Jan 20, 1998SAN DIEGO
Qualcomm products mentioned within this press release are offered by Qualcomm Technologies, Inc. and/or its subsidiaries.
Qualcomm Incorporated (NASDAQ: QCOM) today reported record first quarter results with revenues of $786 million for the first quarter of fiscal 1998, more than doubling revenues of $389 million for the year ago quarter and a 31 percent increase over last quarter. Net income for the first quarter was $37 million compared with $9 million for the same period in fiscal 1997. Earnings per share for the first quarter of fiscal 1998 was $.50 per share (diluted) compared with $.13 per share (diluted) for the same period in fiscal 1997.
Earnings per share before one-time items in the first quarter of fiscal 1998 was $.58 per share (diluted). Non-recurring items included the write-off of in-process research and development acquired in the purchase of assets from Now Software and the write-down of obsolete leased equipment. These one-time items were partially offset by a gain on the sale of an investment.
"We shipped a record number of CDMA phones and chip sets in the first quarter of fiscal 1998, with good progress in ramping production and improving the yields in our new phone models, particularly in the second half of the quarter," said Qualcomm Chairman and CEO, Dr. Irwin Jacobs. "In addition, we continued to expand our market position as a major supplier of cdmaOne™ infrastructure with agreements in Africa, Eastern Europe and Asia during the quarter. Globalstar development accelerated and the OmniTRACS installed base grew to total more than 224,000 units worldwide. We continue to focus on managing growth and improving profitability."
"Demand for our ASIC products in South Korea continues to be positive and we remain confident in the long-term prospects for CDMA in the region. We also expect that our Korean licensees will expand their export activities in the near-term, which will ultimately benefit the worldwide acceptance and deployment of CDMA," Jacobs added.
Highlights of Financial Performance
Communications systems revenues of $677 million for the first quarter of fiscal 1998 more than doubled revenues for the same period last year. This significant increase was driven by the continued growth in the sales of Code Division Multiple Access (CDMA) phones, Application Specific Integrated Circuits (ASICs) and infrastructure equipment.
Communications systems gross margin for the first quarter was 25 percent compared to 20 percent in the first quarter of fiscal 1997, reflecting overall increased margins on the sale of CDMA equipment due to lower costs achieved with high volume manufacturing and a greater volume of ASICs sales.
License, royalty and development fees were $45 million or 6 percent of total revenues for the first quarter of fiscal 1998, compared to $26 million or 7 percent of total revenues for the year ago period, both on a cash basis. New licensees included Synertek (subscriber license) and Marconi Instruments (test equipment license). The Company expects to continue to experience quarterly fluctuations in license, royalty and development fees due to the variability in the amount and timing of CDMA licenses and royalties.
Contract services revenues were $64 million for the quarter, a 66 percent increase over the fiscal 1997 first quarter revenue of $39 million. The increase is attributable to the development agreement with Globalstar which began in 1994.
Operating expenses, including research and development, selling and marketing and general and administrative, increased to $167 million or 21 percent of revenue in the first quarter of fiscal 1998 compared to $89 million or 23 percent of revenues for the same period last year. The Company continues to invest in the research and development of new CDMA infrastructure, ASIC and subscriber products. Selling and marketing expenses increased due to higher volume of sales along with increased national and international marketing activities. General and administrative expenses continue to increase to support the overall growth in the Company's operations, as well as increased litigation expenses.
On November 10, 1997, the Company acquired Now Software, Inc. In conjunction with the acquisition, the purchase price of approximately $10 million was allocated to the assets acquired based upon their fair market values. Assets acquired included certain software products still in the development stage which are not considered to have reached technological feasibility. This purchased "in-process research and development" totaled $7 million and was expensed at the acquisition date.
During the quarter, the Company recognized other expenses of $5 million for the write-down of leased manufacturing equipment that is no longer utilized in the manufacturing process.
Interest income increased to $12 million for the first quarter of fiscal 1998, representing the increased cash balance as a result of proceeds received from the Trust Convertible Preferred Securities offering during the second fiscal quarter of 1997.
Other non-operating items in the first quarter of fiscal 1998 primarily include income related to a gain on the sale of shares in Entel Telefonia Movil S.A. and the net minority interest in Qualcomm Personal Electronics and other consolidated subsidiaries.
The effective tax rate for the first quarter of fiscal 1998 was 35 percent, compared to 25 percent in the first quarter of fiscal 1997.
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® 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™ low-earth-orbit (LEO) satellite communications system. Other Company products include the Eudora Pro™ 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 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, including the ability to develop and introduce cost effective new products in a timely manner, potential delays in the commercial implementation of the Company's CDMA technology, continued growth in the CDMA subscriber population and the scale-up and operations of CDMA systems, developments in current or future litigation, the Company's ability to effectively manage growth and the intense competition in the wireless communications industry, risks associated with vendor financing, timing and receipt of license fees and royalties, the Company's ability to successfully manufacture and sell significant quantities of CDMA handsets, ASICs and infrastructure equipment on a timely basis, failure to satisfy performance obligations, change in economic conditions of the various markets the Company serves, continued currency fluctuations and risk, 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 28, 1997 and most recent Form 10-Q.
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Qualcomm, OmniTRACS and Eudora are registered trademarks of Qualcomm Incorporated. Globalstar is a trademark of Loral Qualcomm Satellite Services, Incorporated. cdmaOne is a trademark of the CDMA Development Group.
Phone: (619) 658-4224
Fax: (619) 651-2590
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
|December 28, 1997||September 28, 1997|
|Cash and cash equivalents||$209,540||$248,837|
|Accounts receivable, net||576,493||445,382|
|Other current assets||68,887||70,484|
|Total current assets||1,623,893||1,549,595|
|Property, plant and equipment, net||475,152||425,090|
LIABILITIES AND STOCKHOLDER' EQUITY
|Accounts payable and accrued liabilities||$541,589||$409,156|
|Bank lines of credit||78,000||110,000|
|Current portion of long-term debt||3,317||3,238|
|Total current liabilities||668,675||567,478|
|Company-obligated mandatorily redeemable trust convertible preferred securities of a subsidiary trust holding solely debt securities of the Company||660,000||660,000|
|Preferred stock, $0.0001 par value||--||--|
|Common stock, $0.0001 par value||7||7|
|Total stockholders' equity||1,072,825||1,024,178|
|Total liabilities and stockholders' equity||$2,426,349||$2,274,680|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
|Three months ended|
|December 28,1997||December 29, 1996|
|License, royalty and development fees||44,938||25,681|
|Research and development||74,801||46,178|
|Selling and marketing||56,098||26,941|
|General and administrative||36,469||15,592|
|Total operating expenses||732,959||375,921|
|Distributions on trust convertible preferred securities of subsidiary trust||(9,798)||--|
|Other non-operating items, net||3,959||(3,320)|
|Income before income taxes||56,557||12,168|
|Income tax expense||(19,795)||(3,042)|
|Net earnings per common share:|
|Shares used in per share calculation::|