turn, could negatively impact our results of operations ~~and/or~~and cash flows. Further, even a positive resolution to our enforcement efforts may take time to conclude, which may reduce our revenues and cash resources available for other purposes, such as research and development, in the periods prior to conclusion. See also the Risk Factor entitled “Changes in our patent licensing practices, whether due to governmental investigations, private legal proceedings challenging those practices or otherwise, could adversely impact our business and results of operations.”

Our growth increasingly depends on our ability to extend our technologies, products and services into new and expanded product areas, such as RFFE, and adjacent industry segments and applications outside of traditional cellular industries, such as automotive, IoT and networking, among others. Our research, development and other investments in these new and expanded product areas, ~~and~~ industry segments and applications, and related technologies, products and services, as well

as in our existing technologies, products and services and new technologies, such as 5G, may not generate operating income or contribute to future results of operations that meet our expectations.

Our industry is subject to rapid technological change, evolving industry standards and frequent new product introductions, and we must make substantial research, development and other investments, such as acquisitions, in new products, services and technologies to compete successfully. Technological innovations generally require significant research and development efforts before they are commercially viable. While we continue to invest significant resources toward advancements primarily in support of 4G- and 5G-based technologies, we also ~~innovate across a broad spectrum of opportunities to deploy~~invest in new and expanded products, and ~~enter into~~ adjacent industry segments and applications by leveraging our existing technical and business expertise ~~and/or~~and through acquisitions.

In particular, our future growth significantly depends on new and expanded product areas, such as RFFE, and adjacent industry segments and applications outside of traditional cellular industries, such as automotive, IoT (including the connected home, smart cities, wearables, voice and music and robotics), ~~data center,~~ networking, computing and AI, such as machine learning, among others; our ability to develop leading and cost-effective technologies, products and services for new and expanded product areas, ~~and~~ adjacent industry ~~segments;~~segments and applications; and third parties incorporating our technology, products and services into devices used in these product areas, industry segments and ~~industry segments.~~applications. Accordingly, we intend to continue to make substantial investments in these new and expanded product areas and adjacent industry segments and applications, and in developing new products, services and technologies for these product areas, industry segments and ~~industry segments.~~applications.

Our growth also depends significantly on our ability to develop 5G technologies, and to develop and commercialize products using 5G technologies.

However, our research, development and other investments in these new and expanded product areas and adjacent industry segments and applications, and corresponding technologies, products and services, as well as in our existing, technologies, products and services and new technologies, such as 5G, use of ~~both~~ licensed, shared and unlicensed spectrum and convergence of cellular and Wi-Fi, may not succeed due to, among other reasons: new industry segments, ~~and/or~~applications and consumer demand may not develop ~~and/~~or grow as anticipated; our strategies ~~and/~~or the strategies of our customers, licensees or partners may not be successful; improvements in alternate technologies in ways that reduce the advantages we anticipate from our investments; competitors’ technologies, products or services being more cost effective, having more capabilities or fewer limitations or being brought to market faster than our new technologies, products and services; and competitors having longer operating histories in industry segments that are new to us. We may also underestimate the costs of or overestimate the future revenues ~~and/~~or margins that could result from these investments, and these investments may not, or may take many years to, generate material returns. Further, the automotive industry is subject to long design-in time frames, long product life cycles and a high degree of regulatory and safety requirements, necessitating suppliers to the industry to comply with stringent qualification processes, very low defect rates and high reliability standards, all of which results in a significant barrier to entry and increased costs.

If our new technologies, products ~~and/or~~and services are not successful, or are not successful in the time frame we anticipate, we may incur significant costs ~~and/or~~and asset impairments, our business may not grow as anticipated, our revenues ~~and/or~~and margins may be negatively impacted, ~~and/or~~and our reputation may be harmed.

There are numerous risks associated with our operation and control of the manufacturing facilities of our joint venture with TDK, RF360 Holdings, including a higher portion of fixed costs relative to a fabless model, environmental compliance and liability, exposure to natural disasters, timely supply of equipment and materials and manufacturing difficulties.

Manufacturing facilities are characterized by a higher portion of fixed costs relative to a fabless model. ~~In less favorable industry environments, in particular, we~~We may be faced with a decline in the utilization rates of our manufacturing facilities due to decreases in demand for our ~~products.~~products, including in less favorable industry environments. During such periods, our manufacturing facilities could operate at lower capacity levels, while the fixed costs associated with full capacity continue to be incurred, resulting in lower gross profit.

We are subject to many environmental, health and safety laws and regulations in each jurisdiction in which we operate our manufacturing facilities, which govern, among other things, emissions of pollutants into the air, wastewater discharges,

the use and handling of hazardous substances, waste disposal, the investigation and remediation of soil and ground water contamination and the health and safety of our employees. We are also required to obtain and maintain environmental permits from governmental authorities for certain of our operations. We cannot make assurances that we will be at all times in compliance with such laws, regulations and permits. Certain environmental laws impose strict, and in certain circumstances, joint and several, liability on current or previous owners or operators of real property for the cost of investigation, removal or remediation of hazardous substances. Certain of these laws also assess liability on persons who arrange for hazardous substances to be sent to disposal or treatment facilities when such facilities are found to be contaminated. In addition, we

could also be held liable for consequences arising out of human exposure to hazardous substances or other environmental damage.

We have manufacturing facilities in Asia and Europe. If tsunamis, flooding, earthquakes, volcanic eruptions or other natural disasters, or geopolitical conflicts, were to damage, destroy or disrupt our manufacturing facilities, it could disrupt our operations, delay new production and shipments of inventory orand result in costly repairs, replacements or other costs. In addition, natural disasters or geopolitical conflicts may result in disruptions in transportation, distribution channels orand supply chains, orand significant increases in the prices of raw materials.

Our manufacturing operations depend on securing raw materials and other supplies in adequate quality and quantity in a timely manner from multiple suppliers, and in some cases, we rely on a limited number of suppliers, particularly in Asia. Accordingly, there may be cases where supplies of raw materials and other products are interrupted by disaster, accident or some other event at a supplier, supply is suspended due to quality or other issues, or there is a shortage of supply due to a rapid increase in demand, which could impact production and prevent us from supplying products to our customers. If the supply-demand balance is disrupted, it may considerably increase costs of manufacturing due to increased prices we pay for raw materials or fuel. From time to time, suppliers may extend lead times, limit the amounts supplied to us or increase prices due to capacity constraints or other factors. Additionally, supply of and costs of raw materials may be negatively impacted by trade protection policies such as tariffs, or escalating trade tensions, particularly with countries in Asia. Further, it may be difficult or impossible to substitute one piece of equipment for another or replace one type of material with another. A failure by our suppliers to deliver our requirements could result in disruptions to our manufacturing operations.

Our manufacturing processes are highly complex, require advanced and costly equipment and must be continuously modified to improve yields and performance. Difficulties in the production process can reduce yields or interrupt production, and as a result, we may not be able to deliver products or do so in a timely, cost-effective or competitive manner. Further, to remain competitive ~~and/or~~and meet customer demand, we may be required to improve our facilities and process technologies and carry out extensive research and development, each of which may require investment of significant amounts of capital and may have a material adverse effect on our results of operations, financial condition ~~and/or~~and cash flows.

The continued and future success of our licensing programs requires us to continue to evolve our patent portfolio, and our licensing programs may be impacted by the proliferation of devices in new industry segments such as automotive and IoT, as well as the need to extend license agreements that are expiring ~~and/~~or to cover additional future patents.

We own a very strong portfolio of issued and pending patents related to 3G, 4G, 5G and other technologies. It is critical that we continue to evolve our patent portfolio, particularly in 5G. If we do not maintain a strong portfolio that is applicable to current and future standards, ~~(such as 5G),~~ products and services, particularly 5G, our future licensing revenues could be negatively impacted.

In addition, new connectivity and other services are emerging that rely on devices that may or may not be used on traditional cellular networks, such as devices used in the IoT and automotive industry segments. We also seek to diversify and broaden our technology licensing programs to new industry segments in which we can utilize our technology ~~leadership, such as wireless charging and other technologies.~~leadership. Standards, even de facto standards, that develop as these technologies mature, in particular those that do not include a base level of interoperability, may impact our ability to obtain royalties at all or that are equivalent to those that we receive for products used in cellular communications. Although we believe that our patented technologies are essential and useful to the commercialization of such services, any royalties we receive may be lower than those we receive from our current licensing program.

Further, 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. As a result, there are agreements with some licensees where later patents are not licensed by or to us. Additionally, ~~certain~~many of our license agreements (including essentially all of our ~~recent~~ agreements in ~~China)~~China and our recent worldwide standard-essential patent only agreements) are effective for a specified term. In order to license or to obtain a license to such later patents or after the expiration of athe specified term, orand to receive royalties after the specified ~~time period,~~term, we will need to extend or modify such license agreements or enter into new license agreements with such licensees. Accordingly, to the extent not renewed on their terms or by election for an additional (generally multi-year) period, if applicable, we will need to extend or modify such license agreements or enter into new license agreements with such licensees more frequently than we have done historically. We

might not be able to ~~renew~~extend or modify those license agreements, or enter into new license agreements, in the future without affecting the material terms and conditions of our license agreements with such licensees, and such modifications or new agreements may negatively impact our revenues. If there is a delay in ~~renewing~~extending, modifying or entering into a new license agreement ~~prior to its expiration,~~with a licensee, there would be a delay in our ability to recognize revenues related to that licensee’s product sales. Further, if we are unable to reach agreement on such modifications or new agreements, it could result in patent infringement litigation with such companies.

We depend on a limited number of third-party suppliers for the procurement, manufacture and testing of our products manufactured in a fabless production model. If we fail to execute supply strategies that provide technology leadership, supply assurance and low cost, our business and results of operations may be harmed. We are also subject to order and shipment uncertainties that could negatively impact our results of operations.

Our QCT segment primarily utilizes a fabless production model, which means that we do not own or operate foundries for the production of silicon wafers from which our integrated circuits are made. Other than the manufacturing facilities we ~~now~~ operate through our RF360 Holdings joint venture, we rely on independent third-party suppliers to perform the manufacturing and assembly, and most of the testing, of our integrated circuits. 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 models to purchase our integrated circuits. Under the turnkey model, our foundry suppliers are responsible for delivering fully assembled and tested integrated circuits. Under the two-stage manufacturing model, we purchase die in singular or wafer form from semiconductor manufacturing foundries and contract with separate third-party suppliers for manufacturing services such as wafer bump, probe, assembly and the majority of our final test requirements. The semiconductor manufacturing foundries that supply products to our QCT segment are primarily located in Asia, as are our primary warehouses where we store finished goods for fulfillment of customer orders. The following could have an adverse effect on our ability to meet customer demands ~~and/or~~and negatively impact our revenues, business operations, profitability ~~and/or~~and cash flows:

a reduction, interruption, delay or limitation in our product supply sources;

a failure by our suppliers to procure raw materials or to provide or allocate adequate manufacturing or test capacity for our products;

our suppliers’ inability to react to shifts in product demand or an increase in raw material or component prices;

our suppliers’ delay in developing leading process technologies, or inability to develop or maintain leading process technologies, including transitions to smaller geometry process technologies;

the loss of a supplier or the inability of a supplier to meet performance, quality or yield specifications or delivery schedules;

additional expense ~~and/~~or production delays as a result of qualifying a new supplier and commencing volume production or testing in the event of a loss of or a decision to add or change a supplier; ~~and/or~~and

natural disasters or geopolitical conflicts ~~particularly in Asia,~~ impacting our suppliers.

Additionally, supply of and costs of raw materials may be negatively impacted by trade protection policies such as tariffs, or escalating trade tensions, particularly with countries in Asia. While we have established alternate suppliers for certain technologies, we rely on sole- or limited-source suppliers for certain 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. To the extent we have established alternate suppliers, these suppliers may require significant levels of support to bring complex technologies to production. As a result, we may invest a significant amount of effort and resources and incur higher costs to support and maintain such alternate suppliers. Further, any future consolidation of foundry suppliers could increase our vulnerability to sole- or limited-source arrangements and reduce our suppliers’ willingness to negotiate pricing, which could negatively impact our ability to achieve cost reductions ~~and/or~~and could increase our manufacturing costs. Our arrangements with our suppliers may obligate 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. Our ability, and that of our suppliers, to develop or maintain leading process technologies, including transitions to smaller geometry process technologies, and to effectively compete with the manufacturing processes and performance of our competitors, could impact our ability to introduce new products and meet customer demand, could increase our costs (possibly decreasing our margins) and could subject us to the risk of excess inventories. ~~Our inability to meet customer demand due to sole- or limited-sourcing and/or the additional costs that we incur because of these or other supply constraints or because~~Any of the ~~need to support alternate suppliers~~above could negatively impact our business, our results of operations ~~and/or~~and cash flows.

Although we have long-term contracts with our suppliers, many of these contracts do not provide for long-term capacity commitments. To the extent 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 or limiting capacity to manufacture or test our products. Accordingly, capacity for our products may not be available when we need it or at reasonable prices. To the extent we do obtain long-term capacity commitments, we may incur additional costs related to those commitments ~~and/~~or make non-refundable payments for capacity commitments that are not used.

~~One or more of our~~Our suppliers or potential alternate suppliers may manufacture CDMA- or OFDMA-based integrated circuits that compete with our products. Such suppliers could elect to allocate raw materials and manufacturing capacity to their own products and reduce or limit deliveries to us to our detriment.

In addition, we may not receive reasonable pricing, manufacturing or delivery terms from our suppliers. 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. To the extent we are unable to obtain adequate supply, we may be obligated to make payment to our customers for such shortfalls.

Additionally, we place orders with our suppliers using our and our customers’ forecasts of customer demand, which are based on a number of assumptions and ~~estimates, and~~estimates. As we move to smaller geometry process technologies, the manufacturing lead-time increases. As a result, the orders we place with our suppliers are generally only partially covered by commitments from our customers. If we, or our customers, overestimate customer demand that is not under a binding commitment from our customer, we may experience increased excess ~~and/~~or obsolete inventory, which would negatively impact our results of operations.

Claims by other companies that we infringe their intellectual property 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, among other factors, the complex technical issues and inherent uncertainties in intellectual property litigation. If any of our products or services were found to infringe another company’s intellectual property rights, we could be subject to an injunction or be required to redesign our products or services, which could be costly, or to license such rights ~~and/~~or pay damages or other compensation to such other company. If we are unable to redesign our products or services, license such intellectual property rights used in our products or services or otherwise distribute our products (e.g., through a licensed supplier), we could be prohibited from making and selling such products or providing such services. 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, chipset foundries and semiconductor assembly and test service providers against certain types of liability ~~and/or~~and damages arising from qualifying claims of patent infringement by products or services sold or provided by us, or by intellectual property provided by us to our chipset foundries and semiconductor assembly and test service providers. Reimbursements under indemnification arrangements could have an adverse effect on our results of operations ~~and/or~~and cash flows. Furthermore, any such litigation could severely disrupt the supply of our products and the businesses of our chipset customers and their customers, which in turn could hurt our relationships with them and could result in a decline in our chipset sales ~~and/~~or reductions in our licensees’ sales, 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 an adverse effect on our results of operations and cash flows.

We expect that we may continue to be involved in litigation and may have to appear in front of administrative bodies (such as the United States 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 is very broad and may include, for example, monetary damages or fines or other orders to pay money, royalty payments, injunctions on the sale of certain of our integrated circuit products ~~(and/or~~(or on the sale of our customers’ devices using such products) ~~and/~~or the issuance of orders to cease certain conduct ~~and/~~or modify our business practices. Further, a governmental body in a particular country or region may assert, and may be successful in imposing, remedies with effects that extend beyond the borders of that country or region. In addition, 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 harm our relationships with them and could result in a decline in our worldwide chipset sales ~~and/~~or a reduction in our licensees’ sales to wireless operators, causing corresponding declines in our chipset ~~and/~~or licensing revenues.

Certain legal matters, ~~including~~which may include certain claims by other companies that we infringe their intellectual property, are described more fully in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 6. Commitments and Contingencies.”

We may engage in strategic acquisitions, transactions or make investments, ~~that~~or be unable to consummate planned strategic acquisitions, which could adversely affect our results of operations or fail to enhance stockholder value.

We engage in strategic acquisitions and other transactions, including joint ventures, and make investments, which we believe are important to the future of our business, with the goal of maximizing stockholder value. We acquire businesses and other assets, including patents, technology, wireless spectrum and other intangible assets, enter into joint ventures or other strategic transactions and purchase minority equity interests in or make loans to companies that may be private and ~~early-stage.~~early-

stage. Our strategic activities are generally focused on opening or expanding opportunities for our products and technologies and supporting the design and introduction of new products and services (or enhancing existing products or services) for voice and data communications and new industry segments. Recent material transactions include our RF360 Holdings joint venture with TDK ~~Corporation and our proposed acquisition of NXP.~~Corporation. Many of our strategic activities entail a high degree of risk and require the use of ~~domestic and/or foreign~~significant amounts of capital, and investments may not become liquid for several years after the date of the investment, if at all. Our strategic activities may not generate financial returns or result in increased adoption or continued use of our technologies, products or services. We may underestimate the costs ~~and/~~or overestimate the benefits, including product, revenue, cost and other synergies and growth opportunities that we expect to realize, and we may not achieve those benefits. 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. In addition, we may record impairment charges related to our strategic activities. Any losses or impairment charges that we incur related to strategic activities will have a negative impact on our financial condition and results of operations, and we may continue to incur new or additional losses related to strategic assets or investments that we have not fully impaired or exited.

Achieving the anticipated benefits of business acquisitions, including joint ventures and other strategic investments in which we have management and operational control, depends in part upon our ability to integrate the businesses in an efficient and effective manner and achieve anticipated synergies, and we may not be successful in these efforts. Such integration is complex and time consuming and involves significant challenges, including, among others: retaining key employees; successfully integrating new employees, technology, products, processes, operations (including manufacturing operations), sales and distribution channels, business models and business systems; retaining customers and suppliers of the businesses; consolidating research and development ~~and/or~~and supply operations; minimizing the diversion of management’s attention from ongoing business matters; consolidating corporate and administrative infrastructures; and managing the increased scale, complexity and globalization of our business, operations and employee base. We may not derive any commercial value from associated technologies or products or from future technologies or products based on these technologies, and we may be subject to liabilities that are not covered by indemnification protection that we may obtain, and we may become subject to litigation. Additionally, we may not be successful in entering or expanding into new sales or distribution channels, business or operational models (including manufacturing), geographic regions, industry segments ~~and/~~or categories of products served by or adjacent to the associated businesses or in addressing potential new opportunities that may arise out of the combination.

If we do not achieve the anticipated benefits of business acquisitions or other strategic activities, our business and results of operations may be adversely affected, and we may not enhance stockholder value by engaging in these transactions.

~~If we are unsuccessful in executing our cost plan, our business and results of operations may be adversely affected.~~

~~On January 16,~~In fiscal 2018, we ~~announced~~terminated our proposed acquisition of NXP because the acquisition had not been approved by the State Administration for Market Regulation (SAMR) in China by the date specified in the acquisition agreement. As a ~~cost plan designed to align our cost structure to our long-term margin targets. As part of this plan,~~result, we will ~~implement a series~~not realize the anticipated benefits of ~~targeted reductions across our businesses~~that acquisition. In addition, future acquisitions may now be more difficult, complex or expensive to ~~reduce annual costs by $1 billion, excluding incremental costs resulting from any future acquisition of a business. We expect these cost reductions to be fully captured in fiscal 2019.~~

~~We cannot provide assurance~~the extent that our cost plan will be successful, that anticipated cost savings will be realized, that our operations, business and financial results will improve and/or that these efforts will not disrupt our operations (beyond what is intended). Our ability to achieve the anticipated cost savings and other benefits within the expected time frames is subject to many estimates and assumptions, which are subject to significant economic, competitive and other uncertainties, some of which are beyond our control. Further, we may experience delays in the timing of these efforts and/or higher than expected or unanticipated costs in implementing them. Moreover, changes in the size, alignment or organization of our workforce could adversely affect employee morale and retention, relations with customers and business partners,reputation for our ability to ~~develop and deliver products and services as anticipated and/or impair~~consummate acquisitions has been harmed. Further, if U.S./China trade relations remain strained, our ability to realize our current or future business and financial objectives. If we do not succeed in these efforts, if these efforts are more costly or time-consuming than expected, if our estimates and assumptions are not correct, if we experience delays or if other unforeseen events occur, our business and results of operationsconsummate any transaction that would require approval from SAMR may be ~~adversely affected.~~

severely impacted.

We are subject to various laws, regulations, policies and standards. Our business may suffer as a result of existing, or new or amended, laws, regulations, policies or standards ~~and/~~or our failure or inability to comply with laws, regulations, policies or standards.

Our business, products and services, and those of our customers and licensees, are subject to various laws and regulations globally, as well as government policies and the specifications of international, national and regional communications standards bodies. Compliance with existing laws, regulations, policies and standards, the adoption of new laws, regulations, policies or standards, changes in the interpretation of existing laws, regulations, policies or standards, changes in the regulation of our activities by a government or standards body ~~and/~~or rulings in court, regulatory, administrative or other proceedings relating to such laws, regulations, policies or standards, including, among others, those affecting licensing practices, competitive business practices, the use of our technology or products, protection of intellectual property, trade and trade protection including tariffs, foreign currency, investments or loans, spectrum availability and license issuance, adoption of standards, the provision of device subsidies by wireless operators to their customers, taxation, export control, privacy and data protection, environmental protection, health and safety, labor and employment, human rights, corporate governance, public disclosure or business conduct, could have an adverse effect on our business and results of operations.

Government policies, particularly in China, that regulate the amount and timing of funds that may flow out of a country have impacted and may continue to impact the timing of our receipt of payments from our customers ~~and/or~~and licensees in such country, which may negatively impact our cash flows.

Delays in government approvals or other governmental activities that could result from, among others, a decrease in or a lack of funding for certain agencies or branches of the government ~~and/~~or political changes, could result in our incurring higher costs, could negatively impact our ability to timely consummate strategic transactions ~~and/or~~and could have other negative impacts on our business and the businesses of our customers and licensees.

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, and our costs could increase if our vendors (e.g., suppliers, third-party manufacturers or utility companies) pass on their costs to us. ~~Any~~The imposition of tariffs on ~~our~~ raw materials or our products could have a negative impact on our revenues ~~and/or~~and results of operations. We are also subject to laws and regulations impacting the manufacturing operations of our RF360 Holdings joint venture. See the Risk Factor entitled “There are numerous risks associated with our operation and control of the manufacturing facilities of our joint venture with TDK, RF360 Holdings, including ~~high~~a higher portion of fixed costs relative to a fabless model, environmental compliance and liability, exposure to natural disasters, timely supply of equipment and materials and manufacturing difficulties.”

Regulations in the United States require that we determine whether certain materials used in our products, referred to as conflict minerals, originated in the Democratic Republic of the Congo or an adjoining country (collectively, the Covered Countries), or were from recycled or scrap sources. Other countries orand regions are imposing similar regulations, which may ~~impose similar requirements~~require us to undertake additional verification and reporting, including regarding countries in addition to the ~~future.~~Covered Countries and minerals in addition to conflict minerals. The verification and reporting requirements, in addition to customer demands for conflict free sourcing, impose additional costs on us and on our suppliers and may limit the sources or increase the prices of materials used in our products. Further, if we are unable to determine that the conflict minerals used in our products do not directly or indirectly finance or benefit armed groups in the Covered Countries, we may face challenges with our customers that place us at a competitive disadvantage, and our reputation may be harmed. Similarly, other laws and regulations have been adopted or proposed that require additional transparency regarding the employment practices of our suppliers, and any failure to maintain responsible sourcing practices could also adversely affect our relationships with customers and our reputation.

Laws, regulations, policies and standards are complex and changing and may create uncertainty regarding compliance. Laws, regulations, policies and standards are subject to varying interpretations in many cases, and their application in practice may evolve over time. As a result, our efforts to comply may fail, particularly if there is ambiguity as to how they should be applied in practice. Failure to comply with any law, regulation, policy or standard may adversely affect our business, results of operations ~~and/or~~and cash flows. New laws, regulations, policies and standards or evolving interpretations of legal requirements may cause us to incur higher costs as we revise current practices, policies ~~and/~~or procedures and may divert management time and attention to compliance activities.

Our use of open source software may harm our business.

Certain of our software 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 software associated with our integrated circuit products, that incorporate open source software elements and operate in an 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. Furthermore, in the course of product development, we may make contributions to third party open source projects that could obligate our intellectual property to adverse licensing conditions. For example, to encourage the growth of a software ecosystem that is interoperable with our products, we may need to contribute certain implementations under the open source licensing terms that govern such projects, which may adversely impact certain of our associated intellectual property. 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, and we may not adequately protect our intellectual property rights. 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 employ adequate controls to protect our intellectual property rights, our contributions to and use of open source software presents risks that could have an adverse effect on these rights and on our business.

Our stock price, earnings and the fair value of our investments are subject to substantial quarterly and annual fluctuations and to market downturns.

Our stock price and earnings have fluctuated in the past and are likely to fluctuate in the future. Factors that may have a significant impact on the market price of our stock ~~and/or~~and earnings include those identified throughout this Risk Factors section; volatility of the stock market in general and technology-based companies in particular; announcements concerning us, our suppliers, our competitors or our customers or licensees; and variations between our actual financial results or guidance and expectations of securities analysts or investors, among others. Further, increased volatility in the financial markets ~~and/or~~and overall economic conditions may reduce the amounts that we realize in the future on our cash equivalents ~~and/or~~and marketable securities and may reduce our earnings as a result of any ~~impairment charges that we record to reduce recorded~~reductions in the fair values of marketable ~~securities to their fair values.~~securities.

In the past, securities class action litigation has been brought against ~~a company~~companies following periods of volatility in the market price of ~~its~~their securities. Due to changes in our stock price, we are and may in the future be the target of securities litigation. Securities litigation could result in substantial uninsured costs and divert management’s attention and our resources. Certain legal matters, including certain securities litigation brought against us, are described more fully in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 6. Commitments and Contingencies.”

We maintain an extensive investment portfolio of varied holdings, which are generally classified as available-for-sale and are therefore recorded on our consolidated balance sheet at fair value, with unrealized gains or losses reported as a component of accumulated other comprehensive income. The fair values of our investments are subject to fluctuation based primarily on market price volatility, as well as the underlying operations of the associated investment, among other things. If the fair value of such investments decreases below their cost basis, as some of our previous investments have, we may be required in certain circumstances to recognize a loss in our results of operations. The sensitivity of and risks associated with the market value of our investment portfolio are described more fully in our Annual Report on Form 10-K for our fiscal year ended September 24, 2017 and in “Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk” in this Quarterly Report.

There are risks associated with our ~~indebtedness.~~indebtedness and our significant stock repurchase program.

Our outstanding indebtedness and any additional indebtedness we incur ~~including in connection with our proposed acquisition of NXP,~~ may have negative consequences on our business, including, among others:

requiring us to use cash to pay the principal of and interest on our indebtedness, thereby reducing the amount of cash available for other purposes;

limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions, stock repurchases, dividends or other general corporate and other purposes;

limiting our flexibility in planning for, or reacting to, changes in our business and our industry; ~~and/or~~and

increasing our vulnerability to interest rate fluctuations to the extent a portion of our debt has variable interest rates.

Our ability to make payments of principal and interest on our indebtedness depends upon our future performance, which is subject to general economic conditions, industry cycles and financial, business and other factors, including factors which negatively impact our cash flows, such as licensees withholding some or all of the royalty payments they owe to us or our paying fines or modifying our business practices in connection with regulatory investigations, many of which are beyond our control. If we are unable to generate sufficient cash flow from operations in the future to service our debt, we may be required to, among other things: refinance or restructure all or a portion of our indebtedness; reduce or delay planned capital or operating expenditures; reduce or eliminate our dividend payments; or sell selected assets. Such measures might not be sufficient to enable us to service our debt. In addition, any such refinancing, restructuring

or sale of assets might not be available on economically favorable terms or at all, and if prevailing interest rates at the time of any such refinancing ~~and/~~or restructuring are higher than our current rates, interest expense related to such refinancing ~~and/~~or restructuring would increase. If there are adverse changes in the ratings assigned to our debt securities by credit rating agencies, our borrowing costs, our ability to access debt in the future ~~and/or~~and the terms of such debt could be adversely affected.

Our variable rate indebtedness may use LIBOR as a benchmark for establishing the interest rate. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past. The consequences of these developments cannot be entirely predicted but could include an increase in the cost of our variable rate indebtedness.

We have implemented a stock repurchase program to repurchase up to $30 billion of our outstanding common stock. This stock repurchase program has significantly reduced and will continue to reduce the amount of cash that we have available to fund our operations, including research and development, working capital, capital expenditures, acquisitions, investments, dividends and other corporate purposes; and increases our exposure to adverse economic, market, industry and competitive conditions and developments, and other changes in our business and our industry. In addition, this significant decrease in our cash reserves exacerbates the risks described above associated with our indebtedness.

Our business and operations could suffer in the event of security breaches of our information technology systems, or other misappropriation of our intellectual property or proprietary or confidential information.

~~Attempts by others~~Third parties regularly attempt to gain unauthorized access to our information technology systems, and most of such attempts are increasingly more sophisticated. These attempts, which might be related to industrial or other espionage, criminal hackers or state-sponsored intrusions, include trying to covertly ~~introducing~~introduce malware to our computers and networks, including those in our manufacturing operations, and impersonating authorized users, among others. Such attempts could result in the misappropriation, theft, misuse, disclosure or loss or destruction of the intellectual property, or the proprietary, confidential or personal information, of us or our employees, customers, licensees, suppliers or other third parties, as well as damage to or disruptions in our information technology systems. These threats are constantly evolving, thereby increasing the difficulty of successfully defending against them or implementing adequate preventative measures.

We seek to detect and investigate all security incidents and to prevent their recurrence but attempts to gain unauthorized access to our information technology systems may be successful, and in some cases, we might be unaware of an incident or its magnitude and effects. The misappropriation, theft, misuse, disclosure or loss or destruction of the intellectual property, or the proprietary, confidential or personal information, of us or our employees, customers, licensees, suppliers or other third parties, could harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives, cause us to lose business, damage our reputation,subject us to legal or regulatory proceedings, cause us to incur other loss or liabilityand otherwise adversely affect our business. We expect to continue to devote significant resources to the security of our information technology systems.

In addition, employees and former employees, in particular former employees who become employees of our competitors, customers or licensees, may misappropriate, use, publish or provide to our competitors, customers or licensees our intellectual property ~~and/~~or proprietary or confidential business information. This risk is exacerbated as competitors for talent, particularly engineering talent, increasingly attempt to hire our employees. See the Risk Factor entitled “We may not be able to attract and retain qualified employees.” Similarly, we provide access to certain of our intellectual property ~~and/~~or proprietary ~~and/~~or confidential business information to our direct and indirect customers and licensees, who may wrongfully use such intellectual property ~~and/~~or information ~~and/~~or wrongfully disclose such intellectual property ~~and/~~or information to third parties, including our competitors. 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 proprietary or confidential business information could harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives and/or otherwise adversely affect our business. To the extent any security breach results in inappropriate disclosure of our customers’ or licensees’ proprietary or confidential information, we may incur liability. We expect to continue to devote significant resources to the security of our information technology systems.

Potential tax liabilities could adversely affect our results of operations.

We are subject to income taxes in the United States and numerous foreign jurisdictions, including Singapore where our QCT segment’s ~~non-United States~~non-U.S. headquarters is located. Significant judgment is required in determining our provision for income taxes. We regularly are subject to examination of our tax returns and reports by taxing authorities in the United States federal jurisdiction and various state and foreign jurisdictions, most notably in countries where we earn a routine return and the tax authorities believe substantial value-add activities are performed. Our current examinations are at various stages with respect to assessments, claims, deficiencies and refunds. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, income taxes payable and deferred taxes in the period in which the facts give rise to a revision become known. Although we believe that our tax estimates are reasonable, ~~at March 25, 2018,~~ the final determination of tax audits and any related legal proceedings could materially differ from amounts reflected in our historical income tax provisions and accruals. In such case, our income tax provision, results of operations ~~and/or~~and cash flows in the period or periods in which that determination is made could be negatively affected.

~~On December 22, 2017, tax reform legislation known as the Tax Cuts and Jobs Act (the Tax Legislation) was enacted in the~~The United States. Given the amount and complexity of the changes in tax law resulting from the Tax Legislation, we have not finalized the accounting for the income tax effects of the Tax Legislation. This includes the provisional amounts recorded in the six months ended March 25, 2018 related to the repatriation taxStates Treasury Department has issued proposed regulations on deemed repatriated earnings and profits of U.S.-owned foreign subsidiaries (Toll Charge) and the remeasurement of deferred taxes. Further, we are in the process of analyzing the effects of new taxes due on certain foreign income, such as GILTI (global intangible low-taxed income), BEAT (base-erosion anti-abuse tax), FDII (foreign-derived intangible income) and limitations on interest expense deductions (if certain conditions apply) that are effective starting in fiscal 2019, and otherseveral provisions of the Tax ~~Legislation. The impact~~Legislation, including foreign tax credits, FDII, GILTI, BEAT and interest expense deduction limitations, which are expected to be finalized in the next several months. When finalized, these proposed regulations may adversely affect our provision for income taxes, results of the Tax Legislation may differ from this estimate, possibly materially, during the one-year measurement period due to, among other things, further refinement of our calculations, changes in interpretations and assumptions we have made, guidance that may be issued and actions we may take as a result of the Tax Legislation.operations and/or cash flows.

We have tax incentives in Singapore provided that we meet specified employment and other criteria, and as a result of the expiration of these incentives, our Singapore tax rate ~~increased in fiscal 2017 and~~ is expected to increase in fiscal 2022 and again in fiscal 2027. If we do not meet the criteria required to retain such incentives, our Singapore tax rate could increase prior to fiscal ~~2027,~~2022, and our results of operations and cash flows could be adversely affected.

Tax rules may change in a manner that adversely affects our future reported results of operations or the way we conduct our business. Further changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting (BEPS) project that was undertaken by the Organization for Economic Co-operation and Development (OECD). The OECD, which represents a coalition of member countries, recommended changes to numerous long-standing tax principles

related to transfer pricing. These changes, ifas adopted by countries, ~~could~~may increase tax uncertainty and may adversely affect our provision for income taxes, results of operations ~~and/or~~and cash ~~flow. We have not yet determined what changes, if any, may be needed to our operations or structure~~flows. Partially to address ~~BEPS. If our effective~~BEPS, we moved certain IP from Singapore to the United States. As a result, if tax rates were to increase ~~particularly~~ in the United States, ~~or Singapore,~~ our results of operations, cash flows ~~and/or~~and financial condition could be adversely affected.

Global, regional or local economic conditions, or political actions including trade protection policies such as tariffs, that impact the mobile communications industry or the other industries in which we operate could negatively affect the demand for our products and services and our customers’ or licensees’ products and services, which may negatively affect our revenues.

A decline in global, regional or local economic conditions or a slow-down in economic growth, or political actions including ~~as a result of~~ trade protection policies such as tariffs, particularly in geographic regions with high concentrations of wireless voice and data users or high concentrations of our customers or licensees, could have adverse, wide-ranging effects on demand for our products and services and for the products and services of our customers or licensees, particularly equipment manufacturers or others in the wireless communications industry who buy their products, such as wireless operators. Any

prolonged economic downturn or “trade war” may result in a decrease in demand for our products and technologies; a decrease in demand for the products of our customers or ~~technologies;~~licensees; the insolvency of key suppliers, customers or licensees; delays in reporting ~~and/~~or payments from our licensees ~~and/~~or customers; failures by counterparties; and negative effects on wireless device inventories. In addition, our customers’ ability to purchase or pay for our products and services and network operators’ ability to upgrade their wireless networks could be adversely affected by economic conditions, leading to a reduction, cancelation or delay of orders for our products orand services.

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

Our future success depends largely upon the continued service of our executive officers and other key management and technical personnel, and on our ability to continue to identify, attract, retain and motivate them, which may become increasingly difficult in an environment of cost reductions. Implementing our business strategy requires specialized engineering and other talent, as our revenues are highly dependent on technological and product innovations. The market for employees in our industry is extremely ~~competitive.~~competitive, and competitors for talent, particularly engineering talent, increasingly attempt to hire, and to varying degrees have been successful in hiring, our employees, including by establishing local offices in San Diego. Further, existing immigration laws make it more difficult for us to recruit and retain highly skilled foreign national graduates of universities in the United States, making the pool of available talent even smaller. If we are unable to attract and retain qualified employees, our business may be harmed.

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 our products.

Our customers sell their products throughout the world in various currencies. Our consolidated revenues from international customers and licensees as a percentage of our total revenues were greater than 90% in each of the last three fiscal years. Adverse movements in currency exchange rates may negatively affect our business, revenues, results of operations ~~and/or~~and cash flows due to a number of factors, including, among others:

Our products and those of our customers and licensees that are sold outside the United States may become less price-competitive, which may result in reduced demand for those products ~~and/~~or downward pressure on average selling prices;

Certain of our revenues that are derived from products that are sold in foreign currencies could decrease, resulting in lower revenues, cash flows and margins;

Certain of our revenues, such as royalties, that are derived from licensee or customer sales denominated in foreign currencies could ~~decrease;~~decrease, resulting in lower revenues and cash flows;

Our foreign suppliers may raise their prices if they are impacted by currency fluctuations, resulting in higher than expected costs, lower margins and ~~lower margins;~~cash flows;

Certain of our costs that are ~~derived from supply contracts~~ denominated in foreign currencies could ~~increase; and/or~~increase, resulting in higher than expected costs and cash outflows; and

Foreign exchange hedging ~~transactions that we engage in~~exposes us to ~~reduce the impact of currency fluctuations~~counterparty risk and may require the payment of structuring ~~fees, limit~~fees. If the ~~U.S. dollar value of royalties from licensees’ sales that are denominated in~~ foreign ~~currencies, cause earnings volatility if the~~exchange hedges do not qualify for hedge accounting, the hedge results may cause earnings volatility. The foreign exchange hedging activities are designed to lessen earnings volatility; therefore, hedges may reduce the impact of currency fluctuations to certain revenues and ~~expose us to counterparty risk if the counterparty fails to perform.~~costs.

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

The use of devices containing our products to interact with untrusted systems or otherwise access untrusted content creates a risk of exposing the system hardware and software in those devices to malicious attacks. While we continue to focus on this issue and are taking measures to safeguard our products from cybersecurity threats, device capabilities continue to evolve, enabling more elaborate functionality and ~~use cases,~~applications, and increasing the risk of security failures. Further, our products are inherently complex and may contain defects or errors that are detected only when the products are in use. Because our

products and services are responsible for critical functions in our customers’ products ~~and/or~~and networks, security failures, defects or errors in our products or services could have an adverse impact on us, on our customers ~~and/or on~~and the end users of our customers’ products. Such adverse impact could include shipment delays; product liability claims or recalls; write-offs of our inventories, property, plant and equipment ~~and/or~~and intangible assets; unfavorable purchase commitments; a shift of business to our competitors; a decrease in demand for connected devices and wireless services; damage to our reputation and our customer relationships; regulatory actions; and other financial liability or harm to our business. Further, security failures, defects or errors in the products of our customers or licensees could have an adverse impact on our results of operations ~~and/or~~and cash flows due to a delay or decrease in demand for our products or services generally, and our premium-tier products in particular, among other factors. Development of products and features in new domains of technology and the migration to integrated circuit technologies with smaller geometric feature sizes are complex, ~~and~~ add risk to manufacturing yields and ~~reliability.~~

reliability and increase the likelihood of product defects or errors. Further, ~~manufacturing, testing, marketing and use of~~failures, defects or errors in our products ~~and~~or those of our customers ~~and~~or licensees entail the risk of product ~~liability.~~liability claims.

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 ~~2017~~2018 Annual Report on Form 10-K. At March ~~25, 2018,~~31, 2019, there have been no material changes to the financial market risks described at September ~~24, 2017.~~30, 2018. We do not currently anticipate any other near-term changes in the nature of our financial market risk exposures or in management’s objectives and strategies with respect to managing such exposures.

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 terms are defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). 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 were no changes in our internal control over financial reporting in the second quarter of fiscal ~~2018~~2019 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

Information regarding certain legal proceedings is provided in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 6. Commitments and Contingencies.” We are also engaged in numerous other legal actions arising in the ordinary course of our business and, while there can be no assurance, we believe that the ultimate outcome of these other legal actions will not have a material adverse effect on our business, results of operations, financial condition or cash flows.

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.” ~~With~~Other than the exception of prior changes to our Risk Factors in our Form 10-Q for the fiscal quarter ended December 24, 2017, specifically changes to the risk factor labeled “Potential tax liabilities could adversely affect our results of operations” and the additionelimination of the ~~risk factor labeled~~Risk Factor entitled “If we are unsuccessful in executing our cost plan, our business and results of operations may be adversely affected,” we do not believe those updates 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

~~Issuer purchases~~On July 26, 2018, we announced a new repurchase program authorizing us to repurchase up to $30 billion of ~~equity securities~~our common stock. We did not repurchase any of our shares in the second quarter of fiscal 2019. At March 31, 2019, $7.8 billion remained authorized for repurchase. The stock repurchase program has no expiration date.

In September 2018, ~~were:~~

we entered into three accelerated share repurchase agreements (ASR Agreements) to repurchase an aggregate of $16 billion of our common stock. During the fourth quarter of fiscal 2018, 178.4 million shares were initially delivered to us under the ASR Agreements and retired. Pursuant to the terms of the ASR Agreements, the final number of shares and the average purchase price will be determined at the end of the purchase periods, which are scheduled to occur in early September 2019 but may occur earlier in certain circumstances.

Total Number of
Shares Purchased
Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be
Purchased Under the Plans or Programs
(2)
(In thousands) (In thousands) (In millions)
December 25, 2017 to January 21, 2018 293
$ 68.28
293
$ 1,399
January 22, 2018 to February 18, 2018 1,197
66.85
1,197
1,320
February 19, 2018 to March 25, 2018 1,627
61.44
1,627
1,220
Total 3,117

3,117


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


~~(2)~~	On March 9, 2015, we announced a repurchase program authorizing us to repurchase up to $15 billion of our common stock. At March 25, 2018, $1.2 billion remained authorized for repurchase. The stock repurchase program has no expiration date.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

In connection with the European Commission (EC) fine (see “Notes to Condensed Consolidated Financial Statements, Note 6. Commitments and Contingencies” in this Quarterly Report), the Company intends to provide a financial guarantee to satisfy its obligation of €997,439,000 while the Company appeals the EC’s decision to the General Court of the European Union. To provide the financial guarantee, the Company entered into (a) a Continuing Letter of Credit Agreement (Uncommitted) dated as of April 20, 2018, between the Company and BNP Paribas (BNP), pursuant to which BNP has agreed to issue an irrevocable letter of credit in an aggregate amount of €250,000,000 in favor of the EC (the BNP Letter of Credit); (b) a Master Reimbursement Agreement dated as of April 20, 2018, between the Company and Barclays Bank PLC (Barclays), pursuant to which Barclays has agreed to issue a standby letter of credit in an aggregate amount of €332,000,000 in favor of the EC (the Barclays Letter of Credit and, together with the BNP Letter of Credit, the Letters of Credit); (c) a General Indemnity Agreement dated as of April 20, 2018, between the Company and Swiss Reinsurance America Corporation (Swiss Re), pursuant to which Swiss Re has agreed to provide a guarantee for an aggregate amount of €60,000,000 in favor of the EC (the Swiss Re Guarantee); and (d) a General Agreement of Indemnity dated as of April 20, 2018, between the Company and Euler Hermes North America Insurance Company (Euler), pursuant to which Euler has agreed to provide a guarantee for an aggregate amount of €200,000,000 in favor of the EC (the Euler Guarantee). In addition, pursuant to the Company’s existing General Indemnity Agreement with Zurich American Insurance Company and Zurich Insurance Group Ltd (collectively, Zurich) dated as of October 30, 2017, Zurich will provide a guarantee for an aggregate principal amount of €155,439,000 in favor of the EC (the Zurich Guarantee and, together with the Swiss Re Guarantee and the Euler Guarantee, the Guarantees). Collectively, the aggregate principal amount of the Letters of Credit and the Guarantees will equal €997,439,000.Not applicable.

Each Letter of Credit contains certain customary representations and warranties, affirmative covenants and events of default. Each Letter of Credit provides that, in the event a disbursement is made in respect of such Letter of Credit but is not reimbursed as required, the unreimbursed amount will bear interest at a rate per annum equal to the prime rate (as defined in the applicable Letter of Credit) plus 2.0%. The Company has also agreed to pay customary fees to each of BNP and Barclays in connection with the BNP Letter of Credit and the Barclays Letter of Credit, respectively. If an event of default under a Letter of Credit occurs and is not cured or waived, any unpaid fees outstanding under such Letter of Credit may be declared immediately due and payable.

The Swiss Re Guarantee and the Euler Guarantee each contain customary provisions for transactions of this type, and provide that the Company will pay all premiums, costs and charges of Swiss Re and Euler under the terms of the applicable

Guarantee. In addition, the Company will pay Swiss Re and Euler interest at a rate per annum equal to the prime rate (as defined in the applicable Guarantee) plus 2.0% on any payments made by Swiss Re or Euler, as applicable.

ITEM 6. EXHIBITS

Exhibit
Number
Exhibit Description Form File No./ Film No. Date of First Filing Exhibit Number Filed Herewith
2.1
Master Transaction Agreement, dated January 13, 2016, by and among Qualcomm Global Trading Pte. Ltd., each other Purchaser Group member, TDK Japan, each other Seller Group member, and, solely for purposes of Section 10.9 thereof, QUALCOMM Incorporated. (1) 8-K 000-19528/ 161339867 1/13/2016 2.1
2.2
Amendment #1, dated December 20, 2016, to Master Transaction Agreement, dated January 13, 2016, by and among Qualcomm Global Trading Pte. Ltd., each other Purchaser Group member, TDK Japan, each other Seller Group member, and, solely for purposes of Section 10.9 thereof, QUALCOMM Incorporated. (1) 10-Q 000-19528/ 17546539 1/25/2017 2.3
2.3
Amendment #2, dated January 19, 2017, to Master Transaction Agreement, dated January 13, 2016, by and among Qualcomm Global Trading Pte. Ltd., each other Purchaser Group member, TDK Japan, each other Seller Group member, and, solely for purposes of Section 10.9 thereof, QUALCOMM Incorporated. (1) 10-Q 000-19528/ 17546539 1/25/2017 2.4
2.4
Amendment #3, dated February 3, 2017, to Master Transaction Agreement, dated January 13, 2016, by and among Qualcomm Global Trading Pte. Ltd., each other Purchaser Group member, TDK Japan, each other Seller Group member, and, solely for purposes of Section 10.9 thereof, QUALCOMM Incorporated. (1) 10-Q
000-19528/
17770305
4/19/2017 2.6
2.5
Purchase Agreement dated as of October 27, 2016 by and between Qualcomm River Holdings, B.V. and NXP Semiconductors N.V. (1) 8-K 000-19528/ 161956228 10/27/2016 2.1
2.6
Amendment No. 1, dated February 20, 2018, to Purchase Agreement, dated as of October 27, 2016, by and between Qualcomm River Holdings B.V. and NXP Semiconductors N.V. (1) 8-K 000-19528/ 18623109 2/20/2018 2.1
2.7
Amendment No. 2, dated April 19, 2018, to Purchase Agreement, dated as of October 27, 2016, by and between Qualcomm River Holdings B.V. and NXP Semiconductors N.V., as amended by Amendment No. 1 to the Purchase Agreement, dated as of February 20, 2018, by and between Qualcomm River Holdings B.V. and NXP Semiconductors N.V. (1) 8-K 000-19528/ 18762502 4/19/2018 2.1
3.1
Amended and Restated Certificate of Incorporation. 8-K 000-19528/ 18766678 4/20/2018 3.1
3.2
Amended and Restated Bylaws. 8-K 000-19528/ 18766678 4/20/2018 3.2
4.1
Indenture, dated May 20, 2015, between the Company and U.S. Bank National Association, as trustee. 8-K 000-19528/ 15880967 5/21/2015 4.1
4.2
Officers’ Certificate, dated May 20, 2015, for the Floating Rate Notes due 2018, the Floating Rate Notes due 2020, the 1.400% Notes due 2018, the 2.250% Notes due 2020, the 3.000% Notes due 2022, the 3.450% Notes due 2025, the 4.650% Notes due 2035 and the 4.800% Notes due 2045. 8-K 000-19528/ 15880967 5/21/2015 4.2
4.3
Form of Floating Rate Notes due 2018. 8-K 000-19528/ 15880967 5/21/2015 4.3
4.4
Form of Floating Rate Notes due 2020. 8-K 000-19528/ 15880967 5/21/2015 4.4
4.5
Form of 1.400% Notes due 2018. 8-K 000-19528/ 15880967 5/21/2015 4.5
4.6
Form of 2.250% Notes due 2020. 8-K 000-19528/ 15880967 5/21/2015 4.6
4.7
Form of 3.000% Notes due 2022. 8-K 000-19528/ 15880967 5/21/2015 4.7
4.8
Form of 3.450% Notes due 2025. 8-K 000-19528/ 15880967 5/21/2015 4.8

Exhibit

Number

Exhibit Description

Form

File No./ Film No.

Date of First Filing

Exhibit Number

Filed Herewith

2.1

Master Transaction Agreement, dated January 13, 2016, by and among Qualcomm Global Trading Pte. Ltd., each other Purchaser Group member, TDK Japan, each other Seller Group member, and, solely for purposes of Section 10.9 thereof, QUALCOMM Incorporated. (1)

8-K

000-19528/ 161339867

1/13/2016

2.1

2.2

Amendment #1, dated December 20, 2016, to Master Transaction Agreement, dated January 13, 2016, by and among Qualcomm Global Trading Pte. Ltd., each other Purchaser Group member, TDK Japan, each other Seller Group member, and, solely for purposes of Section 10.9 thereof, QUALCOMM Incorporated. (1)

10-Q

000-19528/ 17546539

1/25/2017

2.3

Amendment #2, dated January 19, 2017, to Master Transaction Agreement, dated January 13, 2016, by and among Qualcomm Global Trading Pte. Ltd., each other Purchaser Group member, TDK Japan, each other Seller Group member, and, solely for purposes of Section 10.9 thereof, QUALCOMM Incorporated. (1)

10-Q

000-19528/ 17546539

1/25/2017

2.4

Amendment #3, dated February 3, 2017, to Master Transaction Agreement, dated January 13, 2016, by and among Qualcomm Global Trading Pte. Ltd., each other Purchaser Group member, TDK Japan, each other Seller Group member, and, solely for purposes of Section 10.9 thereof, QUALCOMM Incorporated. (1)

10-Q

000-19528/

17770305

4/19/2017

2.6

3.1

Amended and Restated Certificate of Incorporation

8-K

000-19528/ 18766678

4/20/2018

3.1

3.2

Amended and Restated Bylaws

8-K

000-19528/ 18957073

7/17/2018

3.1

4.1

Indenture, dated May 20, 2015, between the Company and U.S. Bank National Association, as trustee.

8-K

000-19528/ 15880967

5/21/2015

4.1

4.2

Officers’ Certificate, dated May 20, 2015, for the Floating Rate Notes due 2018, the Floating Rate Notes due 2020, the 1.400% Notes due 2018, the 2.250% Notes due 2020, the 3.000% Notes due 2022, the 3.450% Notes due 2025, the 4.650% Notes due 2035 and the 4.800% Notes due 2045.

8-K

000-19528/ 15880967

5/21/2015

4.2

4.3

Form of Floating Rate Notes due 2020.

8-K

000-19528/ 15880967

5/21/2015

4.4

Form of 2.250% Notes due 2020.

8-K

000-19528/ 15880967

5/21/2015

4.6

4.5

Form of 3.000% Notes due 2022.

8-K

000-19528/ 15880967

5/21/2015

4.7

4.6

Form of 3.450% Notes due 2025.

8-K

000-19528/ 15880967

5/21/2015

4.8

4.7

Form of 4.650% Notes due 2035.

8-K

000-19528/ 15880967

5/21/2015

4.9

4.8

Form of 4.800% Notes due 2045.

8-K

000-19528/ 15880967

5/21/2015

4.10

4.9

Officers’ Certificate, dated May 26, 2017, for the Floating Rate Notes due 2019, the Floating Rate Notes due 2020, the Floating Rate Notes due 2023, the 1.850% Notes due 2019, the 2.100% Notes due 2020, the 2.600% Notes due 2023, the 2.900% Notes due 2024, the 3.250% Notes due 2027 and the 4.300% Notes due 2047.

8-K

000-19528/ 17882336

5/31/2017

4.2

4.10

Form of Floating Rate Notes due 2023.

8-K

000-19528/ 17882336

5/31/2017

4.5

4.11

Form of 2.600% Notes due 2023.

8-K

000-19528/ 17882336

5/31/2017

4.8

4.12

Form of 2.900% Notes due 2024.

8-K

000-19528/ 17882336

5/31/2017

4.9

4.13

Form of 3.250% Notes due 2027.

8-K

000-19528/ 17882336

5/31/2017

4.10

Exhibit
Number
Exhibit Description Form File No./ Film No. Date of First Filing Exhibit Number Filed Herewith
4.9
Form of 4.650% Notes due 2035. 8-K 000-19528/ 15880967 5/21/2015 4.9
4.10
Form of 4.800% Notes due 2045. 8-K 000-19528/ 15880967 5/21/2015 4.10
4.11
Officers’ Certificate, dated May 26, 2017, for the Floating Rate Notes due 2019, the Floating Rate Notes due 2020, the Floating Rate Notes due 2023, the 1.850% Notes due 2019, the 2.100% Notes due 2020, the 2.600% Notes due 2023, the 2.900% Notes due 2024, the 3.250% Notes due 2027 and the 4.300% Notes due 2047. 8-K 000-19528/ 17882336 5/31/2017 4.2
4.12
Form of Floating Rate Notes due 2019. 8-K 000-19528/ 17882336 5/31/2017 4.3
4.13
Form of Floating Rate Notes due 2020. 8-K 000-19528/ 17882336 5/31/2017 4.4
4.14
Form of Floating Rate Notes due 2023. 8-K 000-19528/ 17882336 5/31/2017 4.5
4.15
Form of 1.850% Notes due 2019. 8-K 000-19528/ 17882336 5/31/2017 4.6
4.16
Form of 2.100% Notes due 2020. 8-K 000-19528/ 17882336 5/31/2017 4.7
4.17
Form of 2.600% Notes due 2023. 8-K 000-19528/ 17882336 5/31/2017 4.8
4.18
Form of 2.900% Notes due 2024. 8-K 000-19528/ 17882336 5/31/2017 4.9
4.19
Form of 3.250% Notes due 2027. 8-K 000-19528/ 17882336 5/31/2017 4.10
4.20
Form of 4.300% Notes due 2047. 8-K 000-19528/ 17882336 5/31/2017 4.11
10.45
Waiver and Consent No. 2, dated as of February 26, 2018, among QUALCOMM Incorporated, the lenders party thereto and Goldman Sachs Bank USA, as administrative agent. 8-K 000-19528/ 18662702 3/2/2018 1.1
10.46
Credit Agreement among QUALCOMM Incorporated, the lenders party thereto and Goldman Sachs Bank USA, as administrative agent, dated as of March 6, 2018. 8-K 000-19528/ 18678483 3/9/2018 10.1
10.47
Amendment No. 1, dated as of April 20, 2018, among QUALCOMM Incorporated, the lenders party thereto and Goldman Sachs Bank USA, as administrative agent, to the Credit Agreement dated as of November 8, 2016, among QUALCOMM Incorporated, the lenders party thereto and Goldman Sachs Bank USA, as administrative agent. 8-K 000-19528/ 18771694 4/24/2018
10.1

10.48
Amendment No. 1, dated as April 20, 2018, among QUALCOMM Incorporated, the lenders party thereto and Goldman Sachs Bank USA, as administrative agent, to the Credit Agreement dated as of March 6, 2018, among QUALCOMM Incorporated, the lenders party thereto and Goldman Sachs Bank USA, as administrative agent. 8-K 000-19528/ 18771694
4/24/2018

10.2

10.49
Tender and Support Agreement, dated as of February 20, 2018, by and among Qualcomm River Holdings B.V., Arrowgrass Master Fund Ltd. and Arrowgrass Customised Solutions I Limited.
8-K

000-19528/ 18623109 2/20/2018 10.1
10.50
Tender and Support Agreement, dated as of February 20, 2018, by and among Qualcomm River Holdings B.V., D. E. Shaw Valence Portfolios, L.L.C., D. E. Shaw Kalon Portfolios, L.L.C., D. E. Shaw Orienteer Portfolios, L.L.C., D. E. Shaw Oculus Portfolios, L.L.C., D. E. Shaw Orienteer X Portfolios, L.L.C. and D. E. Shaw Asymptote Portfolios, L.L.C.
8-K

000-19528/ 18623109

2/20/2018

10.2
10.51
Tender and Support Agreement, dated as of February 20, 2018, by and among Qualcomm River Holdings B.V., Davidson Kempner International Ltd., Davidson Kempner Institutional Partners, L.P., Davidson Kempner Partners and M.H. Davidson & Co.
8-K

000-19528/ 18623109

2/20/2018

10.3

Exhibit
Number
Exhibit Description Form File No./ Film No. Date of First Filing Exhibit Number Filed Herewith
10.52
Tender and Support Agreement, dated as of February 20, 2018, by and among Qualcomm River Holdings B.V., Elliott Associates, L.P., Elliott Associates International, L.P. and Elliott International Capital Advisors Inc.
8-K

000-19528/ 18623109

2/20/2018

10.4
10.53
Tender and Support Agreement, dated as of February 20, 2018, by and among Qualcomm River Holdings B.V., Farallon Capital Partners, L.P., Farallon Capital Institutional Partners, L.P., Farallon Capital Institutional Partners V, L.P., Farallon Capital Institutional Partners II, L.P., Farallon Capital Offshore Investors II, L.P., Farallon Capital F5 Master I, L.P., Farallon Capital (AM) Investors, L.P. and Farallon Capital Institutional Partners III, L.P.
8-K

000-19528/ 18623109

2/20/2018

10.5
10.54
Tender and Support Agreement, dated as of February 20, 2018, by and among Qualcomm River Holdings B.V., HBK Master Fund L.P. and HBK Merger Strategies Master Fund L.P.
8-K

000-19528/ 18623109

2/20/2018

10.6
10.55
Tender and Support Agreement, dated as of February 20, 2018, by and among Qualcomm River Holdings B.V. and Pentwater Capital Management LP. 8-K 000-19528/ 18623109 2/20/2018 10.7
10.56
Tender and Support Agreement, dated as of February 20, 2018, by and among Qualcomm River Holdings B.V., Soroban Master Fund LP and Soroban Opportunities Master Fund LP.
8-K

000-19528/ 18623109

2/20/2018

10.8
10.57
Tender and Support Agreement, dated as of February 20, 2018, by and among Qualcomm River Holdings B.V. and TIG Advisors, LLC. 8-K 000-19528/ 18623109 2/20/2018 10.9
10.58
Form of 2016 Long-Term Incentive Plan Non-Employee Director Deferred Stock Unit Grant Notice and Non-Employee Director Deferred Stock Unit Agreement for Non-Employee Directors in Singapore. (2) X
10.59
Form of 2016 Long-Term Incentive Plan Non-Employee Director Deferred Stock Unit Grant Notice and Non-Employee Director Deferred Stock Unit Agreement for Non-Employee Directors in Spain. (2) X
10.60
Form of 2016 Long-Term Incentive Plan Non-Employee Director Deferred Stock Unit Grant Notice and Non-Employee Director Deferred Stock Unit Agreement. (2) X
10.61
Qualcomm Incorporated Amended and Restated 2018 Director Compensation Plan. (2) X
10.62
Amended and Restated QUALCOMM Incorporated 2001 Employee Stock Purchase Plan, as amended. (2) X
31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Steve Mollenkopf. X
31.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for George S. Davis. X
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 Steve Mollenkopf. X
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 George S. Davis. X
101.INS XBRL Instance Document. X
101.SCH XBRL Taxonomy Extension Schema. X
101.CAL XBRL Taxonomy Extension Calculation Linkbase. X
101.LAB XBRL Taxonomy Extension Labels Linkbase. X
101.PRE XBRL Taxonomy Extension Presentation Linkbase. X
101.DEF XBRL Taxonomy Extension Definition Linkbase. X

Exhibit

Number

Exhibit Description

Form

File No./ Film No.

Date of First Filing

Exhibit Number

Filed Herewith

4.14

Form of 4.300% Notes due 2047.

8-K

000-19528/ 17882336

5/31/2017

4.11

10.7

QUALCOMM Incorporated Non-Qualified Deferred Compensation Plan, as amended and restated effective February 13, 2019. (2)

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Steve Mollenkopf.

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for David Wise.

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 Steve Mollenkopf.

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 David Wise.

101.INS

XBRL Instance Document.

101.SCH

XBRL Taxonomy Extension Schema.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase.

101.LAB

XBRL Taxonomy Extension Labels Linkbase.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase.

101.DEF

XBRL Taxonomy Extension Definition Linkbase.

(1) The Company shall furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request.

(2) Indicates management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a).

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/ ~~George S. Davis~~David Wise
	~~George S. Davis~~David Wise
	~~Executive~~ Senior Vice President, Treasurer and Interim Chief Financial Officer

Dated: ~~April 25, 2018~~May 1, 2019

6568



	Total Stockholders’ Equity
Balance at September 24, 2017	$	30,746
Net loss	(5,590		)
Other comprehensive income	161
Common stock issued under employee benefit plans and related tax benefits	343
Share-based compensation	499
Tax withholdings related to vesting of share-based payments	(196		)
Dividends	(1,719		)
Stock repurchases	(425		)
Balance at March 25, 2018	$	23,819



	2018				2017
	Per Share		Total		Per Share		Total
First quarter	$	0.57	$	862	$	0.53	$	801
Second quarter	0.57		857		0.53		798
	$	1.14	$	1,719	$	1.06	$	1,599



	Current				Noncurrent
	March 25, 2018		September 24, 2017		March 25, 2018		September 24, 2017
Available-for-sale:
U.S. Treasury securities and government-related securities	$	12	$	23	$	—	$	959
Corporate bonds and notes	1,498		2,014		—		271
Mortgage- and asset-backed and auction rate securities	73		93		35		40
Equity and preferred securities and equity funds	40		36		—		—
Debt funds	—		109		—		—
Total available-for-sale	1,623		2,275		35		1,270
Time deposits	2		4		—		—
Total marketable securities	$	1,625	$	2,279	$	35	$	1,270



	For the three months ended				For the six months ended
	March 25, 2018		March 26, 2017		March 25, 2018		March 26, 2017
Gross realized gains	$	11	$	57	$	13	$	303
Gross realized losses	—		—		—		(107		)
Net realized gains	$	11	$	57	$	13	$	196



Income Tax Expense (in millions)
	Three Months Ended									Six Months Ended
	March 25, 2018			March 26, 2017			Change			March 25, 2018		March 26, 2017			Change
Income tax (benefit) expense	$	(5	)	$	108		$	(113	)	$	5,922	$	296		$	5,626
Effective tax rate	(1		%)	13		%	(14		%)	N/M		17		%	N/M



	Total Number of Shares Purchased	Average Price Paid Per Share (1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
	(In thousands)			(In thousands)	(In millions)
December 25, 2017 to January 21, 2018	293	$	68.28	293	$	1,399
January 22, 2018 to February 18, 2018	1,197	66.85		1,197	1,320
February 19, 2018 to March 25, 2018	1,627	61.44		1,627	1,220
Total	3,117			3,117