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NOTE 11. ACQUISITIONS
During fi scal 2005, the Company acquired the following four entities
for a total cost of $295 million, which was paid primarily in cash:
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Iridigm Display Corporation (Iridigm), a California-based display
technology company.
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Trigenix Limited, a United Kingdom-based developer of user inter-
faces for mobile phones.
>
Spike Technologies, Inc., a semiconductor design services company
based primarily in India.
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ELATA, Ltd., a United Kingdom-based developer of mobile content
delivery and device management software systems.
An additional $4 million in consideration is payable in cash through
November 2006 if certain performance and other milestones are
reached. Goodwill recognized in those transactions amounted to
$216 million, of which $81 million is expected to be deductible for tax
purposes. Goodwill was assigned to the QMT, QIS and QCT segments
in the amounts of $128 million, $81 million and $7 million, respec-
tively. Technology-based intangible assets recognized in the amount
of $36 million have a weighted-average useful life of seven years.
On August 11, 2005, the Company announced its intention to acquire
all of the outstanding capital stock of Flarion Technologies, Inc.
(Flarion), a privately held developer of Orthogonal Frequency Division
Multiplexing Access (OFDMA) technology. Upon completion of the
acquisition, which is anticipated in the fi rst half of fi scal 2006, pend-
ing regulatory approval and other customary closing conditions, the
Company estimates that it 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, the Company may issue additional aggregate consider-
ation 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. The acquisition of Flarion is intended to broaden the
Company’s ability to effectively support operators who may prefer
an OFDMA or a hybrid OFDM/CDMA/WCDMA network alternative
for differentiating their services. The addition of Flarion’s intellec-
tual property and engineering resources will also supplement the
resources that the Company has already dedicated over the years
towards the development of OFDM/OFDMA technologies.
NOTE 12. DISCONTINUED OPERATIONS IN THE QSI SEGMENT
On December 2, 2003, Embratel Participações S.A. (Embratel)
acquired the Company’s direct and indirect ownership interests
in Vésper São Paulo S.A. and Vésper S.A. (the Vésper Operating
Companies), consolidated subsidiaries of the Company’s QSI seg-
ment, (the Embratel sale transaction) for no consideration. The
Vésper Operating Companies’ existing communication towers and
related interests in tower site property leases (Vésper Towers)
were not included in the Embratel sale transaction, and as such, the
Company effectively retained, through a new wholly-owned subsid-
iary (TowerCo), ownership and control of the Vésper Towers. The
Company realized a net loss of $52 million on the Embratel sale
transaction during fi scal 2004, partially offset by a $40 million net
gain which resulted from the subsequent sale of TowerCo. As a result
of the disposition of the remaining operations and assets related to
the Vésper Operating Companies, the Company determined that the
results of operations and cash fl ows related to the Vésper Operating
Companies, including the results related to TowerCo and the gains
and losses realized on the Embratel and TowerCo sales transactions,
should be presented as discontinued operations in its consolidated
statements of operations and cash fl ows. At September 25, 2005,
the Company had no remaining assets or liabilities related to the
Vésper Operating Companies or TowerCo recorded on its consoli-
dated balance sheet. Revenues of $36 million and $123 million were
reported in the loss from discontinued operations during fi scal 2004
and 2003, respectively.
NOTE 13. AUCTION DISCOUNT VOUCHER
The Company was awarded a $125 million Auction Discount Voucher
(ADV) by the Federal Communications Commission (FCC) in June 2000
as the result of a legal ruling. The ADV was fully transferable and,
subject to certain conditions, could be used in whole or in part by
any entity in any FCC spectrum auction over a period of three years,
including those in which the Company is not a participant.
During fi scal 2004, the Company transferred approximately $18 mil-
lion of the ADV’s value to a wireless operator for approximately
$17 million in cash. As a result of this transfer, the Company recorded
an additional $17 million in other operating income in the QSI segment
during fi scal 2004. During fi scal 2004, the Company also recorded
$4 million in other operating income and $4 million in selling, general
and administrative expenses in the QSI segment for cooperative
marketing expenses incurred, with no effect on net income, related
to an arrangement under which a portion of the ADV was transferred
to a wireless operator prior to fi scal 2004. The Company recorded
$47 million in other income in the QSI segment during fi scal 2003
related to transfers of the ADV’s value to wireless operators.
The Company also used approximately $30 million of the ADV during
fi scal 2004 as fi nal payment for wireless licenses granted in fi scal
2004 in which the Company was the highest bidder in a FCC auction
held during fi scal 2003. On a cumulative basis, the Company used
$38 million of the ADV as payment for these wireless licenses, for
which the Company had no cost basis at September 26, 2004. The
ADV had no remaining value at September 25, 2005.