Exhibit 99.1
FOR IMMEDIATE RELEASE
QUALCOMM Contact:
Bill Davidson
Vice President, Investor Relations
1-(858) 658-4813 (ph) 1-(858) 651-9303 (fax)
e-mail: ir@qualcomm.com
QUALCOMM ANNOUNCES FIRST QUARTER FISCAL 2005 RESULTS
REVENUES $1.4 BILLION, EPS $0.30
REVENUES $1.4 BILLION, EPS $0.28 EXCLUDING QSI SEGMENT
SAN DIEGO - January 19, 2005 - QUALCOMM Incorporated (NASDAQ: QCOM) today
announced results for its first quarter fiscal 2005 ended December 26, 2004.
Revenues were $1.4 billion in the first fiscal quarter, up 15 percent
year-over-year and 24 percent sequentially(1). First fiscal quarter net income
was $513 million and diluted earnings per share were $0.30, up 46 percent and 43
percent, respectively, year-over-year, and up 31 percent and 30 percent,
respectively, sequentially(1).
Revenues excluding the QUALCOMM Strategic Initiatives (QSI) segment were $1.4
billion in the first fiscal quarter, up 21 percent year-over-year and 1 percent
sequentially, when compared to 2004 results excluding QSI prepared under the
"New Method"(1) of recording royalties. First fiscal quarter net income
excluding the QSI segment was $474 million and diluted earnings per share were
$0.28, up 21 percent and 17 percent, respectively, year-over-year, and down 5
percent and 7 percent, respectively, sequentially. Throughout, comparative
results excluding the QSI segment are presented as if the New Method had been in
use in the prior year.
Detailed reconciliations between total QUALCOMM results and QUALCOMM results
excluding QSI (for the first quarter fiscal 2005) and between total QUALCOMM
results and QUALCOMM results excluding QSI prepared under the New Method of
recording royalties (for each quarter in 2004 and in total) are included at the
end of this news release. Prior period reconciliations are presented on our
Investor Relations web page at www.qualcomm.com.
- --------------------
(1)The New Method of recording royalties is based solely on reports received
from licensees for royalty bearing sales of equipment in the prior quarter. The
Company adopted this New Method during the fourth quarter of fiscal 2004 on a
prospective basis. Under the Prior Method of recording royalties, the Company
recorded an estimate of earned royalties in the quarter preceding its receipt of
licensee reports. As a result of the change, GAAP results for the fourth quarter
of fiscal 2004 reflect only partial economic performance of the Companys
licensing business as royalty revenue that would have been recognized in the
fourth quarter of fiscal 2004 was recognized in the first quarter of fiscal
2005. Results under the New Method are presented herein to assist investors with
evaluating financial performance on a comparable basis.
- -more-
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 2 of 19
"The deployment and expansion of third generation (3G) Code Division Multiple
Access (CDMA) networks and devices continues to drive our results," said Dr.
Irwin Mark Jacobs, chairman and CEO of QUALCOMM. "Wideband Code Division
Multiple Access (WCDMA) contributed 32 percent to our royalty revenues from
September quarter shipments, demonstrating further expansion of WCDMA networks
and increasing device sales. Consumers and enterprises worldwide are attracted
by and benefiting from an increasing range of entertaining and useful
applications. The downloading of applications and content to wireless phones has
grown dramatically, providing incremental revenue growth to 3G operators. By
November of 2003, there had been more than 60 million downloads of BREW
applications since the first BREW operator launched services in November of
2001. By November of 2004, over 200 million downloads of applications had
occurred using the BREW system. BREW is now offered by 37 operators in 24
countries under various service brand names and the BREW developer community is
thriving."
"With the transition to 3G CDMA well under way, the growing demand for advanced
features and services at an affordable market price is compelling operators to
further upgrade to the higher data rates and resulting lower cost enabled by
1xEV-DO for CDMA2000(R) and by HSDPA (High Speed Downlink Packet Access),
available soon for WCDMA. CDMA2000 operators are rapidly expanding 1xEV-DO
networks and using the increased capacity to offer multimedia services, which
have proven popular in Korea and Japan. We recently announced first samples of
the CSM6800(TM), the base station chip that supports CDMA2000 1xEV-DO Revision
A. With higher speed, especially on the reverse link, as well as lower latency,
Revision A, when deployed, will enable the consumer and enterprise to not only
receive, but also send large amounts of data using their wireless device.
Revision A is designed to support fully-competitive push-to-talk services and
high capacity, high quality VoIP (Voice over Internet Protocol). Competition
among network operators is clearly speeding the 2G to 3G transition and the
further evolution of 3G performance, services, and devices."
"The wireless market is changing rapidly and will continue to do so for the
foreseeable future. The mobile phone is becoming the essential consumer device
and our strategy of comprehensive feature integration in our Mobile Station
Modem(TM) (MSM(TM)) digital chipset is enabling convergence of a broad array of
consumer functions within the ubiquitous phone. In a complementary cycle, the
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 3 of 19
BREW platform supports the availability of compelling applications in the
marketplace to take advantage of these advanced features."
Research and development (R&D) expenses were $228 million in the first fiscal
quarter, up 52 percent year-over-year, largely attributable to increased
headcount related to development of integrated circuit products and initiatives
to support multimedia applications, high-speed wireless Internet access and
multimode, multiband, multinetwork products including CDMA2000(R) 1xEV-DO,
WCDMA, and HSDPA. This includes $9 million in R&D expenses attributable to the
QSI segment.
Selling, general and administrative (SG&A) expenses were $148 million in the
first fiscal quarter, up 25 percent year-over-year, largely attributable to
increases in employee related headcount expenses to support our growing
worldwide customer base, and professional fees related to legal, patent and
audit activities. This includes $5 million in SG&A expenses attributable to the
QSI segment.
Our fiscal 2005 effective income tax rate is estimated to be approximately 28
percent, compared to approximately 25 percent in fiscal 2004. Excluding the QSI
segment, our fiscal 2005 effective tax rate is estimated to be approximately 30
percent, compared to 27 percent in fiscal 2004. The increased estimated annual
effective tax rates as compared to the prior fiscal year are primarily due to
proportionately less foreign earnings subject to a lower rate. The 2004 Working
Families Act, enacted on October 4, 2004, extended the research and development
tax credit. As a result, the effective tax rates in the first quarter of fiscal
2005 of approximately 27 percent for total QUALCOMM and 29 percent excluding QSI
are lower than the expected annual effective tax rates.
QUALCOMM STRATEGIC INITIATIVES
The QUALCOMM Strategic Initiatives (QSI) segment includes our strategic
investments and related income and expenses. The first quarter fiscal 2005
results consisted primarily of $51 million in net realized gains on investments
and $3 million in gains on derivative instruments, partially offset by $14
million of operating expenses, including $9 million in R&D costs related to
MediaFLO(TM) USA. Total QUALCOMM results for the first quarter of fiscal 2005
include $0.02 of diluted earnings per share for the QSI segment.
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 4 of 19
BUSINESS OUTLOOK
The following statements are forward-looking and actual results may differ
materially. Please see Note Regarding Forward-Looking Statements at the end of
this news release for a description of certain risk factors and QUALCOMM's
annual and quarterly reports on file with the Securities and Exchange Commission
(SEC) for a more complete description of risks. Due to their nature, certain
income and expense items such as realized investment gains or losses in QSI and
asset impairments cannot be accurately forecast. Accordingly, the Company
excludes such items from its business outlook, and actual results may vary
materially from the business outlook if the Company incurs any such income or
expense items.
This outlook does not include the effects in the Company's fourth quarter of
fiscal 2005 from expensing equity-based compensation programs under SFAS No.
123R, Share-Based Payment, which is scheduled to be effective for fiscal periods
beginning after June 15, 2005. The Company will not adopt the revised standard
prior to the fourth quarter of fiscal 2005.
CORE BUSINESS OUTLOOK
Comparisons of fiscal 2005 to fiscal 2004 for our core business (excluding the
QSI segment) provided below present fiscal 2004 annual and quarterly results
assuming application of the New Method of recording royalties based solely on
reports received from licensees.
FISCAL 2005
Based on the current business outlook, we are reiterating our prior
revenue guidance and increasing our earnings guidance for fiscal 2005
excluding the QSI segment. We are also reiterating our prior calendar year
CDMA market guidance and our estimate of fiscal 2005 CDMA phone average
selling price. We anticipate that revenues excluding the QSI segment will
be in the range of approximately $5.8-$6.3 billion, an increase of 16-26
percent year-over-year. We anticipate diluted earnings per share excluding
the QSI segment will be approximately $1.16-$1.20 for fiscal 2005, an
increase of 8-12 percent year-over-year. We estimate the CDMA phone market
to be in the range of 218-228 million units in calendar 2005. Based on the
223 million unit midpoint of this estimate, we anticipate shipments of
approximately 168
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 5 of 19
million CDMA2000 units and approximately 55 million WCDMA units. We
anticipate average selling prices for CDMA phones, CDMA2000 and WCDMA
combined, to increase 5 percent in fiscal 2005 to approximately $215 per
unit, compared to approximately $205 in fiscal 2004.
SECOND QUARTER FISCAL 2005
Based on the current business outlook, we anticipate that revenues
excluding the QSI segment in the second fiscal quarter will be in the
range of approximately $1.35-$1.45 billion, an increase of 14-22 percent
year-over-year. We anticipate that diluted earnings per share excluding
the QSI segment will be approximately $0.25-$0.27 in the second fiscal
quarter, compared to $0.26 in the prior year. This estimate assumes
shipments of approximately 35-37 million MSM phone chips during the
quarter. We anticipate worldwide CDMA/WCDMA phone shipments of
approximately 46-49 million units in the December quarter at an average
selling price of approximately $214 per unit. Under the New Method,
royalty revenues in the second fiscal quarter will be based solely on
reports received from licensees for royalty bearing sales of equipment in
the prior quarter ended December 26, 2004.
GAAP OUTLOOK
We compare 2005 GAAP outlook below to GAAP results for fiscal 2004. Fiscal 2004
GAAP results are based on the Prior Method through the third quarter and reflect
only partial economic performance of the Company's licensing business in the
fourth quarter.
FISCAL 2005
Based on the current business outlook, we anticipate that total QUALCOMM
revenues will be in the range of approximately $5.8-$6.3 billion, an
increase of 18-29 percent year-over-year. We are increasing our earnings
guidance for total QUALCOMM and now anticipate diluted earnings per share
for fiscal 2005 will be approximately $1.15-$1.19, an increase of 12-16
percent year-over-year and including an estimated $0.01 loss per share
attributed to the QSI segment.
SECOND QUARTER FISCAL 2005
Based on the current business outlook, we anticipate that total QUALCOMM
revenues in the second quarter will be in the range of approximately
$1.35-$1.45 billion, an increase of 11-19 percent year-over-year. We
anticipate that total QUALCOMM earnings per share will be approximately
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 6 of 19
$0.24-$0.26 in the second fiscal quarter, a decrease of 10-17 percent
year-over-year and including an estimated $0.01 loss per share attributed
to the QSI segment.
CASH AND MARKETABLE SECURITIES
QUALCOMM's cash, cash equivalents and marketable securities totaled
approximately $8.0 billion at the end of the first quarter fiscal 2005, compared
to $7.6 billion on September 26, 2004 and $5.9 billion on December 28, 2003. We
paid $176 million in cash for business acquisitions in the first quarter fiscal
2005. In the first quarter fiscal 2005, net cash transfers to QSI were $28
million. Detailed reconciliations between changes in total QUALCOMM GAAP cash
flow and changes in cash, cash equivalents and marketable securities and total
QUALCOMM excluding the QSI segment are included at the end of this news release.
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 7 of 19
RESULTS OF BUSINESS SEGMENTS The following tables, which present segment
information, have been adjusted to reflect the 2005 segment presentation (Notes
1 and 2), as well as to present QTL results for fiscal year 2004 as if the New
Method of recognizing QTL revenues had been in effect for the entire year. GAAP
equivalents and reconciliations for fiscal 2004 periods are included at the end
of this news release (dollars in millions, except per share data):
FIRST QUATER - FISCAL YEAR 2005
RECONCILING QUALCOMM TOTAL
SEGMENTS QCT QTL QWI ITEMS (3) EXCLUDING QSI QSI QUALCOMM
- ------------------------------------------------- --- --- --- ----------- ------------- ----- --------
REVENUES 865 400 159 (34) 1,390 - 1,390
CHANGE FROM PRIOR YEAR (NEW METHOD FOR QTL(5)) 15% 33% 19% N/M 21% N/M 21%
CHANGE FROM PRIOR QUARTER (NEW METHOD FOR QTL(5)) 2% (1%) 3% N/M 1% N/M 1%
EARNINGS BEFORE TAXES 242 358 16 48 664 40 704
CHANGE FROM PRIOR YEAR (NEW METHOD FOR QTL(5)) (8%) 32% 300% N/M 19% N/M 28%
CHANGE FROM PRIOR QUARTER (NEW METHOD FOR QTL(5)) (11%) (2%) 33% N/M (1%) N/M 3%
NET INCOME 474 39 513
CHANGE FROM PRIOR YEAR (NEW METHOD FOR QTL(5)) 21% (154%) 61%
CHANGE FROM PRIOR QUARTER (NEW METHOD FOR QTL(5)) (5%) (19%) (6%)
DILUTED EARNINGS PER COMMON SHARE 0.28 0.02 0.30
CHANGE FROM PRIOR YEAR (NEW METHOD FOR QTL(5)) 17% (150%) 58%
CHANGE FROM PRIOR QUARTER (NEW METHOD FOR QTL(5)) (7%) N/M (6%)
FOURTH QUARTER - FISCAL YEAR 2004
QUALCOMM
NEW METHOD* RECONCILING EXCLUDING QSI
SEGMENTS QCT (2)* QTL (5) QWI (2)* ITEMS (2)(3)* (2)(5)*
- ------------------------------------------------ -------- ----------- -------- ------------- -------------
REVENUES 850 404 155 (38) 1,371
EARNINGS FROM CONTINUING OPERATIONS BEFORE TAXES 273 364 12 24 673
NET INCOME 499
DILUTED EARNINGS PER COMMON SHARE 0.30
SECOND QUARTER - FISCAL YEAR 2004
QUALCOMM
NEW METHOD* RECONCILING EXCLUDING QSI
SEGMENTS QCT (2)* QTL (5) QWI (2)* ITEMS (2)(3)* (2)(5)*
- ------------------------------------------------ -------- ----------- -------- ------------- -------------
REVENUES 715 358 140 (29) 1,184
EARNINGS FROM CONTINUING OPERATIONS BEFORE TAXES 259 330 2 8 599
NET INCOME 428
DILUTED EARNINGS PER COMMON SHARE (4) 0.26
FIRST QUARTER - FISCAL YEAR 2004
QUALCOMM
NEW METHOD * RECONCILING EXCLUDING QSI
SEGMENTS QCT (1)(2)* QTL (5) QWI(1)(2)* ITEMS (2)(3)* (2)(5)*
- ------------------------------------------------ ----------- ------------ ---------- --------------- -------------
REVENUES 752 300 134 (32) 1,153
EARNINGS FROM CONTINUING OPERATIONS BEFORE TAXES 262 271 4 22 559
NET INCOME 391
DILUTED EARNINGS PER COMMON SHARE (4) 0.24
TWELVE MONTHS - FISCAL YEAR 2004
QUALCOMM
NEW METHOD* RECONCILING EXCLUDING QSI
SEGMENTS QCT(2)* QTL (5) QWI (2)* ITEMS (2)(3)* (2)(5)*
- ------------------------------------------------ ------- ----------- -------- ------------- -------------
REVENUES 3,111 1,483 571 (133) 5,031
EARNINGS FROM CONTINUING OPERATIONS BEFORE TAXES 1,049 1,346 19 81 2,495
NET INCOME 1,800
DILUTED EARNINGS PER COMMON SHARE 1.07
(1) During the second quarter of fiscal 2004, the Company reorganized its
wholly-owned subsidiary, SnapTrack, Inc. (SnapTrack), a developer of
wireless position location technology. As a result of the reorganization
of SnapTrack,
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 8 of 19
revenues and operating results related to SnapTrack's server software
business (software for location-based services and applications) that were
previously presented in the QCT segment became part of the QIS division in
the QWI segment. Segment information for the first quarter of fiscal 2004
has been adjusted to conform to the new segment presentation.
(2) During the first quarter of fiscal 2005, the Company reorganized its
MediaFLO USA business into the QSI segment. The operating expenses related
to the MediaFLO USA business were included in reconciling items through
the end of fiscal 2004. Also during the first quarter of fiscal 2005, the
Company reorganized a division in the QWI segment that develops and sells
test tools into the QCT segment. Prior period segment information has been
adjusted to conform to the new segment presentation.
(3) Reconciling items related to revenues consist primarily of other
non-reportable segment revenues less intersegment eliminations.
Reconciling items related to earnings before taxes consist primarily of
corporate expenses, charges that are not allocated to the segments for
management reporting purposes, unallocated net investment income,
non-reportable segment results, interest expense and the elimination of
intercompany profit.
(4) The Company effected a two-for-one stock split in August 2004. All
references to number of shares and per share amounts reflect the stock
split.
(5) QTL's results in the fourth quarter of fiscal 2004 reflect the Company's
decision to make the prospective change to the New Method of recording
royalties based solely on reports received from licensees for royalty
bearing sales of equipment in the prior quarter. This change had the
one-time effect of reducing royalty revenues in the fourth quarter of
fiscal 2004. Therefore, GAAP results for fiscal 2004 do not reflect a full
year of the economic performance of the Company's licensing business, as
royalty revenue that would have been recognized in the fourth quarter of
fiscal 2004 was recognized in the first quarter of fiscal 2005. Results
using the New Method of recording royalties are presented for prior
periods to illustrate the differences between the Prior Method of
recording royalties and the New Method implemented during the fourth
quarter of fiscal 2004.
* As adjusted as described in the notes above.
N/M - Not Meaningful
Sums may not equal totals due to rounding.
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 9 of 19
BUSINESS SEGMENT HIGHLIGHTS
QUALCOMM CDMA TECHNOLOGIES (QCT)
- Shipped approximately 39 million MSM phone chips to customers
worldwide during the first fiscal quarter, compared to approximately
32 million units in the year ago quarter and approximately 39
million units in the fourth quarter of fiscal 2004.
- Shipped CSM((TM)) infrastructure chips for 3G CDMA2000 1X and
1xEV-DO to support approximately 2.5 million equivalent voice
channels, compared to approximately 4.6 million in the year ago
quarter and approximately 5.4 million in the prior quarter.
Equivalent voice channels are provided rather than actual chip
shipments because our CSM infrastructure chips currently support
from eight to 32 voice channels per chip.
- QUALCOMM named "Best Financially Managed Company" by the Fabless
Semiconductor Association for outstanding financial performance for
the third consecutive year.
- Announced that more than 30 handset designs are currently under
development based on QUALCOMM's first commercially available
Enhanced Platform chipset the MSM6150(TM) and MSM6550(TM) chipset
solutions. These integrated chipsets deliver increased processing
capacity and lower power consumption to drive the global demand for
3G enhanced-multimedia products and services. Devices based on the
MSM6150 or MSM6550 chipsets will deliver revenue-generating
multimedia services on large, high-resolution QVGA screens allowing
dynamic viewing of wireless interactive 3D gaming, video streaming
and video telephony and images from integrated digital still cameras
of up to 4.0 megapixel resolution.
- Announced two industry milestones: the world's only single-chip
solution for CDMA2000 1X, which integrates a baseband modem, radio
transceiver, power management and multimedia engines into a single
chip; and the industry's first CDMA2000 1X radio transceiver -- a
component of this single-chip -- a radioOne(R) solution that
combines radio receiver and transmitter functionalities into a
single design using cost-effective RF CMOS (Complementary Metal
Oxide Semiconductor) process technology.
- Announced the MBD1000 chipset to support QUALCOMM's FLO (Forward
Link Only) mediacast technology. Wireless operators will be able to
leverage the FLO mediacast solution to deliver simultaneously to a
greater number of users a wide variety of TV-like news,
entertainment and informational programming from leading media
corporations.
- Shipped engineering samples of the CSM6800 and the MSM6275 chipsets.
The CSM6800 for CDMA2000 1xEV-DO Revision A infrastructure
equipment, provides a seamless migration path to the next evolution
of CDMA2000 and supports higher data rates and
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 10 of 19
greater system capacity to enable advanced wireless multimedia. The
MSM6275 solution is a WCDMA (UMTS) chipset with support for
High-Speed Downlink Packet Access (HSDPA) and GSM/GPRS/EDGE (EGPRS).
The MSM6275 chipset, part of QUALCOMM's Enhanced Multimedia
Platform, delivers peak data rates of 1.8 Mbps, allowing faster
transmission of data files to advance commercial wireless
multimedia.
- In November 2004, the Company completed the acquisition of all of
the outstanding capital stock of Spike for $15 million, excluding
assumed liabilities. Spike Technologies, a semiconductor design
services company based primarily in India, will provide QCT with
additional engineering resources to help reduce our time to market.
QUALCOMM TECHNOLOGY LICENSING (QTL)
- Licensee information for the fourth quarter of fiscal year 2004 as
reported by licensees in the first quarter of fiscal 2005:
- WCDMA royalties contributed approximately 32 percent of
total royalties compared to approximately 12 percent of
total royalties in the year ago quarter.
- Shipments of 40 million units at an average selling
price of approximately $212.
- Forty-one subscriber licensees reported sales of
CDMA2000 1X products and 12 subscriber licensees
reported sales of WCDMA products.
- Eleven infrastructure licensees reported sales of
CDMA2000 1X products and 11 infrastructure licensees
reported sales of WCDMA products.
QUALCOMM WIRELESS & INTERNET GROUP (QWI)
QUALCOMM INTERNET SERVICES (QIS)
- Third-party BREW publishers and developers have earned more than
$200 million from the sales of BREW applications. This achievement
marks the ongoing momentum for the BREW solution within the rapidly
expanding global wireless industry. As of November 2004, 37 wireless
operators were offering BREW services in 24 countries and cumulative
BREW application downloads exceeded 200 million worldwide.
- Announced advanced firmware over-the-air (FOTA) update capabilities
via the BREW solution in conjunction with Insignia Solutions and
Bitfone Corporation. These capabilities enable wireless operators
and handset manufacturers to remotely reflash a BREW-enabled
device's firmware-repairing software flaws or adding new
functions-thus eliminating the
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 11 of 19
need for more costly and time-consuming in-store cable-based updates
and massive device recalls.
- Collaborated with Opera Software to give mobile users a more
flexible shopping experience on their handsets. These new
capabilities via Opera's mobile Web browser and the BREW solution
allow operators to enhance their subscribers' wireless Internet
experience by providing them with a feature-rich shopping
experience, via BREW-enabled handsets. This advanced shopping
experience gives users the opportunity to purchase and download
contextually relevant content such as applications, ringtones,
wallpapers and skins.
- In October 2004, QUALCOMM completed the acquisition of all of the
outstanding capital stock of Trigenix Limited (Trigenix), a United
Kingdom-based developer of user interfaces for mobile phones for
approximately $35 million, excluding assumed liabilities. Trigenix's
suite of technologies provides additional substantial advantages to
QUALCOMM's existing user interface offerings that enable flexible
and customizable wireless device user interface for wireless
operators and device manufacturers.
QUALCOMM WIRELESS BUSINESS SOLUTIONS(R) (QWBS)
- Shipped approximately 13,300 satellite-based systems (OmniTRACS(R),
TruckMAIL(TM)) and more than 11,600 terrestrial-based systems
(OmniExpress(R), GlobalTRACS(R), T2(TM) Untethered TrailerTRACS(R)
and LINQ) in the first quarter of fiscal 2005. This compares to
approximately 9,700 satellite-based systems and 1,100
terrestrial-based systems in the first quarter of 2004 and
approximately 13,900 satellite-based systems and nearly 4,900
terrestrial-based systems in the fourth quarter of fiscal 2004. This
brings the cumulative total to approximately 533,000 satellite-based
systems and over 34,000 terrestrial-based systems shipped worldwide.
- Announced that Ryan Incorporated Central, one of the nation's
largest operators specializing in construction site work and mass
excavation, has implemented the GlobalTRACS equipment management
solution as a core element of its corporate-wide information
gathering and asset management program.
- Announced that Schneider National Inc., a premier provider of
transportation, logistics and related services, has purchased
QUALCOMM's T2 Untethered TrailerTRACS Asset Management Solution and
has begun implementing the technology across its fleet of more than
48,000 trailers. QUALCOMM's T2 Untethered TrailerTRACS solution
leverages GPS positioning and wireless communications technology to
assist carriers in determining and
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 12 of 19
reporting a trailer's location and load status, regardless of
whether or not the trailer is hooked to a tractor.
- Announced that OmniTRACS(R) mobile communications solution now has
service in Alaska and Hawaii, extending its coverage footprint to
all 50 U.S. states and the NAFTA region. The OmniTRACS solution will
provide wireless monitoring service to trucks transporting freight
within Alaska and along the Alcan Highway.
OTHER
- In October 2004, QUALCOMM completed the acquisition of all of the
outstanding capital stock of Iridigm Display Corporation (Iridigm),
a privately held display technology company, that it did not already
own, for approximately $188 million, excluding assumed liabilities.
Iridigm is a nonreportable segment included in reconciling items in
the reconciliation of revenues and EBT for reportable segments to
the consolidated totals. QUALCOMM expects its acquisition of Iridigm
to accelerate the time to market for Iridigm's patented display
technology, which should rapidly increase the capability of wireless
devices by driving down their cost and power consumption.
QUALCOMM STRATEGIC INITIATIVES (QSI)
- Established a subsidiary, MediaFLO(TM) USA Inc., to deploy and
operate a nationwide "mediacast" network, to deliver many channels
of high-quality video and audio programming to third-generation
mobile phones at mass market prices. MediaFLO USA intends to provide
interactive multimedia services to consumers in cooperation with
U.S. cellular operators beginning in 2006.
CONFERENCE CALL
QUALCOMM's first quarter fiscal 2005 earnings conference call will be broadcast
live on January 19, 2005 beginning at 2:30 p.m. Pacific Standard Time on the
Company's web site at: www.qualcomm.com. This conference call may contain
forward-looking financial information. The conference call will include a
discussion of "non-GAAP financial measures" as that term is defined in
Regulation G. The most directly comparable GAAP financial measures and
information reconciling these non-GAAP financial measures to the Company's
financial results prepared in accordance with GAAP, as well as the other
material financial and statistical information to be discussed in the conference
call, will be posted on the Company's Investor Relations web site at
www.qualcomm.com immediately prior to commencement of the call. A taped audio
replay will
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 13 of 19
be available via telephone on January 19, 2005 beginning at approximately 4:30
p.m. (PST) through February 3, 2005 at 4:30 p.m. (PST). To listen to the replay,
U.S. callers may dial (800) 633-8284 and international callers may dial (402)
977-9140. U.S. and international callers should use reservation number 21219395.
An audio replay of the conference call will be available on the Company's web
site at www.qualcomm.com for two weeks following the live call.
QUALCOMM Incorporated (www.qualcomm.com) is a leader in developing and
delivering innovative digital wireless communications products and services
based on the Company's CDMA digital technology. Headquartered in San Diego,
Calif., QUALCOMM is included in the S&P 500 Index and is a 2003 FORTUNE 500(R)
company traded on The Nasdaq Stock Market(R) under the ticker symbol QCOM.
NOTE REGARDING USE OF NON-GAAP FINANCIAL MEASURES
The Company presents financial information excluding the QUALCOMM Strategic
Initiatives (QSI) segment to facilitate evaluation by management, investors and
analysts of its ongoing core operating businesses, including QUALCOMM CDMA
Technologies (QCT), QUALCOMM Technology Licensing (QTL) and QUALCOMM Wireless &
Internet (QWI). QSI results relate to strategic investments for which the
Company has exit strategies of varying durations. Management believes that the
information excluding QSI presents a more representative measure of the
operating and liquidity performance of the Company because it excludes the
effect of fluctuations in value of investments that are unrelated to the
Company's operational performance.
The Company presents cash flow information excluding QSI and including
marketable securities. The Company's management uses this non-GAAP presentation
to analyze increases and decreases in certain of its liquid assets, comprised of
cash, cash equivalents and marketable securities. Management views certain
marketable securities as liquid assets available to fund operations, which
result from cash management strategies designed to increase yields. However,
these instruments do not meet the definition of cash equivalents in accordance
with Statement of Financial Accounting Standards No. 95, "Statement of Cash
Flows" and must be excluded from the GAAP statements of cash flows. Since the
GAAP statements of cash flows reconcile the Company's beginning and ending cash
and cash equivalents balances, the purchases and sales of marketable securities
are presented as inflows and outflows. For internal analysis of the Company's
cash position, management does not view these transactions as inflows and
outflows from the business, but as cash
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 14 of 19
management transactions. If required, such investments could be settled
relatively quickly as additional cash resources are needed. The Company believes
that this non-GAAP presentation is a helpful measure of the Company's liquidity.
The Company presents financial results as though the New Method of recording
royalties had been in effect for prior periods to facilitate evaluation by
management, investors and analysts of the results for these periods on a
comparable basis to the Company's current results, current guidance and future
periods. The Company believes that this presentation is useful in evaluating
performance on a consistent and comparable basis.
The non-GAAP financial information presented herein should be considered in
addition, not as a substitute for, or superior to, financial measures calculated
in accordance with GAAP. Reconciliations between total QUALCOMM results and
results excluding QSI, QUALCOMM results and results using the New Method and
total QUALCOMM cash flow and cash, cash equivalents and marketable securities
and total QUALCOMM excluding the QSI segment are presented herein.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to the historical information contained herein, this news release
contains forward-looking statements that are subject to risks and uncertainties.
Actual results may differ substantially from those referred to herein due to a
number of factors, including but not limited to risks associated with: the rate
of development, deployment and commercial acceptance of CDMA based networks and
CDMA based technology, including CDMA2000 1X, 1xEVDO and WCDMA, both
domestically and internationally; our dependence on major customers and
licensees; fluctuations in the demand for CDMA based products, services or
applications; foreign currency fluctuations; strategic loans, investments and
transactions the Company has or may pursue; our dependence on third party
manufacturers and suppliers; our ability to maintain and improve operational
efficiencies and profitability; developments in current and future litigation,
as well as the other risks detailed from time-to-time in the Company's SEC
reports.
###
QUALCOMM(R), Mobile Station Modem(TM), MSM(TM), FLO(TM), MediaFLO(TM),
gpsOne(TM), CSM(TM), Qtv(TM), MSM6250(TM), MSM6255(TM), MSM6500(TM),
MSM6550(TM), MSM6300(TM), radioOne(TM), powerOne(TM), RFL6202(TM), RFR6202(TM),
RTR6250(TM), RFR6122(TM), RFT6122(TM), PM6650(TM), BREW(R), QChat(R), QUALCOMM
Wireless Business Solutions(R), TruckMAIL(TM), OmniTRACS(R), OmniExpress(R),
GlobalTRACS(R), T2(TM) and TrailerTRACS(R) are trademarks and/or service marks
of QUALCOMM Incorporated. CDMA2000(R) is a registered trademark of the
Telecommunications Industry Association. All other trademarks are the property
of their respective owners.
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 15 of 19
QUALCOMM INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THIS SCHEDULE IS TO ASSIST THE READER IN RECONCILING FROM
RESULTS EXCLUDING QSI TO TOTAL QUALCOMM RESULTS
(In millions, except per share data)
(Unaudited)
THREE MONTHS ENDED DECEMBER 26, 2004
---------------------------------------------------
EXCLUDING TOTAL
QSI QSI QUALCOMM
------------ ------------- ----------
Revenues:
Equipment and services $ 978 $ - $ 978
Licensing and royalty fees 412 - 412
------------ ------------- ----------
1,390 - 1,390
------------ ------------- ----------
Operating expenses:
Cost of equipment and services revenues 430 - 430
Research and development 219 9 228
Selling, general and administrative 143 5 148
------------ ------------- ----------
Total operating expenses 792 14 806
------------ ------------- ----------
Operating income (loss) 598 (14) 584
Investment income, net 66 (a) 54 (b) 120
------------ ------------- ----------
Income before income taxes 664 40 704
Income tax expense (190) (c) (1) (191) (c)
------------ ------------- ----------
Net income $ 474 $ 39 $ 513
============ ============= ==========
Earnings per common share:
Diluted $ 0.28 $ 0.02 $ 0.30
============ ============= ==========
Shares used in per share calculations:
Diluted 1,704 1,704 1,704
============ ============= ==========
(a) Includes $53 million in interest and dividend income related to cash, cash
equivalents and marketable securities, which are not part of the Company's
strategic investment portfolio.
(b) Includes $51 million in realized gains on investments and $3 million in
gains on derivative instruments.
(c) The fiscal year 2005 estimated effective tax rate for operations excluding
QSI and total QUALCOMM are approximately 30% and approximately 28%,
respectively.
Revenues and earnings excluding the QSI segment, including forward looking
periods, are calculated as total QUALCOMM revenues and earnings less revenues
and earnings attributed to the QSI segment. No other adjustments are made.
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 16 of 19
QUALCOMM INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND MARKETABLE SECURITIES
THIS SCHEDULE IS TO ASSIST THE READER IN RECONCILING CASH FLOWS FROM CASH,
CASH EQUIVALENTS AND MARKETABLE SECURITIES EXCLUDING QSI TO TOTAL QUALCOMM
CASH FLOWS
(In millions)
(Unaudited)
THREE MONTHS ENDED DECEMBER 26, 2004
-----------------------------------------------------
EXCLUDING TOTAL
QSI QSI QUALCOMM
-----------------------------------------------------
Earnings before taxes, depreciation, amortization and other
adjustments (1) $ 684 $ (14) $ 670
Working capital changes and net taxes paid (2) (297) 24 (273)
-------------- --------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 387 10 397
Capital expenditures (112) (76) (188)
-------------- --------------- ---------------
FREE CASH FLOW (NET CASH PROVIDED BY OPERATING
ACTIVITIES LESS CAPITAL EXPENDITURES) 275 (66) 209
Net additional share capital 96 - 96
Net issuance of notes receivable - (2) (2)
Collection of finance receivables 1 - 1
Other investments and acquisitions, net of cash acquired (176) (3) (179)
Other items (2) - (2)
Changes in fair value and other changes to marketable
securities 90 97 187
Marketable securities pending settlement receipts 65 - 65
Transfer from QSI (3) 74 (74) -
Transfer to QSI (4) (102) 102 -
-------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND
MARKETABLE SECURITIES (5) $ 321 $ 54 $ 375
============== =============== ===============
(1) Reconciliation to GAAP:
Net income $ 474 $ 39 $ 513
Non-cash adjustments (a) 228 (2) 226
Net realized gains on marketable securities and
other investments (13) (51) (64)
Net taxes paid (5) - (5)
-------------- --------------- ---------------
Earnings before taxes, depreciation, amortization
and other adjustments $ 684 $ (14) $ 670
============== =============== ===============
(2) Reconciliation to GAAP:
Increase in cash resulting from changes in working
capital $ (302) $ 24 $ (278)
Net taxes paid 5 - 5
-------------- --------------- ---------------
Working capital changes and net taxes paid $ (297) $ 24 $ (273)
============== =============== ===============
(3) Cash from loan payments and sale of equity
securities.
(4) Funding for strategic debt and equity investments,
operations of Vesper and other QSI operating
expenses.
(5) Reconciliation to GAAP cash flows:
Net decrease in cash and cash equivalents (GAAP) $ (79) $ - $ (79)
Plus: Net purchase (proceeds) of marketable
securities 245 (43) 202
Plus: Net increase (decrease) in fair value and
other changes to marketable securities 90 97 187
Plus: Net increase in marketable securities
pending settlement receipt 65 - 65
-------------- --------------- ---------------
Net increase (decrease) in cash, cash equivalents
and marketable securities $ 321 $ 54 $ 375
============== =============== ===============
Supplemental detail:
(a) Non-cash adjustments are comprised of:
Depreciation and amortization $ 44 $ 1 $ 45
Gains on derivative instruments - (3) (3)
Non-cash income tax benefit 184 1 185
Other non-cash charges - (1) $ (1)
-------------- --------------- ---------------
Total non-cash adjustments $ 228 $ (2) $ 226
============== =============== ===============
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 17 of 19
QUALCOMM INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
QUALCOMM
EXCLUDING
QSI QSI (a) QUALCOMM QUALCOMM
December 26, December 26, December 26, SEPTEMBER 26,
2004 2004 2004 2004
-------------- ------------- ------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,135 $ - $ 1,135 $ 1,214
Marketable securities 4,933 56 4,989 4,768
Accounts receivable, net 659 - 659 581
Inventories 156 - 156 154
Deferred tax assets (a) 359 - 359 409
Other current assets 126 9 135 101
-------------- ------------- ------------- ---------------
Total current assets 7,368 65 7,433 7,227
Marketable securities 1,742 144 1,886 1,653
Property, plant and equipment, net 746 - 746 675
Goodwill 527 - 527 356
Deferred tax assets (a) 410 - 410 493
Other assets 266 298 564 416
-------------- ------------- ------------- ---------------
Total assets $ 11,059 $ 507 $ 11,566 $ 10,820
============== ============= ============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 262 $ - $ 262 $ 286
Payroll and other benefits related liabilities 154 - 154 194
Unearned revenue 179 - 179 172
Dividends payable 115 - 115 -
Other current liabilities 250 4 254 242
-------------- ------------- ------------- ---------------
Total current liabilities 960 4 964 894
Unearned revenue 143 - 143 170
Other liabilities 120 - 120 92
-------------- ------------- ------------- ---------------
Total liabilities 1,223 4 1,227 1,156
-------------- ------------- ------------- ---------------
Stockholders' equity:
Preferred stock, $0.0001 par value - - - -
Common stock, $0.0001 par value - - - -
Paid-in capital 7,144 - 7,144 6,940
Retained earnings 3,107 - 3,107 2,709
Accumulated other comprehensive income 3 85 88 15
-------------- ------------- ------------- ---------------
Total stockholders' equity 10,254 85 10,339 9,664
-------------- ------------- ------------- ---------------
Total liabilities and stockholders'
equity $ 11,477 $ 89 $ 11,566 $ 10,820
============== ============= ============= ===============
(a) Deferred tax assets and liabilities are not allocated to the Company's
segments. Net deferred tax assets and liabilities, if any, of subsidiaries
that are consolidated by QSI are reflected as QSI assets and liabilities.
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 18 of 19
QUALCOMM INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
---------------------------
DECEMBER 26, DECEMBER 28,
2004 2003 (a) (b)
------------ ------------
Revenues:
Equipment and services $ 978 $ 853
Licensing and royalty fees 412 354
------------ ------------
1,390 1,207
------------ ------------
Operating expenses:
Cost of equipment and services revenues 430 370
Research and development 228 150
Selling, general and administrative 148 118
------------ ------------
Total operating expenses 806 638
------------ ------------
Operating income 584 569
Investment income, net 120 35
------------ ------------
Income from continuing operations before income taxes 704 604
Income tax expense (191) (193)
------------ ------------
Income from continuing operations 513 411
------------ ------------
Loss from discontinued operations - (59)
------------ ------------
Net income $ 513 $ 352
============ ============
Basic earnings per common share from continuing operations $ 0.31 $ 0.26
Basic loss per common share from discontinued operations - (0.04)
------------ ------------
Basic earnings per common share $ 0.31 $ 0.22
============ ============
Diluted earnings per common share from continuing operations $ 0.30 $ 0.25
Diluted loss per common share from discontinued operations - (0.04)
------------ ------------
Diluted earnings per common share $ 0.30 $ 0.21
============ ============
Shares used in per share calculations:
Basic 1,639 1,601
============ ============
Diluted 1,704 1,654
============ ============
Dividends per share announced $ 0.07 $ 0.07
============ ============
(a) We affected a two-for-one stock split in August 2004. All references to
number of shares and per share amounts reflect the stock split.
(b) As adjusted to present results related to Vesper, TowerCo and SMP licenses
as discontinued operations.
QUALCOMM Announces First Quarter Fiscal 2005 Results Page 19 of 19
QUALCOMM INCORPORATED
A COMPARISON OF THE "PRIOR METHOD" OF RECORDING ROYALTIES AND THE "NEW METHOD"
OF RECORDING ROYALTIES FOR PRIOR YEAR PERIODS FOR COMPARATIVE PURPOSES
THREE MONTHS ENDED YEAR ENDED
----------------------------------------------------- -------------
($ in millions, except per share data) SEPTEMBER 26, JUNE 27, MARCH 28, DECEMBER 28, SEPTEMBER 26,
2004 2004 2004 2003 2004
PRIOR METHOD OF RECORDING ROYALTIES
Estimate of estimated licensees for prior period $ 253 $ 237 $ 205 $ 151 $ 151
Royalties reported by estimated licensees for
prior period 255 264 262 208 208
------------- ---------- --------- ------------ -------------
Prior period variance included in reporting period 2 27 57 57 57
Other royalties reported in reporting period 99 109 51 45 1,084
Estimate for estimated licensees for current period - 253 237 205 -
------------- ---------- --------- ------------ -------------
Total QTL royalty revenues from external licensees 101 389 345 307 1,141
Intercompany revenue 36 33 30 32 132
License revenue 14 15 15 15 59
------------- ---------- --------- ----------------------------
Total QTL revenue using Prior Method $ 436 $ 390 $ 353
Total QTL revenue including prospective change to
New Method in Q4 '04 $ 151 $ 1,331
NEW METHOD OF RECORDING ROYALTIES
Total royalties reported by external licensees (a) $ 354 $ 373 $ 313 $ 253 $ 1,292
Intercompany revenue 36 33 30 32 132
License revenue 14 15 15 15 59
------------- ---------- --------- ------------ -------------
Total QTL revenue using New Method $ 404 $ 420 $ 358 $ 300 $ 1,483
Difference between the methods $ (253) $ 16 $ 32 $ 54 $ (151)
------------- ---------- --------- ------------ -------------
Total QCOM revenues as reported under GAAP $ 1,118 $ 1,341 $ 1,216 $ 1,207 $ 4,880
Less: Difference between the royalty methods (253) 16 32 54 (151)
------------- ---------- --------- ------------ -------------
Total QCOM revenues using New Method 1,371 1,325 1,184 1,153 5,031
TOTAL QCOM REVENUES, AND QCOM REVENUES EXCLUDING
QSI USING NEW METHOD $ 1,371 $ 1,325 $ 1,184 $ 1,153 $ 5,031
TOTAL QCOM earnings from continuing operations
before taxes as reported under GAAP $ 431 $ 668 $ 610 $ 604 $ 2,313
Less: earnings from continuing operations before
taxes attributed to difference between the
royalty methods $ (253) $ 16 $ 32 $ 54 $ (151)
------------- ---------- --------- ------------ -------------
Total QCOM earnings from continuing operations
before taxes using New Method $ 684 $ 652 $ 578 $ 550 $ 2,464
Less: QSI earnings from continuing operations
before taxes (c) $ 11 $ (12) $ (21) $ (8) $ (31)
QCOM EARNINGS FROM CONTINUING OPERATIONS BEFORE
TAXES EXCLUDING QSI USING NEW METHOD (c) $ 673 $ 664 $ 599 $ 558 $ 2,495
TOTAL QCOM net income as reported under GAAP $ 393 $ 486 $ 488 $ 352 $ 1,720
Less: Net income attributed to difference between
the royalty methods (b) (154) 10 20 33 (92)
------------- ---------- --------- ------------ -------------
Total QCOM net income using New Method 547 476 468 319 1,812
Less: QSI net income (loss) (c) 48 (4) 40 (72) 12
QCOM NET INCOME EXCLUDING QSI USING NEW METHOD (c) $ 499 $ 482 $ 428 $ 391 $ 1,800
QCOM diluted EPS as reported under GAAP $ 0.23 $ 0.29 $ 0.29 $ 0.21 $ 1.03
EPS ATTRIBUTED TO DIFFERENCE BETWEEN THE ROYALTY
METHODS $ (0.09) $ 0.01 $ 0.01 $ 0.02 $ (0.06)
------------- ---------- --------- ------------ -------------
Total QCOM diluted EPS using New Method $ 0.32 $ 0.28 $ 0.28 $ 0.19 $ 1.08
EPS attributed to QSI (c) $ 0.03 $ (0.00) $ 0.02 $ (0.04) $ 0.01
QCOM DILUTED EPS EXCLUDING QSI USING NEW METHOD (c) $ 0.30 $ 0.29 $ 0.26 $ 0.24 $ 1.07
Shares previously used for diluted EPS n/a 841 836 827 n/a
Adjusted for stock split 1,692 1,682 1,672 1,654 1,675
(a) Represents royalty revenue that would have been reported during the period
if the "new method" had been adopted retroactively. Does not represent
royalty revenue that will be recognized under GAAP due to the effect of
the accounting change on these periods.
(b) QTL's rounded effective tax rate was 39% in fiscal 2004 .
(c) During the first quarter of 2005, the Company reorganized its MediaFLO USA
business into the QSI segment. The operating expenses related to the
MediaFLO USA business were included in reconciling items through the end
of fiscal 2004. Prior period segment information has been adjusted to
conform to the new segment presentation.
All EPS amounts have been adjusted to reflect the 2:1 stock split that was
effected during the fourth quarter of fiscal 2004.
QTL revenues as reported under GAAP and using the new method are presented to
illustrate the difference between the prior method used for royalties prior to
the fourth quarter of fiscal 2004 and the new method implemented starting in the
fourth quarter of fiscal 2004.
Sums may not equal totals due to rounding.
Revenues and earnings excluding the QSI segment, including forward looking
periods, are calculated as total QUALCOMM revenues and earnings less revenues
and earnings attributed to the QSI segment. No other adjustments are made.