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
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° 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 on 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.
Domestic and international OmniTRACS® 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® unit, highly regarded by the transportation industry for generating fuel and other operational savings. With the introduction of CabCARD™ 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™ 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.
Sales of Eudora Pro™ continue to grow and contribute positively to earnings. Eudora Pro 3.0 software has received numerous awards during the quarter including C