Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: brational who wrote (22043)	5/1/2002 2:15:48 AM
From: cfoe	Respond to of 197214

I hope others have more information about how revenues get booked relative to when chips get shipped. I have no specific knowledge about how QCOM keeps its books. However, if they follow GAAP for recognizing revenues (and I am certain they do) then: 1 - they recognize revenue when the sale is made. 2 - a sale is made (normally) when ownership transfers 3 - if the sale is made "on account" (and not C.O.D.) then the sale is recognized at the same time the account receivable is put on the books. 4 - in summary, I am certain they recognize ASIC revenues when the chips are shipped and invoiced, which I think we are safe in assuming is simultaneous. Another way to say this is that when Irwin, et al refer to chips shipped in a quarter, they are talking about chips sold (whether or not the actual cash has been received or not). Hope this helps.

To: brational who wrote (22043)	5/1/2002 10:32:12 AM
From: David E. Taylor	Respond to of 197214

BR: You already had one answer from cfoe in this and I agree with his response, but I'll toss in my 2c worth also. First, there was an earlier question from Peter about "revenue recognition" to which I responded here: Message 17400702 I thought about this some more, and if QCOM follows GAAP and industry practice, they will book "revenues" at the point in time the product is shipped (from their fabs) to the customer, since that's the legal point in time when the "title and risk of loss" passes from QCOM to the customer. Actually, the shipper probably has the "risk of loss" until the product actually is delivered and accepted. So I believe that everything shipped, up to and including the last day of the quarter, will get booked as "revenues" in that quarter. The invoiced amount will show up as part of "accounts receivable" on the balance sheet until the invoice actually gets paid, but the revenue gets booked when product is shipped. This allows some companies to engage in "channel stuffing", where they ship a bunch of product out in the last few days or weeks of the Q to boost revenues and make things look better than they really are. Unless they keep doing this, the next Q will show a drop off as that excess product gets sold off, and shipments decline to reduce the excess channel inventory. Even if they repeat the practice the next Q, they can't keep this up for ever, since they can really only ship what they can ultimately sell! "Accounts receivable" are something to keep an eye on because they're an indication of how quickly QCOM's customers pay their bills, and whether any of them are having trouble doing so. The $452,145,000 shown at the end of Q2 for accounts receivables (excluding QSI) that you cited is a sizeable chunk of change, but not out of line, since it represents about 33 days worth of revenues - and typical commercial invoices are "net 30 days". For comparison, here's my original data table with the "A/C Receivable" (QCOM total - since that's all we have - so not just QCT) added in: FY CSM 95A/B 1X QCT Revs Blended Accounts ASP Receivable Q2 01 1.0 15.0 1.0 $363.741 $22.73 $539.899 Q3 01 3.0 12.0 2.0 $333.115 $23.79 $544.928 Q4 01 4.0 9.0 4.0 $336.881 $25.91 $517.557 Q1 02 1.0 9.0 6.0 $359.144 $23.94 $575.923 Q2 02 2.5 6.0 8.0 $343.815 $24.56 $505.556 For the last two Q's where QCOM has also provided the numbers excluding QSI, "A/C Receivables" were $531.694 million and $452.145 million (the number you cited), so whichever way you slice it, the company's receivables actually decreased by $70-$80 million, but so did revenues, so the ratio was still about 33 days for each Q. Hope this helps clarify things. David T.