Qualcomm 2006 Annual Report Download - page 52

38 qualcomm 2006
Management’s Discussion and Analysis continued
two-way data messaging, position reporting and wireless application
services to transportation companies, private eets, construction
equipment eets and other enterprise companies. QIS provides
BREW-based (Binary Runtime Environment for Wireless) products
that include user interface and content delivery and management
products and services for the wireless industry. QIS also provides
QChat and QPoint products and services. QChat enables virtually
instantaneous push-to-talk functionality on CDMA-based wireless
devices while QPoint enables operators to offer E-911 and loca-
tion-based applications and services. The QGOV division provides
development, hardware and analytical expertise to United States
government agencies involving wireless communications technolo-
gies. QWI revenues comprised 9%, 11% and 12% of total consoli-
dated revenues in scal 2006, 2005 and 2004, respectively.
QSI manages the Company’s strategic investment activities,
including MediaFLO USA, Inc. (MediaFLO USA), the Company’s
wholly-owned wireless multimedia operator subsidiary. QSI also
makes strategic investments to promote the worldwide adoption
of CDMA-based products and services. Our strategy is to invest in
CDMA-based 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. Our MediaFLO USA
subsidiary expects to offer a nationwide multicasting network
based on our MediaFLO MDS and FLO technology. This network is
expected to be utilized as a shared resource for wireless operators
and their customers in the United States. The commercial availability
of the MediaFLO USA network and service will be determined by
our wireless operator partners. MediaFLO USA’s network will use
the 700 MHz spectrum for which we hold licenses for a nationwide
footprint. Additionally, MediaFLO USA plans to procure, aggregate
and distribute content in service packages which we will make
available on a wholesale basis to our wireless operator customers
(whether they operate on CDMA or GSM/WCDMA networks) in
the United States. Distribution, marketing, billing and customer
relationships are expected to remain services provided by our
wireless operator partners. As part of our strategic investment
activities, we may consider various corporate structuring and exit
strategies at some point in the future, which may include distribu-
tion of 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-based telecommunications
system and provides related services; the QUALCOMM MEMS
Technologies division, which is developing an iMoD display technol-
ogy based on micro-electro-mechanical system (MEMS) structure
combined with thin lm optics; the QUALCOMM Flarion Technologies
division, which is developing OFDM/OFDMA technologies; and
other product initiatives.
and to test interoperability with existing and planned networks.
QCT revenues comprised 58%, 58% and 64% of total consolidated
revenues in scal 2006, 2005 and 2004, respectively.
QCT utilizes a fabless production business model, which means that
we do not own or operate foundries for the production of silicon
wafers from which our integrated circuits are made. Integrated
circuits are die, cut from silicon wafers, that have completed the
assembly and nal test manufacturing processes. Die, cut from
silicon wafers, are the essential components of all of our inte-
grated circuits and a signicant portion of the total integrated
circuit cost. We rely on independent third-party suppliers to
perform the manufacturing and assembly, and most of the testing,
of our integrated circuits. Our suppliers are also responsible for the
procurement of most of the raw materials used in the production
of our integrated circuits. The majority of our integrated circuits
are purchased on a turnkey basis, in which our foundry suppliers are
responsible for delivering fully assembled and tested integrated
circuits. We also employ a two-stage manufacturing business model
in which we purchase completed die directly from semiconductor
manufacturing foundries, and directly manage and contract with
third-party manufacturers for back-end assembly and test services.
We refer to this two-stage manufacturing business model as
Integrated Fabless Manufacturing (IFM). IBM, Taiwan Semiconductor
Manufacturing Company, Ltd. and United Microelectronics are the
primary foundry suppliers for our family of baseband integrated
circuits. Atmel, Freescale (formerly Motorola Semiconductor) and
IBM are the primary foundry suppliers for our family of analog,
radio frequency and power management integrated circuits. Our
fabless model provides us the exibility to select suppliers that
offer advanced process technologies to manufacture, assemble
and test our integrated circuits at a competitive price.
QTL grants licenses to use portions of our intellectual property
portfolio, which includes certain patent rights essential to and/or
useful in the manufacture and sale of certain wireless products,
including, without limitation, products implementing cdmaOne,
CDMA2000, WCDMA, CDMA TDD and/or OFDMA standards and
their derivatives. QTL receives revenue from license fees as well
as ongoing royalties based on worldwide sales by licensees of
products incorporating or using our intellectual property. License
fees are xed amounts paid in one or more installments. Ongoing
royalties are generally based upon a percentage of the wholesale
selling price of licensed products, net of certain permissible
deductions (e.g. certain shipping costs, packing costs, VAT, etc.).
QTL revenues comprised 35%, 32% and 27% of total consolidated
revenues in scal 2006, 2005 and 2004, respectively. The vast
majority of such revenues has been generated primarily through
our licensees’ sales of cdmaOne, CDMA2000 and WCDMA products.
QWI, which includes QUALCOMM Wireless Business Solutions
(QWBS), QUALCOMM Internet Services (QIS) and QUALCOMM
Government Technologies (QGOV), generates revenues primarily
through mobile communication products and services, software and
software development aimed at support and delivery of wireless
applications. QWBS provides satellite- and terrestrial-based