Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Mike Buckley who wrote (38480)	1/26/2001 5:56:41 PM
From: Sully-	Read Replies (1) \| Respond to of 54805

Mike FWIW..... From the Management`s Discussions: 10-Q, QUALCOMM INC 1 of 2..... see link for copy of the full discussion.... Message 15254222 The Company intends to continue its strategic investment activities to promote the worldwide adoption of CDMA products and the growth of CDMA-based wireless data and CDMA-based wireless Internet products and solutions. In general, the Company enters into strategic relationships with CDMA carriers and companies that have developed or are developing innovative technologies or products for the wireless industry. QUALCOMM enters into joint ventures with strategic partners that are designed to increase wireless usage and dependence on wireless devices. As part of these investment activities, QUALCOMM may provide financing to facilitate the marketing and sale of CDMA equipment by authorized suppliers. QUALCOMM also, from time-to-time, makes investments in entities such as venture funds or incubators focused on the wireless market. In November 2000, QUALCOMM announced the formation of QUALCOMM Ventures, an organization that will make strategic investments in early stage companies globally to support the adoption of CDMA and use of the wireless Internet. QUALCOMM made a $500 million commitment to this strategic initiative that is expected to be invested over a period of four years. Most of the Company's strategic investments are illiquid securities that have a high degree of risk. Such securities generally will not become liquid until more than one year from the date of investment, if at all. To the extent that such investments do become liquid, QUALCOMM will attempt to make regular periodic sales that will be recognized in net investment income. It is likely that some portion of these investments will never become liquid and that QUALCOMM may be required to recognize losses from time to time in the future as it determines that impairment in the value of particular investments have become other than temporary. In October 2000, the Company agreed to invest $200 million in the convertible preferred shares of Inquam Limited (Inquam). Inquam was formed to acquire, own, develop and manage wireless telecommunication systems, either directly or indirectly, with the primary intent of deploying CDMA-based technology. See "Notes to Condensed Consolidated Financial StatementsNote 5 Investments in Other Entities." In December 2000, the Company announced the formation of a Korean partnership fund, QUALCOMM/Hansol iV CDMA Fund, with Hansol i Ventures Co., Ltd. to invest in Korean start-up companies engaged in the development and commercialization of CDMA products to support the adoption of CDMA and the use of the wireless Internet. See "Notes to Condensed Consolidated Financial StatementsNote 5Investments in Other Entities." In December 2000, the Company and an investor in CDMA telecommunications operators in Latin America executed a Term Loan Agreement in which the Company agreed to provide $230 million of convertible debt financing, including $30 million for capitalized interest. See "Notes to Condensed Consolidated Financial StatementsNote 8Commitments and Contingencies." On January 22, 2001, the Company entered into a senior secured credit facility with Leap Wireless International, Inc. (Leap Wireless) in the amount of $125 million. Under the agreement, the Company expects to transfer a $125 million Auction Discount Voucher to Leap Wireless to support its spectrum acquisition activities in the FCC's current auction of PCS spectrum. The facility is expected to be repaid in a lump sum payment, including principal and accrued interest, no later than five years after the date of the initial draw. The facility bears interest at a variable rate, to be determined based on the collateral provided to the Company. The Company was required to adopt Statement of Financial Accounting Standards No. 133 (FAS 133), "Accounting for Derivative Instruments and Hedging Activities" as of the beginning of fiscal 2001. FAS 133 requires certain derivative instruments to be recorded at fair value. After adoption of FAS 133, unrealized gains and losses on these derivative instruments are recorded in the income statement. The Company recorded a $129 million gain, net of taxes, as the cumulative effect of the change in accounting principle as of the beginning of fiscal 2001. The cumulative effect of the accounting change related primarily to the recognition of the unrealized gain on a warrant to purchase 4,500,000 shares of Leap Wireless common stock issued to the Company in connection with its spin-off of Leap Wireless in September 1998. Additionally, the Company recorded $160 million in pre-tax unrealized losses on derivative instruments during the first quarter of fiscal 2001, primarily resulting from a decline in the market price of Leap Wireless stock which reduced the fair value of the Leap Wireless warrant. The new requirement to record unrealized gains and losses on these instruments in the income statement may cause substantial quarterly and annual fluctuations in operating results due to stock market volatility. See "Notes to Condensed Consolidated Financial StatementsNote 1Basis of Presentation" and "Item 3. Quantitative and Qualitative Disclosure About Market Risk." Ö¿Ö