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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 152.21-0.3%Jan 29 3:59 PM EST
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To: Uncle Mikey who wrote (410)1/3/1997 9:49:00 PM
From: Philip Merryman   of 152472
 
Mr. McElhatton,

The best answer probably lies in Qualcomm's 10-K for the fiscal year ending September 29, 1996. The following are 2 excerpts from the 10-K that comment on Qualcomm's relationship with NextWave:

1. "Pursuant to an Equipment Requirements Agreement with QUALCOMM, upon satisfaction of certain conditions, NextWave is obligated to purchase approximately 50% of NextWave's infrastructure equipment requirements from QUALCOMM. The agreement also provides that QUALCOMM will offer 100% financing for equipment purchased under such agreement, on commercial terms. The terms of the equipment purchases, including equipment financing arrangements, will be established in a further agreement to be negotiated in good faith by the parties. There can be no assurance that such an agreement will be concluded."

2. "In fiscal 1996 the Company provided $30 million in financing to NextWave in connection with its plans to bid on PCS licenses in the recently completed C-block auctions conducted by the FCC. The financing originally consisted of $5 million of equity and $25 million in a convertible loan. In connection with this investment, subject to the satisfaction of certain conditions, NextWave has committed to purchase approximately 50% of its PCS infrastructure equipment
requirements from the Company. In March 1996, the Company increased its equity investment to $20 million by converting $15 million of the convertible loan balance to equity. Of the remaining $10 million loan, $9.6 million was repaid in the fiscal third quarter and $0.4 million was converted into a three-year note with an equity conversion option. The Company currently holds less than 5% of NextWave's outstanding shares and is accounting for its investment under the cost method. The Company expects its ownership percentage to decrease in the future as NextWave raises additional equity. See Note 8 of Consolidated Financial Statements."

However, NextWave recently contracted with Lucent Technologies and Hughes for the supply of CDMA infrastructure equipment so it is not clear if NextWave foresees additional demand or changing to Qualcomm at a later date. It should be mentioned that Qualcomm receives 20% of any CDMA infrastructure contracts awarded to Hughes due to an earlier agreement between Qualcomm and Hughes.

Philip Merryman
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