Ladies and gentlemen, thank you for standing by. Welcome to the QUALCOMM Third 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 July 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 634-26-04. 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, Steve Altman, Dr. Sanjay Jha and Bill Keitel. In addition, 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. We had another tremendous quarter. But before discussing our performance and the status of the market, let me start by briefly commenting on our continuing legal issues. Obviously, we are disappointed with the rulings on behalf of Broadcom both in the Santa Ana case and in front of the ITC. We continue to believe that the rulings are wrong and are pursuing all avenues to reverse and to mitigate the effects of these rulings, including working with our partners who may obtain a license from Broadcom. We've been unable to come to agreement ourselves with Broadcom because they've insisted that a comprehensive settlement includes the ability for it's customers to obtain royalty free rights through significant portions of our patent portfolio which would have a material impact on our licensing business. This business is funded on R&D and innovations that we have transferred to are approximately 140 licensees. We remain committed to defend our business model and the benefits they provide to wireless industry. Unfortunately given the threat of injunctions against certain of our products, the next few months represent a crucial litigation time-frame and we can't predict the outcomes at this time. Let's talk about the business. As I said, we had another outstanding quarter at Qualcomm. Record CDMA-based chipsets and strong handset shipments delivered record revenue and earnings per share in the third fiscal quarter. The worldwide 3G CDMA market is accelerating and our results demonstrate that we continue to successfully execute on our current and long-term strategic goals. These excellent results demonstrate the commitment and execution by our employees, industry partners, and licensees as they continue to deliver the most innovative technology and solutions to the global market place. We thank them for their support. I'd now like to highlight…

Thank you Paul and good afternoon everyone. As Paul highlighted, there are many exciting developments throughout the industry enabled by our technology, employees and partners. Although the industry and consumers have received substantial benefits from our efforts, a small group of companies continue to attack our business model. In the most recent quarter, we have made progress in some of these battles, while losing ground in others. We were disappointed with the rulings in our disputes with Broadcom, both in the California Litigation and in the ITC. We continue to believe that the rulings were incorrect and are pursuing all avenues to reverse and mitigate the effect of these rulings, including seeking a Presidential disapproval of the ITC ruling. In the event that an injunction is issued against our business, we will seek to stay the application of such an injunction, while we appeal the infringement findings. Given the threat of injunctions against certain of our products, the next few months represent a crucial litigation time frame and the outcomes and impact of any injunction or exclusion order is uncertain for us, as well as for our customers and consumers, who stand to be harmed significantly of denied access to our market leading technology. Regarding the ITC, last week the Court of Appeals for the Federal circuit, denied the request for a stay of the exclusion order, solely on procedural ground. In essence the courts decision was that the exclusion order is not subject to appeal until after the Presidential review period. The court made no determination of the subsidy of merits of the stay request, and we are free to renew our request as are our customers for a stay if the President has not approved the ITC decision. Last day for the president to act is August 6.…

Thank you, Steve. QCT had another excellent quarter and I would like to discuss the highlights. We continue to maintain focus on delivering exceptional results. The third quarter of fiscal 2007 was another record setting quarter in terms of revenue, operating profit, and shipments. QCT generated revenue of $1.37 billion. This was our fifth consecutive record revenue and represents a growth of 21% over the third quarter of fiscal 2006 and 9% compared to the previous quarter. Our operating profit was 32% of revenue an increase of 27% year-over-year and 19% quarter-over-quarter. We shipped over 65 million MSM chipsets in the third quarter and set a record for the eight consecutive quarter. QCT reached an additional milestone as we shipped our cumulative one billionth MSM, during the month of June. This growth can be partially attributed to consumer demand for mobile broadband services on a global basis. As a result, our UMTS chipset shipments increased 127% year-over-year and 79% quarter-over-quarter. As the estimated quarter-over-quarter growth for the UMTS market overall was just over 20%, we believe we gained market share during this time. Meanwhile, CDMA 2000 EV-DO remained strong as shipments increased 34% year-over-year. Wireless users in developing markets such as Africa, South America and India are driving demand for entry to our products. We have noticed a trend for wireless users in these markets to migrate towards most feature rich devices thus increasing demand for our multimedia tier of chipsets. Demand in established markets for our higher end products is increasing as well. In the third fiscal quarter, QCT started volume shipments of our 7000 series Convergence Platform chipsets. These Dual Core solutions power advanced smart phones and other devices that are now available in North America and Japan. This strong initial uptake indicates that our technologically advanced products…

Thank you Sanjay, and good afternoon everyone. We are pleased to report another quarter of record revenues chipset shipments and earnings per share as 3G adoption around the world continues to accelerate. Revenues increased 19% year-over-year to more than $2.3 billion and pro forma earnings per share increased 31% year-over-year to $0.55. GAAP diluted earnings for the June quarter were $0.47 per share, including a $0.04 loss in estimated share based compensation, and a $0.04 loss attributable to our QSI segment. During the quarter, we returned $363 million in capital to our shareholders, including $234 million of cash dividends or $0.14 a share and $129 million to repurchase 3.1 million shares of our common stock. Cash flow was strong again this quarter with operating cash flow of nearly $1 billion, up 21% year-over-year and pro forma free cash flow of nearly $1 billion up 23% year-over-year. Our fiscal 2007 pro forma effective tax rate is estimated to be 23% compared to our previous estimate of 24%. The decrease in our estimated annual affective tax rate is primarily the result of our estimate of additional foreign earnings tax at less than the United States Federal tax rate. Due to this change in estimate, the third quarter rate is lower than the expected annual rate. QCT again had record MSM shipments during the quarter, including strong sequential growth and demand for WCDMA chipset. Compared to the year ago quarter MSM shipments and QCT earning before tax increased 18% and 27% respectively as QCT continues to deliver exceptional financial result while maintaining and extending its technical leadership position. QTL increased 20% year-over-year to $766 million for royalties on handset shipments that occurred in the March quarter and were reported to us in the June quarter. We estimate new handset shipments during the March…

Thank you, Bill. Before we go in to our quarter 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 time on the call. Operator, we are ready for questions.

(Operator Instructions). One moment please for the first quarter. Mike Walkley from Piper Jaffray. Please go ahead with your question.

First question is for Sanjay, just -- it’ll be your historic range of guidance for your operating margin, you have hit that high end of the range. How should we think about that going forward, if you can help us on your margins, on your business?

Mike, we certainly had a very, very good quarter this quarter. The range that we've established before which is 25% to 32% continues to be the operating range in which we hope to bring our operating income. I certainly won’t apologize if we exceed that but our plan is to again stay in that 25% to 32% range.

Okay great. And I'll just ask a follow-up question for Bill. Lots of moving parts here in the first quarter without the Nokia conjunction. Can you maybe just walk us through if you have taken up your macro guidance. And you say Nokia has a 5% impact? How did we go from $0.55 this quarter to your $0.48 to $0.50 range?

Sure Mike. So if we take the mid-point of that fourth quarter guidance $0.49 and we walk $0.55 down to $0.49, we have a $0.06 differential. Number one, the major component is Nokia. Obviously we are anticipating that Nokia will not report for the fourth fiscal quarter, so that’s $0.05. The remaining penny is taxed. Let me explain that. We lowered our estimated effective tax rate for the year effective with the third quarter. That added to the third quarter $0.02 of extra earnings. So without that improved tax rate our results would have been $0.53, a penny above our guidance based on hitting the high end of our MSM guidance and royalty reports coming in a bit stronger. Of that $0.02 improvement approximately a penny related to a catch up for Q1 and Q2 as we lowered the effective tax rate estimate affected in the third quarter. One penny was for the third quarter alone. Now, that one penny catch-up in the third quarter from Q1 and Q2 obviously that’s not going to be in the fourth quarter. So that basically walks you through that $0.06 differential; $0.05 Nokia, $0.01 of tax.

Right. Thank you very much.

Edward Schneider from Chartered Equity Research, please go ahead with your question.

Hi, a question for Paul. Paul, how long do you expect the period of more intense litigation to last once you have spoken and also have there been or do you anticipate any discussions regarding compensations for customers like Verizon incurring cost or pay out in the settlement to Broadcom’s issue?

We have a number of things that are going on that could lead to continued litigation whether it’s the Nokia situation which we’ve talked about their option period and which could possibly even extend beyond the option period. Broadcom right now we have one other case that has not yet commenced and then there is still the stuff going on relative to antitrust and then of course the continuing things that we've talked about already, so essentially those things can -- could last over some reasonable period of time.

And then you discussed in terms of higher expense that you were talking quarter-to-quarter and now that you are getting into a more difficult period?

Say that again.

I mean you are referring to higher expenses or at least the exposures of higher litigation costs and uncertainties in that more intense period, you are obviously referring to you know what’s going on with the ITC case, what's going on with Broadcom’s sort of the settlement with your carrier customers, you see that lasting to the end of the year or well into 2008. I am looking for resolution of all issues, of course it is a lot about standing, but in this period of more intense litigation, is that something is going to happen to the rest of this year or do you expect it going into ‘08?

I mean there are different components to it. So, for example some of our costs on the legal side have actually decreased, but it can come, it can ebb and flow depending on how the litigation goes, so it’s a little bit hard to predict. Its also hard to predict because with these litigations as you get results that also impact the decisions made both by us and by the company’s who are initiating litigation where they would want you to know increase or decrease. As an example some of the things that we did on the Nokia side where we went into arbitration I think that led to last litigation then we had anticipated that other people had anticipated. And so, these various decisions can impact those costs in one way or another. Now clearly, you had asked about the carrier -- our discussions with carriers, we are here to work with our partners to try and minimize the impact to their businesses, but any of those discussions that we have been having are very preliminary at this point and so we are working through that over a period of time. Clearly, we also continued to focus on things like workarounds and so forth, and so that could also impact the period of time over which we made some support to our carrier partner, it would impact the amount of time that that happens.

Tim Long from Banc of America. Please go ahead with your question.

Thank you, a question for Paul and Steve, and then I might have a quick one for Bill after that. Could you talk a little bit about what you think the implications are from the various Broadcom decisions that stand to add and with the ITC as it relates to what’s going to be coming down the pike with Nokia. In other words, do you think the hard line that’s been taken favors QUALCOMM relative to some of the GSM action against Nokia in the U.S. and what do you think the relationship is to any actions that Nokia may take against QUALCOMM on the CDMA side?

Yes, I think -- this is Steve. I think it clearly impacts our thinking, and I think should impact Nokia’s thinking in terms of the potential downside of these various patent litigations. The types of royalties that Broadcom is asking for even one patent, I think justifies and validates how reasonable our licensing program is, and gives us I think a greater strength of continuing that aspect of it. But clearly there is -- as with litigation in any case there are downsides for both companies and continued negotiations and discussions occur with Nokia, there's still no significant progress that I can report to you. But I think that our belief is that as we continue down our path with Nokia, certain things are going to happen in the litigation process that are going to cause the companies to get closer and closer together on a deal. And I believe that as both of us kind of look to see how this litigation with Broadcom transpires, I think that impacts the various thinking.

Okay, and then if I could just -- for Bill. My preliminary math here shows that the kind of effective royalty rate if you look at just the royalties as a percentage, did it tick up in the June quarter? If you could just let us know if that's the case and how we should look at that royalty rate going forward and if it is moving up, what other pieces, is it Sony Ericsson, the best market development funds, if you could just clarify that rate?

Yes, Tim it did tick up in the June quarter, at least based on the information we disclosed. There's a couple of other variables in there we don't disclose, but it did tick up from about 3.8% to 3.9%. One of the factors in there was the $30 million payment from Sony Ericsson. Looking into the September quarter, you do have a diversion there in terms of what we disclose and now we are giving revenue guidance without an assumption that Nokia will not report or pay. So just based purely on the numbers we disclose, one would calculate a decrease in that effective royalty rate, but if you take that $0.05 estimate of what Nokia owes us and factor that up into revenue and royalties, you would find that the effect of royalty rate we are expecting to stay constant into the September quarter relative to the June quarter, on Nokia's side.

Tim Luke from Lehman Brothers. Please go ahead with your question.

Thanks very much. Just a couple of clarifications and a question. Bill, I was just wondering if you might have been able to give a sense of where the inventory was and where you see the channel inventory and what you may be targeting going forward? And then for Steve or Paul with -- following the Verizon Broadcom arrangement, should we think about it being fairly logical, I mean obviously you perceived that in your release to be somewhat positive for the industry. Should we perceive that other carriers may be likely just to follow that structure? And in the Verizon commentary, they suggested that beyond the current sort of issues at hand, there may be other suits pending and I was just wondering if you might have provided any color on what you felt they may be leading to, was it just the Santa Ana process that Steve talked of or not. So, those are the couple of questions. Thank you.

Tim, its Bill. First on your inventory question, so we continue to see the total inventory channel for CDMA technology products to be continuing within that 15 to 20 week band. Our most current estimates still have us at the higher end of the band, where we have been for now, we think we have been for a quarter. Our estimates are based on a slight decrease in that channel in looking out into the current quarter. But having said that, honestly we are having discussions here and the analysis going is to whether there is the just the fact that there are so many more models and variety of handsets into the market, the range from high end to low end and the variety in between is growing so significantly that we are wondering if the 15 to 20 week band is going to continue to be a relevant guide looking forward. So we haven’t completed or concluded that analysis, but there is reason to believe that what was normal in the past, could have picked up a bit going forward.

In terms of the Verizon deal, obviously we haven’t seen that deal ourselves. But it wouldn’t be illogical for us to expect that other operators might talk to Broadcom and in fact I think Broadcom made some statements about how they were open to making similar types of offers to others. So that’s certainly possible and if you look at the history of the way licensing is traditionally been done, these kinds of things have happened upstream of the chip manufacturer. In terms of comments about beyond the current issues, its not clear to us to exactly what they were talking about, but we think that they were talking about existing patent litigation outside of the ITC and so that would account for those statements.

Tal Liani from Merrill Lynch. Please go ahead with your question.

Thank you. I have one question and another question, so let's count it as one on the same subject. First is when you speak with handset makers on workaround solution, which is one of the ways for you to bypass or to sort of resolve the ITC case. Then you get very different views depending on who you speak with. On one hand the Samsung and the Sprint of the world are telling you piece of cake, it's in the work, its coming, its already been in flat. On the other Verizon's clearly voting against it by signing this kind of deal because they are willing to shell $109 to resolve it. So, can you take us through the process? I understand you have nothing currently to say about it, but can you take us through the process of the workaround solution? What does it mean? How long does it take to implement it, where is it in the process and a little bit more color on this issue. Thank you.

Hi Tal, its Lou Lupin, I will tackle that one or at best give a shot. When we talk about the ITC in particular and the patent involved in the ITC, I think as you've seen from a variety of comments made by us and others that potential workarounds are in fact at different stages of acceptance and deployment with different manufactures and different carriers and we have been emphasizing that there are commercial uncertainties, as well as legal uncertainties with respect to a workaround and that's one of the very important reasons that we think the President should disprove this order, because although we may feel very strongly that a particular does not infringe, it is question of acceptance by the manufacturers, by the carriers and ultimately there will be some kind of a process, no doubt, in which that new design will face some kind of a challenge. But Broadcom has made it very clear what their intentions are, so we think its very, very likely that any new design that we propose would be subject to that challenge. And I think we have touched on in the past that, kind of a legal challenge for workaround can play itself out in a couple of places, one would be at the customer service, which is charged with enforcing the order of the commission and in fact as the authority in the first instance not only to enforce the order, but to determine which handsets are within the scope of the order and which handsets and other products are outside the scope of the order. And then if customs is unable resolve it or if a party chooses to pursue a different path the international trade commission itself can also consider that question. So there are multiple possible paths of timing. Timing is different depending on which path you are talking about and in fact depending upon when proceedings get initiated and who brings them and what happens. So it is a bit unpredictable in terms of trying to map out the expected time frames for the process.

And on the same subject, assuming the worst case scenario happens when the court case on the other patents or the other dispute with Broadcom and the court case bans the importation of chips to the U.S. that are based on your Broadcom patents. What are the implications? Here we are not dealing with handsets, we are dealing with chips. So what are the implications then if you would not be able to import any handsets including to yourself or to your customers to the U.S., if any?

This is Lou again. I mean again it is a very complex question, because we don’t have in hand any order from that court and the question of whether the injunction should even issue is still open and then even if one should issue, what’s the scope. And again that court will have to carefully consider the impact on others beside QUALCOMM. QUALCOMM is the only party before that court and any release the court could order would have to flow through QUALCOMM and be directed primarily at QUALCOMM and the only way others really get directly affected by the order is if in legal terms. Now the legal terms are if they are acting in concert with QUALCOMM and there are lot of requirements before you can find that some third party that was never present, never had an opportunity to defend itself, meet that definition of acting in concert. So I think to make a long story short I think there is a lot of complexity here that you know they have to sort itself out over the next few weeks and months as we move through the process, in that case of having the judge consider whether an injunction is appropriate and there will be an opportunity in the course of that process to better understand Broadcom’s position to put our position out there and then ultimately get a ruling from the judge at the end of the day which we will then consider, we will certainly comply, but we have also considered what alternatives, like alternative design that least works.

And so just to add that in that case though shipments to Verizon should not be impacted nor understand it.

Brian Modoff from Deutsche Bank, please go ahead with your question.

Yeah, a couple of questions, is there any precedence from Broadcom agreement with Verizon relative to your case relative to fair and reasonable terms and what they are asking of you versus what they are willing to give to horizon for that amount of money? And then Sanjay any indication of what you think you about 3G WCDMA market share is exiting that end of the last quarter? Thanks.

U.S. law is very focused on actual arms leant deals between patent holders and licensees for helping to determine what the fair value of patents are. It’s a primary factor that courts look at under case is going back for decades. So we believe that the true economics of the Verizon deal are very important to help gauge whether the previous offers that Broadcom had made to us were reasonable clearly they are unreasonable by any measure, and in particular in light of the actual economics of the Verizon deal.

Potentially can you, is there a process that you can engage in now to bring that in to some of the legal proceedings?

I am sorry could you repeat your question?

Is there a process now that you can engage in to bring that agreement and that arrangement in to legal proceedings between yourselves and Broadcom?

It will certainly be a very important factor that the court considers in the Santa Ana case as to whether an injunction should issue, for example because I think Broadcom has demonstrated by agreeing to a license that includes a payment that when the caps are properly taken into account is probably $1 or may be even less than $1 or a unit. They have shown not only what they think is unacceptable or not but they are not going to be irreparably injured that they can be compensated by money and that’s one of their very important tests as to whether an injunction should be issued. One of the primary things they have to show to get an injunction is one that you’ll be irreparably injured and two you can’t be adequately compensated by money. And I think the Verizon deal cuts very sharply against both of those factors when you consider what they have done. So yes we absolutely have the opportunity to introduce that evidence and we think it should be an important consideration.

Brian this is Sanjay. With regards to my best understanding of Broadcom's market share in UMTS chipset. I think that if I just go back to the iSuppli numbers they are in wireless at least not in the top-five chipset provider and to the best of my knowledge they are not shipping large volume as of right now. I believe that there are some design activities that they have on-going with some customers but in terms of volume my best understanding is that they are shipping extremely limited volume. If I compare ourselves then our position in the marketplace in contrast I think we are shipping high volume products in every single marketplace with large numbers of customers and maintaining our technology leadership both in terms of modem technology as well as application prosper technology as well as multimedia technology and now with the introduction of Bluetooth and wireless LAN and peripheral wireless connectivity also. So I believe that we are very well positioned to one, increase our market share; and secondly, increasingly capture more of the silicon in the handset. So I can't with precision comment on their market share; I don't see today that they are my top competitor, but I think we are very well positioned.

Mike Ounjian from Credit Suisse please go ahead with your question.

Great thank you very much. First, Lou, you went to a number of the cases with Nokia and today we got an update on the arbitration demands you brought earlier this year. Can we just get an update on that process? And then, Paul, would be interested in your thoughts on some of the discussions in the EU about creating a mobile TV standard that seems to be going in the direction of DVD-H and where do you see that process today and what that might mean for the future of MediaFLO outside the U.S.?

With respect to the Nokia arbitration, we have now arrived at a process for selecting arbitrators and that process is underway and we expect to have the arbitration panel in place in fairly short order. And then once the panel is in place we think that the procedure will start moving forward, subsequently the panel will set a schedule and of course we will be pushing for a pretty aggressive schedule. I suspect Nokia will be pushing for '08 schedule and we won't know what kind of schedule we get obviously until the arbitrators order, but that would be the next step.

With respect to the discussion of EU on mobile TV standard, obviously we have all been watching those comments and also the responses to those comments, and so I think that that is not firm and in fact there is discussions between EU authority over that and national regulators and I have had some discussions with various national regulators about those issues. So I think that the opportunity still exits for MediaFLO and I think the fact that we've demonstrated, substantially better performance of the MediaFLO system with third parties helps a lot and you can see that there are other trials that are going on around the world. So, in my opinion, the international momentum for MediaFLO continues to grow and we'll continue to follow these developments in the EU and hopefully they will go in the right direction.

Great thank you.

Mark McKechnie from American Technology Research. Please go ahead with your question.

Yes thanks. Congrats on a good solid quarter, it looks like 3G is finally really starting to accelerate after a long period here, so good job. I just want to get these numbers right, here. You said UMTS was up 78% quarter-on-quarter and 128% year-on-year. Is that your chip shipments, Sanjay?

127% year-over-year, 79% quarter-over-quarter. Those are chip shipments, yes.

Wow. And with that kind of shipment, did you have some falloff, and was there a weak part of your business at all, or was this in clearly, or what offset some of that strength?

I think if you look at our operating profit, this was a record that we have hit in probably the last six to eight quarters, so as I look at our chipset portfolio, I am extremely pleased with where we stand and I would just like to point out that we are delivering these numbers with record investment in next generation technologies. So, Mark, I think I am very, very delighted with the execution that the team is delivering right now.

I am just trying to find something wrong, and I can’t. So, on the chip ASPs and margins are pretty strong as well, is that -- on the ASP is that really, I would guess a mix shift or UMTS or is this QSC ramping up, or what, how should we look at the ASP uptake?

There are three things that go on, which govern ASP. One, is that in our business there is a volume-based decline in pricing that we deliver to our customers. Secondly, then it depends on the mix of low end, medium end and high end chipsets, and in that mix there are two factors, one is whether it’s deal chipset or whether it’s a low end 1X chipset or whether it’s UMTS, high end UMTS chipset or low end. The second one is the multimedia and application processors, so whether its 7000 series or low end 6000 series, the first thing that contributes to the mix is customer mix. If we have a large customer shipping a lot of volume then that tends to depress our ASP a little bit because they tend to get to higher volumes and lower prices faster, but I would say a combination of all of these factors right now is looking pretty good for us and as a result of the success of the 7000 series we feel pretty comfortable that our ASP will remain relatively in a narrow band looking forward.

James Faucette from Pacific Crest. Please go ahead with your question.

Thank you, I had a couple of questions related to the accounting and like -- and as well as the handset ASP. The handset ASP how much you are able to calculate your royalties has remained amazingly stable for the last year. I am just wondering if you have any idea what that ASP might look like on a constant currency or constant dollar terms?

James, this is Bill Keitel. We have had some favorable effects improvements in the last year or so. The numbers in single-digit percentage though in terms of the effects advantage that we’ve enjoyed here.

Okay great. And then --

So, its stability is really more of a increasing demand for handset functionality and data capabilities, number one, and number two the higher growth of the WCDMA market.

And then a question for Sanjay. You indicated that you are obviously spending more on R&D now than you had anytime in the past and I am just wondering with the continued growth and strength of the chip business, if you are seeing opportunities for investment that are currently under-funded or not funded at all such that you can further increase their R&D budgets beyond maybe what you traditionally would have been able to as we go into next year?

This is Paul. Sanjay always sees an opportunities for additional R&D investments.

I don’t know how to respond to that except to say that I am very comfortable with the level of investment that we are making in our business and what I have committed to you, the investors, is that we will not increase our R&D faster than our revenue. That we have a large number of opportunities in front of us to grow our revenues and with the execution that we are seeing we could certainly invest in number of other areas, but we are not intending to grow our R&D faster than our revenue in the coming quarters in a year.

John Lau from Jefferies and Co. Please go ahead with your question.

Great. Thank you. You had mentioned that you hadn’t seen the Verizon agreement. So in terms of that Verizon comment it was clear they are probably going to be seeking the $6 from you? My questions are what is your position on that $6? And the second part is did Verizon discuss this with you before they answered that agreement with Broadcom? And finally I guess this is the most difficult point, what is the legal implication or your liabilities/responsibility to someone that is probably two degrees removed from your customer base? Thank you.

As I said earlier we have had some preliminary discussions, but I just want to point out that if you look at the caps and the expected volumes over the time period that deal is no where near a $6 per device deal. And so while we have had some primary discussion and I can’t put any numbers around any financial support we might be willing to give, $6 is not the right number.

Your final question comes from Ehud Gelblum from J.P. Morgan.

Hi. Thank you very much. Couple of quick questions if I could, one is the three patents that were in stand and a case, do you have workaround pending for those patents too just in case, kind of a backup or have you looked at that in the backup scenario? In addition Lou, I think you had mentioned that the offers at Broadcom that were made to you for the ITC case were not reasonable and that the offer they made to Verizon sounds a lot more reasonable. Are they under obligation for that patent to be reasonable at all, I don’t know if actually they have a firm commitment on that patent or not. And then Bill when you look at the tax rate, the incredibly shrinking tax rate not just with you guys, but a lot of companies in our sector how low can that go? Does it stay down at that rate, you mentioned that it was from international, sort of a mix of international revenues, how should we look at that, I mean is there a 20%, is there a break through 20%? What are the kinds of moving parts on taxes going forward?

Hey Ehud, it's Lou. I will take the first two questions. We look at all of our options whenever we are confronted with any claim of patent infringement and obviously as it claims it will become more serious or in this case or as indicated at least at the trial court level, we increase the level of effort that we put into all avenues. So, certainly we are very carefully looking at alternative designs with respect all those patterns just like we did with respect to the ITC case. Again, there are same complexities are associated with implementing more grounds including commercial acceptance, technical acceptance and continuing in legal uncertainty about acceptability, but having said that, yes, we are certainly putting very significant effort into pursuing all avenues and that will include workarounds as well as we go alternative. With respect to the second question, the particular pattern in the ITC has never been declared by Broadcom or any predecessor owners as essential penny Standards Body. However, the way in which they construed it and attempted to read it on our products in the litigation actually raises a very interesting question about whether in fact they do consider to be essential and therefore I failed to declare and did not live up to their obligations to the relevant standards bodies and is quite possible that that will be a subject of a future litigation, and its not an issue that was raised in the ITC however.

So, it would not necessarily be right now, under a frank commitment, but you think you could maybe perhaps interpret it to be under a frank commitment.

If in fact it is essential and again at least in -- with respect to some of the products in the ITC, they attempted to read it on the standard. If in fact it is essential then it would be subject to frank commitment whether they've made obligation, whether they've made declaration to the relevant standards body or not, but that frankly isn’t open issue presently because they have not made a declaration. And so, we would have to proceed through some legal channel to establish and in fact they had an obligation and indeed if they had an obligation and they didn’t fulfill it, and it was a knowing failure to fulfill that might in fact affect the enforceability of the pattern. But these issues are not currently pending in the ITC case.

Ladies and Gentlemen, we have reached the end of the …

Excuse me, operator, one more question very quickly. The tax question, who'd -- I think it were a QUALCOMM, we have an offshore operation and a domestic operation. And a simple way to think of it is the chip business is primarily offshore tax, probably low rate and the onshore operations essentially the licensing business taxed at full rate. So, the relative mix of the two -- net income of the two is what is a major driver on the tax rate. Business mix aside, there is a modest further opportunity to improve the tax rate but I'd say it's fairly modest.

And we have now reached the end of the allotted time for questions and answers. Dr. Jacobs do you have any closing comments?

Yes. I am very proud of the results that we delivered this quarter. And while its true that the increased uncertainty has been introduced into future business results by the legal issues, fundamentally, our businesses continue to execute extremely well, and I would say that we are even more focused on working closely with our partners going forward to ensure that we can bring the best technology in the wireless market and the best possible results to our shareholders. So, thank you everyone.

Ladies and gentlemen, this does conclude today's conference you may now disconnect.