Qualcomm Reports Fourth Quarter And Fiscal 1996 Results
SAN DIEGO, Nov. 18 /PRNewswire/ -- Qualcomm Inc today announced financial results for the fourth quarter and fiscal
year ended September 29, 1996. Revenues for the fourth quarter were $283 million, up 133 percent from the year ago
quarter of $122 million, while revenues for the year were $814 million, up 111 percent from the prior year's revenues of $387
million.
Net income for the fourth quarter was $8 million compared with the year ago quarter of $11 million, while net income for the
1996 fiscal year was $21 million compared with the fiscal 1995 net income of $30 million.
Fully diluted earnings per share for the fourth quarter were $.11 compared to $.17 from the year ago quarter, while fully
diluted earnings per share for the fiscal year were $0.30 compared to $0.52 per share in the previous year. Earnings were
lower due to significant investment in research and development and selling and marketing expenses in 1996, both of which
doubled in absolute dollars in the fiscal year, but fell as a percentage of sales, and to lower percentage gross margins incurred
in commencing high volume manufacturing of Code Division Multiple Access (CDMA) subscriber and infrastructure
equipment.
To meet the rising demand for CDMA, OmniTRACS(R) and Eudora(R) products, many customers placed orders with
QUALCOMM this year and total backlog and contracts as of September 29, 1996 totaled over $1.7 billion. Portions of the
backlog and certain contracts are subject to performance guarantees and contingencies. "This fiscal year has been one of
record growth for QUALCOMM, especially for our CDMA business," said Irwin Mark Jacobs, chief executive officer.
"Significant major milestones were achieved in the development and deployment of CDMA technology. Orders were received
by the Company for approximately $1 billion in equipment, commercial CDMA products were shipped in large volumes to
network operators, and the several major Personal Communications Services (PCS) and cellular networks commenced digital
service domestically and internationally, including PCS PrimeCo, Hutchison Telephone, Korea Mobile Telecom, Shinsegi,
360(degrees) Communications, AirTouch Cellular and Bell Atlantic Nynex Mobile (BANM). Our OmniTRACS system
business continued to make strong contributions, with particular growth in international unit sales and in messaging revenues
domestically, as we grew our share of the U.S. long-haul trucking mobile wireless communications market."
Business Highlights for the Quarter and Fiscal Year
CDMA
In North America, many of the leading PCS and cellular operators have chosen CDMA, and are now building commercial
networks in virtually every major market. PCS PrimeCo recently announced the nationwide commercial launch of their digital
CDMA networks in 15 of their markets using QCP-1900 phones manufactured by QUALCOMM Personal Electronics
(QPE), a joint venture between QUALCOMM and Sony. This marks a major milestone in the continuing deployment of
CDMA technology. Earlier this fiscal year a number of service operators, including Korea Mobile Telecom, Shinsegi Telecom,
AirTouch Cellular, Bell Atlantic Nynex Mobile (BANM) and 360(degrees) Communications joined Hutchison Telephone in
Hong Kong by launching commercial CDMA service, and by September industry sources placed the CDMA subscribers at
over 400,000. The Company is shipping CDMA phones and infrastructure to support most of these commercial deployments.
In conjunction with Northern Telecom, QUALCOMM began the delivery of commercial infrastructure equipment to Sprint
Spectrum L.P. (SSLP) for the build-out of their PCS systems in late 1996 and continued delivering to BC TEL Mobility for
the CDMA overlay to their cellular system.
The strategic CDMA alliance with Hughes Network Systems (HNS), a subsidiary of General Motors, is another significant
milestone, expanding the market for QUALCOMM designed and manufactured infrastructure equipment. Under its
agreement, QUALCOMM will share its infrastructure designs with HNS. In return, HNS has agreed to purchase from
QUALCOMM an ongoing percentage of HNS's customers' infrastructure requirements. HNS recently announced a strategic
supply agreement with NextWave Communications under which HNS will supply up to $1 billion in CDMA infrastructure
equipment over the next six years for NextWave's CDMA PCS network.
In fiscal 1996, QPE dedicated a new manufacturing facility and completed the installation of eight production lines in order to
support existing and future orders for CDMA phones. To alleviate future shipment limitations related to the supply of
components, QPE has secured alternative sources for most ASIC components required in the production of CDMA handsets
and infrastructure. During the fourth quarter, QPE's CDMA handset production capacity continued to ramp up and shipments
exceeded 200,000 phones, and to date, QPE has produced over 400,000 CDMA phones for U.S. and international service
providers. QUALCOMM also broke ground on a new manufacturing facility scheduled for completion early in the first quarter
of 1997, which will increase infrastructure production capacity to over 400 base stations per month. In support of the licensees
manufacturing CDMA equipment, the QUALCOMM ASIC components business shipped over two million ASICs during the
fiscal year.
OmniTRACS
Combined domestic and international OmniTRACS unit shipments were 10,969 in the fourth quarter. This brought the total
number of shipped OmniTRACS system units to over 175,000. The total number of countries now delivering OmniTRACS
service is 32, served by 8 network management facilities. "With over 650 domestic customers, QUALCOMM's OmniTRACS
business continues to be successful in both the capture of new orders, such as National Freight Inc., Global Van Lines,
Superior Carriers, and May Trucking Company, and the renewal of existing contracts with major transportation companies,
including J.B. Hunt, Chemical Leaman Tank Lines, and Comcar Industries, Inc.," said Harvey P. White, president.
The Company received approval from the FCC to increase its authority to support over 250,000 OmniTRACS system
terminals. In recognition of the OmniTRACS system's superior performance and functionality, OmniTRACS equipment was
used to track the Olympic Torch on its 15,000 mile trek across the U.S. and is in use by the U.S. Army for peace keeping
efforts in Bosnia.
Globalstar(TM)
During the quarter, the Globalstar development effort passed a significant milestone with the successful completion of
end-to-end calls using laboratory Globalstar hardware. With the signing of 21 more service provider agreements, Globalstar
extended its reach to 103 countries around the world. Earlier in the year, QUALCOMM licensed Orbitel Mobile
Communications Ltd. as a manufacturer of Globalstar handsets.
Eudora
With over 18 million users, Eudora email software continues to lead the Internet email market with over 70 percent of all new
Internet mailboxes, according to a recent study by International Data Corporation. During the quarter, the Eudora Division
released a new version of Eudora Pro(TM) for Windows operating systems. The planned introduction of a client/server
configuration will extend the software's reach from the Internet to corporate "intranets," opening the door to a large, rapidly
growing market. Integration of Eudora capability with the Company's wireless products is a strategic objective.
Other
Identifying QUALCOMM as a company with a consistently applied system of quality standards and procedures for design,
development, production, installation and servicing, QUALCOMM received a Certificate of Registration during the year for
conformance to the ISO 9000 and 9001 international standards, recognized worldwide as a hallmark of total quality
management.
Highlights of Financial Performance
Communications systems revenues were $215 million in the fourth quarter, a 174 percent increase over revenues of $79
million in the same quarter in fiscal 1995. For the fiscal year, communication systems revenues were $583 million, a 136
percent increase over fiscal 1995 revenues of $247 million. This growth was due to the increase of sales of CDMA subscriber
equipment to carriers and Application Specific Integrated Circuits (ASIC) products to other CDMA manufacturers.
Communications systems gross margin was 22 percent in the fourth quarter versus 34 percent in the fourth quarter of 1995,
and for the fiscal year, the gross margin was 24 percent compared to 42 percent in the 1995 fiscal year, due to lower gross
margins on CDMA and ASIC products compared with the OmniTRACS business that contributed the majority of
communications systems revenue in the year ago quarter. The gross margin on CDMA products was impacted by start-up
costs associated with a ramp-up of high volume manufacturing.
Contract Services revenues in the fourth quarter reached $36 million, a 47 percent increase over revenues of $24 million in last
year's fourth quarter, and for the fiscal year Contract Services revenues were $131 million, a 38 percent increase over fiscal
1995 revenues of $95 million, due primarily to the increased resources applied to the Globalstar development contract.
License, royalty and development fees contributed $32 million in the quarter, a 72 percent increase compared to revenues of
$19 million in the same quarter of the prior year, and license and development fees contributed $100 million in the fiscal year, a
125 percent increase compared to $44 million from the 1995 fiscal year. During the fourth quarter, QUALCOMM signed
multi- million dollar license contracts with Hughes Network Systems (HNS), Sony Electronics, Inc., and Kyocera
Corporation, and included revenues from software licenses and other fees from new and existing licensees.
During the year, a total of three new CDMA infrastructure licensees, five new subscriber licensees, two new ASIC licensees
and two new test equipment licensees were added to the list of companies who are authorized to build and sell equipment
based on QUALCOMM's CDMA technology, bringing the total count of licenses to 48. In addition to those stated
previously, subscriber, infrastructure and ASIC licenses were granted to DENSO Co. Ltd., Kenwood Corporation, Siemens
Wireless Terminals, VLSI Technology and DSP Communications. Also, royalties, principally from the sale of handset and
infrastructure equipment by licensees, increased with delivery of commercial CDMA networks around the world. The
Company expects to continue to experience quarterly fluctuations in license and development fee revenues.
Research and development (R&D), sales and marketing (S&M) and general and administrative (G&A) expenses, both in the
quarter and in the fiscal year, grew substantially in absolute dollars, while decreasing from the year ago quarter and the
previous fiscal year as a percent of sales. QUALCOMM continues to invest in the development of CDMA infrastructure,
subscriber equipment and ASIC products for commercial deployment and in new OmniTRACS system and other products,
positioning the Company to increase its participation in the rapidly growing wireless market. In the fourth quarter, R&D
expenses doubled from the year ago quarter from $24 million to $48 million, but decreased as a percent of sales from 20
percent to 17 percent, and similarly in the fiscal year, R&D expenses doubled from the 1995 fiscal year from $80 million to
$162 million, but decreased as a percent of sales from 21 percent to 20 percent.
The increase in Sales and Marketing expenses reflected growing sales activities focused on introducing QUALCOMM's
commercial CDMA wireless products to worldwide markets. QUALCOMM also participated with its customers in
cooperative sales and marketing programs, including market development funding. In the fourth quarter, S&M expenses more
than doubled from the year ago quarter from $11 million to $23 million, but decreased as a percent of sales from 9 percent to
8 percent, and similarly, in the fiscal year, S&M expenses nearly doubled from the 1995 fiscal year from $38 million to $74
million, but decreased as a percent of sales from 10 percent to 9 percent.
In the quarter, G&A expenses increased over the year ago quarter from $9 million to $15 million, but fell as a percent of sales
from 7 percent to 5 percent, and in the fiscal year G&A expenses increased over the previous fiscal year from $35 million to
$49 million, but fell as a percent of sales from 9 percent to 6 percent.
Net interest income decreased slightly to $3.6 million for the quarter, compared to $4.0 million for the year ago quarter. Net
interest income increased to $21 million in fiscal 1996 compared with $7 million in fiscal 1995. The increase resulted from
interest income on proceeds raised in an equity offering in August 1995.
Headquartered in San Diego, QUALCOMM develops, manufactures, markets, licenses and operates advanced
communications systems and products based on its proprietary digital wireless technologies. The Company's primary product
areas are the OmniTRACS(R) system (a geostationary satellite-based, mobile communications system providing two-way data
and position reporting services), CDMA wireless communications systems and products and, in conjunction with others, the
development of the Globalstar(TM) low-earth-orbit (LEO) satellite communications system. Other Company products include
the Eudora Pro(TM) electronic mail software, ASIC products, and communications equipment and systems for government
and commercial customers worldwide. For more information on QUALCOMM products and technologies, please visit the
Company's Website at qualcomm.com.
Except for the historical information contained herein, this news release contains forward-looking statements that are subject to
risks and uncertainties, including timely product development and commercial implementation of the Company's CDMA
technology, continued growth in the CDMA subscriber population and the scale up and operations of CDMA systems, timing
and receipt of license fees and royalties, the Company's ability to successfully manufacture significant quantities of CDMA or
other equipment on a timely and profitable basis and those related to performance guarantees, change in economic conditions
of the various markets the Company serves, as well as the other risks detailed from time to time in the Company's SEC
reports, including the report on Form 10-K for the year ended September 28, 1997 and most recent Form 10-Qs.
QUALCOMM, OmniTRACS and Eudora are registered trademarks and Eudora Pro is a trademark of QUALCOMM
Incorporated. Globalstar is a trademark of Globalstar, L.P.
QUALCOMM Incorporated
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended Twelve months ended
Sept. 29 Sept. 24 Sept. 29 Sept. 24
1996 1995 1996 1995
Revenues:
Communications systems $215,316 $78,565 $582,953 $246,997
Contract services 35,901 24,361 131,022 95,150
License, royalties and
development fees 31,887 18,580 99,875 44,465
Total revenues 283,104 121,506 813,850 386,612
Operating expenses:
Communications systems 168,451 52,113 445,481 143,774
Contract services 24,276 17,176 90,380 69,396
Research and development 48,091 23,711 162,340 80,171
Selling and marketing 23,177 10,668 74,114 37,754
General and administrative 14,893 8,865 48,971 34,918
Total operating expenses 278,888 112,533 821,286 366,013
Operating income (loss) 4,216 8,973 (7,436) 20,599
Interest income 4,864 4,720 24,239 9,529
Interest expense (1,290) (691) (3,354) (2,264)
Minority interest in losses
of consolidated subsidiary 2,879 4,608 13,178 12,016
Income before income taxes 10,669 17,610 26,627 39,880
Income tax expense (2,727) (6,687) (5,600) (9,700)
Net income $7,942 $10,923 $21,027 $30,180
Net earnings per common
share
Primary $0.11 $0.17 $0.30 $0.53
Fully diluted $0.11 $0.17 $0.30 $0.52
Shares used in per share
calculation
Primary 70,773 63,476 70,214 57,420
Fully diluted 70,773 63,858 70,468 58,194
QUALCOMM Incorporated
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
ASSETS
September 29, September 24,
1996 1995
Current assets:
Cash and cash equivalents $110,143 $500,629
Investments 236,129 66,335
Accounts receivable, net 217,433 82,733
Inventories 171,511 44,010
Other current assets 15,974 10,923
Total current assets 751,190 704,630
Property, plant and equipment, net 352,699 185,513
Investments 8,009 12,032
Other assets 73,432 38,542
Total assets $1,185,330 $940,717
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $229,799 $95,769
Unearned revenue 13,226 8,213
Bank lines of credit 80,700 0
Current portion of long-term debt 2,234 1,015
Total current liabilities 325,959 104,997
Long-term debt 10,908 33,479
Other liabilities 3,550 2,624
Total liabilities 340,417 141,100
Stockholders' equity:
Preferred stock, $0.0001 par value
Common stock, $0.0001 par value 7 6
Paid-in capital 819,042 794,774
Retained earnings 25,864 4,837
Total stockholders' equity 844,913 799,617
Total liabilities and stockholders' equity $1,185,330 $940,717
SOURCE QUALCOMM |
