Qualcomm 2002 Annual Report Download - page 72

GLOBALSTAR L.P.
Under now-terminated contracts with Globalstar L.P. (Globalstar), the Company
designed, developed and manufactured subscriber products and ground communications
systems utilizing CDMA technology and provided contract development services.
Globalstar was formed to design, construct, and operate a worldwide, low-Earth-orbit
satellite-based telecommunications system (the Globalstar System).
Through partnership interests held in certain intermediate limited partnerships
and other indirect interests, the Company owns an approximate 6.3% interest in
Globalstar. The Company uses the equity method to account for its investment
in Globalstar.
On June 30, 2000, Globalstar defaulted on a $250 million bank facility that the
Company partially guaranteed in 1996. As a result of this default, the Company’s
guaranty was called, and the Company paid $22 million to the subject banks in full
satisfaction of this guaranty plus interest. Pursuant to an agreement entered into in
1996, with respect to the original provision of this guaranty, the Company accepted a
subordinated promissory note issued by Globalstar with a principal amount equal to
the amount the Company paid under its guaranty. The promissory note bears interest
at LIBOR plus 3%, and principal and interest are due and payable in full on June 30, 2003.
Starting in the first quarter of fiscal 2001, the Company decided to not recognize
revenue on business with Globalstar related entities until cash is received. Revenues
resulting from agreements with Globalstar and its consolidated subsidiaries for
fiscal 2002, 2001 and 2000 were $4 million, $35 million and $219 million, respectively.
On January 16, 2001, Globalstar announced that, in order to have sufficient funds
available for the continued progress of its marketing and service activities, it had
suspended indefinitely principal and interest payments on all of its debt, including its
vendor financing obligations. As a result, Globalstar did not make an approximately
$22 million payment for principal and interest due to QUALCOMM on January 15, 2001.
Globalstar also announced its intent to restructure its debt. As a result, the Company
recorded total net charges of $49 million in cost of revenues, $519 million in asset
impairment and related charges, $10 million in investment expense and $58 million
in other non-operating charges during fiscal 2001 related primarily to the impairment
of certain assets. Globalstar filed for Chapter 11 bankruptcy protection during fiscal
2002. During fiscal 2002, the Company recorded net credits of $4 million in cost of
revenues related to recoveries on assets impaired in fiscal 2001. The Company does
not anticipate receiving any of the contractual amounts due from Globalstar. The
Company did not recognize any interest income during fiscal 2002 or 2001 and does
not anticipate recognition of any interest income in the future.
QUALCOMM PERSONAL ELECTRONICS
In fiscal 1994, a subsidiary of the Company and a subsidiary of Sony Electronics
Inc. (Sony Electronics) entered into a general partnership, QUALCOMM Personal
Electronics (QPE), to manufacture CDMA consumer equipment for wireless applica-
tions. The Company owns 51% of QPE and consolidates QPE in its financial statements.
In February 2000, the Company sold its terrestrial-based CDMA wireless consumer
phone business (Note 14). As a result, QPE has no on-going operations.
During fiscal 2001, QPE distributed certain assets to its owners based on their
pro-rata ownership interests. Sony Electronics’ 49% share of the distribution reim-
bursed the Company for cash advanced to and the forgiveness of receivables from
Sony Electronics in February 2000 related to the sale of the Company’s terrestrial-
based CDMA wireless consumer phone business (Note 14). The distribution by QPE
reduced the minority interest liability to Sony Electronics and a related receivable
included in other current assets by $40 million. During fiscal 2000, QPE sales to Sony
Electronics and purchases of inventory and capital equipment from Sony Electronics
and other Sony affiliates were not material. At September 30, 2002 and 2001, there
were no outstanding accounts receivable from Sony Electronics.
OTHER
Other strategic investments as of September 30, 2002 and 2001, amounted to
$130 million and $184 million, respectively, including $73 million and $80 million,
respectively, accounted for using the cost method. The fair values of cost method
investments approximate their recorded values. At September 30, 2002, effective own-
ership interests in the investees ranged from 1% to 50%.
Summarized financial information regarding our principal equity investments,
excluding both Vésper and Wireless Knowledge (Note 13), derived from their unaudited
financial statements, follows. These investments are noncontrolling interests in
venture capital funds. Information is presented in the aggregate, and net (loss)
income is generally presented from the acquisition date (in thousands):
September 30,
2002 2001
Current assets $ 59,625 $ 43,254
Noncurrent assets 65,742 69,832
Total assets $125,367 $113,086
Current liabilities $ 257 $ 87
Total liabilities $ 257 $ 87
September 30,
2002 2001 2000
Net (loss) income $(15,259) $ 14,555 $ (5,828)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued