Qualcomm Incorporated (NASDAQ: QCOM) 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 sharefor the same period last year, an increase in earnings per share of 29 percent. Earnings per share for fiscal 1998 were $1.47 (diluted) comparedto $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 WirelessInternational. The distribution was made from both retained earnings and paid-in capital, reducing the retained earnings balance to zero atyear-end. Excluding equity losses of investees transferred to Leap Wireless, incurred prior to the effective date of the spin-off, earningsper share would have been $.66 (diluted) for the fourth quarter of fiscal 1998. 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 subscribersworldwide. 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 theevolution 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 areworking 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
ASIC Products Division
- Exceeded 7 million CDMA phones shipped since inception of Qualcomm Personal Electronics (QPE), representing a doubling of shipments fromfiscal 1997 to fiscal 1998.
- Shipped the dual-mode cellular/analog Q phone and introduced the first-of-its-kind pdQ CDMA digital smartphone, which marries thefunctionality of a PalmPilot 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 megabitsper second.
- Commenced production of Q phones in Qualcomm's new phone manufacturing facility in Sao Paulo, Brazil.
- Exceeded 25 million Mobile Station Modem (MSM) chips shipped to date to CDMA phone manufacturers worldwide, including QPE, as compared to 10million 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 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.
- 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 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 Personal Communications, TruckMAIL for small fleets, and untethered trailer tracking.
- Signed five new license agreements for cdmaOne technology, bringing the total number of companies licensed to over 60. The new or expandedlicensees 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 PerformanceCommunications systems revenues of $802 million for the fourth quarter of fiscal 1998 and approximately $2.9 billion for fiscal 1998, a 65 percentincrease 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 $50million or 8 percent of total revenues for the fourth quarter of fiscal 1997. License, royalty and development fees contributed $214 million oftotal 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 fiscal1997. Contract services revenues for fiscal 1998 were $270 million, compared to $212 million for fiscal 1997. The increase is attributable tothe development agreement with Globalstar.Operating expenses, including research and development, selling and marketing and general and administrative, for the fourth quarter of fiscal1998 were $220 million. Operating expenses increased in absolute dollars in fiscal 1998, but held constant at 23 percent of total revenues. TheCompany continues to invest substantially in research and development across all of its business areas. Selling and marketing expenses increaseddue to international marketing activities and a nationwide advertising campaign during fiscal 1998. General and administrative expenses increasedin 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 anincrease 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) is a leader in developing and delivering innovative digital wireless communications products and servicesbased on the Company's CDMA digital technology. The Company's major business areas include CDMA phones; Applications Specific IntegratedCircuits (ASICs); wireless infrastructure; technology licensing; and satellite-based systems including OmniTRACS and portions of the Globalstarsystem. 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 anduncertainties, the risk that the rate of growth in the CDMA subscriber population will decrease, the risks associated with the scale-up andoperations 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 aretrademarks of Qualcomm Incorporated. Globalstar is a trademark of Loral Qualcomm Satellite Services, Incorporated. cdmaOne is a trademark of theCDMA Development Group. PalmPilot is a trademark of Palm Computing, Inc., 3Com Corporation, or its subsidiaries.