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To: DaveMG who wrote (162)	7/27/1999 12:18:00 AM
From: Phil Wilson	Respond to of 426

HP Provides Second HP RFIC Test System to QUALCOMM; QUALCOMM Shortens Time-to-Market for Manufacturing RF ASICs With RF/Analog/Digital Test Capabilities of HP 84000 Business Wire - July 26, 1999 11:15 PALO ALTO, Calif.--(BUSINESS WIRE)--July 26, 1999-- Hewlett-Packard Company today announced that QUALCOMM Incorporated, based in San Diego, purchased its second HP 84000 RFIC (radio frequency integrated circuit) test system within the past year. The system, worth more than a million dollars, provides the additional test capacity QUALCOMM needs to bring several new RF ASICs (application-specific integrated circuits) to market rapidly. QUALCOMM said it is using the HP 84000 test system to characterize its prototype RFIC devices and to transform evaluation-test information into production-test solutions for the company's contract manufacturers. "As the wireless industry embraces higher levels of device integration, HP is evolving its systems to meet more challenging test requirements for manufacturing complex wireless SOC (System-On-a-Chip) devices in volume," said John Scruggs, vice president and general manager of the Automated Test Group. According to Charlie Jones, director of engineering RF/analog IC production/test at QUALCOMM, key selection factors included "HP's excellent working relationship with QUALCOMM and our familiarity with the HP 84000 test platform. Another factor in our purchase decision was our desire to minimize any chance of our suppliers experiencing any quality or reliability problems with their test systems." QUALCOMM said it will use its new HP 84000 system to test highly integrated mixed-signal devices, such as the RFT3100, a device for wireless applications with analog and digital functionality that will interface with QUALCOMM's MSM (Mobile Station Modem) digital chip and provide signal modulations and frequencies for RF signal processing. "With several devices coming to market at once, we alleviated what could have been a very challenging time-to-market goal by getting a second HP 84000 test system," said Jones. "We are moving forward with a high degree of confidence, because we never have to worry about the level of support that we can expect from HP." About HP 84000 Series RFIC Test Systems HP 84000 Series RFIC systems lower the cost of test for integrated-circuit manufacturers in the rapidly growing RF-communications market by increasing throughput, speeding parts changeover and improving repeatability. HP 84000 Series RFIC measurement software uses a simple, graphical interface that includes predefined test-plan menus and forms. Designed as a state-of-the-art VXI platform, the HP 84000 Series can be easily expanded as RF integrated circuitry become more complex. The latest measurement software included with the HP 84000 Series (revision A.02.00) provides test enhancements that keep pace with wireless-device integration, providing mixed-signal capability and highly accurate RF performance. Information on HP's semiconductor test solution can be found on the World Wide Web at hp.com. About QUALCOMM QUALCOMM CDMA Technologies is the leading developer and supplier of CDMA chipsets, hardware and software solutions and tools with more than 40 million MSM chips shipped worldwide. The division supplies chipsets to the world's leading CDMA handset and infrastructure manufacturers including: Alps Electric Co., Ltd.; Casio Computer Co., Ltd.; Denso Corporation; Fujitsu Limited; Hitachi, Ltd.; Hyundai Electronics Industries Co., Ltd.; Kyocera Corporation; LG Information and Communications, Ltd.; Samsung Electronics Ltd.; Sanyo Electric Co., Ltd.; and Toshiba Corporation, among others. QUALCOMM Incorporated (Nasdaq:QCOM) 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 major business areas include CDMA phones; integrated CDMA chipsets and system software; technology licensing; and satellite-based systems including OmniTRACS and portions of the Globalstar system. Headquartered in San Diego, Calif., QUALCOMM is a FORTUNE 500 company with fiscal 1998 revenues in excess of U.S. $3 billion. For more information, please visit the Company's web site at qualcomm.com. About HP Hewlett-Packard Company -- a leading global provider of computing and imaging solutions and services for business and home -- is focused on capitalizing on the opportunities of the Internet and the proliferation of electronic services. HP had computer-related revenue of $39.5 billion in its 1998 fiscal year. HP plans to launch a new company consisting of its industry-leading test-and-measurement, semiconductor products, chemical-analysis and medical businesses. These businesses represented $7.6 billion of HP's total revenue in fiscal 1998. With leading positions in multiple market segments, this technology-based company will focus on opportunities such as communications and life sciences. HP has 123,000 employees worldwide and had total revenue of $47.1 billion in its 1998 fiscal year. Information about HP, its products and the company's Year 2000 program can be found on the World Wide Web at hp.com. CONTACT: Hewlett-Packard Company Bob Durstenfeld, 408/553-6820 robert_durstenfeld@hp.com John Lucas, 408/553-7091 john_lucas@hp.com or QUALCOMM Christine Trimble, 619/651-3628 ctrimble@qualcomm.com

To: DaveMG who wrote (162)	7/27/1999 10:40:00 AM
From: DaveMG	Respond to of 426

Lehman Brother's analysis of Q3/99 .......part 1 lehman.com Headline: QUALCOMM: 3Q99 Beats, Excellent Outlook, Ests & Target Increased Again, I Author: Tim Luke, Mark Sue (212)526-4993 Rating: 1 Company: QCOM Country: SEO CUS Industry: TELECM Ticker : QCOM Rank(Old): 1-Buy Rank(New): 1-Buy Price : $158 1/4 52wk Range: $160-19 Price Target (Old):$165 Today's Date : 07/20/99 Price Target (New):$200 Fiscal Year : SEP ------------------------------------------------------------------------------ EPS 1998 1999 2000 QTR. Actual Old New Old New 1st: 0.29A 0.33A 0.33A - -E - -E 2nd: 0.13A 0.41A 0.41A - -E - -E 3rd: 0.17A 0.68E 0.75A - -E - -E 4th: 0.27A 0.76E 0.88E - -E - -E ------------------------------------------------------------------------------ Year:$ 0.85A $ 2.18E $ 2.37E $ 3.02E $ 3.80E Street Est.: $ 2.05E $ 2.06 $ 2.77E $ 2.79 ------------------------------------------------------------------------------ Price (As of 7/16): $158 1/4 Revenue (1999): 3.6 Bil. Return On Equity (99): N/A Proj. 5yr EPS Grth: 35.0 % Shares Outstanding: 148.0 Mil. Dividend Yield: N/A Mkt Capitalization: 23.42 Bil. P/E 1999; 2000 : 72.6 X; 52.4 X Current Book Value: $6.86 /sh Convertible: YES Debt-to-Capital: 99.8 % Disclosure(s): C, A ------------------------------------------------------------------------------ * Post close yesterday wireless equipment leader QUALCOMM reported very strong third quarter 1999 EPS of $0.75 (excluding one-time charges) coming in comfortably ahead of both our high-end estimate of $0.68 and consensus estimate of $0.63. * Excluding operating expenses and one-time charges related to the infrastructure business now sold to Ericsson, EPS would have reached $0.86 indicating QUALCOMM's substantial EPS leverage going forward. Based on our confidence in QUALCOMM's earnings outlook, we are once again taking our high-end estimates sharply higher. Our estimates for fiscal 1999 and fiscal 2000 increase from $2.18 and $3.02 to $2.37 and $3.80, respectively (calendar 1999 and calendar 2000 EPS are now $3.00 and $4.00). * Third quarter 1999 revenues of $911 million (excluding royalties) were broadly in line with our estimate of $934 million. ASICs drive growth was up 110% to an estimated $305 million, with impressive ASIC book-to-bill of 1.2. Royalties were also strong at $93 million versus our estimate of $83 million. Handset sales of approximately $420 million, versus our $450 million estimate, were impacted by some component issues (1.7 million units flat with second quarter 1999) with management suggesting that some shortages may continue in fourth quarter 1999 -- however, we maintain our conservative handset estimate of $470-480 million for fourth quarter 1999. * QUALCOMM's gross margins surged to 35.3% versus 28.3% in second quarter 1999 while operating expenses moved sharply lower reflecting infrastructure wind down and lower handset advertising. Operating income increased to 14% versus 5% in second quarter 1999. Meanwhile, balance sheet strengthened with cash increasing and receivables and inventories moving lower. * With CDMA clearly gaining rapid momentum around the world, visibility continuing to strengthen for second half 1999 and Street estimates moving sharply higher, QUALCOMM remains a top pick in wireless equipment. Our new price target increases to $200 from $165, or 40 times our new calendar 2001 EPS estimate of $5.00. ------------------------------------------------------------------------------ Strong Third Quarter 1999, Impressive Earnings Leverage, Estimates Go Sharply Higher Once More Post close yesterday, CDMA innovator QUALCOMM reported very strong third quarter 1999 EPS of $0.75 versus $0.14 in third quarter 1998 coming in comfortably ahead of the consensus estimate of $0.63 and our high-end estimate of $0.68. Excluding one-time charges related to the sale of the company's infrastructure business to Ericsson and operating expenses related to the business now sold to Ericsson, EPS for the quarter would have been an impressive $0.86. This impressive figure now provides a clear indication of QUALCOMM's earnings leverage going forward. We now look for QUALCOMM's earnings to move sharply upwards from these levels in fiscal 2000. We think third quarter highlights included extremely strong chipset sales, the ramp of the new ThinPhone, strong royalty payments and improving gross and operating margins. The improved visibility and strong earnings leverage lead us to raise our high-end EPS estimates once again. Our EPS estimates for fiscal 1999 and fiscal 2000 increase from $2.18 and $3.02 to $2.37 and $3.80, respectively. Our new calendar 1999 and 2000 estimates are $3.00 and $4.00. We believe Street estimates will move substantially higher this morning from current consensus levels of just $2.06 and $2.79 for fiscal 1999 and fiscal 2000. Strong Revenue Growth Continues, Broadly In Line With our Estimates Revenues (excluding royalty payments) in third quarter 1999 came in at $911 million broadly in line with our high-end target of $934 million. Chipset sales were extremely strong during the quarter reflecting very robust demand from handset manufactures in Japan, Korea, the United States, and Brazil. QUALCOMM shipped a record 11 million MSN chipsets (bringing the total to date to 50 million) up from 9 million in second quarter 1999. We estimate that chip sales soared from around $230 million in second quarter 1999 to over $300 million in third quarter 1999. The chip division closed the quarter with an impressive book-to-bill ratio of 1.2 providing strong visibility into the next quarter. QUALCOMM's Omnitracs division also showed good progress in third quarter 1999 reaching $75 million while Contract Services to the GlobalStar project exceeded our estimate of $82 million by $6 million. We look for this line to trend lower going forward as the project nears its launch. While QUALCOMM does not break out its revenues by segment other than for contract services and royalties, we believe sales by division may resemble our estimates below. ($ in Millions) Revenues Forecast Actual OmniTracs $75.0 $75 CDMA Chipsets $285.0 $300 Infrastructure $30.0 $25 Globalstar $10.0 $10 Handset $450.1 $412 Other $3.0 $1 Contract Services $82.4 $88 Total $934.9 $911 Licensing & Royalties $85.0 $93 Concerns Over Component Shortages for Handsets May Be Overdone Management confirmed QUALCOMM shipped over 1.7 million CDMA handsets during third quarter 1999, in line with the second quarter 1999 unit level and bringing the total to date to over 12 million units. During the quarter, handset shipments were impacted by component shortages which have been experienced by numerous handset vendors and which limited revenue growth to around an estimates $410-$425 million versus our estimate of around $450 million. While removing some upside from an otherwise excellent quarter, we believe management's concerted efforts are likely to ensure sequentially higher unit shipments in the fourth quarter in a range of approximately 1.9 million to 2 million with revenues of over $470-$480 million. We are encouraged by management's confirmation that the strength of demand for components in the wireless handset area should be seen as potentially restraining some of the upside of the company's forecasts for the phone division rather than negatively impacting current expectations. The handset unit's profitability has been favorably impacted by the rollout of the new lower cost ThinPhone which is now likely to increase its contribution to overall handset sales from third quarter 1999's 20% level to an estimated 50% in fourth quarter 1999. We believe gross margins are likely to continue to improve looking ahead for the unit from a current estimated level of %-24%. During the conference call, management highlighted that its production goal is for 1 million phones per month by the end of fiscal 1999, which represents an improvement on earlier guidance of 1 million phones by the end of calendar 1999

To: DaveMG who wrote (162)	7/27/1999 10:42:00 AM
From: DaveMG	Read Replies (1) \| Respond to of 426

Lehman Brother's analysis of Q3/99 earning's report....part II lehman.com Headline: QUALCOMM: 3Q99 Beats, Excellent Outlook, Ests & Target Increase Again, II Author: Tim Luke, Mark Sue (212)526-4993 Rating: 1 Company: QCOM Country: SEO CUS Industry: TELECM Ticker : QCOM Rank(Old): 1-Buy Rank(New): 1-Buy Price : $158 1/4 52wk Range: $160-19 Price Target (Old):$165 Today's Date : 07/20/99 Price Target (New):$200 Fiscal Year : SEP ------------------------------------------------------------------------------ EPS 1998 1999 2000 QTR. Actual Old New Old New 1st: 0.29A 0.33A 0.33A - -E - -E 2nd: 0.13A 0.41A 0.41A - -E - -E 3rd: 0.17A 0.68E 0.75A - -E - -E 4th: 0.27A 0.76E 0.88E - -E - -E ------------------------------------------------------------------------------ Year:$ 0.85A $ 2.18E $ 2.37E $ 3.02E $ 3.80E Street Est.: $ 2.05E $ 2.06 $ 2.77E $ 2.79 ------------------------------------------------------------------------------ Price (As of 7/16): $158 1/4 Revenue (1999): 3.6 Bil. Return On Equity (99): N/A Proj. 5yr EPS Grth: 35.0 % Shares Outstanding: 148.0 Mil. Dividend Yield: N/A Mkt Capitalization: 23.42 Bil. P/E 1999; 2000 : 72.6 X; 52.4 X Current Book Value: $6.86 /sh Convertible: YES Debt-to-Capital: 99.8 % Disclosure(s): C, A ------------------------------------------------------------------------------ Royalties Surge Royalty payments in third quarter 1999 reached an impressive $92.7 million which included $6 million in license fees, versus $77 million in the prior quarter, outpacing even our high-end expectations of $85 million. As CDMA momentum continues to grow in the United States and abroad, we expect royalty payments to grow at their healthy pace and, for fourth quarter 1999, we look for total royalty payments of $97 million. Gross Margins Continue to Improve Gross margins improved in third quarter 1999 coming in at 35.3% versus 28.3% in the prior quarter and 23.7% in the same period a year ago. Improving gross margins were helped by sales mix and engineering efficiencies in both the new generation of chipsets and the new lower cost ThinPhone. Looking ahead we expect further improvements in overall gross margins to approximately 36.5% by the end of fourth quarter 1999. Operating Margins Improve as Expenses Move Sharply Lower Strong revenues and improving gross margins allowed QUALCOMM to achieve record earnings leverage with operating income improving to 13.5% of sales versus 4.5% in the prior quarter and 0.8% in the same period a year ago. R&D came in at $93.8 million or 10.3% of sales versus $99.7 million or 11.6% of sales in second quarter 1999. Meanwhile, sales and marketing expenses were trimmed to $50.3 million, or 5.5% of sales, versus $53.2 million or 6.6% of sales in the prior quarter, reflecting lower levels of investment in handset advertising with consumers. G&A expenses at the end of third quarter 1999 were $53.3 million or 5.8% of sales. While QUALCOMM closed third quarter 1999 with an effective tax rate of 35%, the company suggested that the tax rate is likely to trend upwards. For fiscal 2000 we are estimating a tax rate of 36%. Balance Sheet Metrics Improve QUALCOMM closed third quarter 1999 with cash and equivalents of $448.2 million versus $204.6 million in the prior quarter with the boost in cash coming from the sale of the infrastructure segment to Ericsson and cash from operations. Accounts receivables declined to $786.8 million versus $873.7 million in the prior quarter despite the increase in sales and also declined to a impressive 83 days in averages versus 96 days in average in the prior quarter. Inventories at the end of third quarter 1999 were also trimmed to $212.9 million and continued their decline to close at 36 days in average versus 44 days in the prior quarter. Separately, QUALCOMM recently announced that it will file a registration statement to offer 4 million additional ordinary shares with an additional 600,000 for over-allotment. We expect QUALCOMM to use the proceeds for general corporate purposes and working capital requirements. Stock Opinion: Price Target Raised, Reiterate Buy With CDMA hitting its stride and strong visibility increasing into fourth quarter 1999, we are once again raising our high-end EPS estimates for QUALCOMM. Our EPS estimates for fiscal 1999 and 2000 increase to $2.37 and $3.80, respectively. Our revenue estimates (excluding royalties) are $3.65 billion in fiscal 1999 and around $4.34 billion in fiscal 2000. We are currently looking for royalty revenues to increase from $214 million in fiscal 1998 to around $311 million in fiscal 1999 and as high as around $450 million in fiscal 2000. With QUALCOMM's gross and operating margins likely to provide considerable leverage, we believe these estimates may prove conservative and we believe our estimates may move steadily higher over the balance of calendar 1999. We remain encouraged by the strong growth prospects for both QUALCOMM and the global CDMA market. We believe the current strong CDMA growth and continued wireless buildouts is a testament to benefits of CDMA technology. In the United States, we believe the highly successful one-rate plans offered by many major carriers such as Sprint are likely to continue to drive rapid CDMA subscriber growth. Overseas, the removal of uncertainty of standards should help several large new markets such as Japan, Brazil, India and China gain momentum in 1999. We also believe QUALCOMM will benefit from increased royalty revenues as the existing CDMA market expands and as a converged global third generation wireless standard based on CDMA begins to be deployed. We continue to view QUALCOMM as a highly attractive investment vehicle in the wireless equipment sector. Our 1 Buy rating and our new 12-month price target of $200 is based on QUALCOMM achieving a multiple of around 40 times our new high-end calendar 2001 estimate of $5.00. BUSINESS DESCRIPTION: QUALCOMM provides advanced communications systems and products based on digital wireless technology. These include the OmniTRACS systems and digital wireless telephone systems based on CDMA technology.