Qualcomm 2005 Annual Report Download - page 40
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During the fourth quarter of fi scal 2005, MediaFLO conducted the
fi rst live, over-the-air demonstration of FLO technology. The dem-
onstration featured over-the-air delivery and viewing of multiple
channels of high quality (QVGA) wireless multimedia content, both
streaming video and multicast packet data, on a wireless handset.
Our Business and Operating Segments
We design, manufacture and market digital wireless telecommu-
nications products and services based on our CDMA technology
and other technologies. We derive revenue principally from sales
of integrated circuit products, from license fees and royalties for
use of our intellectual property, from services and related hardware
sales and from software development and licensing and related ser-
vices. Operating expenses primarily consist of cost of equipment
and services, research and development and selling, general and
administrative expenses.
We conduct business primarily through four reportable segments.
These segments are: QUALCOMM CDMA Technologies, or QCT;
QUALCOMM Technology Licensing, or QTL; QUALCOMM Wireless
& Internet, or QWI; and QUALCOMM Strategic Initiatives, or QSI.
QCT is a leading developer and supplier of integrated circuits and
system software for wireless voice and data communications, multi-
media functions and global positioning. QCT’s integrated circuit
products and software are used in wireless phones, data cards and
infrastructure equipment. The wireless phone integrated circuits
include the Mobile Station Modem (MSM), Radio Frequency (RF)
and Power Management (PM) devices. The wireless phone integrated
circuits and software perform voice and data communication, multi-
media and global positioning functions, radio conversion between
radio and baseband signals, and power management. The infrastruc-
ture equipment integrated circuits provide the core baseband CDMA
modem functionality in the operator’s equipment. QCT software
products are the operating systems that control the phone and the
functionality imbedded in our integrated circuit products. QCT reve-
nues comprised 58%, 64% and 63% of total consolidated revenues
in fi scal 2005, 2004 and 2003, respectively.
QTL grants licenses to use portions of our intellectual property port-
folio, which includes certain patent rights essential to and/or useful
in the manufacture and sale of CDMA products, including, without
limitation, products implementing cdmaOne, CDMA2000, WCDMA
and/or the CDMA TDD standards and their derivatives. QTL receives
license fees as well as ongoing royalties based on worldwide sales
by licensees of products incorporating our intellectual property.
QTL revenues comprised 32%, 27% and 26% of total consolidated
revenues in fi scal 2005, 2004 and 2003, respectively.
QWI, which includes QUALCOMM Wireless Business Solutions (QWBS),
QUALCOMM Internet Services (QIS) and QUALCOMM Government
Technologies (QGOV), generates revenue primarily through mobile
communication products and services, software and software devel-
opment aimed at support and delivery of wireless applications. QWBS
provides satellite and terrestrial-based two-way data messaging,
position reporting and wireless application services to transporta-
tion companies, private fl eets, construction equipment fl eets and
other enterprise companies. QIS provides BREW (Binary Runtime
Environment for Wireless) products and services, including the
In addition to historical information, the following discussion
contains forward-looking statements that are subject to risks and
uncertainties. Actual results may differ substantially from those
referred to herein due to a number of factors, including but not
limited to risks described in the section entitled Risk Factors in
the Company’s Annual Report on Form 10-K and elsewhere in this
Annual Report.
OVERVIEW
Recent Highlights
Revenues for fi scal 2005 were $5.67 billion, with net income of
$2.14 billion. The following recent developments occurred with
respect to key elements of our business or our industry:
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CDMA-based 3G subscribers to wireless operators’ services grew
to at least 213 million worldwide through September 2005, including
at least 15 million 1xEV-DO subscribers and at least 35 million WCDMA
subscribers, according to data from a large portion of the wireless
operators around the world.
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CDMA-based handset shipments by manufacturers to wireless
operators during the period July 2004 through June 2005 totaled
approximately 182 million units at an average selling price of approxi-
mately $215 based on reports in fi scal 2005 by our licensees.
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The ratio of WCDMA reported royalties to total reported royalties
grew from approximately 26% reported in the fourth quarter of
fi scal 2004 to approximately 41% reported in the fourth quarter
of fi scal 2005.
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Through October 2005, six manufacturers in China have been added,
at our standard worldwide WCDMA royalty rates, to the more than
60 companies that have licensed our WCDMA patent portfolio.
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During fi scal 2005, we shipped approximately 151 million Mobile
Station Modem (MSM) integrated circuits for CDMA-based phones
and data modules (nearly all of which were 3G, including CDMA2000 1X,
1xEV-DO and WCDMA) compared to approximately 137 million MSM
integrated circuits in the prior fi scal year. During fi scal 2005, seven
new customers selected our WCDMA (UMTS) MSM integrated circuits
for their WCDMA phone products bringing the total number of WCDMA
customers to 32, 16 of which have been publicly announced.
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As of September 2005, 56 wireless operators were offering BREW
services in 29 countries, including customers acquired related to
the ELATA acquisition. As reported in June 2005, BREW publishers
and developers have earned more than $350 million to date from
the sale of wireless applications and services developed for the
BREW service. Through September 2005, three operators, including
ALLTEL, have entered into agreements to license our uiOne user
interface technology.
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During fi scal 2005, we continued to invest in new emerging techno-
logies through strategic acquisitions and research and development.
We completed four acquisitions this year, including Iridigm, Trigenix,
Spike and ELATA, and announced our intent to acquire Flarion. Each of
these acquisitions provides us complementary or expanded offerings
to our existing technologies.
Management’s Discussion and Analysis of Financial Condition and Results of Operations