Qualcomm 2002 Annual Report Download - page 71

NOTE 4. INVESTMENTS IN OTHER ENTITIES
VELOCOM, INC.
On November 29, 2001, the Company forgave $119 million under its debt facility
with VeloCom, Inc. (VeloCom), an investor in Vésper Holding (Note 13) and converted
its remaining $56 million convertible promissory note into equity securities of
VeloCom (the VeloCom exchange) in conjunction with its acquisition of Vésper
Holding. The VeloCom exchange increased the Company’s equity interest in VeloCom
to 49.9%. The Company uses the equity method to account for its investment in
VeloCom. At September 30, 2002, the Company’s investment in VeloCom was $33 million,
net of the Company’s equity in VeloCom’s losses.
VeloCom’s summarized financial information, derived from its unaudited financial
statements, is as follows (in thousands):
September 30,
2002
Balance sheet:
Current assets $ 3,922
Noncurrent assets 8,068
Total assets $ 11,990
Current liabilities $ 105
Total liabilities $ 105
Redeemable preferred stock $380,032
Income statement:
Net loss $ (48,634)
INQUAM LIMITED
In October 2000, the Company agreed to invest $200 million in the convertible pre-
ferred shares of Inquam Limited (Inquam) for an approximate 42% ownership interest
in Inquam. Inquam was formed to acquire, own, develop and manage wireless commu-
nications systems, either directly or indirectly, with the primary intent of deploying
CDMA-based technology. In addition, the Company advanced $10 million under a prom-
issory note, bearing interest at 10% that matured on January 31, 2002. In April 2002,
Inquam used a portion of the equity funding commitment from the Company to repay
the promissory note. The Company uses the equity method to account for its investment
in Inquam. At September 30, 2002, the Company’s investment in Inquam was $114 million,
net of equity in losses, and $27 million of the equity funding commitment was
outstanding. Inquam’s management expects to meet certain operational milestones
necessary for expansion of Inquam’s CDMA operations during 2003. In addition,
Inquam’s management expects to raise additional funds over the next 12 months
required for Inquam to realize the full value of its current operations. Remaining
funding commitments from the Company and another investor are expected to be
exhausted by March 2003. Total additional funding required by Inquam for calendar
2003 is estimated to be between $175 million and $195 million. If new investors can-
not be found or should existing investors decide not to provide additional funding, or
if Inquam does not promptly meet certain operational milestones necessary for
expansion, Inquam’s growth potential and the value of the Company’s investment in
Inquam may be negatively affected.
Inquam’s summarized financial information, derived from its unaudited financial
statements, is as follows (in thousands):
September 30,
2002 2001
Balance sheet:
Current assets $ 60,083 $ 15,649
Noncurrent assets 265,631 94,909
Total assets $ 325,714 $110,558
Current liabilities $ 98,496 $ 7,085
Noncurrent liabilities 36,812 36,953
Total liabilities $ 135,308 $ 44,038
Income statement:
Net revenues $ 17,648 $ 6,162
Gross profit (9,344) 1,056
Net loss $(104,366) $ (28,676)
RELIANCE INFOCOMM LIMITED
In December 2001, the Company agreed to invest up to $200 million in exchange
for up to 4% of the common shares of Reliance Infocomm Limited (RIL), formerly
Reliance Communications Limited, a wireless carrier in India. RIL intends to con-
struct and operate a CDMA commercial network deploying CDMA2000 1X technology
to provide basic telephone services, Wireless Local Loop (WLL) with limited mobility,
national long distance and international long distance services in India. The
Company’s obligation to make this investment became subject to termination during
fiscal 2002 because RIL failed to meet certain milestones. However, the Company
may purchase the shares upon RIL’s completion of certain closing conditions. If the
Company completes the investment, funding is likely to occur through September
2003. At September 30, 2002, the Company had not purchased any shares related to
this agreement.
QUALCOMM 2002 ANNUAL REPORT PAGE 69