CDMA Goes To Market in the U.S. -
SAN DIEGO, Jan. 20 /PRNewswire/ -- QUALCOMM Incorporated (Nasdaq:
QCOM)
today reported revenues for the first quarter of fiscal year 1997 of
$389 million, up 165 percent from the year ago quarter of $147 million. The
first quarter's net income was $9 million or $.13 per share compared with
$10 million or $.15 per share for the same period in fiscal 1996. No revenue
was recognized in the quarter on shipments of base stations to Sprint Spectrum
L.P. (SSLP) as the equipment has not been placed into commercial service.
These shipments are included in inventory.
"During the quarter, the growth of CDMA throughout the world accelerated
and key PCS and cellular operators in the U.S. launched commercial service in
many markets," said Dr. Irwin Mark Jacobs, chairman and chief executive
officer of QUALCOMM. "U.S. consumers can now walk into retail outlets across
the country, buy and easily activate a CDMA phone, and enjoy the clear voice
and true digital quality of CDMA technology developed and manufactured in our
facilities in San Diego."
Business Highlights for the Quarter
CDMA
QUALCOMM Personal Electronics (QPE) is one of the top suppliers of
wireless handsets in the telecommunication industry, shipping over 200,000
handsets in the month of December to carriers deploying commercial CDMA
systems. Supply problems of components eased with increasing yields and
capacity of existing suppliers and new suppliers becoming qualified.
Shipments by QUALCOMM of CDMA Application Specific Integrated Circuits
(ASIC)
to our licensees grew significantly in the quarter.
QUALCOMM announced the signing of a $140 million binding Letter of Intent
with Chase Telecommunications, Inc., a C-Block PCS license winner and
affiliate of PCS PrimeCo, to supply and finance CDMA infrastructure equipment.
QUALCOMM also made a $4 million equity investment in Chase
Telecommunications.
On November 12, PCS PrimeCo announced the nationwide commercial launch of
their digital CDMA networks in 16 markets using QUALCOMM's CDMA
QCP-1900
phones manufactured by QUALCOMM Personal Electronics (QPE), a joint venture
between QUALCOMM and Sony. On December 16, Sprint PCS also launched their
commercial PCS service in 8 markets using QPE's CDMA handsets. The number of
CDMA commercial systems expanded rapidly with Centennial Cellular Corporation
launching PCS service and AirTouch, GTE, 360 degrees Communications and
Cellular One launching cellular service during the quarter, all using handsets
from QPE. By the end of December, the number of CDMA cellular subscribers in
Korea reached over 900,000 with service provided by Korea Mobile Telecom and
Shinsegi Telecom.
During the quarter, QUALCOMM signed a multi-million dollar world wide
license agreement with Hitachi Ltd. of Japan to manufacture CDMA
infrastructure equipment. In Japan, one of the world's fastest-growing
markets for wireless, leading carriers have announced plans to deploy CDMA to
provide increased capacity with high quality.
The Company's CDMA technology continues to enjoy increased acceptance
around the world for mobile and wireless local loop networks. The CDMA
Development Group (CDG), consisting of 62 international service providers and
manufacturers supporting CDMA, recently set roaming standards for CDMA-based
operators to offer international roaming to their subscribers. Through IS-41
and dual mode phones, CDMA customers have the potential to roam in markets
with AMPS analog cellular systems which are present in every major market of
North and South America and more than 100 countries. CDMA commercial networks
are either deployed or being deployed in 54 markets and in 19 countries around
the globe. The Company believes that its issued patents provide broad
coverage for many digital wireless applications of CDMA, such as satellite,
cellular, cordless telephone, PCS, wireless, PBX, wireless local loop and
broader band versions of CDMA supporting high data rate applications.
In September, Ericsson, Inc. and Telefonaktiebolaget L.M. Ericsson (Ericsson)
filed suit in the U.S. District Court alleging that various elements of
QUALCOMM's CDMA equipment system and components infringe one or more
patents
owned by Ericsson. In December, QUALCOMM filed a counter suit in the U.S.
District Court for the Southern District of California. The complaint alleges
unfair competition by Ericsson based an a pattern of conduct intended to
impede the acceptance and commercial deployment of QUALCOMM's CDMA
technology.
The complaint also charges that Ericsson's patent infringement claims against
the Company violate a 1989 agreement between the companies. Finally, the
lawsuit seeks a judicial declaration that certain of Ericsson's patents are
not infringed by QUALCOMM and are invalid. The Company believes that the
named Ericsson patents are not required to produce IS95 compliant systems and
that Ericsson's claims are without merit and will vigorously defend itself
against such claims.
OmniTRACS
Domestic and international OmniTRACS(R) unit shipments continued strong in
the face of a soft trucking market in the U.S. with over 9,100 terminals
shipped during the first quarter. Domestic OmniTRACS customers added during
the quarter included May Trucking Company, Bulkmatic Transport Company,
Pacific Gas and Electric Company (PG&E), and Matlack Systems, Inc., the later
two expanding QUALCOMM's presence in the utility market and tank truck
industry respectively.
"Message service revenues in the U.S. continued to increase with the
growing installed base of domestic units and international sales were strong.
Total OmniTRACS terminals shipped to U.S. and worldwide markets are now over
185,000," said Harvey White, president. "We are pleased at the acceptance of
the value of OmniTRACS by our customers and continue to add services and
features to improve this value."
The OmniTRACS division announced the sale of its 50,000th SensorTRACS(R)
unit, highly regarded by the transportation industry for generating fuel and
other operational savings. With the introduction of CabCARD(TM) Personal
Communications during the quarter, domestic users of the OmniTRACS system have
the ability to send and receive Internet email messages anywhere in the world,
from the cabs of their trucks. The drivers' families with Internet access can
use QUALCOMM's Eudora software for their email messaging. Eudora Light is
available free-of-charge and can be downloaded directly off the Internet from
QUALCOMM's web site.
Globalstar(TM) Satellite System
Increased revenues and margins resulted from continued progress by
QUALCOMM on the development of Globalstar gateway and handset equipment for
commercial service. Also in the quarter, QUALCOMM signed a second licensee to
design and manufacture phones with dual mode Globalstar CDMA/Global System for
Mobile (GSM) cellular phones. Globalstar satellite phones will be able to
operate on either satellite or the local GSM or CDMA cellular networks
throughout the world. The U.S. Federal Communications Commission (FCC) issued
an order granting Globalstar low-earth-orbit (LEO) satellite
telecommunications system final authorization for its requested feeder link
frequencies, ensuring Globalstar's access to the U.S. domestic
telecommunication market, and paving the way for the approval and licensing of
Globalstar's local and regional service providers by regulatory authorities
around the world.
Eudora
Sales of Eudora Pro(TM) continue to grow and contribute positively to
earnings. Eudora Pro 3.0 software has received numerous awards during the
quarter including C|Net's Internet Product of the Year, Home Office
Computing's Editor's Pick, PC Week's Analyst's Choice, Daily Spectrum's Best
Email of 1996 and Internet Insider's Editor's Choice Award. Continuing its
successful marketing strategy of using freeware to build Eudora Pro sales, the
Eudora division recently released an enhanced version of Eudora Light software
that sets new standards for Internet email freeware. Other key activities
included the addition of Tech Data as the newest distributor of Eudora
software in the U.S., Latin America and Canada, bundling agreements with
Microsoft and NETCOM(R), and implementation of an Internet Service Providers
incentive program.
Other
Dr. Irwin Mark Jacobs, QUALCOMM's chairman and chief executive officer,
was selected as the Master Entrepreneur of the Year at the Ernst & Young
sponsored awards program recognizing top entrepreneurs and business leaders
from around the world, and was honored as the Wireless Person of the Year by
Radio Communications Report (RCR), a prominent trade magazine for the wireless
industry.
Highlights of Financial Performance
Compared to the first quarter of fiscal 1996, communications systems
revenues increased 266 percent to $325 million as a result of significant
growth in shipments of CDMA phones and ASICs. Communication systems gross
profit declined from 29 percent to 20 percent compared to first quarter 1996
due to margins on CDMA phones and ASICs being lower than margins on the
Company's OmniTRACS business. Gross Margins on CDMA equipment improved as
production efficiencies were achieved and volumes increased.
License, royalty and development fees contributed $26 million of revenue
in the first quarter, essentially unchanged from the year ago quarter. During
the quarter, QUALCOMM signed an infrastructure licensing agreement with
Hitachi Ltd. and the second Globalstar handset licensee, as previously
mentioned, and received additional revenues from new and existing licensees.
Additionally, the Company recorded revenues from royalties associated with the
sale of CDMA equipment by licensees. The Company will continue to experience
quarterly fluctuations in license and development fees due to the variability
in the amount and timing of CDMA license fees and royalties.
Contract service revenues in the first quarter reached $39 million, a
20 percent increase over revenue of $32 million in last year's first quarter,
due primarily to the continued ramp-up of the Globalstar development contract.
Research and development (R&D) expenditures during the quarter were
$46 million, or 12 percent of revenues compared to $32 million or 22 percent
of total revenues for the first quarter of fiscal 1996. QUALCOMM continues to
add to its engineering resources and the reduction of $1.9 million, or
4 percent, from the fourth quarter of 1996 was a result of lower material and
equipment purchases relating to the R&D effort in the first quarter.
Purchases of material and equipment for R&D will vary from quarter to quarter
but overall R&D expenditures are expected to increase in future quarters.
Sales and marketing expenses were $27 million or 7 percent of revenues for
the first quarter of fiscal 1997, compared to $15 million or 11 percent of
revenues in the same period last year. General and administrative expenses
were $16 million or 4 percent of revenues for the first quarter of fiscal
1997, compared with $11 million or 8 percent of revenue in the same period
last year. The increase in selling and marketing expenses was due to
increased CDMA marketing activity both domestically and internationally. The
increase in general and administrative expense was driven primarily by
additional personnel and associated overhead costs necessary to support the
overall growth in the Company's operations and in particular relating to
strengthening of information systems. Although the Company is experiencing
rapid growth, it continues to emphasize control of operating expenses and
reduction of expenses as a percentage of revenue.
QPE achieved profitability in the current quarter as indicated by the
minority interest line item which changed to a reduction of earnings of
$3 million in the first quarter of fiscal 1997 from a contribution to earnings
of $4 million in the year ago quarter, as.
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
web site 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 29,
1996 and most recent Form 1O-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. All other trademarks are the property of their respective
owners.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
ASSETS
December 29, 1996 September 29, 1996
Current assets:
Cash and cash equivalents $ 126,735 $ 110,143
Investments 162,573 236,129
Accounts receivable, net 327,166 217,433
Inventories 244,848 171,511
Other current assets 17,186 15,974
Total current assets 878,508 751,190
Property, plant and equipment, net 350,628 352,699
Investments 6,008 8,009
Other assets 76,765 73,432
Total assets $1,311,909 $1,185,330
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities$286,533 $229,799
Unearned revenue 15,902 13,226
Bank lines of credit 137,000 80,700
Current portion of long-term debt 3,001 2,234
Total current liabilities 442,436 325,959
Long-term debt 10,105 10,908
Other liabilities 4,092 3,550
Total liabilities 456,633 340,417
Stockholders' equity:
Preferred stock, $0.0001 par value --- ---
Common stock, $0.0001 par value 7 7
Paid-in capital 820,279 819,042
Retained earnings 34,990 25,864
Total stockholders' equity 855,276 844,913
Total liabilities and
stockholders' equity $1,311,909 $1,185,330
QU
ALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended
December 29, 1996 December 31, 1995
Revenues:
Communications systems $324,580 $88,704
Contract services 38,679 32,163
License, royalty and development fees 25,681 25,736
Total revenues 388,940 146,603
Operating expenses:
Communications systems 259,485 62,752
Contract services 27,725 22,303
Research and development 46,178 32,255
Selling and marketing 26,941 15,490
General and administrative 15,592 11,256
Total operating expenses 375,921 144,056
Operating income 13,019 2,547
Interest income 4,453 7,877
Interest expense (1,984) (692)
Minority interest in (income)
loss of consolidated subsidiary (3,320) 4,315
Income before income taxes 12,168 14,047
Income tax expense (3,042) (3,933)
Net income $9,126 $10,114
Net earnings per common share
Primary $0.13 $0.15
Fully diluted $0.13 $0.15
Shares used in per share calculation
Primary 70,659 69,188
Fully diluted 70,659 69,246
SOURCE QUALCOMM Incorporated
CO: QUALCOMM Incorporated
ST: California
IN: CPR
SU: SLS
01/20/97 05:32 EST prnewswire.com
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