(BSNS WIRE) QUALCOMM Announces Third Quarter Fiscal 2002 =1
QUALCOMM Announces Third Quarter Fiscal 2002 =1
Business Editors & High-Tech Writers
SAN DIEGO--(BUSINESS WIRE)--July 25, 2002--QUALCOMM Incorporated
(NASDAQ: QCOM):
QUALCOMM's third quarter fiscal 2002 earnings conference call will
be broadcast live on July 25, 2002 beginning at 2:30 p.m. Pacific
Daylight Time on the Company's web site at: www.qualcomm.com.
This conference call may contain forward-looking financial
information. The taped audio replay will be available for five
business days. To listen to the replay, U.S. callers may dial
(800) 633-8284 and international callers may dial (858) 812-6440.
Both U.S. and international callers should use reservation number
20713120.
QUALCOMM Incorporated (NASDAQ: QCOM) today announced its third
quarter fiscal 2002 results ended June 30, 2002. Pro forma revenues
were $721 million, an increase of 10 percent compared to $657 million
in the year ago quarter and 9 percent compared to $659 million in the
second quarter of fiscal 2002. Pro forma earnings per share were $0.24
in the third quarter of fiscal 2002, an increase of 20 percent
compared to $0.20 per share in both the year ago quarter and the
second quarter of fiscal 2002(1) (see Pro Forma Condensed Consolidated
Statements of Operations Schedule for pro forma adjustments). GAAP
reported revenues for the third quarter of fiscal 2002 were $771
million compared to $657 million in the year ago quarter and $696
million in the second quarter of fiscal 2002. GAAP reported loss was
$14 million or $0.02 per share in the third quarter compared to a loss
per share of $0.26 in the year ago quarter and earnings per share of
$0.05 in the second quarter of fiscal 2002.
GAAP reported losses for the third quarter were primarily due to
$194 million in charges related to Leap Wireless investments. Due to
the significant decline in the market value of the Leap Wireless
marketable securities during the third quarter and the percentage
decline relative to their cost, we transferred $167 million in
cumulative unrealized losses recorded in equity to the earnings
statement for the third quarter of fiscal 2002. This reclassification
was made in accordance with the guidelines for "other than temporary
losses" as required by Financial Accounting Standard (FAS) 115. We
also recorded $27 million in FAS 133 losses related to Leap Wireless
warrants.
"The continued strength of commercial 3G CDMA2000 1X deployments
is evident in our third quarter results, which exceeded our
expectations for pro forma revenues and earnings," said Dr. Irwin Mark
Jacobs, chairman and CEO of QUALCOMM. "We achieved record shipments of
MSM phone chips, CSM equivalent voice channels and gpsOne position
location-enabled devices. We also reached a milestone of one million
BREW users during the quarter and were pleased to see the commercial
launch of two new BREW-enabled networks at KDDI in Japan and Verizon
Wireless in the United States. As part of the rapid evolution with
CDMA to high speed, low cost data, we experienced the first deployment
of CDMA2000 1X EV-DO (data optimized) 2.4 Mbps service by SK Telecom
and KTFreeTel at the World Cup games in South Korea."
"In today's environment where every capital expenditure dollar
counts, we believe the combination of a CDMA2000 1X network and BREW
applications provides CDMA carriers clear economic and service quality
advantages over their competitors. We will continue to work closely
with our chip customers, as well as the wireless carriers and
applications developers, to rapidly deliver 3G CDMA of their
preference to users across the globe," said Dr. Jacobs.
Pro forma revenues increased to $721 million in the third quarter
of fiscal 2002 from $657 million in the year ago quarter, and $659
million in the second quarter of fiscal 2002. The increase in revenues
compared to the year ago quarter is primarily related to an increasing
demand for CDMA products across all major regions of CDMA deployment,
with the exception of Latin America which has been impacted by the
economic downturn in that market. Key drivers of demand are third
generation ("3G") CDMA2000 products, Binary Runtime Environment for
Wireless(TM) (BREW(TM)) applications and gpsOne(TM) position location
capabilities.
Pro forma gross margin for the third quarter of fiscal 2002 was 67
percent compared to 65 percent in the year ago quarter and 67 percent
in the second quarter of fiscal 2002. The increase in pro forma gross
margin from the year ago quarter resulted from improved gross margins
in the QUALCOMM CDMA Technologies (QCT) business segment, primarily
resulting from a change in product mix toward the higher end devices
utilizing our 3G CDMA2000 1X Mobile Station Modem (MSM(TM)) phone
chips and an increase in royalty revenues in the QUALCOMM Technology
Licensing (QTL) business segment.
Pro forma R&D expenses were $114 million in the third quarter of
fiscal 2002 compared to $106 million in the year ago quarter and held
constant to the second quarter of fiscal 2002. The increase in R&D
expenses compared to the year ago quarter was primarily due to QCT
product initiatives to support high-speed wireless Internet access and
multi-mode, multi-band, multi-network chipsets using our radioOne(TM)
direct conversion architecture.
Pro forma selling, general and administrative expenses were $99
million in the third quarter of fiscal 2002 compared to $102 million
in the year ago quarter and $97 million in the second quarter of
fiscal 2002. The decrease in SG&A expense compared to the year ago
quarter was primarily due to a reduction in bad debt expense,
partially offset by the effects of increased head count and related
expenses for our support and marketing efforts related to the BREW
application development platform.
Pro forma investment income was $28 million for the third quarter
of fiscal 2002 compared to $24 million in both the year ago quarter
and the second quarter of fiscal 2002. Pro forma investment income is
primarily comprised of interest income on corporate cash and
marketable securities. The increase in interest income as compared to
the year ago quarter was a result of higher average balances of cash
and marketable securities.
The Company's pro forma annual effective income tax rate for
fiscal 2002 is estimated to be 35 percent.
QUALCOMM Strategic Initiatives (Excluded from Pro Forma Results)
The QUALCOMM Strategic Initiatives (QSI) segment includes our
strategic investments and related income and expenses from non-core
businesses including the Vesper Companies. QSI revenues were $49
million in the third quarter of fiscal 2002, primarily related to the
consolidation of the Vesper Companies. QSI losses before taxes for the
third quarter of fiscal 2002 were $285 million compared to $119
million in the second quarter of fiscal 2002, an increase of $166
million primarily due to the $167 million charge to record the
difference between cost plus accrued interest and market value of Leap
Wireless stock and bonds. Financial Accounting Standard (FAS) 133
losses, principally related to Leap Wireless warrants which have been
marked to market through the earnings statement on a continuing basis,
decreased by $22 million compared to the second quarter of fiscal
2002. Vesper operations improved in the third quarter of fiscal 2002
with an $11 million decrease in our share of losses. The decrease in
QSI losses for Vesper and FAS 133 were offset by expanded Inquam
operations to introduce CDMA2000 1X service in Europe ($3 million);
suspension of recognizing interest income on Leap Wireless bonds ($8
million); increased expenses ($5 million), primarily for our support
of the Pegaso sale to Telefonica; and increased unrealized and
realized losses in other assets ($18 million), including the write-off
of our Wingcast assets.
The financial markets for telecommunications investments, in
general, have been very unfavorable for some time, but particularly in
the most recent fiscal quarter. As a consequence, losses from
investments recorded in the quarter are significant. We are working
with the companies in which we have invested to achieve the objectives
we established at the time of making the investments. In many cases,
recovery from the current valuations may take considerable periods of
time or may not occur at all, but we remain optimistic about the
business models and strategies being executed by Leap Wireless and
Vesper, which have given rise to the most significant losses in the
current quarter. The cash invested and unfunded commitments balance
for QSI is updated quarterly (see QUALCOMM Strategic Initiatives (QSI)
Key Investments Schedule or www.qualcomm.com on the Investor Relations
page under "Segment Reporting").
Business Outlook
The following statements are forward-looking and actual results
may differ materially. Please see below for a description of certain
risk factors and QUALCOMM's quarterly reports on file with the
Securities and Exchange Commission (SEC) for a more complete
description of risks. We will disseminate our quarterly business
outlook, based on current expectations, in conjunction with our
quarterly earnings release and conference call. We will not provide
further material guidance on analysts' financial models beyond the
information provided in our quarterly earnings release and conference
call.
Outlook information is presented on a pro forma basis and excludes
the QSI segment.
Fourth Quarter Fiscal 2002
-- Based on the current business outlook, we expect fourth fiscal
quarter pro forma revenues to increase by approximately 10-13
percent compared to the third quarter of fiscal 2002. We
expect fourth fiscal quarter pro forma earnings per share to
be approximately $0.26-$0.27. This estimate assumes shipments
of approximately 18-19 million MSM phone chips during the
quarter, including approximately 15 million 3G CDMA2000 1X MSM
phone chips.
Fiscal 2002
-- Based on the current business outlook, we expect pro forma
revenue growth for fiscal 2002 to be approximately 7-8 percent
and pro forma earnings per share to be approximately
$0.93-$0.94.
Cash Flow
QUALCOMM's cash, cash equivalents and marketable securities,
excluding QSI, totaled approximately $2.6 billion at the end of the
third quarter of fiscal 2002. The following table presents selected
cash flow information, including cash equivalents and marketable
securities, for the third quarter and first nine months of fiscal 2002
(in millions):
-0-
*T
Selected Cash Flow Information Third Quarter Nine Months
------------------------------ Fiscal 2002 Fiscal 2002
-----------------------------
Earnings before taxes, depreciation,
amortization and asset impairments $ 316 $ 904
Working capital changes and taxes paid (129) (122)
Additional share capital 51 103
-----------------------
Net cash inflows 238 885
Capital expenditures and acquisitions (57) (114)
-----------------------
Net cash provided 181 771
Decrease in fair value of marketable securities (12) (29)
Transfers to QSI (139) (551)
Net increase in cash, cash equivalents and
marketable securities of QUALCOMM, ------------------------
excluding QSI $ 30 $ 191
=======================
*T
Results of Business Segments
The following tables present pro forma segment information (in
thousands):
-0-
*T
Third Quarter -- Fiscal Year 2002
Other/
Reconciling
Segments QCT QTL QWI Items (1) Pro Forma
Revenue 404,253 198,853 109,581 8,631 721,318
Change from
prior quarter 18% 3% (1%) N/M 9%
Change from
prior year 21% 10% 6% N/M 10%
Earnings before
taxes 117,524 174,450 (3,074) 8,906 297,806
% of revenues 29% 88% (3%) N/M 41%
Change from
prior quarter 51% 2% 22% N/M 18%
Change from
prior year 67% 14% (160%) N/M 24%
Second Quarter -- Fiscal Year 2002
Other/
Reconciling
Segments QCT QTL QWI Items (1) Pro Forma
Revenues 343,815 193,955 110,264 11,229 659,263
Earnings before
taxes 77,724 171,535 (3,964) 6,533 251,828
% of revenues 23% 88% (4%) N/M 38%
Third Quarter -- Fiscal Year 2001
Other/
Reconciling
Segments QCT QTL QWI Items (1) Pro Forma
Revenues 333,115 180,129 103,742 39,612 656,598
Earnings
before taxes 70,582 152,890 5,101 11,369 239,942
% of revenues 21% 85% 5% N/M 37%
Nine Months -- Fiscal Year 2002
Other/
Reconciling
Segments QCT QTL QWI Items (1) Pro Forma
Revenues 1,107,212 603,611 329,140 33,306 2,073,269
Change from
prior year 8% 2% 5% N/M 2%
Earnings
before taxes 282,189 534,673 (8,271) 28,492 837,083
% of revenues 25% 89% (3%) N/M 40%
Change from
prior year 18% 0% (128%) N/M 0%
Nine Months -- Fiscal Year 2001
Other/
Reconciling
Segments QCT QTL QWI Items (1) Pro Forma
Revenues 1,027,806 592,599 313,826 94,724 2,028,955
Earnings
before taxes 239,628 533,692 29,081 38,778 841,179
% of revenues 23% 90% 9% N/M 41%
*T
(1) Other/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 the amortization of goodwill and
other acquisition-related intangible assets and impairment and
other 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.
N/M -- Not Meaningful
Business Segment Highlights
QUALCOMM Technology Licensing (QTL)
-- Signed a total of three royalty-bearing CDMA license
agreements during the third quarter of fiscal 2002, including
one new licensee and two extensions to existing license
agreements.
-- Announced royalty-bearing license agreements with Alcatel
(WCDMA and TD-SCDMA infrastructure equipment) and with NEC
(WCDMA and TD-SCDMA applications specific integrated
circuits), shortly after the third quarter of fiscal 2002.
QUALCOMM CDMA Technologies (QCT)
-- Shipped over 16 million MSM phone chips to customers worldwide
during the third quarter of fiscal 2002 compared to
approximately 14 million units in both the year ago quarter
and in the second quarter of fiscal 2002.
-- Shipped approximately 11 million 3G CDMA2000 1X MSM phone
chips during the third quarter of fiscal 2002 for a cumulative
total of approximately 31 million.
-- Shipped CSM infrastructure chips to support approximately 4
million equivalent voice channels compared to approximately 3
million equivalent voice channels in the year ago period and
2.5 million in the second quarter of fiscal 2002. The increase
is primarily attributable to the growth in CDMA2000 1X
deployments.
-- Demonstrated the world's first live WCDMA and GSM calls using
the complete radioOne direct conversion dual-mode solution.
-- Announced an accelerated sampling schedule for customers of
its highly integrated MSM6200(TM) solution, following
successful live voice and data calls in public demonstrations
using MSM6200-based test terminals.
-- Completed a series of third-generation (3G) Universal Mobile
Telecommunications System (UMTS) packet data calls,
representing the first such demonstration of UMTS packet data
services with commercial 3G infrastructure and chipsets for
mobile devices.
QUALCOMM Wireless & Internet Group (QWI)
QUALCOMM Internet Services (QIS)
-- Announced several BREW carrier developments, including:
-- Verizon Wireless, the largest wireless service provider in
the United States launched BREW-enabled application
download service nationwide in June 2002.
-- KTF, South Korea's second largest wireless service
provider, launched BREW-enabled application download
service in November 2001 and is currently offering 16
different BREW-enabled handsets and over 300 BREW
applications.
-- U.S. carrier, ALLTEL, announced its plans to launch its
BREW-based service before the end of 2002.
-- Telesp Celular, the largest mobile phone operator in
Brazil, began a commercial user trial of BREW-based
service in June 2002.
-- Announced that more than one million end users around the
world have purchased and activated BREW-enabled handsets since
November 2001.
-- Hosted more than 1,300 wireless industry professionals from 17
countries at the BREW 2002 Developers Conference in San Diego,
June 3-5, 2002. At BREW 2002, Insignia Solutions demonstrated
the first implementation of their Mobile Foundation(TM)
software that enables the provisioning of Java(TM)
technology-based mobile services for BREW.
-- Announced plans to work with Oracle Corporation, the world's
largest enterprise software company, to extend Oracle 9i(TM)
Lite to support the BREW platform, allowing companies to
develop and deploy mobile enterprise applications for
BREW-enabled devices.
QUALCOMM Wireless Business Solutions (QWBS)
-- Shipped approximately 12,000 OmniTRACS(R) units and related
products in the third quarter of fiscal 2002, compared to
approximately 11,000 units during the year ago quarter and
9,500 units during the second quarter of fiscal 2002.
-- Acquired the equity interests of certain minority shareholders
*** end of story *** |
