Qualcomm 1999 Annual Report Download - page 43

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QUALCOMM Incorporated
FINANCIAL REVIEW
QUALCOMM SEGMENT RESULTS
The following should be read in conjunction with the 1999 financial
results of each reporting segment as detailed in Note 15, “Segment
Information” of the Consolidated Financial Statements and Notes.
CDMA Technologies Segment (QCT)
The QCT segment is a major supplier of components to manufactur-
ers that need to design CDMA into their phones or infrastructure
equipment. QCT continues its tradition of helping manufacturers pro-
duce smaller and more affordable products by bringing new chipsets to
the market with more functionality in a substantially smaller package
size. QCT’s CDMA ASIC products include Mobile Station Modem
(“MSM™”) chips for telephone handsets, Cell Site Modem (“CSM™”)
chips for infrastructure base stations and a number of related chips that
make digital voice transmission and processing possible.
Segment revenues increased 29% to $1,133 million and earnings
before taxes increased 66% to $428 million. Revenue and earnings
before taxes growth was primarily due to increased customer demand
for CDMA chipsets in the United States, Korea, and Japan and to new
product releases. Over 39 million MSM chipsets were sold in fiscal
1999, contributing to the significant growth in both the revenue and
earnings before tax for the fiscal year ended September 1999. MSM
chipset sales increased by more than 20 million over the prior year, an
increase of 160%.
In September 1999, QCT announced an alliance with Lucent
Technologies to commercialize a wireless technology designed to
increase the capacity and data capabilities of Lucent’s network equip-
ment based on CDMA.
In October 1999, QCT announced the development of MSM chipset
and system software solutions that will feature integrated support for
wireless position location technology. Called gpsOne, this MSM solu-
tion is intended to provide a highly cost-effective solution for wireless
position technology in a mobile handset for CDMA cellular and PCS net-
works. In October 1999, QCT also announced further development plans
for MSM solutions that will support the single worldwide CDMA stan-
dard for third generation systems. The new chipsets and systems will
pave the way for QUALCOMM to deliver complete solutions to acceler-
ate the global deployment of third generation CDMA products and
services. These solutions will enable manufacturers and operators
worldwide to easily and effectively evolve their products and services
based on local market requirements and deliver a new breed of fea-
ture-rich, voice and data-centric wireless devices furthering the
growth of the wireless industry.
Technology Licensing Segment (QTL)
QTL provides licenses to third parties related to the design, manu-
facture and sale of products using the Company’s technologies.
Segment revenues increased 57% to $454 million and earnings
before taxes increased 58% to $405 million. Revenue and earnings
before taxes growth was primarily due to royalties paid from licensees
due to an increase in worldwide demand for CDMA technologies.
Wireless Systems Segment (QWS)
QWS designs, manufactures, markets and deploys infrastructure and
handset products for use in terrestrial and non-terrestrial CDMA wire-
less and satellite networks and provides satellite-based two-way data
messaging and position reporting equipment and services to trans-
portation companies.
Segment revenues decreased 10% to $940 million and earnings
before taxes increased 138% to $20 million. Revenue decreased due to
the sale of certain assets of the Company’s terrestrial CDMA wireless
infrastructure business in May 1999 to Ericsson. Earnings before taxes
growth was primarily due to deployment of Globalstar gateways and
OmniTRACS domestic unit demand from existing customers and
increase in messaging revenue due to expansion in customer base,
offset by the impact of the sale of infrastructure contracts to Ericsson.
In October 1999, QWS announced Chinese government approval
of its contract with Guangdong South Satellite Telecommunications
Service Co., Ltd. (“SST”), a subsidiary of Guangdong Nanfang
Communications Group, to provide satellite data services in China.
SST will offer QUALCOMM’s OmniTRACS mobile information manage-
ment system to China’s transportation industry. In August 1999, QWS
also announced a joint venture with AUTOTRAC Comércio e
Telecomunicacões S.A. of Brazil to bring the OmniTRACS mobile infor-
mation management system to Argentina. This OmniTRACS system will
provide two-way satellite-based communications, including real-time
Global Positioning System (“GPS”) monitoring and a satellite communi-
cations system to allow the transfer of data to and from a vehicle while
en route.
Consumer Products Segment (QCP)
QCP designs, manufactures and markets wireless handsets
and accessories using CDMA technology for use in mobile and fixed
wireless networks.
Segment revenues increased 72% to $1,470 million and earnings
before taxes increased 76% to a $40 million loss. Revenue and earnings
before taxes growth was primarily due to an increase in demand
for CDMA handsets, new product releases, expanded manufacturing
facilities with entrance into the Brazilian market and improved manu-
facturing efficiencies.