Qualcomm 2005 Annual Report Download - page 44
Download and view the complete annual report
Please find page 44 of the 2005 Qualcomm annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Management’s Discussion and Analysis continued
40 qualcomm 2005
Litigation. We are currently involved in certain legal proceedings.
Although there can be no assurance that unfavorable outcomes in
any of these matters would not have a material adverse effect on
our operating results, liquidity or fi nancial position, we believe the
claims are without merit and intend to vigorously defend the actions.
We estimate the range of liability related to pending litigation where
the amount and range of loss can be estimated. We record our best
estimate of a loss when the loss is considered probable. Where a lia-
bility is probable and there is a range of estimated loss with no best
estimate in the range, we record the minimum estimated liability
related to the claim. As additional information becomes available,
we assess the potential liability related to our pending litigation
and revise our estimates. We have not recorded any accrual for con-
tingent liability associated with our legal proceedings based on our
belief that a liability, while possible, is not probable. Further, any
possible range of loss cannot be estimated at this time. Revisions
in our estimates of the potential liability could materially impact
our results of operations.
Acquisitions
In October 2004, we completed the acquisitions of Iridigm Display
Corporation (Iridigm), a display technology company, for a total of
approximately $160 million in cash and the exchange of stock
options with an estimated aggregate fair value of approximately
$17 million, and Trigenix Limited (Trigenix), a mobile user interface
company for approximately $33 million in cash. The convergence of
consumer electronics products, including cameras, MP3 players,
camcorders, GPS receivers and game consoles into wireless devices
is driving the increased adoption of 3G CDMA. Iridigm’s display
technology, known as iMoD, enables advanced, high-resolution
multimedia capabilities on all tiers of mobile devices, while providing
substantial performance, power consumption and cost benefi ts, as
compared to other alternative display technologies. Our acquisition
of Iridigm is intended to accelerate the time-to-market for Iridigm’s
display technology, which fi ts our overall strategy of rapidly increasing
the capability of wireless devices while driving down cost, size and
power consumption. In addition to having a better display, operators
and device manufacturers need a secure and modular approach for
customizing their phone user interfaces so they can brand and
differentiate their handsets. Our acquisition of Trigenix complements
our BREW offering by adding Trigenix’s user interface development
tools, enhancing the capabilities of our BREW uiOne user interface
and accelerating the time-to-market for new user inter face features,
such as multi-perspective window display technology.
In August 2005, we completed the acquisition of ELATA, Ltd. (ELATA),
a developer of mobile content delivery and device management soft-
ware systems, for a total of approximately $57 million in cash. Our
acquisition of ELATA will enable us to offer a unifi ed mobile content
delivery system to operators who desire an enhanced framework for
managing, delivering and marketing rich wireless content. The ELATA
single service delivery framework, which leverages open standards
interfaces to ensure interoperability and retain backward compat-
ibility, is platform-agnostic and will allow operators to consolidate
the delivery of all of their content services without having to change
their device portfolio. This acquisition will also expand our presence
in Europe by enabling us to offer European operators a content
delivery system that can be easily integrated with their existing core
network and business systems. The ELATA single service delivery
framework has become part of our family of BREW product offerings
and is being marketed under the brand name deliveryOne.
In August 2005, we announced our intention to acquire Flarion
Technologies, Inc. (Flarion), a developer of OFDMA technology. Upon
completion of the acquisition, which is anticipated in the fi rst half of
fi scal 2006, pending regulatory approval and other customary closing
conditions, we estimate that we will pay approximately $545 million
in consideration, consisting of approximately $272 million in shares
of QUALCOMM stock, $235 million in cash, and the exchange of
Flarion’s existing vested options and warrants with a fair value of
approximately $38 million. Upon achievement of certain agreed
upon milestones on or prior to the eighth anniversary of the close
of this transaction, we may issue additional aggregate consideration
of $205 million, consisting of approximately $173 million payable in
cash to Flarion stockholders and $32 million in shares of QUALCOMM
stock, which will be issued to Flarion option holders and warrant
holders upon or following the exercise of such options and warrants.
Our acquisition of Flarion is intended to broaden our ability to
effectively support operators who may prefer an OFDMA or a hybrid
OFDM/CDMA/WCDMA network alternative for differ entiating their
services. The addition of Flarion’s intellectual property and engi-
neering resources will also supplement the resources that we have
already dedicated over the years towards the development of
OFDM/OFDMA technologies.
Strategic Investments in our QSI Segment
Our QSI segment makes strategic investments to promote the
worldwide adoption of CDMA products and services. QSI segment
assets totaled $442 million at September 25, 2005, compared to
$400 million at September 26, 2004. Our MediaFLO USA subsidiary,
a wireless multimedia operator, is expected to begin commercial
operations in latter 2006. We also enter into strategic relationships
with CDMA wireless operators and developers of innovative tech-
nologies or products for the wireless communications industry.
Due to fi nancial and competitive challenges facing wireless opera-
tors, we cannot assure you that our investments in or loans to these
operators will generate fi nancial returns or that they will result in
increased adoption or continued use of CDMA technologies. CDMA
wireless operators to whom we have provided funding have limited
operating histories, are faced with signifi cant capital requirements
and are highly leveraged and/or have limited fi nancial resources.
If these CDMA wireless operators are not successful, we may have
to write down our investments in or loans to these operators.
Our QSI segment maintains strategic investments in marketable
equity securities classifi ed as available-for-sale. We strategically
invest in companies in the high-technology industry and typically do
not attempt to reduce or eliminate our exposure to market risks in
these investments. The fair values of these strategic investments
are subject to substantial quarterly and annual fl uctuations and
to signifi cant market price volatility. Our strategic investments in
specifi c companies and industry segments may vary over time, and
changes in concentrations may affect price volatility. Downward
fl uctuations and market trends could adversely affect our operat-
ing results. In addition, the realizable value of these securities and
derivative instruments is subject to market and other conditions.