.25...really :)
QUALCOMM Incorporated (NASDAQ:QCOM) today reported pro forma revenues of $2.8 billion and pro forma earnings per share of $1.05 for fiscal 2000, an increase of 12 and 31 percent, respectively, from the year ago period. Pro forma revenues in the fourth quarter of fiscal 2000 were $635 million, an 11 percent decrease compared to $716 million in the year ago period. Pro forma earnings per share were $0.25 in the fourth quarter of fiscal 2000 compared to $0.24 per share in the fourth quarter of fiscal 1999, an increase of 4 percent (see note on page 2).
"This year we continued to focus on improving profitability while investing in areas of future growth. Central to our strategy is the belief that CDMA-based wireless data and Internet access applications will fuel industry growth for years to come. As cdma2000 1x and 1xEV networks are deployed around the world, subscribers will experience data-rich applications at speeds never before possible on a wireless device. We are rapidly integrating these applications utilizing position location, voice recognition, CD-quality music and video into our daily lives," said QUALCOMM Chairman and CEO, Dr. Irwin M. Jacobs. "QUALCOMM is uniquely positioned to benefit from the wireless data revolution, which is enabled by CDMA technology and implemented in our industry-leading integrated circuits. We acquired SnapTrack earlier this year to further expand our technology patent portfolio and deliver the optimal position location solution to our customers, enabling them to develop a broad range of new wireless devices and to meet Enhanced 9-1-1 requirements. In addition, our joint ventures with Microsoft and Ford Motor Company will help pave the way for the expansion of CDMA into new platforms and devices."
"As we move forward, we plan to leverage future growth opportunities by continuing our strong market position with 1x, 1xEV and multi-mode integrated circuits and further developing and investing in wireless data and Internet access applications. We expect to continue the robust 3G licensing cycle that began this year by extending our agreements with both existing and new licensees to include cdma2000, WCDMA and other CDMA technologies at the same royalty rate for each standard. These agreements provide the foundation for growing our royalty stream as new markets, such as China, deploy CDMA networks and legacy networks evolve to third-generation CDMA," Dr. Jacobs said.
Fiscal Year 2000
Earnings Per Share Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
Pro Forma $ 0.27 $ 0.26 $ 0.27 $ 0.25 $ 1.05
Change from prior year 80% 44% 23% 4% 31%
Reported $ 0.23 $ 0.25 $ 0.19 $ 0.17 $ 0.85
Fiscal Year 1999
Earnings Per Share Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
Pro Forma $ 0.15 $ 0.18 $ 0.22 $ 0.24 $ 0.80
Reported $ 0.08 $(0.07) $ 0.09 $ 0.18 $ 0.31
Note: Pro forma results (see pages 12-13) for fiscal 2000 exclude amortization of goodwill and other acquisition-related intangible assets, one-time write-off of purchased in-process technology, employer payroll taxes on employee non-qualified stock option exercises, operating losses incurred by the exited consumer phone business and charges related to the sale of this business, one-time realized gains from sale of marketable securities, employee termination charges and other non-operating items. The difference between pro forma and reported earnings per share in the third and fourth quarters of fiscal 2000 is primarily related to the amortization of goodwill associated with the SnapTrack acquisition completed in March of 2000. Pro forma results for the prior year period exclude the results of exited businesses and related charges, one-time gains and other non-recurring items. Pro forma earnings exclude the abovementioned items and, therefore, differ from reported earnings, which are presented in accordance with generally accepted accounting principles. Earnings per share are computed independently for each of the quarters presented and for the fiscal year. Therefore, the sum of the quarterly net earnings per share will not necessarily equal the total for the year.
Pro forma revenues declined to $635 million in the fourth quarter of fiscal 2000 from $716 million in the fourth quarter of fiscal 1999. The decrease was attributable to lower sales of QUALCOMM MSM integrated circuits utilized in CDMA phones sold in the domestic South Korean market, due to the government-mandated elimination of phone subsidies. CDMA product sales in other worldwide markets continued to grow and pro forma gross margins increased to 63 percent in the fourth quarter of fiscal 2000 compared to 55 percent in the year ago period due to license fees and royalties representing a larger portion of total revenues. Revenues and earnings from licensing activities increased in the fourth quarter of fiscal 2000 despite lower phone shipments in South Korea.
Pro forma earnings per share for the fourth quarter of fiscal 2000 included a $0.01 charge to earnings in the QUALCOMM Wireless Systems (QWS) segment. The charge was related to a limited number of OmniTRACS(R) antenna units the Company believes will experience paint peeling due to the short term use of a paint process that has since been changed. The Company is taking proactive steps to address the issue with OmniTRACS customers while the problem is largely of a cosmetic nature to minimize any potential impact on the operation of the units.
Pro forma operating expenses (research and development and selling, general and administrative) for the fourth quarter of fiscal 2000 increased to 25 percent of revenues compared to 17 percent of revenues during the year ago period primarily due to lower overall revenues and higher R&D expenses. The increase in pro forma research and development expenses, up 40 percent over the fourth quarter of fiscal 1999, was primarily associated with new product and technology initiatives to support high-speed wireless Internet access and mobile data applications, including 1xEV (HDR), position location, Bluetooth and multimedia capabilities (CD-quality music and video).
Net investment income increased to $60 million as a result of higher balances of marketable securities generated from positive cash flow from operations and sales of exited businesses.
The Company's pro forma annual effective income tax rate for fiscal 2000 was 37 percent, compared to 35 percent for fiscal 1999.
Reported revenues for the fourth quarter of fiscal 2000 were $635 million, compared to $1.1 billion in the year ago period. The decrease in reported revenues was primarily attributable to the sale of the QUALCOMM Consumer Products (QCP) phone business in February 2000. Reported earnings per share were $.17 in the fourth quarter of fiscal 2000, compared to $.18 per share in the year ago period. Reported earnings before taxes and net income were $234 million and $139 million in the fourth quarter of fiscal 2000 compared to $210 million and $136 million, respectively, in the year ago period.
Business Outlook
The following statements are forward-looking and actual results may differ materially. Please consult page 10 of this press release for a description of certain risk factors and QUALCOMM's SEC reports for a complete description of risks. In response to SEC Regulation FD (Fair Disclosure), the Company plans to disseminate its quarterly business outlook, based on current expectations, in conjunction with its quarterly earnings release and conference call. The Company will not provide any further material guidance on analysts' financial models beyond the information provided in its quarterly earnings release and conference call.
First Quarter Fiscal 2001
-- Unit Shipments -- The Company expects to ship approximately 14 million MSM integrated circuits during the first quarter of fiscal 2001 compared to 11 million units in the fourth quarter of fiscal 2000.
-- Earnings Per Share -- The Company is comfortable with the current analyst consensus estimate of $0.28 pro forma earnings per share in the first quarter of fiscal 2001. This estimate takes into account a decrease in Globalstar(TM) contract services and other revenues in the first quarter of fiscal 2001 compared to the fourth quarter of fiscal 2000, which will result in lower earnings in the QWS segment of approximately $0.02 per share.
Fiscal 2001
-- The Company is comfortable with the current analyst consensus estimate of $1.29 pro forma earnings per share for fiscal 2001. The Company anticipates growth to be moderate in the first half of fiscal 2001 and to accelerate in the second half as third generation cdma2000 1x product volumes increase.
-- These estimates assume industry wide CDMA phone sales of approximately 90 million units in calendar year 2001 and a 20 percent decrease in the average selling prices of CDMA phones, upon which most royalties are calculated.
-- The Company expects a pro forma effective income tax rate of 37 percent in fiscal 2001.
-- The Company plans to continue to increase its investment in research and development and selling and marketing expenses to support its integrated circuit and system software business, as well as in new products and services during 2001 to drive the rapid adoption and growth of 3G wireless data and Internet access in 2002 and beyond.
Cash Flow
QUALCOMM's cash, cash equivalents and investments totaled approximately $2.5 billion at the end of the fourth quarter of fiscal 2000. The following table presents selected cash flow information for the fourth quarter of fiscal 2000 (in millions):
Selected Cash Flow Information Amount
------------------------------ ------
Earnings before taxes, depreciation,
amortization and non-cash charges $ 344
Working capital changes 7
Additional share capital 35
-----
Net cash inflows 386
-----
Strategic investments and capital expenditures (216)
-----
Net cash generated $ 170
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Pro Forma Results of Business Segments
The following tables present pro forma segment information (in thousands):
Fourth Quarter - Fiscal Year 2000
Reconciling Total
Segments QCT QTL QWS Items (1) QUALCOMM
Revenues 268,989 186,041 150,458 29,957 635,445
Change from
prior year (25%) 26% (28%) N/M (11%)
Earnings before
taxes 64,281 167,939 57,887 12,397 302,504
% of revenues 24% 90% 38% N/M 48%
Change from prior
year (49%) 23% 12% N/M 8%
Fiscal Year 2000
Reconciling Total
Segments QCT QTL QWS Items (1) QUALCOMM
Revenues 1,238,702 705,484 720,907 96,321 2,761,414
Change from
prior year 9% 55% (14%) N/M 12%
Earnings before
taxes 391,519 633,336 272,202 28,916 1,325,973
% of revenues 32% 90% 38% N/M 48%
Change from
prior year (9%) 56% 64% N/M 56%
Fourth Quarter - Fiscal Year 1999
Reconciling Total
Segment QCT QTL QWS Items (1) QUALCOMM
Revenues 358,372 147,602 208,634 1,726 716,334
Earnings
before taxes 125,568 136,060 51,671 (31,917) 281,382
% of revenues 35% 92% 25% N/M 39%
Fiscal Year 1999
Reconciling Total
Segments QCT QTL QWS(2) Items (1) QUALCOMM
Revenues 1,133,422 454,163 843,154 24,212 2,454,951
Earnings
before
taxes 427,994 404,947 166,340 (149,319) 849,962
% of revenues 38% 89% 20% N/M 35%
(1) Reconciling Items related to revenues consist primarily of other non-reportable segment revenue less inter-segment eliminations. Reconciling Items related to earnings before taxes consist primarily of non-reportable segment results, unallocated net investment income, distributions on Trust Convertible Preferred Securities and the elimination of inter-company segment profit.
(2) QWS segment information for fiscal 1999 excludes revenues and losses before taxes related to the Company's terrestrial CDMA wireless infrastructure business sold to Ericsson in May 1999. N/M - Not Meaningful
Highlights of Business Segments - Fourth Quarter and Fiscal 2000
QUALCOMM Technology Licensing (QTL)
-- Entered into eight new license agreements in the fourth quarter of fiscal 2000, a total of 28 new license agreements in fiscal 2000. This brings the cumulative total to over 90 companies now licensed to manufacture and sell CDMA products worldwide.
-- Signed a total of 13 new research and development agreements with Chinese manufacturers, including Beijing Telecommunications Equipment Factory, Chunghwa Telecom Labs, Datang Telecom Technology Co., Eastern Communications Co., Great Dragon Telecomm, Hangzhou Unitop Electric, Hisense Group, Huawei Technologies, Langchao Electronic Information Industry Group, LT Netcomm Co, NG Industrial, Ningbo Bird Co. and Zhongxing Telecom Co.
-- Entered into numerous third generation CDMA license agreements in fiscal 2000. The current list of 3G licensees -- covering WCDMA, cdma2000 and other CDMA technologies -- include Advantest, Agilent, Alps, Ericsson, Fujitsu, Hitachi, Hyundai, Kyocera, LG Electronics, Lucent, Matsushita, Maxon, Motorola, Nortel, Philips, Samsung, Sanyo, Sharp, Sony, Toshiba and Willtech, among others. In all cases, the royalty rate to be paid by these companies for third generation CDMA products is the same rate as those companies pay for second generation cdmaOne(TM) products, and is not dependent upon which standard is implemented.
-- Announced decisions by the Japanese and European Patent Offices to uphold three important QUALCOMM patents. The three patents, which were challenged by competitors, cover important features of second- and third-generation CDMA systems, including cdma2000 and WCDMA.
QUALCOMM CDMA Technologies (QCT)
-- Shipped over 11 million Mobile Station Modem (MSM) phone integrated circuits and system software to customers worldwide during the fourth quarter of fiscal 2000, compared to 14 million units shipped in the year ago period. The reduction of MSM shipments in the fourth quarter of fiscal 2000 was related to lower CDMA phone sales in South Korea. Cumulative shipments of MSM phone integrated circuits exceeded 118 million and total cumulative integrated circuit shipments exceeded 350 million units.
-- Shipped samples of the MSM3300 integrated circuit and system software during the fourth quarter of fiscal 2000. The MSM3300 is the world's first single-integrated circuit multimedia modem that provides the highest level of integration of multimedia features available for mobile phones.
-- Performed the world's first 3G cdma2000 1x wireless data transmissions using MSM5000 and CSM5000 integrated circuits and system software. Data rates of 153 kbps were demonstrated simultaneously on both the forward and reverse channels. The Company is now shipping both the MSM5000 and the CSM5000 to support the first commercial cdma2000 1x deployments in South Korea.
-- Introduced the MSP1000 integrated circuit and system software for Internet applications, including support for the Wireless Internet Launchpad(TM) suite.
-- Announced strategic partnerships with Schlumberger, Ericsson, Symbian, Microsoft, RF Micro Devices and PacketVideo to advance CDMA development and deployment worldwide.
-- Announced extensive pan-European SnapTrack wireless location technology roaming trials with France Telecom Mobiles and other major European carriers.
-- Locate Networks, Glenayre Technologies and Phone.com announced strategic partnerships with SnapTrack to advance high-performance wireless location solutions.
QUALCOMM Wireless Systems (QWS)
-- Shipped approximately 12,000 OmniTRACS units and related products in the fourth quarter of fiscal 2000, a total of 56,000 units for fiscal 2000 and a cumulative total of over 360,000 units. This compares to approximately 15,000 units during the year ago quarter and 49,000 units for fiscal 1999. The lower volume of OmniTRACS unit shipments in the fourth quarter of fiscal 2000 resulted from higher fuel prices and other economic issues affecting the domestic long-haul trucking industry.
-- Processed over six million messages and position reports per day for more than 1,250 U.S. customers.
-- Released commercial versions of OmniExpress(TM), a CDMA-based terrestrial communications system for the U.S. market, and MVPc, a Windows(R) CE-based onboard computer. Commercial shipments commenced on both products in the fourth quarter of fiscal 2000.
-- Announced the availability of LINQ, a GSM-based terrestrial communication system for the European market. LINQ is provided through eQCOM, a Netherlands subsidiary, which has established a European-based Network Management Center for messaging services.
-- Shipped 28,000 Globalstar portable and fixed phones in the fourth quarter of fiscal 2000, for a cumulative total of more than 99,000 Globalstar portable and fixed phone shipments since production began in September of 1999.
Other Developments
-- Announced the formation of a joint venture with Ford Motor Company in July 2000. The new venture, known as Wingcast LLC, will develop and deliver CDMA-based wireless mobility and information services that will bring voice, entertainment, Internet access and safety services into cars and trucks. Wingcast will work with leading industry hardware, software and content providers to offer state-of-the-art in-vehicle applications to consumers.
-- Entered into a strategic alliance between Technicolor and QUALCOMM in June 2000. The two companies formed a joint venture called Technicolor Digital Cinema, LLC to provide
open, end-to-end distribution technology and support services for the delivery of digital cinema to theaters worldwide.
-- Released Eudora(R) 5.0 email software; surpassed the one million active users mark for Eudora email software in Sponsored mode which was released in February 2000; and
exceeded the half-billion impressions delivered mark for ads
shown in Eudora in Sponsored mode.
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. The Company's business areas include integrated circuits and system software; technology licensing; Eudora(R) email software for Windows(R) and Macintosh(R) computing platforms; satellite-based systems including portions of the Globalstar(TM) system and wireless fleet management systems, OmniTRACS(R) and OmniExpress(TM). QUALCOMM owns patents that are essential to all of the CDMA wireless telecommunications standards that have been adopted or proposed for adoption by standards-setting bodies worldwide. QUALCOMM has licensed its essential CDMA patent portfolio to more than 90 telecommunications equipment manufacturers worldwide. Headquartered in San Diego, Calif., QUALCOMM is included in the S&P 500 Index and is a 2000 FORTUNE 500(R) company traded on The Nasdaq Stock Market(R) under the ticker symbol QCOM. |
