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"..They said that non-GAAP tax rate is going up next year so that may account for at least some of the difference between operating income and EPS. It also gets impacted by their assumptions around the total shares outstanding. .."
Also, investment income plays into the calculation as some part of that due to "unknowns" is not included in guidance.
But... there's a such a big delta between non-GAAP operating income and EPS ---- 7 to 10 percentage points.
+ FY15 Revenue guided up1% to 9%, + non-GAAP oper inc up 3 – 12%, + yet non-GAAP EPS down 4% to up 2%.
Revenue / operating income at the top range is guided up 9% and 12% respectively is acceptable...** BUT** EPS **DOWN** 1% at the midpoint and 2% for the high range is very problematic IMO.
Domestic cash dropped to $5.8B last qtr. They spend $714M on dividends each qtr. They bought back $1B in stock last qtr and are likely to repeat that this qtr. Even with last quarter's buyback shares outstanding only dropped 13M. Options are being cashed in like crazy. The buyback of stock mostly facilitates the executives of this company to steadily cash in their options. That's been going on for years and is an issue that should be addressed by the BoD.
If I remember correctly, they once stated they need a steady $4B in cash to keep the lights on.
Could this mean they are getting ready to repatriate some of their foreign cash or does the tax rate just go up because they have fewer expenses for tax purposes? The tax rate normally averaged in the mid to low 20% area. The last couple of years it's been in the high teens which I suspect is due to the higher R&D/SG&A spend. I guess they could be just getting those line items back under control.
There are several ways to buy back shares. In the past, Qualcomm has sold put options on the shares, typically at striking prices above the going price of the shares. If the stock remains below the striking price, QCOM eventually acquires the shares at the striking price, but the net cost is the striking price minus the premium when the put options were initially sold.
So if QCOM were going to buy shares today, they need not fork up, say, a billion or so for stock purchases, but instead might simply sell put options with a striking price above the share price. I noted in an earlier comment that the data from the latest financial report suggests that share buybacks in FY'14 cost about $75 a share. They can do better this time.
"Did they state a number for the tax rate in 2015?" I believe they said 15%.
More to the point, I think there will be corporate tax reform in 2015, reducing the overall corporate rate to perhaps as little as 23%. The administration already floated a reform package with a 28% rate. They could actually cut the rate to 20% and not lose tax revenues as long as they eliminated some of the more outlandish tax subsidies, particularly for the fossil fuel sector.