Qualcomm Incorporated (NASDAQ: QCOM) todayreported record quarterly revenues for the third quarter of fiscal 1998.Total revenues for the period were $875 million, an increase of $355million or 68 percent compared to total revenues of $520 million for thethird quarter of fiscal 1997. For the nine months ended June 28, 1998,revenues increased to $2.4 billion compared to approximately $1.5 billionfor the same period in fiscal 1997.Earnings for the current quarter were reduced by a $20 million write-off ofQualcomm's entire equity investment in NextWave Telecom Inc., subsidiariesof which filed for Chapter 11 bankruptcy protection in June 1998, and $6million of equity losses of certain investees that are proposed to be spunoff to stockholders in the fourth fiscal quarter, as described in theForm-10 filed with the Securities and Exchange Commission. The proposedspin-off remains subject to approval by the Company's Board of Directors.Excluding these items and using the effective tax rate for the year,earnings per share were $25 million or $.33 (diluted). Reported net incomewas $6 million or $.08 (diluted) per share compared with $36 million or$.50 (diluted) per share for the same period last year."We expect that demand for cdmaOne™ products will continue to outpacesupply as worldwide CDMA deployments accelerate in the second half of thisyear and into 1999. We anticipate that each of our CDMA businesses -phones, infrastructure, technology and ASICs - will benefit from thisgrowth," said Dr. Irwin M. Jacobs, chairman and CEO of Qualcomm. "Duringthe June quarter, we shipped over four million MSM handset chips, bringingthe cumulative number of MSMs shipped to over 20 million. QualcommPersonal Electronics shipped over 1.3 million phones this quarter, with acumulative total of over six million handsets shipped since productionbegan. Other achievements this quarter included delivering more than 10commercial gateways for Globalstar, receiving authorization to begincommercial service of our infrastructure network in Chile, and continuingOmniTRACS' industry leadership position with over 250,000 units soldworldwide to date."Highlights of Financial PerformanceCommunications systems revenues were $759 million, an increase of $340million or 81 percent over the third quarter in fiscal 1997. The increasein communications systems revenues compared to the year ago quarter wasprimarily attributed to increased sales of Code Division Multiple Access(CDMA) phones and accessories, Application Specific Integrated Circuits(ASICs), wireless infrastructure, and initial revenues from the sale ofGlobalstar gateway equipment.Communications systems gross margins were 24 percent in the third fiscalquarter, compared to 25 percent for the year ago quarter and 22 percent forthe second quarter of fiscal 1998. Gross margin was improved by 1 percentin the third quarter of 1998 due to a change in warranty provisions atQualcomm Personal Electronics (QPE), whereby warranties will be carried bythe parent companies rather than the manufacturing venture. This one-timeadjustment was offset by a change in minority interest in consolidatedsubsidiaries.License, royalty and development fees for the third quarter of fiscal 1998were $47 million, compared to the same amount in the year ago quarter.License, royalty and development fees for the third quarter includedestimated royalties for the third quarter of fiscal 1998 and a positiveadjustment for the difference between the estimated and actual royaltiesfor the second quarter of fiscal 1998. License, royalty and developmentfees may continue to fluctuate quarterly due to the timing and amount ofnew licenses as well as the timing and amount of sales by the Company'slicensees, changes in foreign currency exchange rates, and changes toprevious estimates.Contract services revenues totaled $70 million in the third quarter offiscal 1998, compared to $54 million for the third quarter of fiscal 1997.The increase in revenues resulted primarily from the development agreementwith Globalstar.Operating expenses, including research and development, selling andmarketing and general and administrative, increased to $197 million in thethird quarter of fiscal 1998 compared to $132 million for the same periodlast year. As a percentage of sales, operating expenses were 23 percentversus 25 percent in the year ago quarter.Minority interest in subsidiary earnings was $19 million versus $1 millionin the year ago quarter. The current quarter included a one-time adjustmentfor warranty provisions, which were allocated to Sony and Qualcomm inproportion to their ownership in the QPE joint venture, as well as improvedoperating earnings in QPE.Losses from equity investments in the current quarter were $6 million,reflecting the initial accounting losses of international wireless operatorinvestments. Qualcomm has announced plans to spin off certain of theseinvestments into a separate company in the fourth quarter of fiscal 1998,subject to approval by the Company's Board of Directors.Headquartered in San Diego, Qualcomm develops, manufactures, markets,licenses and operates advanced communications systems and products based onits proprietary digital wireless technologies. The Company's primaryproduct areas are the OmniTRACS® system (a geostationary satellite-based,mobile communications system providing two-way data and position reportingservices), CDMA wireless communications systems and products and, inconjunction with others, the development of the Globalstar™low-earth-orbit (LEO) satellite communications system. Other Companyproducts include Eudora® electronic mail software, ASIC products, andcommunications equipment and systems for government and commercialcustomers worldwide. For more information on Qualcomm products andtechnologies, please visit the Company's web site at http://www.qualcomm.com.Except for the historical information contained herein, this news releasecontains forward-looking statements that are subject to risks anduncertainties, including continued increasing demand for cdmaOne products,the ability to achieve revenue growth in future quarters, and to developand introduce cost effective new products in a timely manner, potentialdelays in the commercial implementation of the Company's CDMA technology,continued growth in the CDMA subscriber population and the scale-up andoperations of CDMA systems, developments in current or future litigation,the Company's ability to effectively manage growth and the intensecompetition in the wireless communications industry, risks associated withvendor financing, timing and receipt of license fees and royaltiesincluding those with fluctuating foreign exchange values, the Company'sability to successfully manufacture and sell significant quantities of CDMAhandsets, ASICs and infrastructure equipment on a timely basis, failure tosatisfy performance obligations, change in economic conditions of thevarious markets the Company serves, continued currency fluctuations andrisk, as well as the other risks detailed from time to time in theCompany's SEC reports, including the report on Form 10-K for the year endedSeptember 28, 1997 and most recent Form 10-Q.# # #Qualcomm, OmniTRACS and Eudora are registered trademarks of QualcommIncorporated. Q phone is a trademark of Qualcomm Incorporated. Globalstaris a trademark of Loral Qualcomm Satellite Services, Incorporated. cdmaOneis a trademark of the CDMA Development Group.
July 21, 1998July 21, 1998