Stock Analysis on Net
Stock Analysis on Net
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Qualcomm Inc. (NASDAQ:QCOM)

Analysis of Goodwill and Intangible Assets

Advanced level

Accounting Policy on Goodwill and Intangible Assets

Goodwill represents the excess of purchase price over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. Acquired intangible assets other than goodwill are amortized over their useful lives unless the lives are determined to be indefinite. For intangible assets purchased in a business combination, the estimated fair values of the assets received are used to establish their recorded values. For intangible assets acquired in a non-monetary exchange, the estimated fair values of the assets transferred (or the estimated fair values of the assets received, if more clearly evident) are used to establish their recorded values, unless the values of neither the assets received nor the assets transferred are determinable within reasonable limits, in which case the assets received are measured based on the carrying values of the assets transferred. Valuation techniques consistent with the market approach, income approach and/or cost approach are used to measure fair value.

Source: 10-K (filing date: 2019-11-06).

Goodwill and Intangible Asset Disclosure

Qualcomm Inc., balance sheet: goodwill and intangible assets

US$ in millions

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Sep 29, 2019 Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014
Technology-based 5,958  6,334  6,413  5,900  5,735  4,460 
Other 134  149  227  142  206  181 
Other intangible assets, gross carrying amount 6,092  6,483  6,640  6,042  5,941  4,641 
Accumulated amortization (3,920) (3,528) (2,903) (2,542) (2,199) (2,061)
Other intangible assets, net 2,172  2,955  3,737  3,500  3,742  2,580 
Goodwill 6,282  6,498  6,623  5,679  5,479  4,488 
Goodwill and other intangible assets 8,454  9,453  10,360  9,179  9,221  7,068 

Based on: 10-K (filing date: 2019-11-06), 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05).

Item Description The company
Other intangible assets, net Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Qualcomm Inc.’s other intangible assets, net decreased from 2017 to 2018 and from 2018 to 2019.
Goodwill Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Qualcomm Inc.’s goodwill decreased from 2017 to 2018 and from 2018 to 2019.
Goodwill and other intangible assets Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Qualcomm Inc.’s goodwill and other intangible assets decreased from 2017 to 2018 and from 2018 to 2019.

Adjustments to Financial Statements: Removal of Goodwill

Qualcomm Inc., adjustments to financial statements

US$ in millions

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Sep 29, 2019 Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014
Adjustment to Total Assets
Total assets (as reported) 32,957  32,686  65,486  52,359  50,796  48,574 
Less: Goodwill 6,282  6,498  6,623  5,679  5,479  4,488 
Total assets (adjusted) 26,675  26,188  58,863  46,680  45,317  44,086 
Adjustment to Total Qualcomm Stockholders’ Equity
Total Qualcomm stockholders’ equity (as reported) 4,909  928  30,746  31,778  31,421  39,169 
Less: Goodwill 6,282  6,498  6,623  5,679  5,479  4,488 
Total Qualcomm stockholders’ equity (adjusted) (1,373) (5,570) 24,123  26,099  25,942  34,681 
Adjustment to Net Income (loss) Attributable To Qualcomm
Net income (loss) attributable to Qualcomm (as reported) 4,386  (4,864) 2,466  5,705  5,271  7,967 
Add: Goodwill impairments 146  129  —  17  260  116 
Net income (loss) attributable to Qualcomm (adjusted) 4,532  (4,735) 2,466  5,722  5,531  8,083 

Based on: 10-K (filing date: 2019-11-06), 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05).

Qualcomm Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Goodwill (Summary)

Qualcomm Inc., adjusted financial ratios

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Sep 29, 2019 Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014
Net Profit Margin
Reported net profit margin 18.07% -21.40% 11.06% 24.22% 20.85% 30.08%
Adjusted net profit margin 18.67% -20.83% 11.06% 24.29% 21.88% 30.52%
Total Asset Turnover
Reported total asset turnover 0.74 0.70 0.34 0.45 0.50 0.55
Adjusted total asset turnover 0.91 0.87 0.38 0.50 0.56 0.60
Financial Leverage
Reported financial leverage 6.71 35.22 2.13 1.65 1.62 1.24
Adjusted financial leverage — — 2.44 1.79 1.75 1.27
Return on Equity (ROE)
Reported ROE 89.35% -524.14% 8.02% 17.95% 16.78% 20.34%
Adjusted ROE — — 10.22% 21.92% 21.32% 23.31%
Return on Assets (ROA)
Reported ROA 13.31% -14.88% 3.77% 10.90% 10.38% 16.40%
Adjusted ROA 16.99% -18.08% 4.19% 12.26% 12.21% 18.33%

Based on: 10-K (filing date: 2019-11-06), 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05).

Financial ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Qualcomm Inc.’s adjusted net profit margin ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Qualcomm Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Qualcomm Inc.’s adjusted ROA deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Qualcomm Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

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Sep 29, 2019 Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to Qualcomm 4,386  (4,864) 2,466  5,705  5,271  7,967 
Revenues 24,273  22,732  22,291  23,554  25,281  26,487 
Profitability Ratio
Net profit margin1 18.07% -21.40% 11.06% 24.22% 20.85% 30.08%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to Qualcomm 4,532  (4,735) 2,466  5,722  5,531  8,083 
Revenues 24,273  22,732  22,291  23,554  25,281  26,487 
Profitability Ratio
Adjusted net profit margin2 18.67% -20.83% 11.06% 24.29% 21.88% 30.52%

Based on: 10-K (filing date: 2019-11-06), 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05).

2019 Calculations

1 Net profit margin = 100 × Net income (loss) attributable to Qualcomm ÷ Revenues
= 100 × 4,386 ÷ 24,273 = 18.07%

2 Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to Qualcomm ÷ Revenues
= 100 × 4,532 ÷ 24,273 = 18.67%

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Qualcomm Inc.’s adjusted net profit margin ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014
As Reported
Selected Financial Data (US$ in millions)
Revenues 24,273  22,732  22,291  23,554  25,281  26,487 
Total assets 32,957  32,686  65,486  52,359  50,796  48,574 
Activity Ratio
Total asset turnover1 0.74 0.70 0.34 0.45 0.50 0.55
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Revenues 24,273  22,732  22,291  23,554  25,281  26,487 
Adjusted total assets 26,675  26,188  58,863  46,680  45,317  44,086 
Activity Ratio
Adjusted total asset turnover2 0.91 0.87 0.38 0.50 0.56 0.60

Based on: 10-K (filing date: 2019-11-06), 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05).

2019 Calculations

1 Total asset turnover = Revenues ÷ Total assets
= 24,273 ÷ 32,957 = 0.74

2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= 24,273 ÷ 26,675 = 0.91

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Qualcomm Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets 32,957  32,686  65,486  52,359  50,796  48,574 
Total Qualcomm stockholders’ equity 4,909  928  30,746  31,778  31,421  39,169 
Solvency Ratio
Financial leverage1 6.71 35.22 2.13 1.65 1.62 1.24
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets 26,675  26,188  58,863  46,680  45,317  44,086 
Adjusted total Qualcomm stockholders’ equity (1,373) (5,570) 24,123  26,099  25,942  34,681 
Solvency Ratio
Adjusted financial leverage2 — — 2.44 1.79 1.75 1.27

Based on: 10-K (filing date: 2019-11-06), 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05).

2019 Calculations

1 Financial leverage = Total assets ÷ Total Qualcomm stockholders’ equity
= 32,957 ÷ 4,909 = 6.71

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Qualcomm stockholders’ equity
= 26,675 ÷ -1,373 = —

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to Qualcomm 4,386  (4,864) 2,466  5,705  5,271  7,967 
Total Qualcomm stockholders’ equity 4,909  928  30,746  31,778  31,421  39,169 
Profitability Ratio
ROE1 89.35% -524.14% 8.02% 17.95% 16.78% 20.34%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to Qualcomm 4,532  (4,735) 2,466  5,722  5,531  8,083 
Adjusted total Qualcomm stockholders’ equity (1,373) (5,570) 24,123  26,099  25,942  34,681 
Profitability Ratio
Adjusted ROE2 — — 10.22% 21.92% 21.32% 23.31%

Based on: 10-K (filing date: 2019-11-06), 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05).

2019 Calculations

1 ROE = 100 × Net income (loss) attributable to Qualcomm ÷ Total Qualcomm stockholders’ equity
= 100 × 4,386 ÷ 4,909 = 89.35%

2 Adjusted ROE = 100 × Adjusted net income (loss) attributable to Qualcomm ÷ Adjusted total Qualcomm stockholders’ equity
= 100 × 4,532 ÷ -1,373 = —

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Sep 29, 2019 Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) attributable to Qualcomm 4,386  (4,864) 2,466  5,705  5,271  7,967 
Total assets 32,957  32,686  65,486  52,359  50,796  48,574 
Profitability Ratio
ROA1 13.31% -14.88% 3.77% 10.90% 10.38% 16.40%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net income (loss) attributable to Qualcomm 4,532  (4,735) 2,466  5,722  5,531  8,083 
Adjusted total assets 26,675  26,188  58,863  46,680  45,317  44,086 
Profitability Ratio
Adjusted ROA2 16.99% -18.08% 4.19% 12.26% 12.21% 18.33%

Based on: 10-K (filing date: 2019-11-06), 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05).

2019 Calculations

1 ROA = 100 × Net income (loss) attributable to Qualcomm ÷ Total assets
= 100 × 4,386 ÷ 32,957 = 13.31%

2 Adjusted ROA = 100 × Adjusted net income (loss) attributable to Qualcomm ÷ Adjusted total assets
= 100 × 4,532 ÷ 26,675 = 16.99%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Qualcomm Inc.’s adjusted ROA deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.