• CDMA-based device shipments totaled approximately 128 million units, an increase of 14% over the approximate 112 million units shipped in the year ago quarter. (1)

• The average selling price of CDMA-based devices was estimated to be approximately $201, a decrease of approximately 9% from the year ago quarter. (1)

• On April 26, 2009, we entered into a Settlement and Patent License and Non-Assert Agreement with Broadcom Corporation. Under the agreement, the companies have granted certain rights to each other under their respective patent portfolios. We will pay Broadcom $891 million, of which $200 million will be paid in our quarter ending June 28, 2009 and the remainder will be paid ratably through April 2013. As a result of this agreement, we recorded a $748 million pre-tax litigation settlement charge in our second quarter.

• The financial crisis has, and may continue to have, an impact on the value of our marketable securities and net investment income (loss).

Against this backdrop, the following recent developments occurred with respect to key elements of our business or our industry:
• Worldwide wireless subscribers grew by approximately 5% to reach approximately 4.2 billion.(2)

• CDMA subscribers, including both 2G (cdmaOne) and 3G (CDMA2000 1X, 1xEV-DO, WCDMA, HSPA and TD-SCDMA), are approximately 19% of total worldwide wireless subscribers to date. (2)

• 3G subscribers (all CDMA-based) grew to approximately 780 million worldwide including approximately 430 million CDMA2000 1X/1xEV-DO subscribers and approximately 350 million WCDMA/HSPA subscribers. (2)

• In the handset market, CDMA-based unit shipments grew an estimated 5% year-over-year, compared to an estimated decline of 11% year-over-year across all technologies.(3)

(1) December quarter shipments derived from reports provided by our licensees/manufacturers during the quarter and our own estimates of unreported activity.

(2) According to estimates reported by Wireless Intelligence, an independent source of wireless operator data, as of April 24, 2009.

(3) Based on current reports by Strategy Analytics, a global research and consulting firm, in their calendar Q408 Global Handset Market Share Update.

Our Business and Operating Segments
We design, manufacture, have manufactured on our behalf and market digital wireless telecommunications products and services based on our CDMA technology and other technologies. We derive revenues principally from sales of integrated circuit products, license fees and royalties for use of our intellectual property, messaging and other services and related hardware sales, software development and licensing and related services, software hosting services and services related to delivery of multimedia content. Operating expenses primarily consist of cost of equipment and services, research and development and selling, general and administrative expenses.
We conduct business primarily through four reportable segments. These segments are: Qualcomm CDMA Technologies, or QCT; Qualcomm Technology Licensing, or QTL; Qualcomm Wireless & Internet, or QWI; and Qualcomm Strategic Initiatives, or QSI.
QCT is a leading developer and supplier of CDMA-based integrated circuits and system software for wireless voice and data communications, multimedia functions and global positioning system products. QCT's integrated circuit products and system software are used in wireless devices, particularly mobile phones, laptops, data modules, handheld wireless computers, data cards and infrastructure equipment. The integrated circuits for wireless devices include the Mobile Station Modem (MSM), Radio Frequency (RF) and Power Management (PM) devices. These integrated circuits for wireless devices and system software perform voice and data communication, multimedia and global positioning functions, radio conversion between RF and baseband signals and power management. QCT's system software enables the other device components to interface with the integrated circuit products and is the foundation software enabling equipment manufacturers to develop devices utilizing the functionality within the integrated circuits. The infrastructure equipment integrated circuits and system software perform the core baseband CDMA modem functionality in the wireless operator's base station equipment. QCT revenues comprised 54% and 62% of total consolidated revenues in the second quarter of fiscal 2009 and 2008, respectively, and 53% and 63% of total consolidated revenues for the first six months of fiscal 2009 and 2008, respectively.
QCT utilizes a fabless production business model, which means that we do not own or operate foundries for the production of silicon wafers from which our integrated circuits are made. Integrated circuits are die cut from silicon wafers that have completed the assembly and final test manufacturing processes. We rely on independent third party suppliers to perform the manufacturing and assembly, and most of the testing, of our integrated circuits. Our suppliers are also responsible for the procurement of most of the raw materials used in the production of our integrated circuits. We employ both turnkey and two-stage manufacturing business models to purchase our integrated circuits. Turnkey is when our foundry suppliers are responsible for delivering fully assembled and tested integrated circuits. Under the two-stage manufacturing business model, we purchase die from semiconductor manufacturing foundries and contract with separate third-party manufacturers for back-end assembly and test services. We refer to this two-stage manufacturing business model as Integrated Fabless Manufacturing (IFM).
QTL grants licenses to use portions of our intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products, including, without limitation, products implementing cdmaOne, CDMA2000, WCDMA, CDMA TDD, GSM/GPRS/EDGE and/or OFDMA standards and their derivatives. QTL receives license fees as well as ongoing royalties based on worldwide sales by licensees of products incorporating or using our intellectual property. License fees are fixed amounts paid in one or more installments. Ongoing royalties are generally based upon a percentage of the wholesale selling price of licensed products, net of certain permissible deductions (e.g. certain shipping costs, packing costs, VAT, etc.). QTL revenues comprised 39% and 31% of total consolidated revenues in the second quarter of fiscal 2009 and 2008, respectively, and 39% and 29% of total consolidated revenues for the first six months of fiscal 2009 and 2008, respectively. The vast majority of such revenues have been generated through our licensees' sales of cdmaOne, CDMA2000 and WCDMA products.
QWI, which includes Qualcomm Enterprise Services (QES), Qualcomm Internet Services (QIS), Qualcomm Government Technologies (QGOV) and Firethorn, generates revenues primarily through mobile communication products and services, software and software development aimed at support and delivery of wireless applications. QES sells equipment, software and services used by transportation and other companies to connect wirelessly with their assets, products and workforce. QES also sells products that operate on the Globalstar low-Earth-orbit satellite-based telecommunications system and provides related services. Through March 2009, QES has shipped approximately 1,325,000 terrestrial-based and satellite-based communications systems. QIS provides BREW-based

(Binary Runtime Environment for Wireless) products that include user interface and content delivery and management products and services for the wireless industry. QIS also provides QChat, which enables virtually instantaneous push-to-talk functionality on CDMA-based wireless devices. QGOV provides development, hardware and analytical expertise involving wireless communications technologies to United States government agencies. Firethorn builds and manages software applications that enable financial institutions and wireless operators to offer mobile commerce services. QWI revenues comprised 7% of total consolidated revenues in the second quarter of both fiscal 2009 and 2008, and 7% and 8% of total consolidated revenues for the first six months of fiscal 2009 and 2008, respectively.
QSI manages our strategic investment activities, including FLO TV Incorporated (FLO TV), formerly MediaFLO USA, Inc., our wholly-owned wireless multimedia operator subsidiary. QSI also makes strategic investments to promote the worldwide adoption of CDMA-based products and services. Our strategy is to invest in CDMA-based operators, licensed device manufacturers and early-stage companies that we believe open new markets for CDMA technology, support the design and introduction of new CDMA-based products or possess unique capabilities or technology. Our FLO TV subsidiary offers its service over our nationwide multicasting network based on our MediaFLO Media Distribution System (MDS) and FLO technology. This network is utilized as a shared resource for wireless operators and their customers in the United States. The commercial availability of the FLO TV service to retail wireless consumers continues to be determined by our wireless operator partners. FLO TV's network uses the 700 MHz spectrum for which we hold licenses nationwide. Additionally, FLO TV has and will continue to procure, aggregate and distribute content in service packages which we will make available on a wholesale basis to our wireless operator customers (whether they operate on CDMA or GSM/WCDMA networks) in the United States. Distribution, marketing, billing and customer care remain functions that are provided primarily by our wireless operator partners. As part of our strategic investment activities, we intend to pursue various exit strategies at some point in the future, which may include distribution of our ownership interest in FLO TV to our stockholders in a spin-off transaction.
Nonreportable segments include: the Qualcomm MEMS Technologies division, which is developing an interferometric modulator (IMOD) display technology based on micro-electro-mechanical-system (MEMS) structure combined with thin film optics; the Qualcomm Flarion Technologies division, which is developing OFDM/OFDMA technologies; the MediaFLO Technologies division, which is developing our MediaFLO MDS and FLO technology and markets MediaFLO for deployment outside of the United States; and other product initiatives. Looking Forward
We expect the global financial crisis and the resulting slowdown in the worldwide economy to continue to cause lower demand for CDMA-based products in various regions. We expect a greater mix of lower-priced CDMA-based products for emerging markets to impact our financial results for the second half of fiscal 2009 as compared to the second half of fiscal 2008. In addition, the financial crisis may continue to have an impact on the value of our marketable securities and net investment income (loss).
The deployment of 3G networks (CDMA2000 and WCDMA) enables increased voice capacity and higher data rates, thereby supporting more minutes of use and a range of mobile broadband data applications for handsets, 3G connected computing devices and other consumer electronics. Data applications include broadband connectivity, streaming video, location based services, mobile social networking and multimedia messaging. As a result, we expect continued growth in the coming years in consumer demand for 3G products and services around the world. As we look forward to the next several months, the following items are likely to have an impact on our business:
• 3G network launches/expansion in China, including CDMA2000 by China Telecom, WCDMA by China Unicom and TD-SCDMA by China Mobile will encourage competition and growth of 3G products and services in that region.

• The transition to 3G CDMA-based networks is expected to continue:

• More than 550 operators have commercially launched 3G networks, including 275 CDMA2000 1X networks and 275 WCDMA networks; (1)(2)

• More than 105 CDMA2000 operators have commercially launched the higher data speeds of 1xEV-DO and more than 60 have launched EV-DO Revision A. (1)

• More than 255 WCDMA operators have commercially launched the higher data speeds of HSDPA, while more than 70 have launched HSUPA and 4 have launched HSPA+; (2)(3) and

• We expect that CDMA-based device prices will continue to segment into high and low end due to high volumes and vibrant competition in marketplaces around the world. As more operators deploy the higher data speeds of HSPA and EV-DO Revision A and as manufacturers introduce additional highly-featured, converged devices, we expect consumer demand for advanced 3G devices to continue at a strong pace.

• To meet growing demand for advanced 3G wireless devices and increased multimedia functionality, we intend to continue to invest significant resources toward the development of wireless baseband chips, converged computing/communication chips, multimedia products, software and services for the wireless industry. We expect that a portion of our research and development initiatives in fiscal 2009 will not reach commercialization until several years in the future.

• We expect demand for cost-effective wireless devices to continue to grow and have developed a family of Qualcomm Single Chip (QSC) products, which integrate the baseband, radio frequency and power management functions into single chip or package, lowering component counts and enabling faster time-to-market for our customers. While we continue to invest aggressively to expand our QSC product family to address the low-end market more effectively with CDMA-based products, we still face significant competition from GSM-based products, particularly in emerging markets.

• We will continue to invest in the evolution of CDMA and a broad range of other technologies as part of our vision to enable a range of technologies, each optimized for specific services, including the following products and technologies:

• The continued evolution of CDMA-based technologies, including the long-term roadmaps of 1xEV-DO and High Speed Packet Access (HSPA);

• OFDM and OFDMA-based technologies;

• Our service applications platform, content delivery services and user interfaces;

• Our Snapdragon platform to help create new CDMA-based connected computing products and drive connectivity beyond traditional wireless devices;

• Our Gobi mobile data modems to provide worldwide CDMA-based embedded connectivity for existing computing platforms;

• Our MediaFLO MDS and FLO technology for delivery of multimedia content; and

• Our IMOD display technology.

In addition to the foregoing business and market-based matters, the following items are likely to have an impact on our business and results of operations over the next several months:
• We will continue to devote resources to working with and educating all participants in the wireless value chain as to the benefits of our business model in promoting a highly competitive and innovative wireless market. However, we expect that certain companies may continue to be dissatisfied with the need to pay reasonable royalties for the use of our technology and not welcome the success of our business model in enabling new, highly cost-effective competitors to their products. We expect that such companies will continue to challenge our business model in various forums throughout the world. For example, we expect that we will continue to be involved in litigation, and to appear in front of administrative and regulatory bodies, including the European Commission, the Korea Fair Trade Commission and the Japan Fair Trade Commission to defend our business model and to rebuff efforts by companies seeking to gain competitive advantage or negotiating leverage.

• We have been and will continue evaluating and providing reasonable assistance to our customers. This includes, in some cases, certain levels of financial support to minimize the impact of the litigation in which we are involved.

(1) According to public reports made available at www.cdg.org.

(2) As reported by the Global mobile Suppliers Association, an international organization of WCDMA and GSM (Global System for Mobile Communications) suppliers in their April 2009 reports.

(3) As reported by operators Telstra, Telekom Austria, Starhub and CSL Limited.

Further discussion of risks related to our business is presented in the Risk Factors included in this Quarterly Report.

Revenue Concentrations
Revenues from customers in South Korea, China, Japan and the United States comprised 34%, 21%, 11% and 7%, respectively, of total consolidated revenues for the first six months of fiscal 2009, as compared to 35%, 22%, 16% and 10%, respectively, for the first six months of fiscal 2008. We distinguish revenues from external customers by geographic areas based on the location to which our products, software or services are delivered and, for QTL's licensing and royalty revenues, the invoiced addresses of our licensees. Combined revenues from customers in South Korea, Japan and the United States decreased as a percentage of total revenues, from 61% to 52%, primarily due to an increase in the relative mix of license fees and royalty revenues from licensees in Finland, Taiwan and Canada and shipments of integrated circuits to CDMA device manufacturers with locations in Canada.
Second Quarter of Fiscal 2009 Compared to Second Quarter of Fiscal 2008 Revenues. Total revenues for the second quarter of fiscal 2009 were $2.46 billion, compared to $2.61 billion for the second quarter of fiscal 2008.
Revenues from sales of equipment and services for the second quarter of fiscal 2009 were $1.41 billion, compared to $1.73 billion for the second quarter of fiscal 2008. Revenues from sales of integrated circuit products decreased $308 million, primarily due to a decrease of $339 million related to lower unit shipments, mostly consisting of MSM and accompanying RF and PM integrated circuits, caused by the contraction in CDMA-based channel inventory.
Revenues from licensing and royalty fees for the second quarter of fiscal 2009 were $1.04 billion, compared to $881 million for the second quarter of fiscal 2008. The increase in revenues from licensing and royalty fees was primarily related to amounts received from Nokia in the second quarter of fiscal 2009 while no significant amounts were received in the second fiscal quarter of 2008. In addition, there was an increase in sales of CDMA-based products reported by QTL's licensees, driven by the continued adoption of WCDMA at higher average selling prices than CDMA2000.
Cost of Equipment and Services. Cost of equipment and services revenues for the second quarter of fiscal 2009 was $738 million, compared to $820 million for the second quarter of fiscal 2008. Cost of equipment and services revenues as a percentage of equipment and services revenues was 52% for the second quarter of fiscal 2009, compared to 48% for the second quarter of fiscal 2008. The decrease in margin percentage in the second quarter of fiscal 2009 compared to fiscal 2008 was primarily attributable to a decrease in QCT gross margin relating to the net effects of product price reductions and increases in reserves for excess and obsolete inventory, partially offset by a decrease in average unit costs. Cost of equipment and services revenues in the second quarter of fiscal 2009 included $10 million in share-based compensation, compared to $9 million in the second quarter of fiscal 2008. Cost of equipment and services revenues as a percentage of equipment and services revenues may fluctuate in future quarters depending on the mix of products sold and services provided, competitive pricing, new product introduction costs and other factors.
Research and Development Expenses. For the second quarter of fiscal 2009, research and development expenses were $604 million or 25% of revenues, compared to $553 million or 21% of revenues for the second quarter of fiscal 2008. The dollar increase was primarily attributable to a $39 million increase in costs related to the development of integrated circuit products, next generation CDMA and OFDMA technologies, the expansion of our intellectual property portfolio and other initiatives to support the acceleration of advanced wireless products and services, including lower cost devices, the integration of wireless with consumer electronics and computing, the convergence of multiband, multimode, multinetwork products and technologies, third-party operating systems and services platforms. The technologies supporting these initiatives may include CDMA2000 1X, 1xEV-DO, EV-DO Revision A, EV-DO Revision B, WCDMA, HSDPA, HSUPA, HSPA+ and OFDMA. Research and development expenses for the second quarter of fiscal 2009 included share-based compensation and in-process research and development of $68 million and $6 million, respectively, compared to $60 million included in share-based compensation in the second quarter of fiscal 2008.

Selling, General and Administrative Expenses. For the second quarter of fiscal 2009, selling, general and administrative expenses were $375 million or 15% of revenues, compared to $420 million or 16% of revenues for the second quarter of fiscal 2008. The dollar decrease was primarily attributable to a $22 million decrease in costs related to litigation and other legal matters and a $21 million decrease in other professional fees. Selling, general and administrative expenses for the second quarter of fiscal 2009 included share-based compensation of $62 million, compared to $61 million in the second quarter of fiscal 2008.
Litigation Settlement. The second quarter of fiscal 2009 operating expenses included a $748 million litigation settlement charge related to the Settlement and Patent License and Non-Assert Agreement with Broadcom, which will result in the dismissal with prejudice of all litigation between the companies.
Net Investment (Loss) Income. Net investment loss was $91 million for the second quarter of fiscal 2009, compared to net investment income of $93 million for the second quarter of fiscal 2008. The net decrease was comprised as follows (in millions):

                                                     Three Months Ended
                                                March 29,         March 30,
                                                   2009             2008         Change
  Interest and dividend income                  $      121       $       117     $     4
  Interest expense                                      (4 )              (6 )         2
  Net realized gains on investments:
  Corporate and other segments                           -                13         (13 )
  QSI                                                    -                24         (24 )
  Other-than-temporary losses on investments:
  Corporate and other segments                        (199 )             (47 )      (152 )
  QSI                                                  (10 )             (15 )         5
  Gains on derivative instruments                       13                 4           9
  Equity in (losses) earnings of investees             (12 )               3         (15 )

                                                $      (91 )     $        93     $  (184 )

The increase in interest and dividend income on cash, cash equivalents and marketable securities was a result of higher average balances held by corporate and segments other than QSI. Other-than-temporary losses on marketable securities and the reduction in net realized gains on corporate investments related primarily to depressed securities values caused by a major disruption in U.S. and foreign financial markets including a deterioration of confidence in financial markets and a severe decline in the availability of capital and demand for debt and equity securities.
Net realized gains on QSI investments in the second quarter of fiscal 2008 were related to the sale of our investment in a wireless CDMA-based operator in Romania.
Income Tax Expense. Income tax expense was $188 million for the second quarter of fiscal 2009, compared to $140 million for the second quarter of fiscal 2008. The effective tax rate for the second quarter of fiscal 2009 was negative 186%, as compared to 15% for the second quarter of fiscal 2008. In the second quarter of fiscal 2009, we recorded a $748 million pre-tax litigation settlement charge attributable to the Settlement and Patent License and Non-Assert Agreement with Broadcom with a discrete tax benefit computed at a rate less than the United States federal rate. In addition, we recorded a tax expense of $52 million to adjust net deferred tax assets primarily to reflect the future impact of California budget legislation enacted February 20, 2009.
The estimated annual effective tax rate for fiscal 2009 is equal to the United States federal statutory rate primarily due to benefits of approximately 15% related to foreign earnings taxed at less than the United States federal rate and 4% related to research and development tax credits, offset by the impact of an increase in valuation allowance related to capital losses of 10%, state taxes of approximately 5% and the revaluation of deferred items of 4%.

First Six Months of Fiscal 2009 Compared to First Six Months of Fiscal 2008 Revenues. Total revenues for the first six months of fiscal 2009 were $4.97 billion, compared to $5.05 billion for the first six months of fiscal 2008. Revenues from two customers of our QCT, QTL and QWI segments (each of whom accounted for more than 10% of our consolidated revenues for the period) comprised approximately 30% in aggregate of total consolidated revenues in the first six months of both fiscal 2009 and 2008.
Revenues from sales of equipment and services for the first six months of fiscal 2009 were $2.84 billion, compared to $3.43 billion for the first six . . .