Qualcomm 2002 Annual Report Download - page 51

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Globalstar and warrants to acquire partnership interests in Globalstar to their esti-
mated fair values.
Income tax expense was $101 million for fiscal 2002, compared to $105 million for
fiscal 2001. The annual effective tax rate was 22% for fiscal 2002, compared to a nega-
tive 23% rate for fiscal 2001. The annual effective tax rate for fiscal 2002 was lower than
the statutory rate due to the reduction of deferred tax assets and the related valuation
allowance that was previously charged to tax expense, partially offset by foreign losses
for which we are not recording a tax benefit. The fiscal 2001 effective tax rate was the
result of pre-tax losses for which no tax benefit was recorded and foreign tax expense.
The annual effective tax rate on profits for fiscal 2002 cannot be meaningfully com-
pared to the effective tax rate on losses for the prior fiscal year.
We recorded an $18 million loss, net of taxes, in fiscal 2001 as the net cumulative
effect of changes in accounting principles at September 30, 2000. The cumulative
effect of the adoption of SAB 101 was a $147 million loss, net of taxes, offset by a
$129 million gain, net of taxes, resulting from the cumulative effect of the adoption of
FAS 133. The gain resulting from the adoption of FAS 133 related primarily to the
unrealized gain on a warrant to purchase 4,500,000 shares of Leap Wireless common
stock issued to us in connection with our spin-off of Leap Wireless in September 1998.
FISCAL 2001 COMPARED TO FISCAL 2000
Total revenues for fiscal 2001 were $2,680 million, compared to $3,197 million for
fiscal 2000. Revenue from Samsung, Kyocera, and LG, customers of both QCT and
QTL, comprised an aggregate of 14%, 12% and 10% of total consolidated revenues,
respectively, in fiscal 2001. In fiscal 2000, Samsung accounted for 11% of total
consolidated revenues.
Revenues from sales of equipment and services for fiscal 2001 were $1,908 million,
compared to $2,526 million for fiscal 2000. Revenues from sales of equipment and
services for fiscal 2000 included $419 million in revenue related to the terrestrial-
based CDMA wireless consumer phone business which was sold in February 2000.
Excluding the revenue of the business sold in fiscal 2000, revenues from sales of
equipment and services decreased by $199 million in fiscal 2001. The decrease was
primarily related to a $310 million decline in revenues related to the business with
Globalstar, offset by a $107 million increase in integrated circuit sales, largely attrib-
uted to higher unit shipments and average selling prices of MSM integrated circuits,
and higher CSM infrastructure integrated circuit revenues and a $24 million increase
in QWI revenue due to the implementation of SAB 101 in fiscal 2001.
Revenues from licensing and royalty fees for fiscal 2001 were $772 million, com-
pared to $671 million for fiscal 2000. The increase was primarily related to a $149 million
increase in royalties and license fees and a $16 million increase in software revenues,
offset by a $64 million decrease due to the implementation of SAB 101 in fiscal 2001.
Cost of equipment and services revenues for fiscal 2001 was $1,035 million, com-
pared to $1,507 million for fiscal 2000. Total cost of revenues for fiscal 2000 included
$433 million in cost of revenues related to the terrestrial-based CDMA wireless consumer
phone business which was sold in February 2000. Excluding the cost of revenues of
the business sold in fiscal 2000, total cost of revenues decreased by $39 million in fiscal
2001, consistent with the decrease in revenues. Cost of revenues as a percentage
of revenues was 39% for fiscal 2001 and 2000. Cost of revenues as a percentage of
revenues may fluctuate in future quarters depending on the mix of products sold and
services provided, royalties and license fees earned, competitive pricing, new product
introduction costs and other factors.
For fiscal 2001, research and development expenses were $415 million or 15% of
revenues, compared to $340 million or 11% of revenues for fiscal 2000. The dollar and
percentage increases in research and development expenses were primarily due to
$101 million in increased integrated circuit product initiatives to support high-speed
wireless Internet access and multimode, multi-band, multi-network products including
cdmaOne, CDMA2000 1X/1xEV-DO, GSM/GPRS, WCDMA and position location tech-
nologies, offset by a $44 million decrease in terrestrial-based CDMA wireless
consumer phone products research and development as a result of exiting this busi-
ness in February 2000. In addition, the percentage increase is attributed to a more
significant reduction in revenue relative to research and development expenses as a
result of the sale of the terrestrial-based CDMA wireless consumer phone business
in February 2000.
For fiscal 2001, selling, general and administrative expenses were $367 million or
14% of revenues, compared to $343 million or 11% of revenues for fiscal 2000. The
dollar and percentage increases in selling, general and administrative expenses from
fiscal 2000 were primarily due to $61 million associated with the expansion of inter-
national business activities in China, Japan, South Korea and Europe and trade show
expenses related to the expansion of the integrated circuit customer base and
product portfolio and $21 million related to the introduction of products and services
by our QIS division, including our BREW product, offset by a $67 million decrease in
expenses for terrestrial-based CDMA wireless consumer phone products as a result
of the sale of the business in February 2000. In addition, the percentage increase is
attributed to a more significant reduction in revenue relative to selling, general and
administrative expenses as a result of the sale of the terrestrial-based CDMA wire-
less consumer phone business in February 2000.
Amortization of goodwill and other acquisition-related intangible assets was
$255 million for fiscal 2001, compared to $146 million in fiscal 2000. For fiscal 2001,
no purchased in-process technology was recorded, compared to $60 million in fiscal
2000. The increase in amortization in fiscal 2001 and the purchased in-process tech-
nology charge in fiscal 2000 resulted from the acquisition of SnapTrack, Inc.
(SnapTrack) in March 2000.
QUALCOMM 2002 ANNUAL REPORT