QUALCOMM's CEO Hosts 2013 Annual Meeting of Stockholders Conference (Transcript)

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QUALCOMM Incorporated (NASDAQ:QCOM) 2013 Annual Meeting of Stockholders Conference Transcript March 5, 2013 12:30 PM ET


Paul Jacobs - Chairman and CEO

Barbara Alexander - Independent Director

Donald Cruickshank - Independent Director

Raymond Dittamore - Independent Director

Dr. Susan Hockfield - Independent Director

Dr. Robert Kahn - Independent Director

Sherry Lansing - Independent Director

Duane Nelles - Independent Director

Dr. Francisco Ros - Independent Director

Brent Scowcroft - Independent Director

Marc Stern - Independent Director

Adelia Coffman - Co-Founder and Director Emeritus

Dr. Irwin Jacobs - Founding Chairman and CEO, Emeritus

Steve Altman - Vice Chairman

Steve Mollenkopf - President and COO

Bill Keitel - Executive Vice President and CFO

Derek Aberle - Executive Vice President and Group President

Cristiano Amon - EVP, QUALCOMM Technologies, Inc. and Co- President, QMC

Andrew Gilbert - EVP, European Innovation Development, QUALCOMM Europe

Matt Grob - Executive Vice President, QTI and CTO

Peggy Johnson - EVP, QTI and President, Global Market Development

Jim Lederer - Executive Vice President, QTI and General Manager, QCT

Don Rosenberg - EVP, General Counsel and Corporate Secretary

Dr. Dan Sullivan - Executive Vice President, Human Resources

Jim Thompson - Executive Vice President, Engineering

Jay Rains - DLA Piper, Corporate Legal Counsel

Terrence Ward - PricewaterhouseCoopers LLP, Independent Accountants

Peter Yesawich - Inspector


Paul Jacobs

Good morning, everyone, and very happy to have everyone here. Thanks very much. I’m Paul Jacobs, the Chairman of the Board and CEO of QUALCOMM Incorporated. And welcome to the 2013 Annual Meeting of Stockholders.

So before I call the meeting to order, I would like to introduce the members of our Board of Directors who are here with us this morning. They are sitting down here, Barbara Alexander; Sir Donald Cruickshank; Raymond Dittamore; Dr. Susan Hockfield; Dr. Robert Kahn; Sherry Lansing; Duane Nelles; Dr. Francisco Ros; Gen. Brent Scowcroft; and Marc Stern.

Also here our Co-Founder and Director Emeritus, Adelia Coffman; and Founding Chairman and CEO, Emeritus, Dr. Irwin Jacobs; and of course, the true power behind QUALCOMM my mother, Joan Jacobs.

I’d also like to introduce the executives who are present today, Steve Altman, Vice Chairman; Steve Mollenkopf, President and Chief Operating Officer; Bill Keitel, Executive Vice President and Chief Financial Officer; Derek Aberle; Executive Vice President and Group President; Cristiano Amon, Executive Vice President, QUALCOMM Technologies, Inc. or QTI and Co- President of QMC; Andrew Gilbert, Executive Vice President, European Innovation Development, QUALCOMM Europe; Matt Grob, Executive Vice President, QTI and Chief Technology Officer; Peggy Johnson, Executive Vice President, QTI and President of Global Market Development; Jim Lederer, Executive Vice President, QTI and General Manager of QCT; Don Rosenberg, Executive Vice President, General Counsel and Corporate Secretary; Dr. Dan Sullivan, Executive Vice President, Human Resources; and Jim Thompson, Executive Vice President of Engineering.

Also present are Jay Rains of the law firm DLA Piper the company’s outside Corporate Legal Counsel; and Mr. Terrence Ward, the accounting firm of PricewaterhouseCoopers LLP, the company’s independent accountants. And I should say that Mr. Ward will be available to answer any questions concerning PricewaterhouseCoopers LLP and its services to the company.

All right. The Annual Meeting of Stockholders of QUALCOMM Incorporated will come to order. I will act as Chairman of this meeting and Don Rosenberg will act as Secretary. Will the secretary please report with respect to stockholders list and the distribution of the notice of the meeting?

Don Rosenberg

(Inaudible) company’s common stock on January 7, 2013, the record date for this meeting, I also have with me an affidavit certifying that on January 7, 2013 a notice of the annual meeting stockholders of the company was distributed to each stockholder of record as of the close of the business on the record date. The affidavit of distribution will be attached to the minutes of this meeting.

Paul Jacobs

Stockholders who have voted by mail or by proxy need not cast ballots today unless they wish to change their vote, prior to opening the polls for voting we would like to distribute ballots to anyone who did not pick up one at the registration table and would like one.

Please note that any shares held with your stockbroker cannot be voted at this meeting without legal proxy, a legal proxy is an authorization issued in your name from your broker. So please raise your hand if you’d like a ballot.

So at this time I appoint Mr. Peter Yesawich to act as inspector of election at this meeting. Mr. Yesawich, has taken and subscribed to the customary oath of office to execute his duties with strict and partiality. This oath will be attached to the minutes of this meeting. Mr. Yesawich’s function is to decide upon the qualification of voters, accept their votes and when balloting is complete to tally the final votes. Will the secretary please report with respect to the existence of a quorum?

Don Rosenberg

I’ve been informed by the inspector of election that proxies have been received for 1,468,539,685 shares of the 1,716,764,257 shares of the company’s common stock outstanding on the record date, which represents approximately 85.54% of such outstanding shares. This constitutes the quorum for the transaction of business.

Paul Jacobs

Since requirements for calling this meeting have been duly observed and there are represented here more than the necessary number of shares of the outstanding common stock of the company to constitute a quorum, I hereby declare this meeting to be duly constitute -- duly constituted for the transaction of all business.

So the formal business of this meeting is listed in the notice of annual meeting and proxy statement that was provided to stockholders. There are several proposals to be considered but stockholders at this meeting.

We will now place each of the proposal set forth in the notice before the meeting and falling the formal business of the meeting will adjourn and I’ll make a few remarks on company developments over the past year and we’ll take questions.

So the time is now 9:47 a.m. and the polls are now open for voting on all matters to be presented. The polls will be close to voting after we go through these matters.

The meeting will now proceed to the election of 11 directors to serve until next year’s Annual Meeting of Stockholders. The Board has nominated the following persons for election as directors of the company. Barbara Alexander; Sir Donald Cruickshank; Raymond Dittamore; Dr. Susan Hockfield; Thomas Horton; myself, Dr. Paul Jacobs; Sherry Lansing; Duane Nelles; Dr. Francisco Ros; Gen. Brent Scowcroft; and Marc Stern.

Those nominations need no second. Since no other Director nominations received prior to the dead lines specified in our bylaws and stated in last year’s proxy materials, the nominations are closed. Is there any discussion?

The next item of business is the approval of the 2006 long-term incentive plan as amended, which includes an increase in the share reserve by 90 million shares. Is there any discussion?

The next item of business is the ratification of the selection of PricewaterhouseCoopers LLP as the independent accountants of the company for the fiscal year ending September 29, 2013. Is there any discussion?

The final item of business is the advisory approval of the company’s executive compensation. Is there any discussion?

That concludes proposals for today’s meeting. If you wish to vote by ballot on these matters, please hold up your ballots, we now should may collected. Okay. Great. So we are ready to continue. Have all the ballots been executed and delivered?

Don Rosenberg


Paul Jacobs

The time is now 9:50 a.m. and I declare the polls closed. Has the inspector of election computed -- completed the tally.

Peter Yesawich

Yeah, Mr. Chairman.

Paul Jacobs

I now call upon the inspector of election to report on the results of the voting.

Peter Yesawich

Mr. Chairman, based on the proxies and ballots received, I can report that all nominees for Director have elected to serve until next year’s Annual Meeting of Stockholders. The 2006 long-term incentive plan as amended has been approved. The selection of PricewaterhouseCoopers LLP as the company’s independent accountants for the fiscal year ending September 29, 2013 has been ratified. The advisory approval of executive compensation has been approved.

Paul Jacobs

Thank you. The four voting results we published on our website and reported within four business days on Form 8-K, which will be filed with the Securities and Exchange Commission.

So this concludes the formal business of our meeting and we’d now like to adjourn the formal meeting, so is there a motion to adjourn the meeting. Zero second. It’s been moved in second that this meeting be adjourned. Any objections? Hearing no objection, this meeting is adjourned.

Before we review QUALCOMM’s business and take questions I’d like to thank two of our directors who are concluding their service on the Board at this meeting, Dr. Robert Kahn who has been a member of the Board since 1997; and Steve Bennett who has been a member of the Board since 2008.

On behalf of QUALCOMM Board and executive committee, I’d like to thank them both for their leadership, expertise and strategic guidance they have provided over the years and in honor of their Board service, I’m pleased to announce that QUALCOMM is donating $1 million to the University of California San Diego Foundation.

UCSD Foundation plays a critical role in the growth and success of the campus, helping to sustainable both the excellence of their academic programs, as well as their important research which impact society, environment and human lives.

This donation will support three specific areas of the foundation, the Chancellor’s Discretionary Fund, the International Relations and Pacific Studies Innovation Fund, the Jacobs School of Engineering Dean’s Discretionary Fund. It’s been an honored to have you both service member of our Board of Directors. Thanks very much for your service.

All right. Now we’re on to the review of the business. But before I start, my lawyers tell me that, I have to put this up. So let me just say what I have say here. During today’s presentation we will make forward-looking statements, I hope to make forward-looking statements relating to our expectations and other future events which may material -- may differ materially from actual results. I refer you to our SEC filings, including our most recent Forms 10-K and 10-Q, which identify important factors that could cause actual results to differ material those projected in the forward-looking statements.

We will use any non-GAAP financial measures as defined by Regulation G, you’ll find the required reconciliations to GAAP on our website and you can also view a copy of our Safe Harbor statement on our website. I’m sure that is hard to read but anyway, please look on our website if you need to see that.

So I think we had a pretty good year. I think looking at the environment, the macroeconomic environment that we’re operating in, it’s really amazing to see the kind of growth we are able to achieve the $19 billion in revenues that were up 28% year-over-year, $3.51 GAAP EPS which is up 39% year-over-year and $3.71 non-GAAP EPS which was up 16% year-over-year.

And the other thing is, we’ve continue have a lot of momentum, I mean, the chip business is leading the industry, we have tremendous roadmap. Obviously, last year we went through the issues where we had gotten incredible traction for chip and we had a little bit of trouble securing enough supply. But even with that you could see as we left the year and we got supply, and the demand more closely calibrated business just really went extremely well.

We shipped 590 million MSM chips or those are the chips that go inside phone that was up 22%. And if we look at the licensing business, we judge that based on the size of the overall market and we had $187 billion worth of total reported device sales by our licensees, which was up 25% year-over-year.

So this growth of smartphones really is driving the business very, very strongly and we’re sitting in just a wonderful position. And we’re able to continue to make the investments that we need to make to drive this leadership position and in fact, I would say extend our leadership position over our competition, really the scale of the business is allowing us to do that.

And it feel like we’re really sitting in a place where we can see the trends of the industry and anticipate where the industry can go and actually shape where the industry can go, so there is a really a lot of nice things that are coming together for us.

And because we’ve done so well, we’ve really been recognized for that, lot of honors and awards you can see up here, some that we’re very proud of best companies to work for, we are number 11 on that list and that’s really a testament the employees are the ones who really decide that and they submit their anonymous contributions to this poll and so that’s how we are chosen. So it’s great to know that employees enjoy working here because that means that they are very motivated.

MIT’s technology review ranked us one of the 50 most innovative companies, actually just recently the FORTUNE World’s Most Admired Companies ranked us number four most innovative company.

And our legal department is also recognized for its innovation. Financial Times, we were the winner of the in house category for the most Innovative U.S. Lawyers in 2012. So across the Board people of QUALCOMM are trying to innovate, trying to drive not just the industry forward but also our internal processes and really be the best that we can be and that really does result in very strong performance.

And so this is one of Bill’s favorite chart, it talk about how we compare, what percentile are we in relative to other S&P companies, non-financial S&P companies. So if you look only 1% of the S&P 500 was higher than us in revenue and earnings growth whether you look over one-year or two-year ranking.

You can see the numbers on operating margins, return on invested capital, operating cash flow margin. We are in the top 10% of all non-financial S&P 500 companies in these categories. And it’s very interesting to see that that kind of performance, as I said earlier in tough macroeconomic environment, which I think affected a lot of company’s performance. So it’s really, really nice to be in this kind of position and those kind of percentile rankings of the business.

Another chart I like to show is what happens since this management team came on in 2005. So you can see the growth of the market cap has been pretty dramatic, but revenues even more dramatic and if you look out to our projections this year, it’s even that much more dramatic growth.

Earnings per share continue to grow, cash and marketable securities, you heard in this $28 billion in the bank which hopefully makes you feel like we have a very secure company. It certainly makes all of us feel very good about this, stability makes the employees feel good about, stability makes the industry see us as a very strong company that can continue to invest to drive the industry forward.

But of course, when you have that much money and you’re making that much money, it’s incredibly important to give that money back to you, to our stockholders. And so this morning, I hope -- hopefully you saw this announcement already, but if you have not, the Board voted yesterday to increase our dividend by 40%, so one of the largest increases you have. It’s our 12 consecutive increased to our dividend and so now we are up to a $40 share annualized.

And I should say because sometimes you say, oh, you are tech company, you are paying the dividend, we must not be growing. Well, I think you seen already that we are growing. So, we are very confident and the ability to both invest in our business and return capital to our stockholders and we see that as responsibility of this company do that.

In addition to raising the dividend, we also announced a new $5 billion stock repurchase program and if you look sort of overall overtime we’ve return just about $20 billion to stockholders since 2003, in fiscal ‘12 it was $2.9 billion and that’s put up between $9.1 billion in dividends and $10.8 billion in stock repurchases since 2003.

Now, we were very focused on being able to continue to grow our dividend and we’ve raise every year since 2003. If you look at our stock buyback program we’ve been very opportunistic about our stock buyback program, very disciplined about it. And I think that, if you look at the kinds of returns that we’ve been able to achieve on our stock buyback program. I think we’ve done very prudent thing in terms of stock buybacks.

Now, I should say also, maybe and list your help here a little bit, and we obviously have significant offshore cash balances. Those -- that cash can’t be brought back to the United States without a significant impact in tax, which other countries don’t have a similar sort of system, other countries have let’s called, generally have a territorial system, which means that taxes are assessed on the amount of money that you make in the company -- in the country, sorry, and then your tax in foreign jurisdictions for the money that you are making in those foreign jurisdictions.

But certainly if we were able to have a territorial system in the United States or have repatriation of that money that’s offshore we would be able to do significantly more in terms of returning capital to shareholders.

So I encourage you to reach out to your Congress people, stated that that something that you’d like because they really do need to hear from people that that’s something that they want. Otherwise it’s portrayed as some sort of giveaway to corporations when in fact it’s our ability to return capital to you our stockholders. So, if you have the inclination please feel free to help us out that one. I’ve been lobbying that myself. So, we’ll see how it will go.

As I said, we’re able to invest in the business. So this chart maybe a little bit confuse, on the left side, your left side, we show where the cash is come from, X, we took the R&D out of it, so this is sort of our cash flows and minus the R&D investment. And so you can see $10 billion come from shares and but most of it $60 billion come from operations.

On the side closes to me, you can see how we’ve use that, some of it’s been invested, $19 billion in marketable securities, we’ve returned as I said earlier, $19 billion to do you, the stockholders and you can see a very large investment in the use for the business.

R&D, capital expenditures, which there are relatively small, we’re fabulous company, we don’t have big factories and things like that generally, but you can see we do have some facilities here. We obviously build by IT equipment. We buy lab equipment, things like that. And then we have some acquisitions as well, obviously, Atheros was the biggest, that’s gone extremely well. The India spectrum that we have is in that category as well.

So you can see that we’re able to invest in the business, invest some money, so we’re generating returns which then also the returns on that money is generally onshore and we can return that to you as well. And then, and obviously, we’re focused on providing money back to our stockholders.

And the reason why we can do that and reason why this results been so great is, because our operating business is our core business, it’s done extremely well. So, if we look at the chip business, you can see this statistics up here in the growth rates really are pretty phenomenal over a long spend of years and fiscal 2012 was another great year for the business, it was record revenues, $12.1 billion that was up 37% and it’s really driven by our roadmap.

We are investing, we are leading the industry with our chipsets and we’re investing across a wide range of areas, it’s no longer the case that we’ve just invest in the radio. We’re also investing in things like the application processors, the graphics processors, digital signal processors, all different radio technologies, different ways of processing the radio signals, different kinds of integration, in fact even investing in new integrated circuit technology, new transistors to keep up with the demand that we see out there for ever increasing functionality at lower cost with lower power these kinds of things. So we are really trying to invest in this business and really set the bar high for the rest of the industry to follow.

Our licensing business also had record fiscal results. It had $6.3 billion in revenues that were up 17% year-over-year, 855 million devices shipped by licensees, it just a phenomenal number, I mean, that’s almost mind-boggling that out of the ideas that happen here, 855 million devices in the year get ship, that’s up 18% year-over-year.

And the average selling prices of those phones are coming up. So we had this worry in the past years, oh, well, things were going always come down -- prices are going to come down because the devices were getting commoditized and with the smartphones coming, people want more and more functionality in their devices and so average selling prices have increased to $219 on average, that was up 6%.

And so instead of going down it’s actually going up and that’s really a global phenomenon. We see that around the world that average selling prices actually bending up because people want more and more functionality out of these devices.

And that’s, one other things that we really focused on was making sure that we license broadly, that we were seen as a company who is an enabler for the rest of the industry. And so we aren’t seen as a tax collector but we are seen as an R&D engine, an innovation engine that helps our partners grow their businesses, and its work extremely well.

We have over 225 CDMA-based licensees right now. There’s a next-generation technology called OFDMA which is 4G/LTE if you’ve heard that term, over 40 royalty bearing for single mode, just single, if they are using 3G in that which generally use the case, it’s all recovered by our existing agreements. But if they have just 4G by itself, we have 40 licensees on that so far.

We added 20 new licensees in China in fiscal ‘12, so place where many companies that have troubles we are seen as a technology provider and therefore company sign up with us for our licenses. And we really believe that this portfolio is the most widely licensed for 3G and 4G of anybody in the industry. So the licensing business has gone extremely well as well.

So that brings me to 2013, and 2013 looks great to, we gave guidance in January, we expect to very strong revenue and earnings growth. So the projections were $23.4 billion to $24.4 billion in revenues, that’s up 22% to 28% year-over-year, $4.25 to $4.45 non-GAAP EPS, up 15% to 20%, $3.61 to $3.81 GAAP EPS, up 3% to 9%.

And what we did in November at our Analyst Meeting, we provided double-digit growth targets over the next five years. So we see out that far our goals for the next five years are to continue to grow double digit. And I should say we did that even with conservative estimates on certain growth areas of the business.

So we didn’t project large growth in tablets and connected tablets. We didn’t project large growth in what’s called machine to machine communications or in what we call small cells. And I’ll explain these things a little bit more later.

The other thing that’s happened over the year, we’ve talked often about how much money we’re spending in pre-revenue research and development. And that came down just slightly year-over-year from 30% to 27%. And really what that happened was there was a large research program that we’re doing on a new type of processor, quad-core processor. And then that sort of came into the revenue generating category. So that was really a key part of it.

So anyways, if you look, I mean, the expectations for the business are very strong. We feel good about the way that the businesses are continuing to grow and that the smartphone trend really is a very global phenomenon. We see no signs of that abating.

And the reason why we’re able to be so well positioned to generate those kind of revenues at the time and that kind of growth at the time when other companies are not able to do similar things is because we really have focused on being a systems company. We really focused on creating the new technology then working with others to get it standardized. So get the entire industry to rally around the technology that we create.

And then through our chip business and some of our other businesses, we productize that business or those ideas and then we bring them out to our customers. And one of the things that we’re very, very good at and very well known for is being able to work with our partners who have huge numbers of companies.

And when they have an issue, they know QUALCOMM engineers are going to arrive in force and help them fix their problem. And that creates tremendous, tremendous loyalty. And it’s because the scale of our business, it really allows us to have that group of highly, highly trained people who can get in there and work with our customers with our partners to make things -- make their things work better.

And so we really work across the whole ecosystem. And it’s not just working with the handset manufacturers, not just working with the infrastructure guys. It’s also with the wireless operators convincing them that we have an idea to solve their big problems to help them improve their business.

We have great relationships with other industries too. You’ll see some stuff that we’ve done with entertainment industry because of course people use their phones for entertainment. But across a broad range of industries, I’m going to talk about later, we have very, very good relationships.

So we’re just focusing not just on one piece of the value chain, which some of our competition does, but on the entire thing from the creation of the ideas, all the way to bring them out into the market. And the business is very, very synergistic because of that between the chip and the licensing business.

Okay. So let’s talk a little bit about where the industry is going because that sort of frames our business, how we invest, where do we think the new opportunities are and really it’s around a few different trends. One of them is about computing. We know that computing is changing. It’s become much, much more mobile.

Another trend that we see is the fact that people are demanding more and more data from their devices. They want to download more videos. They want to get on the Internet. They want to Skype and talk to their friends and family and colleagues. All these kinds of things that are going on that are creating more and more demand for data and loading the operator’s network and by the way driving the value of every bit down.

So we have to create those bits more in expensively. So that’s another big trend. We call it the thousand next challenge because DoCoMo, Japanese -- large Japanese wireless operator came in to us one day and said what you’ve been think about increasing the data throughput of these system, while we need 1000 times more. And we’re thinking maybe 10 to 12 times more.

So it’s kind of a big deal. But I’ll talk to you about how we fix that. We know how to do this. And then another trend is this, what I call the digital sixth sense. So the idea that we have our five natural senses and we through our phones, through our devices augment ourselves to perceive not just the world as it’s physically around us but the cyberspace things, the information world that surrounds us as well.

I’m going to get into more details on all these things. So really, the idea here is blurring the lines between the physical world and the digital world. I’ll talk to you about that. So our initiatives to address these trends, they’re very, very focused. So I have these sort of broad concepts now focusing on what actually we’re doing.

So first of all obviously the core thing that’s going on is the smartphone trend. And we’ve been ahead of that trend. We were in early. We made huge investments early to integrate more functionality into the devices. So that’s one.

Obviously, mobile computing, addressing that opportunity that trend in the industry. So we have initiatives around that. Our emerging markets continue to grow very strongly. There’s a lot of growth in emerging markets. Obviously, very price sensitive markets but the opportunity and the motivation for our employees to know that they can have an idea. And it can improve people’s quality-of-life standard of living around the world is really very, very motivational.

This thousand next challenges I said and then that digital sixth sense that ties into this notion of what you might’ve heard people call the Internet of things, we call the Internet of everything because we think everything is going to be connected in one way or another. And so I’m going to go through each one of these to talk in detail on them.

So starting off with smart phones, clearly, one of the most important areas that drives the business for us today. And if we look at it, it’s because people love these things. It’s the largest mobile computing platform already. It was double shipments. Smartphones were double the shipments of PCs in 2012 already. And we’ve done some research. This was done with Google, the stats that you see up here.

And it’s really become something that’s indispensable to the way that people live their everyday lives. So they use them more than any other device for daily media interactions, fourth-fifths of searches on smartphones are just spontaneous, so you have an idea. You don’t have to wait for it. You’re just right there.

And I’m sure you’ve all had this experience, right. We used to have arguments about facts and when you’re having conversations with your friends and family and now you just Google it, right. I mean, it’s just right there.

And the other things that interesting that was people talked about this multiscreen convergence between TV and smartphones and that’s happening. We’re starting to see the people using smartphones and tablets and that really is presenting some interesting opportunities for us going forward.

And you can just see this wide, wide range of different devices that are being brought out by our partners. And I said earlier, we don’t see this demand for smartphones abating. We did have an analyst that came out and questioned whether it was going to continue to grow. But from our vantage point, we see it continuing to grow. And there’s already over a billion smartphones in the installed base. So a billion smartphones in use.

In 2012, it’s only 18% of the total connections though. So we expect that to grow very, very dramatically numbers. People expect there to be 2.9 billion smartphones in use in 2016. And you can see these numbers here are for 2016. So we see continued growth. And the growth in fiscal 2012 was up 44% year-over-year. We’ve already seen growth rates even higher than that in the early quarters of this fiscal year.

And there’s projections for 5 billion smartphones to be sold between 2012 and 2016 that’s just -- that number is another number that is so phenomenally large. So hard to connect to you but it really does impact people’s lives and really does allow them to improve their quality of life. And that’s why you continue to see this strong demand.

And the other thing is that with this opportunity, it’s given us awesome opportunity to innovate in a lot of different areas. So we use to be known just as a radio company or it’s called modems up here. That was what people knew us for but really, given all this functionality, it’s going into smartphone, it’s given us the opportunity to innovate across a broad range of things. So CPU, that’s the little computer that’s inside, the GPU that’s the graphics processor that makes everything look so pretty.

The DSP and multimedia that’s the images or the sound that comes out of this thing, the connectivity that’s how you connect between to your Wi-Fi network or to your bluetooth headset or to other things, the sensors, the cameras, the things that notice how you’re holding the phone and nowhere you’re with the phone. And then display has been investing there. And you can see we’re really in a great position to innovate across all those areas.

And I don’t expect you to read all these things but just to give you a sense that in each one of these areas, there is an opportunity for QUALCOMM to invest in new technology and lead the market and force our competitors to play catch up. And a great example of that is the CPU where we’re investing in an innovative technology that none of our competitors have.

And they go to great lengths to do all sorts of different technological tricks to try and fix the problem that they didn’t architect it right in the first place. And so we’re really in the lead. And we can get the most performance per watt out of our processors and which means that you get great performance on the device and your battery lasts longer.

On the graphics side, people want graphics. We originally thought that it’s for gaining and things like that. Well, yeah, it is for that but it’s also now the user-interface on the phone. It’s a very, very graphical user-interface. And so when things slide around, they move around, they rotate in three dimensions, draw the stuff that uses the graphics processor.

And the new graphics processor we have is 50% better than the previous one. And it’s twice the compute performance also of the predecessor. So it -- but it also comes at power savings too. I’m going to talk to you about that a little bit.

And then, of course, the modem, the radio side that we’re originally known for, we’re doing all sorts of stuff to improve that because we have these data challenges visibility to get more and more data down to the device. So we really continue to lead in that.

Some of the technologies that we’re able to apply now, we thought of them own and some of the scientist thought of a long, long time ago. And it’s only recently that we’ve had the ability to do those things at a low enough cost and power and size that you could put them into your phone. Things like active interference, cancellation really helped improve the capacity of the network and we can innovate there.

And you can see along, all these different opportunities that we have and there’s many, many more than that. And so that sort of led us to the strategy for the chipset business which has set the bar high for the rest of the industry. That is what we do and we do that in a number of ways. We own the key technologies that go inside these devices.

We implement them ourselves. We didn’t go and license a core for graphics or license a core for the processor. We designed those ourselves to try and make the right trade-offs to focus in on giving the best performance in a mobile application. And integration, we focus very heavily on being able to integrate all these capabilities into the devices.

It is very hard. There’s a lot of work going in and putting all these different technologies onto one chip. As you can see, it’s been hard for our competitors to do that but we were able to do it. And the other thing is we have the scale.

So I talked earlier our customers know that we will show up wherever it is in the world to help them when they have a problem on their phone as they’re trying to get it through the acceptance by an operator to get it out into the market. And they have a problem, we show up and we do that everywhere. And we’re able to invest very heavily to drive the technology roadmap.

So when they want to bring out their next new phone, they know they come to us and they get the coolest new technology. We have our customers compete to try and get the latest processors so that they can have the first phone out with some new functionality.

And so we’re really trying to get that across and the way that we’ve done in the past, obviously is we worked with wireless operators and with the handset manufacturer, explained them, hey our chip is better. But as we see going forward, selling more through retail distribution in some markets or selling directly to the consumer, we’re trying to also make an emotional connection for these chips with the consumers.

So let me just show you a video that we’ve done.


I’m glad you liked that because we were not necessarily known as a marketing company in the past. But I think we’re getting a little bit better at that. So anyways we’ve been investing in, in Snapdragon for quite some time.

As I said, we saw this idea of smartphones and wireless Internet very early on. And now it’s really paying off for us because this chip is -- chipset is inside many, many of the flagship devices that you see. The ones that operators are promoting, the manufacturers are promoting.

So the Galaxy S3 from Samsung, the HTC One, Sony Xperia Z, there is new Nokia Lumia phones. I mean all these devices, all these phones are built on our Snapdragon chipsets. And I think it really comes from the fact what I mentioned earlier that we really do a good job of integrating all these kinds of capabilities into the chips so for a good price and very good size, power, all these kinds of performance metrics. They can get something that will make their products look better to the consumer when they sell them to the consumer.

So really, really, in a very good place and there’s lots more innovation to come. And because of that, you can see these numbers, which show you the kinds of traction that we’re getting on this Snapdragon processor. This was one of the big bets that we made a few years ago and it’s really paid off. And see how many of me different manufacturers are shipping.

It was really interesting. And we just had some recent shows for the mobile industry and some of the competitors were announcing, not customers but reference design or we had one competitor, one company was trying to be a competitor, say well we had 10 different devices made on our chip.

And we have 770 announced and another 550 in development and those are spread between ones that are designed fully by the other company and ones that we have done some of the designs for ourselves. And I’m going to talk to that other program where we do some of the designs for our customers but really tremendous, tremendous traction on these devices.

And what we also did was, we tiered these devices, so we have very high-end processors the Snapdragon 800, Snapdragon 600. These were the high-end processors that we announced at the Consumer Electronics Show. We have array of over 90 device designs on the 600 and 800 processors. And we are expecting to see these Snapdragon 800, that’s really high-end devices come out in the middle of 2013.

And if you look at that relative to your previous best processors, these things were 75% better performance. They run a brand-new micro-architecture, we call Krait. Four of them go into the ship. They run at speeds up to 2.3 gigahertz or the kinds of speeds we used to associate with your laptop or your desktop PC, now in the palm of your hand but at very good power performance, so that it doesn’t burn your battery out.

We have this new graphics processing unit that I talked about earlier and we have our third-generation LTE modems or the 4G modem. While other competitors were trying to get their first one out, we already on our third generation, and we are adding advanced features into that and so that’s actually continuing. While, our competitors kind of skate to where the puck was, we are out here with the pucks going and we are really trying to make it hard on them to figure out where we are going and keep up with us.

On Snapdragon 600, we’ve already seen commercial devices come out. The HTC One got incredible reviews and what I loved about it was, when you looked on the blog and they talked about the performance characteristics of this phone relative to some of the phone based on competitors. I mean, it was just laid in there. We really blew the doors off of the other products. And our competitors were trying to pretend like they were going to be competitive with the Snapdragon 800, which is an even better chip. And the 600 already was really just much, much better than them, so that’s great.

And then, of course for the other markets, the more price conscious, the value segment, we have the Snapdragon 400 and 200. So we are bringing our technology from the high-end through the low tiers as well, because of course people want to have a great experience, whether they are buying a $100 smartphone or they are buying a $600 smartphone. And we want to make sure that we are the people that do that. So, what I’m going to do now is I’m going to show you a little bit of a demo. It’s a demo that we showed off at the Consumer Electronics Show and it shows you -- it gives you, at least a little sense of the kind of capabilities that these devices have.

So, I’m going to go over here and turn on one of our S4 -- sorry, our Snapdragon 800 processors which is this one. So it’s running on a tablet. This is a tablet that we developed for our developers to take this new processor in a tablet form factor and actually themselves to be able to develop their applications on it and their software on it. So if we can go to this tablet. There we go.

So that’s the image that I’m seeing. This isn’t a video. I can actually tap on it and you can see that I can actually push on these and what I’m doing is I’m tapping on those banners. So that’s what’s causing the banners to move and you can see I can scroll around and so forth. And to give you a sense of how the animation works, we have the big dragonfly down and show you sort of what he can do. So it’s very smooth graphics and looks like a game, something off of a console.

So you can see that just all the physics works on there. The animation of the banner is very, very smooth, lot of detail around. You can see all through the image, there is the scene I can zoom in and out and you see things moving and just a lot of detail on there. And the way that this is done, I will show another image. So we’ll have the dragonfly down again, but what I will do is now taking into a mode where you can see all the different polygons that are used to create the scenes. That is going to turning into a little over wireframe mode here in a second.

Now, you can see all of the stuff that’s required to actually make that scene happen. The computation that’s going on to light and to do the shading and you can see. In the water, you see the reflections in the water and the water is rippling down. And the way that all the stuff is done, it’s using different parts of the chip to do different things. So for example, the graphics are used for rendering certain aspects of it, the water, the ripples in the water are done with the graphics.

The compute is doing sort of another pieces of it. The digital signal processor is during the sound that you hear. All these things are coming together to make this kind of an image. And to top it off, this new 800 -- Snapdragon 800, the graphics consume half the power of its predecessor, so much, much more performance at lower power and that’s really the idea that we have to try and make it, make it hard for the competitors to continue to raise the bar as I said.

Okay. So obviously with that kind of capability, now you understand why we say that we are really trying to redefine, how mobile computing is done because we have so much capability in these chips. And what’s very interesting, what’s happened now is that people expect out of their computing device a similar sort of experience that they have out with their smartphone.

So they want very high-resolution screens, which means that we have to more and more powerful graphics processor, more memory bandwidth to write all that information up to the screen. They wanted to be very responsive, sort of that means that we have these very powerful central processing units, application processors and graphics processors and so forth. They want their devices. Your computer in the past -- it was open it up, log on, download, maybe get a security update. It took you a long time before you got stuff going. You can read your e-mail.

Today, you pick up your smartphone and you read your e-mail, check your Facebook, whatever it is that you want to do. People want that kind of connectivity, not just on the smartphone but on the broader devices as well. So all that -- the faster radio protocols that we have, whether it’s LTE or a new Wi-Fi protocol called 802.11ac, all these things come together to give people that kind of experience in their computing platforms that they use.

And then, of course they want entertainment, rich multimedia, whether it’s sound or video, the latest versions and we have all of that kind of capability. And the thing though is coming from the mobile space. We are able to provide that kind of capability to a larger device, larger screen device, but allow it to be sleek and very, very light, use much, much less power. So the batteries are much smaller and it’s less weight, but still last a very, very long time.

And the other thing is lot of times you have a laptop, you feel the heat of that processor just on your lap as it gets warm. Well, these devices are very thermally efficient. So they don’t heat up like those old computers do and these challenges are hard. I mean, we’ve been working on the engineering of solving these kinds of problems for decades. I mean, this is really the fundamental of the company to drive this kind of capability into the broader market.

And so now you see the Snapdragons, they really go across a wide range of devices. So you can see all the way at the edge. You got the BlackBerry Bold down there, a small screen keyboarded device and you come all the way up to this side and you see a smart TV, a Lenovo Smart TV that also has Snapdragon inside. And in between, there is laptops and tablets and phablets. If you got a phablet, that’s a phone and a tablet and it’s a little bigger so.

My wife carries one of those. She loves that. But in any case, there are all sorts of device sizes and types and we are really able to support the breadth of this kind of a roadmap for our customers to do. So really exciting that we’ve seen a lot of innovation in terms of form factors in different kinds of devices. And we are focused on this opportunity because it’s a huge opportunity. If you look at the growth rates for tablets up here, 41%, compare that to PC, PCs are projected to grow 6% if you include both mobile and desktops. 9% of you just look at mobile PCs alone, so much, much smaller rates of growth.

And we’re really in a good position because we have different assets to bring to the table. Here we have the processing capabilities. We have the radio modem capabilities. We have the different kinds of connectivity to really address this sort of growth. So having these mobile devices now connected is what’s really important, because you want them always on, always synchronized. So you just look at it and your information is right there in front of you. And so you can see the kinds of growth rates that we are already seeing in terms of mobile connectivity.

It’s an area that we’re focused on, that the operators were focused on to make sure that these kinds of devices are always connected. And you’ve heard this talk of the cloud. Well, connecting to the cloud, wanting to have access to the cloud at all times means that you need a 3G, a 4G connection in addition to Wi-Fi. And so we think that it’s going to be increasingly important as time goes on that these devices are more and more connected.

And so we are really focused on that. The operators were focused on it as well, because they know that you don’t want to have to sign up for one, two, three different plans in order to have multiple devices. So they are coming up with new schemes that on one base subscription you can add additional devices, or you can buy connectivity at certain times when you needed so and so forth. There’s really a lot of creativity going in on the wireless operator side as well to make this kind of an opportunity come to light.

And with QUALCOMM, we can address in a number of different ways. We can address the complete system through our Snapdragon, which is everything, the application processor, the graphics processors, the radio. We have Gobi, which is just the modem portions, so the radio conductivity portion. We can sell that, if we are selling it against another application processor like, maybe a traditional PC.

We have Atheros script, so if they just want Wi-Fi and local connectivity, we have that too. And then, of course there’s a tremendous opportunity for us on licensing into these new devices as well, so really, really a great opportunity. And one of the things that I love about it is it -- it’s also not just about this, but it’s about the entertainment aspect. The fact that we are able to put so much capability into this device, we have this.

We are going to give you a demo here of a new movie trailer and it’s a little bit loud, so just be prepared but it’s really cool. It shows how we do, 7.1 surround sound on a mobile device. And so have that full movie experience and I think the 7.1 demo is going to really showcase what this Snapdragon can do. So you can run that video.


So if you can believe that that played off of a tablet, that’s powered by Snapdragon 800. It is really amazing the kind of capabilities that we can get out of these devices now. And we had some wonderful stuff that we were showing off at Mobile World Congress where here you see the 7.1. There are speakers actually in the room.

But we have a new technology that in just a standard pair of headset, we can fool your ear into thinking that a here is a sound coming from different areas. And we actually did a demonstration where people went into a room that had the speakers. And we said, put the headsets on, turn the speakers off and just did it through the headset and people couldn’t believe that was actually happening through the headsets. So you will actually be able to get that 7.1 surround sound with a great screen anywhere you go, really inexpensively on a mobile device, so amazing technology in there.

Okay. Turning from entertainment to emerging markets, because I said one of our key areas is driving growth in emerging regions and obviously the key trend there is this move from second-generation to third-generation and fourth-generation radio technologies, so really a great growth opportunity for the company. And what’s interesting is -- I talked a little bit about usage of smartphones in the United States, that Google survey I talk about. But this is a survey that we did with Time Magazine.

A global survey that talks about how people use their devices in other parts of the world and it turns out that people in India and China are using their devices more than people in developed countries, which makes a little bit of sense because this is the way that the way people were getting onto the Internet in many of these kinds of markets.

And so if you look up there, you can see that China leads in terms of surfing the Internet. India is leading in terms of using music on the phone. China, web search, I mean, you can just kind of go down the list. News, 84% of people in China get their news on their phone and that’s much, much higher than the rate in the United States.

And if you just kind of look down through the different areas of usage, the emerging markets lead. And what that means is that there is a tremendous demand to improve, to go from 2G to 3G and 4G, to go from a feature phone to a smartphone that all these things are very good for us. And it really is a fundamental tool for change. We certainly all have seen the kinds of things that have happened, for example, in the Middle East with people using phones in social networks for political change in their countries.

It is just tremendous amount of empowerment that that we are providing through smartphones in these regions. And the growth rates that are projected are very large. Probably, two thirds of the new connections in the year 2016 are expected to be from emerging region. And you can see because we have this just tremendous growth rate there as well. And we expect in 2016 that that will only be around 45% of the population. So there will still be room to grow even after that and so just a lot of opportunity.

The other thing is sometimes you hear numbers quoted, 6 billion connections in the world with some of those cases are multiple, what’s called a SIM multiple connections per user. So the number of users actually can continue to grow even though 6 billion sounds close to the 7 billion, people that are on earth. It’s actually not 6 billion people behind that it might be 3.5 billion, so there’s still from user basis a lot of room for growth as well.

If we are focusing on China, it’s been a great market for us. But 3G, 4G, it’s only 29% of the overall connection. So there’s still very, very long runway for growth. It is already the number one smartphone country in the world, 200 million smartphones were shipped in China in 2012 and that was a growth of 132% year-over-year, so tremendous growth as well.

And what we’ve been able to do to drive that kind of growth is get the prices of the smartphones down, so we’ve invested heavily in the low end of the market to get that price down to now sub 1000 RMB which is about $160, but we see it coming down to the $100 range and even below that.

You might think, oh, well, the prices are going down that’s going to be bad for you, what’s happening is people trading up from a feature phone to a smartphone that -- so that cause the average selling prices actually increase rather than decrease.

And so, the data usage is tremendous there. You see the number of the operators they are doing extremely well. We just had a show for China Telecom, the big CDMA operator in China and there are 480 different companies that are working in the ecosystem supporting China Telecom with devices and services and so forth. Just huge numbers of companies have bought into the ecosystem and driving it.

China Mobile, the largest operator, wireless operator in the world is going to LTE. In their trials, they call them trials even though they spend hundreds of thousands of base stations and cities and all sorts of things.

We have 15 out of the 35 designs our chipsets in their trial. This is through a operator that we didn’t sell to before, because we didn’t have the technology in the past that that operator use in our chipsets. So now we do and now we’re that’s another growth opportunity for us as well.

And as I said, one of the key aspects of the emerging markets is getting the price down. So we expect over 800 million smartphones to be shipped in 2016 into the emerging markets and getting these devices down below $100 is really important. And so, there are lots of different devices out there around the world that that are in that price range, some even as low as just over $60 in China. So, very, very low end devices but they still have smartphone capabilities.

And in order to help manufacturers do that we have this reference design program. So I talked about that a little bit earlier that we actually do the designs for our partners and allow them then to make some modifications but they can get these phones to market extremely quickly.

Generally, these companies are companies that either have some manufacturing advantage. They have some brand advantage, some distribution advantage. They fill some niche of the smartphone distribution channel and we give them ability with minimal engineering effort to bring out product under their name.

And so this QUALCOMM Reference Design or QRD program really reduces their time to market, their investments in non-recurring engineering expenses, gives them the ability to make some changes, to have some flexibility whether it’s on the hardware or the software side. And we have a very broad range of these devices.

So we have them in all the different tiers, so that manufacturer doesn’t need to just build a very low end device which is commoditize but they can have a step up product that they can up-sell their customers to. And we deploy these things already as you see in 13 countries. You can see the number of devices and manufacturers that we are working with.

So really a tremendous success so far and it’s the way that we are fighting the battle down in a very low end of the market and also helping to cause us growth in the emerging markets.

Another thing that we do in the emerging markets is our wireless reach program where we work together with local and global partners to bring wireless technology to underserved communities around the world.

And so right now you can see the number of projects we have. But these are leveraged product, so if we put a dollar in our partners are putting in $2.66. So there’s a high degree of leverage of these kinds of programs.

And last year we launch projects around the world. Malaysia we did a mobile mentoring project for women entrepreneurs. Spain we did an augmented reality program for people with disabilities. Singapore we did a mobile learning project. Indonesia we did a new mobile survey tool with the Grameen Foundation.

We actually received award, QUALCOMM received the award from Grameen Foundation Humanitarian Award because we did a program with them where there is 15,000 entrepreneurs were mostly women, they’re all profitable and they have 1.5 unique customers.

And you may have heard this story before, there was the phone lady, the village phone lady where somebody would be have a phone and they would sell the ability to make calls to people in the village. Well, we started out with that idea, but that actually didn’t work because people have phones.

So we changed the program into something more wireless Internet like, the entrepreneur, the woman entrepreneur become not the phonely but the app store. The place where people could in, find out listings for jobs, or they could go and buy credits for their own phones or they could see other applications that they could use to improve their life. So really interesting how it sort of more from just voice connectivity to data connectivity and that’s really kind of the story through the emerging markets.

Doing a lot of work on mobile health here as well, trying to improve people’s lives and we think mobile health is huge opportunity in the future for the company. So a lot of things going on around wireless reach and in the emerging markets.

Okay, the next thing I’m going to talk to is this 1000x. So this is huge demand for wireless data by people everywhere and it’s been doubling essentially every year and 1000 times is actually a doubling every year for 10 years that gets you roughly to a 1000 time.

So it’s coming from all the things I’ve been talking about, more smartphones, more tablets, more machine to machine connections, more usage, typical smartphone generated 50 times more mobile data traffic than typical feature phone. So you can see that this is happening.

Now what is it mean, I mean, how do we get a 1000x, as I said earlier, we are thinking about 10x to 12x and now we have to do a 1000x, and there are ways to do it. We figure this out. And really the key thing is we improve the radios some, we deploy let’s call it small cells, I’ll tell you what that is in a second, and we get access to more spectrum and all these are playing together in a really nice way to solve the problem.

And so starting off with just radios, as we continue to drive this, we have new versions that the ones on the far left, they improve voice capacity for the different systems. We are improving the data capacity through HSPA+ Advanced and DO Advanced. We are allowing different ways for the network to be rolled out and ability to aggregate bigger and bigger channels with LTE advanced.

And then we have this LTE direct which actually does a new way of discovering services that are around you. We’ve got a great demo that we showed off at Mobile World Congress. It showed the difference between using this new technology and using the Wi-Fi based technology and it just was night day, because this was design to allow your phone to discover services and people that were in the world around you.

So we are improving the efficiency of the networks that way. But one of the key things is is this LTE that we’ve been doing so well at. And as I said, we are on our third generation when our competitors are on their first generation, there’s over 300 QUALCOMM-based LTE devices that have been accepted by wireless carriers already and there’s over 400 LTE devices that are in development right now.

And huge investments by the operators, 64 million LTE connections worldwide, 585% growth rate of that, 145 networks in 66 country. I mean, just this really is going strong because it solves this issue for the operators of getting more data to their customers.

Now from these customers still want more. So how we are doing that well, like I said, we are doing all the different radio technologies, so whatever radio technology our customers want, the operators want, we have those. Most of our competitors they might support two or three of them. We support everything.

One of the key issues when you have this many radio technologies is that, they might not all be deployed everywhere, so you have to handoff back and forth between them. So lots of different possibilities for hand over -- handoff between that adds tremendous amount of complexity.

But what really adds a lot of complexity is a fact that around the world operator, sorry, governments are trying to free up more spectrum. And as an example in LTE, there’s 40 different radio bands around the world.

So now with all those different technologies you guys support all those different radio bands as well. We not don’t have to do that too, and then in addition, you have other connectivity, Wi-Fi and bluetooth and GPS that go inside.

So what have we done to address this, we actually just made a new announcement of what’s called our radio front-end, RF360 Front End. And this allows operator and manufacturer have phones that do address this incredible number of different band, different spectrum bands that are around there.

So that you the consumer doesn’t have to worry. I mean, today, you know that certain phones, you buy a phone. It doesn’t necessarily working in this other country on the latest technology, might fall back to a 2G technology or might not even work at all, but you want to have the latest technology.

The other thing that does is that many of the manufacturers they don’t want to make different versions for different countries around the world. So, single SKU means a single device design that will work around the world.

We save power through this because we have very advanced technologist envelope power tracking technology does amazing to save power. We have great performance. We actually combine some signal processing that’s done in our Snapdragons that then connect to these radios and make them work better. So their performance is better.

We can reduce the size, little graphic here talking about how much smaller it is and that matters a lot because people want thinner phones or they want to have more room for, the manufacturer want more room for the battery to allow them to last longer, I mean, lots of different reasons why the size is very important. And of course, time to market, because we’ve done the pre-integration of lot of things.

This means that we’re selling into the phone new chips that we haven’t sold before. So other companies were selling us now, we will be selling these components and that just means more opportunity for us to generate revenues in QUALCOMM and we’re doing it by a lot of innovation. This has been a program that’s been underway for quite some time for us. This really makes a big difference for the manufacturers.

Okay, the other way that we improve this 1000x beyond getting new spectrum is small cell. So what that means is that very, very densely deployed cells and in order to deploy densely that can’t be that the operator has to roll a truck every time.

What this means that you as the consumer will get a small cell from your operator and you’ll put in your house and that that will be part of the overall network and radically, radically increase the amount of data that can go through the overall network.

And there are lot of innovations that have to happen in order for this to happen. We had to get the cost and the size of these cells to be very, very small and to find ways to connect them back into the rest of the network.

One of the critical things that we do we spent probably a decade working on interference management, because when you have lots of these little cells together they can all interfere with each other. And so I said earlier, we have these new technologies that allow us to get rid of the interference that you might see from another device. So that was a critical component. We have ways of extending the range and shrinking the range. We have different ways to offload traffic whether it’s to Wi-Fi, to a small cell, to the macro, the big cellular network.

We’ve been investing in all of these areas. We believe have a tremendous need. We actually have a little system running in here. We just randomly distributed little cells, these little cells around and plug them into the QUALCOMM Internet. And then we drive the same drivers that we used to drive for the normal outdoor cellular system but now we are being served by little teeny cells that are sitting side offices and just leaking outside. And so really kind of the cool thing in the cell, that’s a cell site, this is a quarter and that’s the cell site. Not that big thing that sits by the side of the road that little teeny thing.

And you can see there is even a lot of green there, so that really wasn’t an attempt to make it super, super small. So these things will be the size of a USB stick, some little teeny thing that’s a base station now.

And its going to cost less than the phone, because it’s build like a phone, but doesn’t have a big screen, doesn’t have battery, doesn’t have memory, all these kinds of things, so these going to be very, very inexpensive.

And so when I talk about the 1000x demand, the 1000x challenge, we weren’t assuming that the revenues of the operators were going to go up with 1000x. We weren’t assuming that the consumer is going to pay 1000 times more. Now because they want watch videos and things that use up lots and lots of bits, and then want to play a lot for every one of those bits.

So how we drive the cost down, well, today to put a cell site in, for the equipment, for the site, for all the conditioning, all of the works they have to do to get that site, it can cost like a $100,000 per site.

These things can be 1000 times less or maybe even more than a 1000 time less, and that’s where you get tremendous saving. And that’s going to make the operators, make their customers a lot happier, because today what the operators do, is they price the service to protect the network. They price it so you use some data but not as much as we want.

You are paying a lot. You want more but you don’t want to pay so much more and they do that to protect their network, so that you only use so much data so you don’t overload their network.

As soon as we open this up, they will be use, able to use much, much more data on the network, you can be a lot happier as a customer, operators are going to be happier, the whole industry I think is going to do quite well.

What have we done to do this? We acquired the company DesignArt Networks to get latest technologies for the radio part of this small cell. We also acquired Atheros QCA to get the wireline technology. Because you see the big piece on that design that’s an ethernet connector that big silver box thing. So the wireline part is really critical here as well.

And the fundamental concept, the final shift is that, you don’t think about cellular network being outside in, meaning that they have a big tower and the antenna outdoors and they send enough power so that it goes, you can make the connection inside.

Now this is inside-out. So you have the cell site, a very small cell site transmitting very small amounts of power inside and then it leaks out on to the street outside and provides coverage.

And there is a lot’s of tricks that you have to do to make all these stuff work well and hand off correctly but the point is that we know how to solve this problem. And the benefit is that is done in license spectrum and license spectrum as opposed to unlicensed for example that Wi-Fi is in and license spectrum the operator can control so that cell sites all cooperate with each other, they all manage the interference together.

And so if you look at making a dense network out of Wi-Fi or unlicensed technology the capacity goes up for little while a minute levels off because the interference causes the problem. We actually just saw this. We were in Barcelona at the show and there were so many Wi-Fi networks up, basically can use Wi-Fi because they all interfered with each other.

In this case, the small cell case they continue to manage interference relative to each other and the capacity continues to go up and up and up, the more of these that you put in. So really good technology and its great for license spectrum and so, we’ve actually been going out to regulators around the world and talking them about how they can free up more spectrum.

One benefit of the small cell is that I can actually use higher frequency. So frequencies that people use to think weren’t useable for that outdoor in-version of the cellular network. Now are very useable for inside-out version of the cellular network and so that’s opened up large amounts of spectrum, that’s going to help solve the 1000x from this well.

So we’re working on license spectrum auctions. We have this notion that in some places spectrum might be used for one use but not used everywhere. So a great example is 3.5 gigahertz in the United States is used for coastal radar.

But it isn’t use anywhere else. And so away from the sites of those coastal radar that’s spectrum has been wasted. We now have a licensing regime and the technology to allow that spectrum be reused where it isn’t being used by radar. So that opens up more spectrum.

And then, of course, on licensed, we love our license. We have Wi-Fi. We’re continuing to drive Wi-Fi forward. I should not take for my comments that I don’t like Wi-Fi, I do. But it’s only one component. It’s not the solution. The solution really is more license spectrum that is what we’re going to drive a lot of capacity with.

Okay. So, Internet of everything. I talked about the Internet of everything before. What does this actually mean. Well, what it means is all the things in the world around us will be connective. And it will impact various different industries. So we have partners in all these different industries whether it’s in the automotive space.

We just announced the great things with BMW and Audi in terms of putting 4G in their car. GM just announced they’re putting 4G in all their cars. In industrial and in energy, we were supplying companies that are building connectivity into the smart meters. So that the meter knows when it should run, when it shouldn’t run, when there’s a power shortage, don’t run the air-condition, don’t run the washing machine, those kinds of things.

So managing that also by the way charging some electric vehicles it’s going to be big challenge to the grid. And so smart grid technologies will affect that. The connected home is a big area, health and fitness, huge area. We have a business called two network where we’re getting lot of companies who want to connect their medical devices up to the wireless network. So that people can be remotely monitor.

And there’s tremendous, tremendous benefits in terms of improvements in mortality rates by having connected devices, monitoring your health. And so there’s tremendous opportunity. And we also did this $10 million Qualcomm Tricorder X PRIZE which is a price competition.

There is over 270 teams around the world who have signed up in this competition to build a little device like the Star Trek Tricorder which is a device that will be carrying consumer kind of device, detect 15 different diseases better than panel of doctors. Because this machine has access to all sorts of testing capabilities, and all sorts of connections in the cloud to get the latest information on different kinds of diseases.

So this will be great for consumers. This is going to be great for underdeveloped countries. And it will, I think, catalyze this whole mobile health area that we’re so excited as an opportunity for QUALCOMM.

Okay. So, in order to make this vision of all these things connected, they actually have to talk to each other and they have to talk to the phone. And today things are done in silos. They don’t actually know how to talk to each other. So we introduced an open-source technology called AllJoyn and what it does, it allows these things to connect together very easily. So you’re not always typing in this then the other thing to get one thing to connect to another and just have nightmare of how do I even do this, where’s the manual, how do I get this to talk to that.

It allows it to do it in a very secure fashion. So it’s easy, it’s secure, very simple and it provides just a layer for all these different devices to talk to each other. So, you’re going to hear over the next year different kinds of devices that you might not expect to talk to each other are now going to talk to your phone and our going to talk to each other.

And they’re going to create sort of this common language that all these things -- we’re very excited. I mean, some ideas like when you get in your car that the car will talk to your phone and say, I have this screen. I have these speakers and microphones and these buttons and the phone will say to the car, hey this is Paul Jacobs getting in. Here’s the settings and he likes and by the way, here’s the music that he has or the videos or whatever it is that he might want the car to know about.

You can imagine this in the retail environment where people have a loyalty card for some restaurant. So they go in, they check in already then they can get information given back to them about offers or they can get points, so whatever. And I mean, you can just all sorts of opportunities for all these different things to talk to each other in a very simple way and communicate back.

Of course, it’s all opt in. The privacy is a very critical elements to this but we’re creating this. And we’re making an open source so that rest of the world doesn’t say QUALCOMM is trying to just -- take over everything and own it so.

We’ve done that and one of the things I want to show is how a tablet and a TV can talk together. So we did a demo with Sesame Street on TVs and tablets talking to each other. And this one it’s a what it does, it uses AllJoyn for the tablet and the smart TV to connect very simply.

And what does is this introduces the pre-scores to the building blocks of music. And it allows them to turn their tablet into a guitar and play along with Abby Cadabby who is going to show up on the screen up there. And it’s also by way -- this is not just AllJoyn. This is also snapdragon. Its our graphics processors. It’s also some stuff going on here. So ready to go with the demo. All right Brian.

Unidentified Participant

Give me one second Paul. Sorry for the delay.

Paul Jacobs

It’s a demo effect.

Unidentified Participant

All right. Sorry about that. Thank you Paul. So I’m excited to show what Sesame Workshop is creating with AllJoyn. But we have is an interactive application of music learning game where children will use their tablets to interact with Abby and so as I pick it up Abby is going to come to life.


So as I play fast, she will match my tempo and as I play slow, she will do the same.


So you can see it’s these type of experiences we’re so excited about AllJoyn being able to power these multi-screen in our actions. Thank you, Paul.

Paul Jacobs

Well, that was really great partnership with Sesame Workshop. It come on stage with me a couple of times at CES to show up different demos, done a lot of great work with them. And this is really another exciting thing where we use this new technology that allows the tablet and the TV just to talk with each other very simply and exchange information back and forth.

But, for example, at CES we showed a NASCAR app, where you could watch the broadcast of a NASCAR race. And you and your friends could post different things on the screen. You could watch the in-car video of this driver, that driver. You could hear the in-car audio of the driver.

So we really see this tremendous, tremendous opportunity for all these devices to interact with each other, to augment reality to bridge this gap between digital and the physical world. And so what we see is just huge amounts of different kinds of content coming into the phone -- into the home, being mashed up together and your large file sizes to it, whether it’s graphics that are being transferred back and forth or video that are being transferred back and forth, you can see the numbers.

Quantity is going to triple. So we have the technologies to deal with that, ranging from the wireless technologies all the way over to the wireline technologies. And really when we added the [Pharaohs] to QUALCOMM, really was a lot bigger than just the sum of the parts. We had this opportunity to exchange technologies back and forth and then go address brand new segments.

And so on the wireless side, we’re integrating Wi-Fi and 3G and 4G into those small cells, I talked about. We have a brand-new version of Wi-Fi, the gigabit version of Wi-Fi that now we’re going to share between the traditional [Pharaohs] products and the traditional, what were the QUALCOMM products. So gateway, smartphones, tablets, notebooks, consumer economy, all these different kinds of things.

On the wireless side, I mean we also got ethernet. We got power line connectivity. So you just may plug your small cell into the wall and over the power line, you’ll actually communicate to the rest of the network. And we have these hybrid solutions where in Europe, for example, the walls are generally thicker and Wi-Fi doesn’t necessarily go from one room to another.

So we have the idea that we’ll have Wi-Fi in one room, Wi-Fi in another room and they actually communicate together over the power line because you just plugged into the wall. I’ve seen these things. And it’s really cool that you can just extend your network by plugging into the wall.

So really this combination all the way across addressing these different areas of opportunities for us. Okay. So all of this comes together into that digital six sense that I was talking about where all these devices might be connected around you and you get information back from it. You can see through a phone and might be -- here’s what the temperature is mashed up with a image that’s on the screen that I can drag-and-drop content to and I can actually control.

So that screen is now got a user-interface that I didn’t necessarily have before and you can think, also I’m going to control light bulbs. Light bulbs don’t have user-interface by themselves. Yeah, they have a switch on the wall over there. But maybe I just point and now I have the opportunity to control things in the world around me.

And they will extend to health care as we talked about, monitoring for yourself or your health, monitoring for your loved ones, all sorts of opportunities, really a lot of interesting partners that are coming together. And so this next one, I’m going to show you is the fun thing that we did with UCSD.

So one of the ideas here is that we’re going to enhance our vision and wear this vuforia technology which allows us to composite graphics, virtual graphics into a real imager of the world. And we had tremendous traction with it. And so what this picture is over here, this is actually a real DaVinci, Leonardo DaVinci, sorry, can’t get it out, painting.

This is a very famous painting called the Adoration of the Magi and it was thought to be one of his tremendous masterpieces. The problem is what you see here is actually not really what the master intended. Up here, you see people that look like they’re watching what’s going on down here. I’m going to show you that’s actually not what’s going on.

You see through first-out phases down here, that’s not what the master intended. And over here, I’ll show you something completely different than what’s actually been shown on the screen, sorry, on the painting. So we worked with UCSD.

They had actually scanned this painting with various different kinds of imaging technologies. So when I hold this up. Now, it recognizes the painting, that the tab was recognizing the painting. And I could actually showed in different -- I can actually enhance the color of it on here. There we go.

I’m going to enhance the color. So this is the visible -- this is an enhanced version. This is an infrared version of it. This is an ultraviolet version of it, okay. So and you can see it’s actually on the tablet actually attached to that. So if I go in and I go back to the visible version, I can actually now come up here into the corner. So there’s this temple up here, looks like there is spectators on it.

But if I rub away, what’s going on. It turns out that appear they’re actually building these construction workers there, building what’s going on, that’s what the master actually drew, not what was painted afterwards. And if I go down here and I look at these faces, you’ll see that what was -- sorry what was painted far less interesting than what was actually drawn down here, the images are just so much more compelling down here.

You can really see that the expressiveness. And if I look up here over in the corner, you don’t see too much but I’m going to show you there’s a little elephant. Right there is the elephant and this was actually, supposedly the coming of Magi, we’re coming. So Leonardo DaVinci was showing that elephant that’s up there in the corner.

And if I just zoom out, I want to show you that this really is, I’m going to change the way that this. So now I’m just showing you the augmentation and the rest of it is the camera view. So I kept my finger in there. You can actually see that’s floating above the image but it’s actually locked.

Here in our view, it looks like it’s actually locked to the image. So that’s an example of taking the virtual world. These different images that the scientist have found by looking at this painting in a different way and actually mapping it into the real world through the camera and using the tablet as that portal between cyberspace and real space.

And so you can imagine all sorts of opportunities when we’re able to combine real space and virtual space together, whether it’s by augmenting things around us or by allowing children to take a textbook. And it has always amazed me that you learnt physics from a textbook, whether it’s a drawing or an experiment.

Now, that we’ll be able to take a tablet and look at that textbook and that physics experiment will come to life. And we’ll simulate the actual physics in the tablet. And we’ll be able to actually interact. So just tremendous, tremendous number of different opportunities.

So you can imagine, one of my favorites is you go to a foreign country and you use it to look at signs on the street that you can’t read. And it just translates the signs for you and not only that, but it makes them clickable. So you could actually see, it’s a restaurant click and now I can see the menu. So we’re doing all sorts of technologies like that with this vuforia technology. Really, really great stuff.

So I hope I gave you a good sense than you really have. There is a lot of initiatives here. We’re really excited about the opportunities that we see ahead of us. It is just starting. I mean, it feels like these smartphones have been around a while. It hasn’t been around that long. It really hasn’t been a long time.

And so we’re at the very beginning of the opportunity of new ways that we can impact not just the mobile industry but other industries as well and be partners into other industries, very, very exciting. And we have the technology leadership and we have the financial strength.

And it’s just very fun for all of us to see going from being sort of an outsider in the early days to being just a fundamental part of industry where people are coming to us and lined a partner with us because they see our ability to innovate and not just have the idea but bring these things to markets. So with these different initiatives, I think we’re well set for the next few years. And obviously, we’re confident on our financial projections.

So let me turn to one sad note, which is -- what made him happy, I don’t know, Bill is happy. So Bill Keitel has made the decision to retire. And he has been a huge part of this management team. He has been a CFO here for the past 11 years. And during that time, he’s really played a critical role in helping to grow QUALCOMM.

And as I said earlier, we’ll try and strive to not just be great at technology but in all aspects of the company. And so I think we’re known well. We’ve got many, many awards for financial reporting. We were one of the earliest companies to certify for Sarbanes-Oxley.

We file our K’s and Q’s on the same days. We do our earnings -- I mean, this has really done a lot of things to provide transparency to you, to the industry analyst community, and also to provide lot of structure internally to the company. And so you can see a lot of these different awards that Bill has won and we will miss him.

And so really on behalf of the board, the executive committee, all of our employees, Bill, I just want to say thank you very, very much for your dedication and your passion for QUALCOMM and all the things that you’ve done to really help grow this company. And I also say want to say thanks because Bill has agreed to stay on an advisory role through the end of the year as we make a transition. And as again, thank you very much Bill.

So just to embarrass you a little bit, I think we have a tribute video for you, if we can run that. No, I don’t think it’s too embarrassing.


I want Bill to come up. Thanks Bill.

Bill Keitel

Thank you, Paul. Just to share a few quick comments as I told Paul and my people, it’s a bittersweet decision for me. Sweet in the respect, I want to spend more time with my family but bitter in the respect that this is just such an unbelievable company. And the people here are all top notch. And people had fun at QUALCOMM.

We worry a lot and work very hard but people have fun. And so it wasn’t an easy decision to pass that by. But after 11 years as a CFO with 17 years in company, I know it’s time for me. So thank you very much.

Paul Jacobs

Don’t go too far because we’ve got one more Q&A right. And are you participating in the Q&A. I think. All right. And then we’ll have Steve Mollenkopf, Derek Aberle, and Don Rosenberg also come up. Now, you are going away already.

So I apologize, I think we went a little long in the presentations but really want to answer any questions that you have. And if you can come to the microphones and just say your name and ask your question and we’ll do our best to answer it.

Question-and-Answer Session

Unidentified Analyst

Larry. Marisol, what’s the status of Marisol and can we expect that technology to come up in any device in the future?

Paul Jacobs

You want to answer Derek or do you want me too? I have been talking. Go ahead.

Derek Aberle

Yeah. So like we’ve obviously been investing in Marisol for quite some time. We, kind of, reevaluated this strategy business towards the end of last year and we made some changes and essentially what we’re doing is we have the existing technology, which is a couple of different display sizes, which we are going to continue to look to directly commercialize and in a few different applications we’ve got some sort of specific ruggedized tablet applications and also the variables category is an area where we are focused on a lot of people looking at watches, both as companion and also cellular.

And so that’s a space that we are pursuing. On top of that, we are in the process. We made some changes to the strategy in terms of the technology and we are focused on developing sort of what’s the next-gen, which will make some improvements in the image quality and resolution in a number of other aspects. And on that path, we are going to look to transition more to a licensing model and partners, which is something we started to do with our other display technology, Pixtronix.

Unidentified Analyst

Are you able to see the image in the sun?

Paul Jacobs

Yeah. Works great in the sun.

Steve Mollenkopf


Unidentified Analyst

[Tim Rollins] a long-term shareholder. Thanks again for the big dividend boost.

Paul Jacobs

You are welcome.

Unidentified Analyst

But really exceeded my expectations, I was hoping for a nickel but it got doubled, great. I also want to thank you for all the individual Investor Presentation, which you give through the Analysts Conferences and so forth and the great financial reporting really helpful for us.

I had a question for Steve. I think at either at the Analyst Day or at the last earnings, you mentioned something about 400 designs wins with your Combo connectivity chip. Can we kind of put that in context? You might have 700 to 800 devices that you’re in within a year and maybe the industry itself has 1,000 to 1,400 devices that come out every year. Can you kind of comment on that.

Steve Mollenkopf

Sure. I have to. One of the other things, I mentioned also at the New York Analyst Day, which of course was here because of the weather. But was that -- here if you look at two different product categories, so on our reference designs that we sell primarily through partners in China, I think the attach rate with a percentage of our designs that shift with our wireless LAN is somewhere in the neighborhood, a little bit north of 75% of that.

On our Snapdragon and high-end platform, it’s actually higher than that actually. Now, there are some leading kinds of hero models that are first generation of the 8960 for example, did not include our wireless LAN like in the Samsung devices. But the HTC, the LG and number of the other devices do include our wireless LAN, as I said the attach rate is actually above 75% there. And I think trending positively, what happens is our integration story still extends the same way that it extends to GPS. It also extends to wireless LANs. So we are -- I think quite bullish on the strategy of combining connectivity with the broader platform.

Unidentified Analyst

In the global, whole global arena, how many devices are coming out every year? On 1400, you might have 800 or 900, or the 1400 and kind of looking at market share.

Steve Mollenkopf

As you may know, we actually don’t comment on market share in a very exact way other than to say that we have -- we believe that we’ve exceeded some of the goals that actually Dr. Jacobs gave to us in the middle of last decade, which -- so now, I think we are the -- we supply the majority of 3G devices today with our chipsets. And those numbers that I mentioned with respect to connectivity percentages would apply to that portion of the market. So, I think it is pretty significant portion of our business today.

Unidentified Analyst

Thank you.

Unidentified Analyst

Hi. My name is [Rod]. This is for Paul. You are hearing a lot of things about Intel. How close are they to you guys? I heard you say something a while back that didn’t seem to be that close, but you always here these analysts or somebody saying that they are right there on your tail.

Paul Jacobs

Well, I think it’s the nature of the businesses that competition is going to invest heavily to try and catch up to us. We feel pretty strongly that we have a lot of different areas in which we have a significant lead. What they’re trying to do is use manufacturing capability to improve the performance of their devices. And the fabless industry understands that Intel is trying to drive chipset technology and they are driving hard very quickly too.

And so you see us actually changing integrated circuit technology very quickly. So they are trying to be a competitor right now, we don’t see them very strongly in our partners and our customer base. They’ve done a few things. They’ve essentially funded some developments by companies, so you have seen a very small handful of devices come out with their chipsets. Remember, they keep saying that they are going to have the next one. And the next one and the goal for us is to make sure we keep raising the bar, so where they are shooting is always behind us.

Now, with that said it’s a big company. They have a lot of assets. So we take them extremely, extremely seriously and we watch them. But I think if you see the kind of tracks that we’ve gotten with the customers that’s probably the best metric to see what the reality is.

Unidentified Analyst

Thank you.

Paul Jacobs


Unidentified Analyst

Paul, hi. About SIMS, incredible technology. I had a question relating to, what is the future of your on-highway truck and trailer tracking segment of your business?

Paul Jacobs

So we’ve been working on that. Do you want to? Okay. We’ve been working on that for a while. It’s obviously not as profitable, as it had been in the past and so we are in the process of actually, looking at how to restructure it and see whether we can get some more profitability out of it and we are looking at sort of strategic alternatives with that as well, so lot of things going on there.

We don’t have a definitive statement about what we are going to do with it. It’s certainly an interesting business in the context of the things I talked about automotive in Telematics. And really the question is, can we drive that to be a strong business within the context of overall QUALCOMM. We are working through that right now.

Unidentified Analyst

Okay. Thanks.

Unidentified Analyst

Hi. My name is [Elizabeth Nolan]. I can only applaud you on your technology. It’s way beyond my comprehension. But as I listened, my ears picked up when I heard that your lawyers received an award for innovation. So, I wondered what it was that they did and as I was thinking back I had this question and that is I understand all the technology companies are concerned about all the money offshore, billions of dollars, probably trillions.

And just bear in mind, medical school costs a lot of money and you can have loans forgiven if you work in underserved areas. Now, technology in San Diego is not underserved, but I’m wondering if there is a way you can -- you get your innovator lawyers to bring some of that money back by providing perhaps after graduation scholarships to some of your workers, either as direct scholarships or as a form of salary compensation for your workers. Because one thing we know, the student loan bubble is just going to explode at some point and maybe some of that money can be brought here, not just from QUALCOMM but other companies. So ask your innovative lawyers about that?

Paul Jacobs

All right. One of our innovative lawyers is right here on stage so.

Steve Mollenkopf

Well, okay. So to answer the first part of your question, we are service providers. That’s what lawyers do for a company like this. But one of the things that we also do is try to integrate very well with the engineers and the businesspeople here. And so one of the things that we were recognized for was an organization that involved, we call it strategic intellectual property and it involves interdisciplinary work among lawyers, engineers and business development people.

And they do a lot of things. They help us on the litigation side. They help us analyze patent value, both ours and external patent value. They participate in the M&A work that the company does and they very importantly try to participate in the strategic direction of the company. They try to understand everything about where R&D is going, so that we can make sure that we support as lawyers, first and foremost protecting it through intellectual property, patents in particular.

And then, of course trying to enforce that those rights. So that was one of the areas that we were acknowledged for. In terms of the last part of your question, I’d just point out -- it’s something that we certainly should look at and do look at a lot. But one of things that we are doing in our patent function now is we’ve basically advertised internally and we’ve attracted a number of engineers who might be interested in transforming their skills as engineers and into patent lawyers.

And so with local law school, one of the law schools, we have set a program and we have a number of people who are engineers who continue to work at QUALCOMM as engineers and go to law school at night. We’re supporting them with striving for the tuition. In fact, the law school is also contributing to that. They are getting paid at the same time and eventually they’ll enter into our patent department, and become patent lawyers who can again help that virtuous cycle of protecting the innovations of the company produces.

Paul Jacobs

We are really trying to advocate to Congressman and to the administration that that money really is an asset of the -- that could be used to improve economy of the country whether it’s other things that you mentioned, or other ways of investing in people and capital expenditures, and all sorts of things that might happen and also returning money to stockholders.

So it’s a political process. It requires people to make their voices heard. So, as I said earlier I encourage you to make your voices heard if you think that we ought to go to a corporate tax system that’s more like the rest of the world that gives us a flexibility and do the kinds of things that you mentioned.

Unidentified Analyst

Yeah. My name is Kim. I have been a long-term shareholder and I’m very happy with the way it’s gone about the IPO. So, I can come here on a Tuesday morning.

Paul Jacobs


Unidentified Analyst

Maybe there is -- in reference to the patent trademark changes, I think this month there is a change in the law for a patent filing, first-to-file versus first to think of it. And since you gain a lot of income from licensing a patent in intellectual property, do you see that will influence how you will do business in the future over that new ruling that’s coming up I think this month?

Paul Jacobs

So, what you are referring to is the patent laws were recently amended. It’s called the Americans Invent Act, after many years and there was a lot of discussion with respect to -- for many years, probably four or five years about what those patent amendments would include and a lot of the discussion really focused not so much on patent efficiency as much as litigation concerns. But finally the end result was a number of changes to the patent laws, which will make, help make the patent to function in the U.S. more efficient, will produce better patents faster and will support innovation. And it was something we were very supportive of. We were not supportive of some of the distractions that people were trying to throw in the way and we were happy that the act was finally passed.

It doesn’t -- in those ways that I just described obviously it helps us because we are so focused on and dependent on intellectual property rights. In terms of how it will affect our licensing program, no big changed there. One of the things though that Derek and I are focused on constantly is trying to talk to policy people, both in the United States and abroad about the importance of patents.

And that you would be surprised that a lot of you can read the daily newspapers and probably read some of it. At the number of people who have lost sight of the fact that the intellectual property laws have in fact been great motivators toward innovation. And we are now in, what everybody describes as an innovation economy, a knowledge-based economy, and now more than ever we need intellectual property rights to protect the inventions.

Of the 65% of our population that are inventors here. So you would be, I think surprised unpleasantly so at perspective of a lot of people and the fact that they don’t understand or somehow lost site of the importance of intellectual property, not only to a company like QUALCOMM but to our economy as a whole. So we spent a lot of time trying to remind people of those points.

Steve Mollenkopf

Let me just add, specifically on the first-to-file point. Most of the world has been on a first-to-file regime for a long time and the U.S. was a little bit of an outlier there. So as we’ve operated our patent practice, we’ve always worked very hard to get our inventions protected quickly and so really, really not much of a change.

Paul Jacobs

All right. Well, I want to say thanks to everybody for your support over the past year and hopefully, you were happy with that and we got some great stuff coming for the next year. So thanks everybody.

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