San Diego -- December 22, 1999 -- Qualcomm Incorporated (NASDAQ: QCOM) and Kyocera Corporation (NYSE: KYO) today announced at 1:30 p.m. (PST) that they have reached a definitive agreement which will result in a newly formed unit of Kyocera acquiring Qualcomm's terrestrial-based wireless Code Division Multiple Access (CDMA) consumer phone business, including its phone inventory, manufacturing equipment and customer commitments. Under this agreement, Kyocera has agreed to purchase a majority of its CDMA chipsets and system software from Qualcomm for a period of five years. Kyocera will continue its existing royalty-bearing CDMA license agreement with Qualcomm. The transaction is expected to close by the end of February 2000. The financial terms of the agreement, which is subject to regulatory approval and other customary closing conditions, were not disclosed.
"This agreement is intended to further increase the demand for CDMA, the world's fastest-growing wireless technology," said Dr. Irwin Mark Jacobs, chairman and CEO, Qualcomm. "Kyocera, already a leading CDMA phone manufacturer in Asia, has committed to build upon the foundation of our phone business to provide state-of-the-art CDMA phones in North America and other markets around the world, and has the opportunity to offer Qualcomm's High Data Rate technology. We are excited about Kyocera's new phone models being introduced in Japan and expect to see these models available shortly in the United States."
The alliance represents a major breakthrough for Kyocera in North America, where Kyocera has only recently begun to market its wireless phones.
"Kyocera will now have a comprehensive global infrastructure for producing and delivering CDMA handsets -- from world-leading R&D and production, to sales, marketing and support," said Yasuo Nishiguchi, president of Kyocera Corporation, the group's parent company headquartered in Kyoto, Japan. "With this North American business base, and our existing operations in Japan and South Korea, our wireless handset business covers the three largest regional markets for CDMA equipment. We are ready to provide handsets to any CDMA carrier in the world."
Qualcomm will form a new subsidiary with a substantial number of employees from Qualcomm Consumer Products, as identified by Kyocera. Through a strategic alliance, these employees' services will be contracted to Kyocera on a cost-plus basis to support Kyocera's phone business for up to three years. Selected employees of Qualcomm Personal Electronics (QPE), a manufacturing joint venture between Qualcomm and Sony Electronics, will be transferred to the newly formed unit of Kyocera. Qualcomm will incur a one-time charge in the first quarter of fiscal 2000 of approximately US$30 million before taxes.
"The combination of the Kyocera and Qualcomm CDMA handset businesses brings a new strong competitor to the CDMA marketplace," said Dr. Paul E. Jacobs, president of Qualcomm Consumer Products. "Through this transaction, the engineering and business teams that built Qualcomm into the leading supplier of CDMA handsets in the United States remain together and can now leverage the advantages of Kyocera, the leading handset supplier in the rapidly growing Japanese CDMA market."
Kyocera's newly formed unit will be a wholly owned subsidiary of Kyocera International, Inc. of San Diego, the Kyocera Group's North American headquarters and holding company. It will be responsible for integrating Qualcomm's handset design, development, manufacturing and marketing expertise with Kyocera's global R&D and technology resources. The new Kyocera unit will lease selected Qualcomm facilities.
With the newly acquired business and its existing manufacturing operations, Kyocera estimates that it will produce approximately 16 million wireless handsets, including CDMA, in the fiscal year ending March 31, 2001 -- essentially doubling its cumulative shipments to date.
Kyocera Corporation is the leading shareholder in DDI Corporation, one of two CDMA carriers in Japan, which was established by Dr. Kazuo Inamori, Kyocera's founder and chairman emeritus, in 1984. On December 16, 1999, DDI announced an agreement to acquire two of Japan's other leading telecommunications providers, KDD and IDO, to form a unified CDMA carrier under the DDI name next year. The new DDI, which will be Japan's second-largest telecommunications carrier, will be a global leader in wireless data and third-generation systems. DDI and IDO are among the first CDMA carriers worldwide to introduce CDMA services supporting 64 kbps data rates. Using Qualcomm chipsets, Kyocera is able to expand its product offering to include these advanced features.
Since its founding in 1959 as a manufacturer of technical ceramics, Kyocera Corporation (www.kyocera.com) has developed a vertically integrated product line that includes high-performance materials, components, equipment and services. The company's consolidated annual sales for the year ended March 31, 1999, totaled 725 billion yen (US$6.1 billion) with net income of 28 billion yen (US$239 million). Kyocera employs approximately 38,000 people worldwide and has been named by Industry Week magazine as one of "The World's 100 Best-Managed Companies."
Qualcomm Incorporated (www.qualcomm.com) 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 business areas include CDMA phones; integrated CDMA chipsets and system software; technology licensing; Eudora® email software for Windows® and Macintosh® computing platforms; and satellite-based systems including OmniTRACS® and portions of the Globalstar™ system. Headquartered in San Diego, Calif., Qualcomm is included in theS&P500 Index, is a 1999 FORTUNE 500® company and ranked number 14 on FORTUNE's "100 Best Companies to Work for in America."
Except for the historical information contained herein, this news release contains forward-looking statements that are subject to risks and uncertainties, including uncertainties regarding the occurrence of all conditions to closing and the risk that the transaction is not consummated, uncertainties regarding the impact of the transaction on the subscriber business and its employees, customers and suppliers, the risk that Qualcomm may incur unfavorable accounting charges or other adverse financial accounting consequences as a result of the transaction, the impact of the proposed transaction on Qualcomm's stock price, the ability to successfully manufacture significant quantities of CDMA or other equipment on a timely and profitable basis, and continued increases in worldwide demand for CDMA, 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 26, 1999, and most recent Form 10-Q.
Certain of the statements made in this news release may be forward-looking statements, which involve risks and uncertainties. Potential risks and uncertainties include general economic conditions in Kyocera's markets, which are primarily Japan, North America, Europe and Asia; exchange rates, particularly between the yen and the U.S. dollar and Deutsche mark, respectively, in which a significant amount of Kyocera's revenues are denominated; Kyocera's ability to launch innovative products and otherwise meet the advancing technical requirements of its customers; and the extent and pace of growth in markets around the world for wireless communications equipment.