QUALCOMM Reports Record Earnings & Revenues For Fiscal 1998
SAN DIEGO, Nov. 3 /PRNewswire/ -- QUALCOMM Incorporated (Nasdaq: QCOM - news) today announced record revenues of $926 million for the fourth quarter of fiscal 1998 and $3.3 billion for the fiscal year ended September 27, 1998. These figures represent a 54 percent increase over fourth quarter 1997 revenues of $601 million and a 60 percent increase over fiscal 1997 revenues of $2.1 billion. The increases were driven by the growing worldwide market acceptance of QUALCOMM's Code Division Multiple Access (CDMA) digital wireless communications products, services and technologies.
Reported net income for the fourth quarter was $40 million or $.54 (diluted) per share compared with $30 million or $.42 (diluted) per share for the same period last year, an increase in earnings per share of 29 percent. Earnings per share for fiscal 1998 were $1.47 (diluted) compared to $1.28 (diluted) for fiscal 1997, a 15 percent increase. Total backlog and contracts as of September 27, 1998 were $2 billion.
On September 23, 1998, QUALCOMM completed the spin-off of its equity investments in certain wireless operators to form Leap Wireless International. The distribution was made from both retained earnings and paid-in capital, reducing the retained earnings balance to zero at year-end. Excluding equity losses of investees transferred to Leap Wireless, incurred prior to the effective date of the spin-off, earnings per share would have been $.66 (diluted) for the fourth quarter of fiscal 1998.( bold print mine -t) Excluding equity losses of investees transferred to Leap Wireless and one-time items, earnings per share would have been $1.88 (diluted) for fiscal 1998.
''This has been an exciting year for QUALCOMM with the commercialization of CDMA dramatically accelerating to more than 16 million subscribers worldwide. We achieved record product shipments in all of our major product areas, despite a challenging world economic environment,'' said Dr. Irwin M. Jacobs, chairman and CEO of QUALCOMM Incorporated. ''We continued to invest in research and development for our products, as well as the evolution of our CDMA technology, to support future growth. We also took advantage of strategic opportunities to invest in wireless operators, and later spun the majority of these investments off to Leap Wireless International. As Harvey White became chairman and CEO of Leap Wireless, Rich Sulpizio advanced to president and chief operating officer of QUALCOMM. With increased emphasis on operating efficiencies, we are working to make fiscal 1999 another successful year for our stockholders, employees and community.''
During fiscal 1998, QUALCOMM achieved a number of significant milestones:
QUALCOMM Consumer Products Division
-- Exceeded 7 million CDMA phones shipped since inception of QUALCOMM
Personal Electronics (QPE), representing a doubling of shipments from
fiscal 1997 to fiscal 1998.
-- Shipped the dual-mode cellular/analog Q(TM) phone and introduced the
first-of-its-kind pdQ(TM) CDMA digital smartphone, which marries the
functionality of a PalmPilot(TM) and a CDMA digital phone.
-- Demonstrated QUALCOMM's High Data Rate (HDR) technology, which will
support wireless Internet access and data rates in excess of 1.5
megabits per second.
-- Commenced production of Q phones in QUALCOMM's new phone manufacturing
facility in Sao Paulo, Brazil.
ASIC Products Division
-- Exceeded 25 million Mobile Station Modem (MSM) chips shipped to date
to CDMA phone manufacturers worldwide, including QPE, as compared to 10
million one year ago.
-- Exceeded 2 million Cell Station Modem (CSM) chips shipped to date to
CDMA infrastructure manufacturers worldwide, including QUALCOMM.
-- Delivered samples of its groundbreaking new fifth generation MSM3000
chip in September 1998 and preparing to ship commercial quantities to
customers by the end of calendar 1998. Supporting data rates up to 86
kilobits per second, the MSM3000 enables longer standby times and
includes substantially greater computing power.
-- Shipped samples of the CSM2000 chip on schedule to CDMA infrastructure
and test equipment manufacturers. The CSM2000 supports up to eight
forward and reverse link channels at significantly lower cost per
channel, as well as significantly lower power consumption.
Wireless Infrastructure Division
-- Deployed CDMA networks using QUALCOMM wireless infrastructure
equipment and services on five continents. Original Equipment
Manufacturer (OEM) sales remained strong, but direct sales to operators
comprised the majority of the Division's sales in fiscal 1998.
-- Received a three-year, $650 million contract award to provide a
nationwide wireless CDMA network to Pegaso PCS in Mexico.
-- Announced the QCell(TM) 519e compact base station, designed to
significantly decrease capital and operating expenses over traditional
outdoor solutions.
-- Launched the first open architecture CDMA network in the U.S.
utilizing the IS-634 interface between QUALCOMM's base station
controller and another manufacturer's switch.
CommSystems Division
-- Shipped more than 20 commercial gateways for the Globalstar low-Earth-
orbit (LEO) satellite-based digital telecommunications system. The
Company's ground station manufacturing and deployment schedule was
unchanged as a result of the Globalstar satellite launch failure in
September 1998.
-- Received a $125 million contract award from Globalstar, L.P. for
portable and fixed CDMA satellite phones.
Wireless Business Solutions Division (formerly OmniTRACS)
-- Exceeded 45,000 OmniTRACS(R) units shipped to customers worldwide
during the fiscal year with international shipments increasing by 96
percent over fiscal 1997.
-- Broadened the Division's scope to include new wireless applications,
including CabCARD(R) Personal Communications, TruckMAIL(TM) for small
fleets, and untethered trailer tracking.
Corporate
-- Signed five new license agreements for cdmaOne(TM) technology,
bringing the total number of companies licensed to over 60. The new or
expanded licensees included Hitachi, Synertek, Philips, Casio and
Uniden.
-- Completed a $400 million, three-year unsecured bank credit facility to
support working capital needs and future growth.
-- Increased name recognition by hosting both the 1998 Super Bowl and
World Series at San Diego's QUALCOMM Stadium.
-- Received industry awards, including Industry Week's 100 Best Managed
Companies; Fortune's Fastest Growing Companies; Business Week's
Information Technology 100.
Highlights of Financial Performance
Communications systems revenues of $802 million for the fourth quarter of fiscal 1998 and approximately $2.9 billion for fiscal 1998, a 65 percent increase over fiscal 1997. The increase represents continued growth in the sales of CDMA phones, Application Specific Integrated Circuits (ASICs) and infrastructure equipment, including significant shipments to Mexico during the quarter. During the fourth quarter of fiscal 1998, the Company did not record as revenue approximately $29 million of infrastructure shipments to Russia; the Company is monitoring the underlying economics of business in that region, as well as other regions affected by the continuing world economic condition.
Communications systems gross margin for the fourth quarter of fiscal 1998 grew to 29 percent compared to 24 percent in the fourth quarter of fiscal 1997. This increase was attributable to higher margins on the sale of CDMA equipment due to improved manufacturing processes and the mix of products sold, including a higher percentage of QUALCOMM phones from QPE. Communications systems gross margin for fiscal 1998 was 25 percent versus 21 percent for fiscal 1997.
License, royalty and development fees were $52 million or 6 percent of total revenues for the fourth quarter of fiscal 1998, compared to $50 million or 8 percent of total revenues for the fourth quarter of fiscal 1997. License, royalty and development fees contributed $214 million of total revenues for fiscal 1998 compared to $152 million of total revenues for fiscal 1997. As evidence of continued support for CDMA in Southeast Asia, the Company signed a subscriber license with Acer Peripherals, a major Taiwanese manufacturer, during the fourth quarter of fiscal 1998. The Company may continue to experience quarterly fluctuations in license, royalty and development fees due to the variability in the amount and timing of CDMA license fees and royalties.
Contract services revenues increased to $71 million for the fourth quarter of fiscal 1998 compared to $69 million in the fourth quarter of fiscal 1997. Contract services revenues for fiscal 1998 were $270 million, compared to $212 million for fiscal 1997. The increase is attributable to the development agreement with Globalstar.
Operating expenses, including research and development, selling and marketing and general and administrative, for the fourth quarter of fiscal 1998 were $220 million. Operating expenses increased in absolute dollars in fiscal 1998, but held constant at 23 percent of total revenues. The Company continues to invest substantially in research and development across all of its business areas. Selling and marketing expenses increased due to international marketing activities and a nationwide advertising campaign during fiscal 1998. General and administrative expenses increased in connection with legal fees associated with patent infringement litigation, staffing increases and associated overhead costs, relating primarily to investment in information systems (including the Year 2000 issue), that are necessary to support the overall growth in the Company's operations.
Operating profits increased significantly to $85 million in the fourth quarter of fiscal 1998 and $243 million for the year, representing an increase of 138 percent and 149 percent, respectively.
Interest income increased to $39 million in fiscal 1998 from $35 million in fiscal 1997 due to proceeds from Trust Convertible Preferred Securities issued during the second quarter of fiscal 1997 which were partially offset by the use of cash to support the Company's substantial growth over the past 12 months. Interest expense decreased to $8 million in fiscal 1998 from $11 million in fiscal 1997. Minority interest in income of consolidated subsidiaries for the fourth fiscal quarter of 1998 was $12 million compared to minority interest in loss of consolidated subsidiaries of $3 million for the fourth quarter of fiscal 1997, reflecting improved profitability at QPE. The Company's effective tax rate for FY98 was 27 percent.
QUALCOMM Incorporated (Nasdaq: QCOM - news) 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; Applications Specific Integrated Circuits (ASICs); wireless infrastructure; technology licensing; and satellite-based systems including OmniTRACS(R) and portions of the Globalstar(TM) system. Headquartered in San Diego, Calif., QUALCOMM's fiscal 1998 revenues exceeded U.S. $3 billion. For more information, please visit the Company's web site at (http://www.qualcomm.com).
Except for the historical information contained herein, this news release contains forward-looking statements that are subject to risks and uncertainties, the risk that the rate of growth in the CDMA subscriber population will decrease, the risks associated with the scale-up and operations of CDMA systems, developments in current or future litigation, risks associated with vendor financing, timing and receipt of license fees and royalties, and changes 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.
QUALCOMM, OmniTRACS and Eudora are registered trademarks of QUALCOMM Incorporated. The Q logo, Q phone, PdQ, QCell, CabCARD and TruckMAIL are trademarks of QUALCOMM Incorporated. Globalstar is a trademark of Loral QUALCOMM Satellite Services, Incorporated. cdmaOne is a trademark of the CDMA Development Group. PalmPilot is a trademark of Palm Computing, Inc., 3Com Corporation, or its subsidiaries.
QUALCOMM Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
September 27, September 28,
1998 1997
ASSETS
Current assets:
Cash and cash equivalents $175,846 $248,837
Investments 127,478 448,235
Accounts receivable, net 612,209 445,382
Finance receivables 56,201 111,501
Inventories 386,536 225,156
Other current assets 178,950 70,484
Total current assets 1,537,220 1,549,595
Property, plant and equipment, net 609,682 425,090
Investments -- 111,786
Finance receivables, net 287,751 --
Other assets 144,180 188,209
Total assets $2,578,833 $2,274,680
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities $660,428 $409,156
Unearned revenue 67,123 45,084
Bank lines of credit 151,000 110,000
Current portion of long-term debt 3,058 3,238
Total current liabilities 881,609 567,478
Long-term debt 3,863 7,729
Other liabilities 25,115 15,295
Total liabilities 910,587 590,502
Minority interest in
consolidated subsidiaries 38,530 --
Company-obligated mandatorily
redeemable trust convertible
preferred securities of a
subsidiary trust holding solely
debt securities of the Company 660,000 660,000
Stockholders' equity:
Preferred stock, $0.0001 par value -- --
Common stock, $0.0001 par value 7 7
Paid-in capital 969,709 906,373
Retained earnings -- 117,798
Total stockholders'
equity 969,716 1,024,178
Total liabilities and
stockholders' equity $2,578,833 $2,274,680
QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1998 1997 1998 1997
Revenues:
Communications
systems $802,008 $482,173 $2,863,092 $1,733,169
Contract services 71,483 69,498 270,388 211,661
License, royalty
and development
fees 52,475 49,748 214,390 151,535
Total revenues 925,966 601,419 3,347,870 2,096,365
Operating expenses:
Communications
systems 569,626 368,259 2,136,297 1,361,641
Contract services 51,146 51,920 197,102 156,365
Research and
development 104,926 71,795 349,483 235,922
Selling and
marketing 66,456 48,532 246,975 147,040
General and
administrative 48,696 25,079 163,372 89,148
Other -- -- 11,976 8,792
Total operating
expenses 840,850 565,585 3,105,205 1,998,908
Operating income 85,116 35,834 242,665 97,457
Interest income 7,049 11,729 39,484 34,845
Interest expense (1,892) (2,814) (8,058) (11,012)
Net gain on sale
of investments -- -- 2,950 13,400
Write-off of
investment in
other entity -- -- (20,000) --
Distributions on trust
convertible preferred
securities of
subsidiary trust (9,774) (9,692) (39,270) (23,277)
Minority interest in
(income) loss of
consolidated
subsidiaries (11,809) 3,051 (48,366) (2,979)
Equity in losses
of investees (11,024) -- (20,731) --
Income before
income taxes 57,666 38,108 148,674 108,434
Income tax expense (17,750) (7,990) (40,142) (16,500)
Net income $39,916 $30,118 $108,532 $91,934
Net earnings per
common share:
Basic $0.57 $0.44 $1.57 $1.37
Diluted $0.54 $0.42 $1.47 $1.28
Shares used in per
share calculation:
Basic 70,115 67,967 69,203 67,335
Diluted 74,585 72,304 73,962 71,887 |
