Qualcomm 2002 Annual Report Download - page 50

development activities, particularly in China, and $13 million resulting from the con-
solidation of Wireless Knowledge, Inc. (Wireless Knowledge), partially offset by a
$22 million reduction in support efforts related to the Globalstar business and a
$14 million reduction in bad debt expense.
Amortization of goodwill and other acquisition-related intangible assets was $259
million for fiscal 2002, compared to $255 million in fiscal 2001. Amortization charges
were primarily related to the acquisition of SnapTrack in March 2000.
For fiscal 2002, asset impairment and related charges were less than $1 million,
compared to $518 million of such charges in fiscal 2001. Asset impairment and related
charges during fiscal 2001 were comprised primarily of $519 million in charges
resulting from management’s determination that certain assets related to the
Globalstar business were impaired.
For fiscal 2002, other operating expenses were $9 million, compared to $51 million
in fiscal 2001. Other operating expenses for fiscal 2002 resulted from the write down
of a note receivable from a development stage CDMA carrier. Other operating expenses
for fiscal 2001 were comprised of a $62 million arbitration decision against us, offset
by $11 million in other income related to the irrevocable transfer of a portion of an
FCC Auction Discount Voucher to a third party.
Interest expense was $26 million for fiscal 2002, compared to $10 million for fiscal
2001. Interest expense for fiscal 2002 was primarily related to the long-term debt of
Vésper Holding. Interest expense for fiscal 2001 was primarily related to interest
charges resulting from the arbitration decision made against us.
Net investment expense was $186 million for fiscal 2002 compared to $317 million
for fiscal 2001. The change was primarily comprised as follows (in millions):
Years Ended September 30,
2002 2001 Change
Interest income:
Corporate $ 102 $ 135 $ (33)
QSI 33 108 (75)
Net realized gains on investments:
Corporate — 11 (11)
QSI 2 59 (57)
Other-than-temporary losses
on marketable securities (206) (147) (59)
Other-than-temporary losses
on other investments (24) (51) 27
Change in fair values of
derivative investments (58) (243) 185
Minority interest in loss (income) of
consolidated subsidiaries 52 (4) 56
Equity in losses of investees (87) (185) 98
$(186) $(317) $131
The decline in interest income on corporate cash and marketable debt securities
was a result of lower interest rates. The decline in QSI interest income was a result
of the cessation of interest income recognition on Pegaso debt facilities starting in the
fourth fiscal quarter of fiscal 2001 and on Leap Wireless bonds starting in the third
quarter of fiscal 2002. The other-than-temporary losses on marketable securities
during fiscal 2002 primarily related to $162 million and $18 million in losses on our
investments in Leap Wireless bonds and common stock, respectively. We determined
that the declines in fair values were other than temporary, as the market values of the
bond and common stock had significantly declined during our third quarter of fiscal 2002
as a result of unfavorable developments in Leap Wireless’ business. The other-than-
temporary losses on marketable securities during fiscal 2001 primarily related to a
$134 million loss on our investment in NetZero, Inc., which subsequently completed
a merger with Juno Online Services, Inc. and became United Online, Inc. The change
in fair values of derivative instruments primarily resulted from $59 million in losses
resulting from declines in the price of Leap Wireless common stock, which reduced
the fair values of our warrants to acquire Leap Wireless common stock. The warrants
had insignificant value at September 30, 2002. Equity in losses of investees decreased
as a result of the consolidation of Vésper Holding effective November 13, 2001, as
these losses are now included in operations.
For fiscal 2002 there were no other non-operating charges, compared to
$167 million in fiscal 2001. Other non-operating charges in fiscal 2001 were primarily
comprised of a $120 million write-down of the note receivable from VeloCom to its fair
value and $58 million in write-downs of recorded values of a note receivable from
MANAGEMENT’S DISCUSSION AND ANALYSIS continued