Ladies and gentlemen, thank you for standing by. Welcome to the QUALCOMM Second Quarter Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded April 25, 2007. The playback number for today's call is 800-642-1687. International callers please dial 706-645-9291. The playback reservation number is 148-68-59. I would now like to turn the call over to John Gilbert, Vice President of Investor and Industry Analyst Relations. John, please go ahead.

Thank you, and good afternoon. Today's call will include prepared remarks by Dr. Paul Jacobs, Dr. Sanjay Jha and Bill Keitel. Steve Altman will not be joining the call today due to previously scheduled business travel. However, Lou Lupin will be available during the question-and-answer session. An Internet presentation and audio broadcast accompanies this call, and you can access it by visiting www.qualcomm.com. During this conference call, if we use any non-GAAP financial measures as defined by the SEC in Regulation G, you can find the required reconciliations to GAAP on our website. I would also direct you to our 10-Q and earnings release, which were filed and furnished, respectively, with the SEC today and are available on our website. We may make forward-looking statements relating to our expectations and other future events that may differ materially from QUALCOMM's actual results. Please review our SEC filings for a detailed presentation of each of our businesses and associated risks and other important factors that may cause our actual results to differ from these forward-looking statements. And now, it is my pleasure to introduce QUALCOMM's CEO, Dr. Paul Jacobs.

Thank you John and good afternoon everyone. Let me begin by highlighting a very successful second fiscal quarter at QUALCOMM. Record CDMA based chipsets and handsets delivered record revenue and earnings per share. We continue to see a strong 3G CDMA market worldwide, now therefore increasing our full year financial guidance for fiscal year 2007. I would like to thank the employees of QUALCOMM, our industry partners and our licensees for continuing to achieve excellent results through an unwavering focus on execution. This effort has resulted in many positive accomplishments for the industry despite the attempts by a small number of competitors to disrupt our business. I would now like to highlight some of our key achievements. QCT delivered their seventh consecutive quarterly record for MSM shipment and CDMA based chipset shipments were up 24% year-over-year. We continue the expansion of our single chip product family by introducing the first 1xEV-DO Rev. A single chip, the QSC6085. This increased level of integration will lower the cost of mobile broadband devices providing greater than 10x increase in uplink speed of 1xEV-DO Release 0. Thus enabling user generated content such as pictures and videos to be economically and rapidly uploaded from the phone. We announced the early sampling of our Universal Broadcast Modem or UBM chip, which supports three mobile television standards, FLO, DVB-H and ISDB-T in a single chip. The flexibility provided by the UBM chip allows handset manufacturers to address three of the world's leading standards with one solution, thereby enabling global mass market adoption of mobile TV. QTL licensees reported a record number of CDMA-based handset shipments for the December quarter, which was an increase of 36% year-over-year. A broad licensing program continues to fund the innovation that fuels mobile wireless broadband growth. Our portfolio is the most licensed…

Thank you, Paul. QCT had a strong second quarter in fiscal 2007. I would like to highlight some of our accomplishments. In the second fiscal quarter, QCT generated revenue of $1.26 billion. It was our fourth consecutive quarter of record revenue. Year-over-year this represents a growth of 24%. We shipped approximately 61 million MSM chipsets in the second fiscal quarter. This is the seventh consecutive record for shipments during the seasonally low quarter for mobile handset. Year-over-year, this represents a growth of 25%. A year ago, we committed to executing on new products that will lower the price of NTT handset segment to enable CDMA carriers to be competitive in emerging marketplace. Today, CDMA 2000 handsets have broken the $30 price barrier in many developing markets, and are now at price parity with 2G GSM handsets. More than 10 handset manufacturers are launching over 35 models of stylish and affordable devices based in our QSC family of single chip product. Emerging market handset affordability and a dramatic growth in shipment of CDMA Cell Site Modem solutions destined for developing markets over the past four quarters are encouraging signs that CDMA is growing and will compete effectively in this market. Finally, as Paul mentioned, LG's KU250, the handset offering QUALCOMM's UMTS chipset that was selected for the 3G for all initiative is expected to start shipping in volume by June of this year. As data-rich mobile services become increasingly popular with consumers, QCT's portfolio is well positioned to enable these services. Year-over-year, our shipment of EV-DO chipsets increased 66% and contributed to the 21% growth year-over-year of our overall CDMA2000 MSM shipment. QCT's UMTS/MSM shipment also increased 56% year-over-year, driven by HSPA-enabled chipset, which now par over 70 HSPA devices that are either launched or in design. Starting in a year…

Thank you Sanjay and good afternoon everyone. I will begin by highlighting the number of key items and our second fiscal quarter results. Revenues increased 21% year-over-year to more than $2.2 billion and pro forma earnings increased 22% year-over-year to $0.50 per share. GAAP diluted earnings for the second fiscal quarter were $0.43 per share including a $0.05 loss for estimated share-based compensation, $0.01 loss for acquired in process R&D and $0.01 loss attributable to the QSI segment. Operating cash flow was almost $1 billion for the second fiscal quarter, up 11% year-over-year. Pro forma free cash flow was more than $1 billion and 49% of revenues. During the quarter we returned approximately $440 million of capital to our shareholders, including just under $400 million of cash dividends and $40 million to repurchase 1 million shares of our common stock. We continue to believe in the repurchase program. We were again limited by a closed trading window for most of the quarter. However, we are prepared to repurchase additional shares as appropriate. Our pro forma estimated tax rate for fiscal 2007 is now 24% compared to our prior estimate of 25%, primarily due to a change in the relative proportion of foreign versus domestic earning. QCT again had record MSM shipments and revenue during the quarter. QCT's second quarter revenues increased 24% year-over-year to almost $1.3 billion on the strength of 61 million MSM shipped, also a 24% increase year-over-year. QCT's operating margin increased to 29% from 26% in the first fiscal quarter. QTL earned record revenues of $759 million this quarter as licensees reported a record of approximately 91 million new handset units shipped, with an average selling price of approximately $214 per handset. These shipments occurred in the December quarter and were reported to us by our licensees…

Thank you, Bill. Before we go into our question-and-answer session, I would like to remind our participants that our goal is to address as many questions as possible before we run out of time on the call today. Therefore, I would like to ask our participants to limit their questions to one per caller. We are ready for calls.

(Operator Instructions). Tim Long from Banc of America. Please go ahead with your question.

Thank you. Just a question related to some of the legal matters here. Just from a higher level, you have the arbitration with Ericsson and Sony Ericsson where you were successful. We have seen press releases from you and Nokia with different understandings of the royalty rate. Could you talk to us a little bit about how it's possible that there are two different perceptions of that royalty rate? And then related to that, do you think there is anything to learn from the, is it a similar type of dynamic that happened or may have happened in the Sony Ericsson case that you think positions you better for a positive outcome and potentially some back payment from Nokia? Thank you.

Tim, its Lou Lupin. With respect to the different statements regarding the royalty rates, we can only tell you about that from QUALCOMM's perspective, and as we said publicly, the rate is not as Nokia has portrayed it. There is a rate that’s forced in the agreement. There is the way of calculating it. And as far as we understand, Nokia has been paying us in accordance with the agreement and in accordance with the rate that’s set forth there, and that's not consistent with their public statement. So, I don't want to speculate on how they get to their number.

Okay. And then just relationship between the two potential arbitrations?

So, there really is no relationship between the two potential arbitrations. The Ericsson arbitration was the disagreement over calculation of the royalties in certain ways for certain products. The Nokia arbitration that we have recently commenced has to do with the question of whether Nokia can continue to use our patents without paying us the royalty rate that set forth in the agreement, and without abiding by the other obligations that they go along with Nokia's use of our patents. And in the Nokia arbitration, we are asking the arbitrator to determinate that in fact they are using our patents. There are obligations that come along with it, most importantly the obligation to pay royalties at the contractual rate as well as the continuing obligation to another rights, they have granted us under their patent.

Okay, thank you.

Matthew Hoffman from Cowen & Company. Please go ahead with your question. Matthew Hoffman - Cowen & Company: Yeah, thanks. I am going to drill down and ask you another question on royalty rates here, Lou. Is it possible to some of the answer here is in the denominator i.e. that Nokia is calculating the rate from a different base, is there some sort of cap on WCDMA handsets that Nokia thinks there might be in the higher ASP categories? Thanks.

Again I can't really tell you what Nokia is doing. Is it possible that they are using some different gross numbers; sure, I guess it's possible, but we have no insight into how they have got into the number that they have described. So, I am sorry I really can't be more helpful on that. We don’t think that as between QUALCOMM and Nokia there is any dispute over how royalties should be calculated. Again, as I said before we think they have been paying us in accordance with the agreement. Matthew Hoffman - Cowen & Company: Okay. Shifting gears back to Paul, and Paul and Bill, it looks like the combined quarterly ASPs were up in calendar 4Q '06 and fiscal 1Q '07. I was hoping you could describe some of the trends behind that. Is it CDMA with the launch of Rev A or is it WCDMA that was driving the increase on phone side? Thanks.

Matt, we think data has been going very strong both DO and WCDMA. So, we think that is driving a richer handset across many markets. Other than that, so I think ASP’s went pretty much in line with our expectation, there are minor deviations, but pretty much as we expected.

Ittai Kidron from CIBC. Please go ahead with your question.

Thank you. Good afternoon gentlemen. Bill, I had a couple of questions for you. I was trying to figure out and think about some of the metrics you provide on a quarterly basis, how they would look like without Nokia into picture, how should we think about, are your average ASPs and Nokia is not included, how should we think about your tax rate given then? I would assume they are paying in certain regions and what's the impact from that on tax rates? Can you give us, you gave us the magnitude of the potential impact on EPS, could you give us a little bit more on the math behind it and how should we think about that going forward?

First on the tax rate, I have updated the tax rate forecast from 25% previously down to 24%, that reflects the number of shifts in the business but obviously one of the changes that we made was, we took out a forecast that Nokia would pay us for the fourth fiscal quarter. So, I think that's one change in the outlook amongst several others that's incorporated in that tax rate forecast I gave you. On ASP’s we'll just have to wait till we get to the fourth quarter, I'm still hopeful that they would pay, I'm not optimistic they will, but I'm hopeful will and so we'll just have to wait till we get to that quarter and see how we report ASPs at that time. I'll certainly, we will all continue to do the best job we can to disclose what you need to understand what's happening within our business.

Maynard Um from UBS, please go ahead with your question.

Hi, thank you. It looks like revenues and margins in the QTL segment were little bit lighter than what I expected. Can you just help us reconcile the numbers or specifically, what is the greatest impact between kind of the mix shift maybe because of Sony Ericsson, the Pantech, bad debt expense or any carrier marketing cost? And if it's the latter, should we assume that these run at those higher levels through the year?

The one item that I mentioned in my comments was we reserved our remaining exposure to the Pantech Group. We took a reserve of $22 million and that's reported in SG&A. So that will be number one. Number two, if you just take QTL revenues, use the items I disclosed, I mentioned last quarter that one could calculate an implicit royalty rate after that at 3.6%, it's not the true royalty rate but it's based on what we disclose, it's what you could calculate and using that same basis this quarter the royalty rate would be 3.8%. I do expect that rate to continue to increase in the next couple of quarters.

Hasan Imam from Thomas Weisel Partners. Please go ahead with your question.

Yeah, thank you. Congrats on the strong results. I have a question on the WCDMA estimates, if you look at the top five handset vendors in terms of their comments on the WCDMA market this quarter, it kind of seems to be a bit weak versus you seem to have taken quite a positive stance on it still. So, I am just wondering has it got something to do with vendors outside of the top five gaining share in that particular segment. Thank you.

Hasan this is Bill. One, of course, we are reporting in our QTL segment, we are reporting what’s shipped in the fourth quarter, and recent reports obviously our people reporting what they shipped in the March quarter. So, there could be a bit of a timing difference. I am expecting total phone units to decrease into the March quarter, which may synch a little bit better with others, but having said that, with all our licensees, as they report, I tend not to look at the numbers until they are essentially all in, because the shift of share one quarter to another between the players can be pretty significant.

Now in the past you have commented on, for example, Huawei taking some share which uses your chipset, so my question was more related to kind of your full year stance on WCDMA.

Well, as Sanjay mentioned, our WCDMA chipsets are growing at a very fast pace. And, so hopefully that's going to show through with our customers doing better in the market. But, thus, we let them come through with their reports and not us jumping ahead of where they might want to report.

Daryl Armstrong from Citigroup, please go ahead with your question.

Thank you very much. First of all in terms of the revision of the Nokia royalty impact, you talked a little bit about the factors that caused that change, assuming any change in industry’s market share or above the factors made in sets. And then second of all, there is a full in part that Nokia by attempting to make partial payments reduce your ability to be able to tax their extension option not from a legal standpoint. Could you explain why this probably would not be the case? Thanks.

Daryl, I will take your first question. I think what you were referring to is in the last two quarters we've been estimating an impact if Nokia didn’t pay in the fourth fiscal quarter, an impact of between $0.04 and $0.06 per share, and this quarter we have tightened that up to say we now estimate it between $0.04 and $0.05 per share. We are just using the best information we can, both reports that we have from all our licensees and trying just to narrow in a little bit more on what we think that impact could be if they don’t pay. So, I don’t regard it as a major shift in our forecast, I would just say it’s fine tuning what we previously gave you and narrowing it down, which I feel comfortable with at this stage of the year.

This is Lou, and I will try to answer the second part of the question. We don’t think that the payments tendered by Nokia, which I think you all know we rejected, impacts in anyway our ability to press our claims in arbitration that if they fail to abide by the terms of the agreement that they are in violation, they are in breach including, breach of their right to extend the agreement. That's so for a couple of reasons. The payment for one thing was not tendered as a payment under the agreement. It was tendered as a payment offered with three pages of new and additional terms and conditions attached to it that we were going to be asked to accept in connection with accepting the payments. So, that's one problem. The other problem is as we have mentioned clearly from a financial perspective, it's likely that that amounted to $20 million is a small fraction of what they will, in fact at the end of the quarter, and that's of course not a novice decision until the end of the quarter, but if you assume they track anything along the lines of their current trends that payment will hardly come close to fulfilling your obligation. So, there is nothing about that payment. That would immunize them for many claims.

Brian Modoff from Deutsche Bank. Please go ahead with your question.

Yeah, guys. Can you talk on the chipset side? Can you talk a little bit about market share? You had some good numbers and guidance on that. From our checks it looks like you are pretty much dominating the Korean market in LG and Samsung. Can you talk about market share gains perhaps at Motorola where do you see that perhaps kicking in and any other vendors that you see on your side that are doing well on the chipset side that would account for your strength?

Brain, I think on CDMA side, we see the strength in EV-DO driving our numbers strongly. Especially I think in the United States the strength that Verizon and the migration that we see at Sprint towards DO Rev. A. I think those two things are certainly the key to our driving the numbers that we have driven this quarter. If we look at the Korean marketplace, we certainly see a vast majority of handset shipments being in CDMA there of course, and LG and Samsung really driving that market also. In terms of UMTS again I think we believe that we have gained some market share from the lows of the third quarter of 2006 that we saw would have increased our market share both the last quarter as well as this quarter. And that has been on the back of our Korean customers doing better in Europe. I think that's fundamentally the most important thing. And second I think is that both Samsung and LG are doing extremely well on Cingular's network. The Blackjack phone and some other phones are doing extremely well there. Those two things are driving growth in our market share also.

John Lau from Jefferies & Company. Please go ahead with your question. John Lau - Jefferies & Company: Thank you. I wanted to go back to the litigation issue, and I was wondering if you can clarify something on a more macro basis. You mentioned that you are going into litigation with Nokia, I mean arbitration with Nokia sorry. How long do you think this can continue whereby the royalties are not being paid, but that they continue shipment? And I know that you have accounted that for the fiscal of Q4, but can I continue for the rest of the account year or beyond, or is that decision now on shipments and royalty in the hands of the arbitration and the clock stop there? Thank you.

We don't know for certain that there won't be payment, although all the indications are that they don't plan to pass. But as Bill mentioned, we really won't know for sure until the payment date arrives and we see whether or not there is payment. If in fact there is non-payment, then we will have to take that fact into account in terms of our future plans, and it would be premature now I think to speculate about what we might or might not do in light of an event that might or might not take place.

Satya Chillara from Pacific Growth Equities. Please go ahead with your question.

Yeah hi. This question is for Sanjay. Sanjay, you commented on some WCDMA market share. I know you guys usually don’t talk about market share numbers. But, qualitatively can you talk about how much increase you had from the Q3 to Q1 of, right now from the March quarter? How many phone percentage points have increased the market share?

Yeah, we have not discussed the number with any precision. I can tell you that our shipments quarter-over-quarter increasing at a rate higher than when we see the market overall growing. I think that's really what gives us a level of confidence that our market share is increasing. Beyond that, especially as we look through the current quarter, it's difficult with precision to say what our market share is, though we know what the market was and that usually takes a little longer to gather that information. So, I can only tell you that, we feel comfortable that we're increasing our market share right now. I can't really provide any more precision around that.

David Wong from A.G. Edwards. Please go ahead with your question.

Thank you very much. On the subject of the arbitration you have with Nokia. Is this mutually agreed to binding arbitration or not?

Yes, it is. It's an arbitration relating to the existing agreement and that agreement specifies that any disputes about the agreement have to be arbitrated in a particular place under the rules of the American Arbitration Association.

Brantley Thompson from Goldman Sachs. Please go ahead with your question.

Hi, I was wondering if you could give us a little color on how we should think about operating margins from the chip business as we go over the next year, clearly had a nice step up sequential this quarter. And as Motorola ultimately ramps more and more production, I'm assuming that should also be a significant contributor but should investors be thinking about this as something that gets into the low-30s or mid-30s or how should we think about the long-term target there? Thanks.

Brantley, I think the guidance that I provided over the last probably two and a half years, that in the long-term our objective is to drag this business to an operating profit range at somewhere between 25% and 32%. Clearly, last quarter we had an operating profit of 26% and we stepped it up nicely. I think on back of good volume and good mix to 29%, our guidance for next year, by next quarter, shipment is 62 million to 65 million units, we see that as a strong volume also, and so as long as we continue to increase our volume I suspect that we will continue to deliver good operating profit but our long-term objective is to deliver in the range of 25% to 32%. The days of delivering high 30% are difficult to recapture but obviously we will try our best.

[Mark McKecney] from [Twin Pix Capital], please go ahead with your question.

No, my questions have been answered, thank you.

Larry Harris from Oppenheimer, please go ahead with your question.

Yes, thank you. A clarification with respect to EV-DO Rev. A there, are you starting to see the impact of the next year's deployment of QChat, as Sprint in your numbers or is this just the impact of data cards? And also, could we see the impact maybe in the quarter or two from the deployment of MediaFLO at AT&T Cingular? Thank you.

In terms of EV-DO, I think the point that I made in my script was that we are seeing a very strong growth in the EV-DO Revision A, GSM Cell Site Modem shipment, and typically that is a leading indicator of demand in that technology. We are beginning to see that even in emerging marketplaces, a lot of the operators are building base stations which are capable of 1xEV-DO and DO Revision A so that they can switch to any of the three technologies at their option. So, I think that we see is a very positive thing for us in emerging marketplace, and of course here in United States both Sprint and Verizon have publicly indicated that they are building EV-DO Revision A network. So, we see this as a positive indication. We also think that the QChat migration by Sprint from their traditional Nextel system is going to be an attractive driver of our growth, particularly the dual mode handset that they brought to the marketplace.

Yeah, just to add to that, the plan of record for Sprint for QChat deployment is the first calendar quarter of '08. So, that's when we ought to see that impact, although as Sanjay said, we are all already seeing the impact of the dual mode item CDMA handset.

And ladies and gentlemen, we have reached the end of the allotted time for just question-and-answers. Dr. Jacobs do you have any closing remarks?

I wanted to thank everybody for being with us today. I am extremely pleased with the quarterly performance of our team, and I am very happy that we were able to raise our yearly guidance factoring in all of these other impacts such as legal expenses, acquisitions and Nokia's statements that they would not be paying us royalties. Even though there is a lot of focus in your questions, in the market about litigation and all of that surrounds it, I think it’s pretty clearly from our results that our team is very focused on innovation and execution, and our engineers are continuing to focus on breakthrough new technologies and services. So, we continue to see the tremendous opportunity ahead of us, and we expect to continue to execute through that opportunity. Thanks very much.

This concludes today's conference call. You may now disconnect.