Qualcomm 2006 Annual Report Download - page 91

qualcomm 2006 77
feasibility had not been established and no future alternative
uses existed. The consolidated nancial statements include the
operating results of these businesses from their respective dates
of acquisition. Pro forma results of operations have not been pre-
sented because the effects of the acquisitions were not material.
During scal 2005, the Company acquired the following four entities
for a total cost of $297 million, including $2 million paid in scal
2006 upon the achievement of certain milestones, which was paid
primarily in cash:
Iridigm Display Corporation (Iridigm), a California-based display
technology company.
Trigenix Limited, a United Kingdom-based developer of user
interfaces for mobile phones.
Spike Technologies, Inc., a semiconductor design services company
based primarily in India.
ELATA, Ltd., a United Kingdom-based developer of mobile content
delivery and device management software systems.
An additional $2 million in consideration is payable in cash
through November 2006 if certain performance and other mile-
stones are reached. Goodwill recognized in these transactions
amounted to $218 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 $9 million, respectively. Technology-based intangible
assets recognized in the amount of $36 million have a weighted-
average useful life of seven years.
note 12. discontinued oPerations in the qsi segment
On December 2, 2003, the Company sold its 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 segment, and the Vésper Operating Companies’
communication towers and related interests in tower site property
leases (Vésper Towers) in two separate transactions. The Company
realized a net loss of $52 million on the sale of the Vésper
Operating Companies during scal 2004, partially offset by a $40
million net gain from the subsequent sale of the Vésper Towers.
The Company also recognized a $19 million net gain resulting from
the extinguishment of debt related to the waiver and return of
personal mobile service licenses to Anatel, the telecommunications
regulatory agency in Brazil. 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
related to the Vésper Operating Companies, including the results
related to the Vésper Towers and the gains and losses realized on
the sales transactions, should be presented as discontinued opera-
tions in its consolidated statements of operations. At September
24, 2006 and September 25, 2005, the Company had no remaining
assets or liabilities related to the Vésper Operating Companies
or the Vésper Towers recorded on its consolidated balance sheet.
Revenues of $36 million were reported in the loss from discontinued
operations during scal 2004.
note 11. acquisitions
On January 18, 2006, the Company completed its acquisition
of all of the outstanding capital stock of Flarion Technologies, Inc.
(Flarion), a privately held developer of OFDMA technology for
approximately $613 million in consideration, consisting of approxi-
mately $349 million in shares of QUALCOMM stock, $229 million
in cash, and the exchange of Flarion’s existing vested options and
warrants with an estimated aggregate fair value of approximately
$35 million. In addition, the Company assumed Flarion’s existing
unvested options with an estimated aggregate fair value of $63
million, which is recorded as share-based compensation over the
requisite service period pursuant to FAS 123R. Upon achievement
of certain agreed upon milestones during the third quarter of
scal 2006, the Company incurred additional aggregate consider-
ation of $197 million, consisting of approximately $185 million
in cash (of which $75 million will be payable in July 2007), $8 million
in shares of QUALCOMM stock (of which $3 million is issuable
in March 2007), and the modication of Flarion’s existing vested
options and warrants with an estimated incremental fair value
of approximately $4 million. The additional amounts payable in
cash and shares on the milestone date were treated as additional
consideration and recorded as goodwill. In addition, the modica-
tion of Flarion’s existing unvested options resulted in an estimated
incremental fair value of $7 million, which will be recorded as
share-based compensation over the requisite service period pur-
suant to FAS 123R. 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 net-
work alternative. The addition of Flarion’s intellectual 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.
During scal 2006, the Company also acquired the following two
entities for a total cost of $69 million, which was paid primarily
in cash:
Berkana Wireless Inc., a California-based developer of complemen-
tary metal oxide semiconductor (CMOS) radio frequency integrated
circuits (RFICs).
Qualphone Inc., a provider of IP-based multimedia subsystems
embedded client software products for mobile devices and
interoperability testing services based primarily in India and Italy.
An additional $4 million in consideration is payable in cash through
August 2007 if certain performance and other milestones are
reached. The Company is in the nal stages of accounting for the
acquisitions and does not anticipate material adjustments to the
preliminary purchase price allocations. Goodwill recognized in
these transactions, no amount of which is expected to be deductible
for tax purposes, was assigned to the QTL and QCT segments in the
amounts of $619 million and $38 million, respectively. Technology-
based intangible assets recognized in the amount of $165 million
are being amortized on a straight-line basis over a weighted-average
amortization period of seventeen years. Purchased in-process
technology in the amount of $22 million was charged to research
and development expense upon acquisition because technological