Qualcomm 2005 Annual Report Download - page 41
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uiOne customizable user-interface product and the deliveryOne
content distribution system, for the development and over-the-air
deployment of data services on wireless devices. QIS also provides
QChat and QPoint products and services. QChat enables virtually
instantaneous push-to-chat functionality on CDMA-based wireless
devices while QPoint enables operators to offer E-911 and location-
based, applications and services. The QGOV division provides
development, hardware and analytical expertise to United States
government agencies involving wireless communications technologies.
QWI revenues comprised 11%, 12% and 13% of total consolidated
revenues in fi scal 2005, 2004 and 2003, respectively.
QSI makes strategic investments to promote the worldwide adoption
of CDMA products and services. Our strategy is to invest in CDMA
operators, licensed device manufacturers and start-up companies
that we believe open new markets for CDMA technology, support the
design and introduction of new CDMA-based products or possess
unique capabilities or technology. Effective as of the beginning of
fi scal 2005, we present the operating results of our wireless multi-
media operator, MediaFLO USA, Inc. (MediaFLO USA), in the QSI
segment. Our MediaFLO USA subsidiary expects to offer a nationwide
mediacast network based on our FLO (Forward Link Only) technology
and MediaFLO Media Distribution System (MDS), initially targeting
100 top domestic markets, with the eventual capability for broader
nationwide coverage. This network is expected to be utilized as a
shared resource for wireless operators and their customers within the
United States starting in latter 2006. FLO is a multicast technology
specifi cally designed for markets where dedicated spectrum is avail-
able and where regulations permit high-power transmission, thereby
reducing the number of towers and related infrastructure required to
provide market coverage. MediaFLO USA plans to use nationwide
700 MHz spectrum for which we hold licenses and will be procuring
and distributing content which we will make available wholesale to our
wireless operator customers. Distribution, marketing, billing and cus-
tomer relationships are expected to remain services provided by our
wireless operator customers. We are evaluating a number of corporate
structuring options, including distributing our ownership interest in
MediaFLO USA to our stockholders in a spin-off transaction.
Nonreportable segments include the QUALCOMM Wireless Systems
division, which sells products that operate on the Globalstar low-
Earth-orbit satellite communications system and provides related
services, the QUALCOMM MEMS Technologies division, comprised of
the Iridigm business, a display technology company that we acquired
in the fi rst quarter of fi scal 2005, and other product initiatives.
Looking Forward
We expect continued growth in demand for CDMA2000 and WCDMA
products and services in markets around the world:
>
Operators on the CDMA2000 technology path are deploying 1xEV-DO
and are preparing to deploy EV-DO Revision A. Many GSM operators
are migrating their networks to WCDMA and are preparing to deploy
HSDPA (High Speed Downlink Packet Access). The deployment of
these 3G networks enables higher voice capacity and data rates,
thereby supporting more minutes of use and data intensive applica-
tions like multimedia.
>
As of October 2005, 87 WCDMA networks have launched, as reported
by the Global Mobile Suppliers Association, an international organiza-
tion of WCDMA and GSM (Global System for Mobile Communications)
suppliers. We expect that the WCDMA market will continue to expand
as operators transition their subscribers to WCDMA devices on these
WCDMA networks.
>
We expect that volume increases and growing competition among
WCDMA phone manufacturers and WDCMA integrated circuit sup-
pliers will help decrease WCDMA phone prices signifi cantly and
drive growth of WCDMA phone sales worldwide.
>
We expect that growing demand for advanced 3G phones and
devices will continue to drive the need for increased multimedia
MSM functionality. To meet this market need, we intend to continue
to invest signifi cant resources toward multimedia functionality.
>
We expect growing demand for low-end phones to continue and
have invested resources for single chip solutions which combine the
baseband, radio frequency and power management chips into one
package. We believe lower component counts and further integra-
tion will drive costs down and enable faster time-to-market to meet
the increasing demand for low-end phones. While we are moving
aggressively to address the low-end market more effectively with
CDMA-based products, we still face signifi cant competition from
GSM-based products in this market.
>
We also expect growing demand for high-end, multimedia phones
with added functionality and capability at a high price point.
>
The expiration of royalty-sharing obligations under two agreements,
one in fi scal 2005 and the other in fi scal 2006, will contribute to an
increase in our royalty revenues in fi scal 2006 and beyond.
>
We will continue our development efforts with respect to our BREW
applications development platform, our new MediaFLO Multimedia
Distribution System (MDS) and FLO technology for low-cost delivery
of multimedia content to multiple subscribers simultaneously and
our iMoD display technology.
We are dependent upon the commercial deployment of 3G wireless
communications equipment, products and services based on our
CDMA technology to increase our revenues and market share. We
continue to face signifi cant competition from non-CDMA technologies,
as well as competition from companies offering other CDMA-based
products. Recent reports suggest that infl ation could have adverse
effects on the global economy and the capital markets. You should
also refer to the Risk Factors in the Company’s Annual Report on
Form 10-K for further discussion of these and other risks related
to our business.
Revenue Concentrations
Revenues from customers in South Korea, Japan and the United States
comprised 37%, 21% and 18%, respectively, of total consolidated
revenues in fi scal 2005 as compared to 43%, 18% and 21%, respec-
tively, in fi scal 2004, and 45%, 15% and 23%, respectively, in fi scal
2003. We distinguish revenue from external customers by geographic
areas based on customer location. Revenues from customers in