Qualcomm 2005 Annual Report Download - page 74
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Please find page 74 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.Notes to Consolidated Financial Statements continued
70 qualcomm 2005
Broadcom Corporation v. QUALCOMM Incorporated: On May 18,
2005, Broadcom fi led two actions in the United States District Court
for the Central District of California against the Company alleging
infringement of ten patents and seeking monetary damages and
injunctive relief based thereon. On the same date, Broadcom also
fi led a complaint in the United States International Trade Commission
(ITC) alleging infringement of fi ve of the same patents at issue in the
Central District Court cases seeking a determination and relief under
Section 337 of the Tariff Act of 1930. On July 1, 2005, Broadcom
fi led an action in the United States District Court for the District of
New Jersey against the Company alleging violations of state and
federal antitrust and unfair competition laws as well as common law
claims, generally relating to licensing and chip sales activities, seeking
monetary damages and injunctive relief based thereon. Discovery
has commenced in the actions.
QUALCOMM Incorporated v. Broadcom Corporation: On July 11, 2005,
the Company fi led an action in the United States District Court for
the Southern District of California against Broadcom alleging infringe-
ment of seven patents, each of which is essential to the practice of
either the GSM or 802.11 standards, and seeking monetary damages
and injunctive relief based thereon. On September 23, 2005, Broadcom
answered and counterclaimed, alleging infringement of six patents.
Discovery has yet to begin in the action.
QUALCOMM Incorporated v. Broadcom Corporation: On October 14,
2005, the Company fi led an action in the United States District Court
for the Southern District of California against Broadcom alleging
infringement of two patents, each of which relates to video encoding
and decoding for high-end multimedia processing, and seeking mon-
etary damages and injunctive relief based thereon. Broadcom has
yet to answer.
Other: The Company has been named, along with many other
manufacturers of wireless phones, wireless operators and industry-
related organizations, as a defendant in purported class action
lawsuits, including In re Wireless Telephone Frequency Emissions
Products Liability Litigation, United States District Court for the
District of Maryland, and several individually fi led actions, seeking
monetary damages arising out of its sale of cellular phones. On
March 5, 2003, the Court granted the defendants’ motions to dismiss
fi ve of the consolidated cases (Pinney, Gimpleson, Gillian, Farina and
Naquin) on the grounds that the claims were preempted by federal
law. On March 21, 2005, the 4th Circuit Court of Appeals reversed
the ruling by the District Court and ordered the cases remanded to
state court. All remaining cases fi led against the Company allege
personal injury as a result of their use of a wireless telephone. Those
cases have been remanded to the Washington, D.C. Superior Court.
The courts that have reviewed similar claims against other companies
to date have held that there was insuffi cient scientifi c basis for the
plaintiffs’ claims in those cases.
On October 28, 2005, it was reported that six telecommunications
companies (Broadcom, Nokia, Texas Instruments, NEC, Panasonic and
Ericsson) fi led complaints with the European Commission, alleging
that the Company violated European Union competition law in its
WCDMA licensing practices. To date, the Company has not been
formally served with the complaints.
Although there can be no assurance that unfavorable outcomes in any
of the foregoing matters would not have a material adverse effect
on the Company’s operating results, liquidity or fi nancial position,
the Company believes the claims made by other parties are without
merit and will vigorously defend the actions. The Company has not
recorded any accrual for contingent liability associated with the
legal proceedings described above based on the Company’s belief
that a liability, while possible, is not probable. Further, any possible
range of loss cannot be estimated at this time. The Company is
engaged in numerous other legal actions arising in the ordinary
course of its business and believes that the ultimate outcome of
these actions will not have a material adverse effect on its operating
results, liquidity or fi nancial position. In addition, some matters that
have previously been disclosed may no longer be described in this
Note because of rulings in the case, settlements, changes in the
Company’s business or other developments rendering them, in the
Company’s judgment, no longer material to the Company’s operating
results, liquidity or fi nancial position.
Long-Term Financing
The Company agreed to provide certain CDMA customers of
Telefonaktiebolaget LM Ericsson (Ericsson) with long-term interest-
bearing debt fi nancing for the purchase of equipment and/or services.
At September 25, 2005, the Company had a commitment to extend up
to $118 million in long-term fi nancing to certain CDMA customers of
Ericsson. The funding of this commitment, if it occurs, is not subject to
a fi xed expiration date and is subject to the CDMA customers meeting
conditions prescribed in the fi nancing arrangement and, in certain
cases, to Ericsson also fi nancing a portion of such sales and services.
Financing under this arrangement is generally collateralized by the
related equipment. The commitment represents the maximum amount
to be fi nanced; actual fi nancing may be in lesser amounts.
Operating Leases
The Company leases certain of its facilities and equipment under
noncancelable operating leases, with terms ranging from less than
1 year to 26 years and with provisions for cost-of-living increases
for certain leases. Rental expense for fi scal 2005, 2004 and 2003
was $39 million, $31 million and $34 million, respectively. Future
minimum lease payments in each of the next fi ve years from fi scal
2006 through 2010 are $67 million, $51 million, $24 million and
$16 million, and $13 million respectively, and $22 million thereafter.
Purchase Obligations
The Company has agreements with suppliers and other parties to
purchase inventory, other goods and services and long-lived assets
and estimates its noncancelable obligations under these agree-
ments for fi scal 2006 to 2009 to be approximately $750 million,
$200 million, $86 million and $6 million, respectively. The Company’s
noncancelable obligations are insignifi cant in fi scal 2010. Of these
amounts, commitments to purchase integrated circuit product inven-
tories for fi scal 2006 to 2009 comprised $634 million, $177 million,
$82 million and $5 million, respectively.