Qualcomm 2006 Annual Report Download - page 53

qualcomm 2006 39
We will continue to invest in the evolution of CDMA and a broad
range of other technologies as part of our vision to enable a range
of technologies, each optimized for specic services, including the
following products and technologies:
• The BREW applications platform, content delivery services and
user interfaces;
• The MediaFLO Media Distribution System (MDS) and FLO tech-
nology for delivery of multimedia content;
• The DO Multicarrier Multilink eXtensions (DMMX) and HSDPA
Multicarrier Multilink eXtensions (HMMX) platforms to support
the long-term roadmaps of 1xEV-DO and HSDPA;
• OFDM and OFDMA-based technologies;
• Our iMoD display technology.
We will continue to devote resources to working with and educating
all participants in the wireless value chain as to the benets of our
business model in promoting a highly competitive and innovative
wireless market. However, we expect that certain companies may
continue to be dissatised with the need to pay fair royalties for
the use of our technology and not welcome the success of our
business model in enabling new, highly cost-effective competitors
to their products. We expect that such companies will continue
their attacks on our business model in various forums throughout
the world.
In addition, our license agreement with Nokia Corp. expires in
part on April 9, 2007. If we cannot conclude an extension or a new
license agreement beyond that time period, Nokia’s rights to sell
subscriber products under most of our patents will expire, as will
our rights to sell integrated circuits under Nokia’s patents. While
we continue to work with Nokia to see if we can reach an agreement,
there is no guarantee that we will be able to successfully resolve
this matter before April 9, 2007, and little progress has been made
to date. If we are unable to reach agreement, we will aggressively
pursue all our legal and business remedies and assume that Nokia
will do likewise. Nokia has stated publicly that it does not intend to
pay us for its use of our patents prior to the resolution of the dispute.
As a result, under generally accepted accounting principles, we will
be unable to record royalty revenue attributable to Nokia’s sales
until a court awards damages or agreement is reached, potentially
resulting in a negative impact on future royalty revenues reported
by our QTL segment.
Further discussion of risks related to our business is presented in
the section entitled Risk Factors in the Company’s Annual Report
on Form 10-K.
Looking Forward
The deployment of 3G networks (CDMA2000 and WCDMA) enables
higher voice capacity and data rates, thereby supporting more
minutes of use and data intensive applications like multimedia.
As a result, we expect continued growth in demand for 3G products
and services around the world:
The deployment of CDMA2000 networks is expected to continue.
• More than 170 operators have launched CDMA2000 1X; (1)
• More than 50 operators have deployed the higher data speeds of
1xEV-DO and several are preparing to deploy EV-DO Revision A.(1)
GSM operators are expected to continue transitioning to
WCDMA networks.
• More than 122 GSM operators have migrated their networks
to WCDMA; (2)
• More than 65 operators have launched commercial HSDPA
networks and manufacturers are beginning to trial the faster
uplink speeds of HSUPA.(2)
We expect WCDMA phone prices to segment into high and low end,
with low-end prices decreasing signicantly as volumes increase
and competition intensies among WCDMA phone manufacturers
and integrated circuit suppliers, as happened with CDMA2000.
We expect phone market share will change and competition will
increase as WCDMA networks grow and expand beyond Japan and
Western Europe into the United States and China.
To meet growing demand for advanced 3G phones and increased
multimedia MSM functionality, we intend to continue to invest sig-
nicant resources toward the development of multimedia products,
software and services for the wireless industry. However, we
expect that a portion of our research and development initiatives
in scal 2007 will not reach commercialization until several years
in the future.
We expect demand for low-end phones to continue, and we have
invested resources to develop single-chip products, which inte-
grate the baseband, radio frequency and power management chips
into one package, lowering component counts and enabling faster
time-to-market. While we are moving aggressively to address the
low-end market more effectively with CDMA-based products, we
still face signicant competition from GSM-based products at the
very low end, particularly in Brazil and India.
(1) According to public reports made available at www.cdg.org.
(2) As reported by the Global mobile Suppliers Association, an international organization of WCDMA and GSM (Global System for Mobile Communications)
suppliers in their September and October 2006 reports.