Qualcomm 2004 Annual Report Download

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QUALCOMM฀is฀fueling฀the฀growth฀of฀the฀
wireless฀world฀by฀delivering฀a฀whole฀new฀
level฀of฀enhanced฀features฀and฀functions.
Innovate

QUALCOMM฀technology฀is฀helping฀to฀defi฀ne฀the฀
wireless฀communications฀revolution.฀Again.฀






Stockholder’s฀Information฀
ONLINE฀ANNUAL฀REPORT
We฀invite฀you฀to฀visit฀www.qualcomm.com฀to฀view฀our฀online฀interactive฀
annual฀report.฀The฀web-based฀report฀complements฀our฀printed฀report฀to฀
provide฀a฀better฀understanding฀of฀QUALCOMM฀Incorporated.
INVESTOR฀RELATIONS
William฀F.฀Davidson,฀Jr.
Vice฀President,฀Investor฀Relations฀
Additional฀copies฀of฀this฀report,฀Form฀10-K,฀the฀Proxy฀Statement฀
or฀other฀fi฀nancial฀information฀will฀be฀provided฀free฀of฀charge.฀
To฀obtain฀these฀documents,฀please฀contact฀QUALCOMM’s฀Investor
Relations฀Department.
QUALCOMM฀Incorporated
Investor฀Relations฀Department
5775฀Morehouse฀Drive
San฀Diego,฀CA฀92121
(858)฀658-4813฀phone
(858)฀651-9303฀fax
(866)฀658-4813฀toll฀free
You฀can฀also฀contact฀us฀by฀sending฀email฀to฀[email protected]฀
or฀by฀visiting฀the฀Investor฀Relations฀page฀on฀the฀Company’s฀
website฀at฀www.qualcomm.com.
TRANSFER฀AGENT
Computershare฀Investor฀Services,฀LLC
2฀North฀La฀Salle฀Street
Chicago,฀IL฀60602฀
(312)฀588-4157
INDEPENDENT฀REGISTERED฀PUBLIC฀ACCOUNTING฀FIRM
PricewaterhouseCoopers฀LLP,฀San฀Diego
CORPORATE฀COUNSEL
Gray฀Cary฀Ware฀&฀Freidenrich฀LLP,฀San฀Diego
MARKET฀INFORMATION
The฀common฀stock฀of฀the฀Company฀is฀traded฀on฀the฀NASDAQ฀Stock฀
Market฀under฀the฀symbol฀“QCOM.”
NOTICE฀OF฀ANNUAL฀MEETING
The฀annual฀meeting฀of฀stockholders฀will฀be฀held฀at฀9:30฀a.m.฀PST,฀
Tuesday,฀March฀8,฀2005฀at฀Copley฀Symphony฀Hall,฀750฀B฀Street,฀
San฀Diego,฀California.
WORLDWIDE฀LOCATIONS฀AS฀OF฀
SEPTEMBER฀2004฀
UNITED฀STATES
Austin,฀Texas
Bethesda,฀Maryland
Boulder,฀Colorado฀฀
Brentwood,฀Tennessee
Campbell,฀California
Cary,฀North฀Carolina
Chantilly,฀Virginia฀
Clemmons,฀North฀Carolina
Concord,฀Massachusetts฀
Irving,฀Texas฀
Kansas฀City,฀Missouri฀
Las฀Vegas,฀Nevada฀
Miami,฀Florida฀
New฀York,฀New฀York
Pittsburgh,฀Pennsylvania฀
Portland,฀Oregon฀
Richardson,฀Texas฀
San฀Diego,฀California
Washington,฀D.C.
INTERNATIONAL
Bangkok,฀Thailand
Beijing,฀China฀
Buenos฀Aires,฀Argentina
Caracas,฀Venezuela
Farnborough,฀England฀
Frankfurt,฀Germany
Guangzhou,฀China
Haifa,฀Israel฀
Hanoi,฀Vietnam
Ho฀Chi฀Minh฀City,฀Vietnam฀
Hong฀Kong,฀China
Hyderabad,฀India
Jakarta,฀Indonesia
London,฀England
Madrid,฀Spain
Melbourne,฀Australia
Mexico฀City,฀Mexico
Moscow,฀Russia฀
Mumbai,฀India
Munich,฀Germany฀
Munster,฀Germany
New฀Delhi,฀India฀
Nuremberg,฀Germany
Osaka,฀Japan
Paris,฀France
Rome,฀Italy
São฀Paulo,฀Brazil฀
Seoul,฀South฀Korea฀
Shanghai,฀China
Singapore
Stockholm,฀Sweden
Sydney,฀Australia
Taipei,฀Taiwan
Tijuana,฀Mexico
Tokyo,฀Japan฀
Waalre,฀Netherlands
฀
©2004฀QUALCOMM฀Incorporated.฀All฀
rights฀reserved.฀Various฀products฀and฀
brand฀names฀may฀also฀be฀trademarks฀
or฀registered฀trademarks฀that฀are฀the฀
property฀of฀their฀respective฀owners.฀12/04
QUALCOMM
Envision

Table of contents

  • Page 1
    2004฀Annual฀Report Envision QUALCOMM฀technology฀is฀helping฀to฀defi ฀ne฀the฀ wireless฀communications฀revolution.฀Again.฀

  • Page 2
    Innovate QUALCOMM฀is฀fueling฀the฀growth฀of฀the฀ wireless฀world฀by฀delivering฀a฀whole฀new฀ level฀of฀enhanced฀features฀and฀functions.

  • Page 3
    ...the฀discontinued฀operations.฀As฀such,฀Revenue,฀Gross฀Margin,฀and฀Free฀Cash฀Flow฀results฀presented฀above฀do฀not฀include฀the฀results฀from฀these฀discontinued฀operations. (2) ฀฀ The฀Company฀effected฀a฀four-for-one฀stock฀split฀in฀December...

  • Page 4
    ...฀and฀has฀the฀one-time฀effect฀of฀reducing฀royalty฀revenues฀in฀fi ฀scal฀2004.฀Therefore,฀GAAP฀results฀for฀fi ฀scal฀2004฀ do฀not฀reï¬, ฀ect฀a฀full฀year฀of฀economic฀performance฀of฀the฀Company's฀licensing฀business,฀as฀royalty...

  • Page 5
    ...฀technology฀and฀advanced฀devices.฀We฀are฀pleased฀to฀note฀ that฀our฀Company฀ranked฀number฀55฀on฀The฀Wall฀Street฀ Journal฀list฀of฀"World's฀Largest฀Public฀Companies"฀ (based฀on฀market฀capitalization฀as฀of฀August฀31,฀2004).1 3G฀CDMA...

  • Page 6
    ...฀segment.3 QUALCOMM Stock Price Since Initial Public Offering (IPO) (price per share weekly) Adjusted for historical stock splits* $100 80 40 20 10 8 4 2 1 $0.5 Over 41% growth Compounded Annually IPO $0.5 12/13/1991 Market Cap $66B 11/12/2004 QUALCOMM's฀฀ performance฀this฀฀ year...

  • Page 7
    ...to฀transition฀easily฀to฀networks฀that฀ offer฀attractive฀multimedia฀services.฀The฀two฀largest฀ United฀States฀CDMA฀networks,฀operated฀by฀Verizon฀and฀ Sprint,฀posted฀strong฀results฀this฀year,฀demonstrating฀that฀ CDMA฀is฀a฀popular฀choice...

  • Page 8
    ...฀value฀฀ of฀delivering฀3G฀services฀over฀CDMA-based฀networks.฀ The฀MVNO฀model฀has฀shown฀great฀success฀in฀Europe฀ and฀now฀in฀the฀United฀States. FUELING฀INDUSTRY฀GROWTH QUALCOMM฀makes฀strategic฀investments฀in฀companies฀ and฀technologies...

  • Page 9
    ...,฀our฀QUALCOMM฀Strategic฀Initiatives฀(QSI)฀ business฀continues฀to฀evolve฀with฀an฀increasing฀focus฀ on฀investing฀in฀complementary฀technologies.฀Fiscal฀ year฀2004฀revenues฀increased฀by฀27฀percent฀year-overyear.4฀Fiscal฀2004฀diluted฀earnings...

  • Page 10
    Envision DIGITAL฀VOICE฀฀ HIGH-SPEED WIRELESS฀DATA WIRELESS฀BROADBAND฀ MULTIMEDIA 06฀฀QUALCOMM฀฀฀

  • Page 11
    ...conceived฀around฀a฀fundamental฀idea฀that฀continues฀to฀drive฀us.฀ It's฀about฀vision฀and฀innovation. It's฀about฀doing฀things฀better. And฀with฀help฀from฀our฀industry฀partners-we're฀enabling฀the฀digital฀wireless฀revolution. ฀QUALCOMM฀฀07

  • Page 12
    ... QUALCOMM฀drew฀the฀attention฀of฀the฀communications฀ industry฀in฀1989,฀when฀it฀demonstrated฀the฀effectiveness฀of฀a฀digital฀wireless฀technology฀called฀Code฀ Division฀Multiple฀Access฀(CDMA).฀Many฀viewed฀the฀฀ The฀Company฀has฀shipped...

  • Page 13
    ...฀from฀InStat/MDR*฀predicts฀ that฀CDMA2000฀and฀WCDMA฀together฀will฀capture฀the฀ largest฀market฀share฀(in฀terms฀of฀number฀of฀subscribers)฀ by฀2009.฀QUALCOMM฀recognizes฀that฀opportunity฀ and฀is฀executing฀a฀strategy฀for฀continued฀growth...

  • Page 14
    Innovate CONSUMER฀฀฀฀ ENTERPRISE GOVERNMENT 10฀฀QUALCOMM฀฀฀

  • Page 15
    ...in฀the฀wireless฀value฀chain. With฀every฀new฀generation฀of฀chipsets,฀QUALCOMM฀ ฀ ฀ raises฀the฀bar฀on฀what฀is฀possible฀in฀wireless.฀ This฀includes฀a฀broad฀range฀of฀industry฀partners,฀the฀consumers฀and฀enterprises฀they฀serve,฀ and...

  • Page 16
    ...฀right฀price฀point. HIGH-SPEED฀WIRELESS฀DOWNLOADS network฀capacity,฀this฀high-speed฀data฀solution฀makes฀฀ it฀possible฀for฀operators฀to฀offer฀advanced฀mobile฀broadband฀services฀such฀as฀multimedia฀and฀position฀location.฀ These฀technologies...

  • Page 17
    ...security-based฀ and฀entertainment฀applications฀and฀services.฀gpsOne฀ provides฀highly฀accurate฀all-terrain฀positioning฀by฀combining฀signals฀from฀global฀positioning฀satellites฀(GPS)฀ and฀wireless฀networks฀ - delivering฀the฀most฀reliable฀ location...

  • Page 18
    ...฀to฀spend฀more฀ time฀with฀customers,฀work฀more฀efficiently฀and฀access฀ corporate฀applications฀via฀the฀wireless฀Internet฀on฀trains,฀ at฀customer฀locations,฀and฀while฀waiting฀in฀airports. The฀second฀annual฀3G฀cdmA-List™฀Awards฀recog...

  • Page 19
    ...฀company฀currently฀ authorized฀to฀transport฀munitions฀in฀the฀United฀States฀ for฀the฀Department฀of฀Defense฀uses฀the฀QUALCOMM฀ solution฀for฀messaging,฀reporting฀and฀incident฀response฀ management.฀Other฀United฀States฀Government฀ agencies...

  • Page 20
    PHONE฀฀฀฀ COMPUTER ENTERTAINMENT฀CENTER Enable PDA COMPUTER TELEVISION CAMCORDER VOICE฀PHONE MP3฀PLAYER GPS฀DEVICE NEWSPAPER WALLET 16฀฀QUALCOMM฀฀฀

  • Page 21
    ... OCR฀SCANNER GAME฀CONSOLE GLUCOMETER ROLODEX® WALKIE-TALKIE PHOTO฀ALBUM FM฀RADIO CAMERA As฀the฀global฀transition฀to฀high-speed฀wireless฀gains฀ traction,฀QUALCOMM฀and฀its฀industry฀partners฀are฀ positioned฀to฀grow฀and฀prosper. ฀QUALCOMM฀฀17

  • Page 22
    ... Vitelcom฀Mobile฀Technology฀is฀the฀ fi ฀rst฀Spanish฀company฀granted฀a฀ CDMA฀subscriber฀equipment฀license â- â- â- â- ฀฀ 13฀million฀CDMA2000฀subscribers฀ (as฀of฀October฀2004) ฀฀ Total฀Indian฀wireless฀subscriber฀ market฀grows฀from...

  • Page 23
    ... * downloads฀of฀3G฀BREW฀applications 113 ฀ * 145M ฀ * 3G฀subscribers฀reported฀worldwide operators฀with฀commercial฀ 3G฀services,฀including฀43฀ WCDMA฀(UMTS) ฀ JAPAN â- ฀ LATIN฀AMERICA฀ â- ฀ SOUTH฀KOREA â- â- â- ฀฀฀ 26฀million฀CDMA...

  • Page 24
    ...operator's฀ existing฀CDMA2000฀1X/1xEV-DO฀or฀WCDMA-based฀ cellular฀networks.฀FLO฀technology฀will฀allow฀consumers฀ to฀"surf"฀channels฀of฀video฀content฀on฀the฀same฀mobile฀ handsets฀they฀use฀for฀traditional฀cellular฀voice฀and฀data฀ services...

  • Page 25
    ...฀convergence฀of฀many฀communications฀and฀computing฀technologies.฀Through฀the฀ continuing฀evolution฀of฀our฀chipsets,฀Launchpad฀suite฀ and฀BREW฀solution,฀and฀the฀creation฀of฀new฀air฀interface฀solutions฀like฀FLO฀technology,฀QUALCOMM฀is฀on...

  • Page 26
    ...฀selected฀ QUALCOMM's฀chipsets฀solutions฀and฀system฀software฀ for฀their฀WCDMA฀deployments.฀This฀is฀the฀largest฀ customer฀base฀in฀the฀industry฀to฀work฀with฀a฀single฀ WCDMA฀wireless฀chipset฀provider. As฀WCDMA฀network฀rollouts฀accelerate...

  • Page 27
    More฀than 2฀billion฀opportunities * As฀wireless฀migration฀gains฀traction,฀we฀believe฀that฀QUALCOMM has฀more฀than฀two฀billion฀opportunities฀to฀grow฀the฀market. * Source:฀EMC฀as฀of฀July฀1,฀2004฀ ฀QUALCOMM฀฀23

  • Page 28
    ...฀digital฀wireless฀communications฀products฀and฀services฀based฀on฀the฀Company's฀ CDMA฀digital฀technology.฀Headquartered฀in฀San฀Diego,฀฀ California,฀QUALCOMM฀is฀included฀in฀the฀S&P฀500฀Index฀and฀ is฀a฀2004฀FORTUNE฀500®฀company...

  • Page 29
    ...฀ services฀company,฀headquartered฀ in฀Milpitas,฀California,฀with฀a฀design฀ center฀in฀Bangalore,฀India.฀ â- â- â- MSM฀ROADMAP CDMA2000 6000 San Diego, CA USA WCDMA/HSDPA฀and฀GSM/GPRS 6200 San Diego, CA USA CDMA2000฀and฀GSM/GPRS 6150 San Diego, CA USA...

  • Page 30
    ...QIS,฀QWBS฀and฀QGOV QIS QUALCOMM฀฀Internet฀Services SUPPORTING฀THE฀GROWTH฀OF฀THE฀WIRELESS฀INTERNET â- ฀฀ Grew฀the฀number฀of฀wireless฀operators฀offering฀BREW-based฀services฀ to฀a฀total฀of฀37฀operators฀in฀24฀ countries.฀There฀have...

  • Page 31
    ... Provides฀development,฀hardware฀ and฀analytical฀expertise฀to฀United฀ States฀government฀agencies฀ involving฀wireless฀communications฀ technologies.฀ QUALCOMM's฀commercial฀OmniTRACS฀vehicle฀tracking฀ system฀is฀being฀used฀extensively฀with฀the฀United...

  • Page 32
    ...฀3G฀CDMA฀MARKET ฀ IN฀FISCAL฀YEAR฀2004: â- â- Cumulative U.S. Patents (U.S. filed applications and granted patents) 3,249 3,389 ฀฀ 46฀subscriber฀licensees฀reported฀ sales฀of฀CDMA2000฀1X฀products.฀฀ ฀฀ 14฀subscriber฀licensees฀reported฀ sales฀of...

  • Page 33
    ...฀second฀annual฀3G฀cdmA-List฀Awards฀honored฀leading฀companies,฀public฀agencies฀and฀non-profit฀ entities฀across฀all฀industries฀for฀their฀successful฀wireless฀data฀solutions฀based฀on฀3G฀CDMA2000฀1X฀ or฀1xEV-DO฀technology.฀The฀2004฀A-List...

  • Page 34
    ...design,฀deployment฀ and฀optimization฀of฀CDMA-based฀networks.฀The฀service฀ is฀available฀through฀international฀training฀centers฀and฀ through฀an฀online฀distance฀learning฀program. REACHING฀OUT฀TO฀THE฀COMMUNITIES฀WE฀SERVE Academic฀excellence฀and...

  • Page 35
    ...฀earned฀ QUALCOMM฀a฀place฀among฀FORTUNE 's฀list฀of฀"100฀Best฀Companies฀to฀Work฀For฀in฀America"฀for฀seven฀years฀in฀ a฀row฀and฀Industry฀Week 's฀"1000฀Best฀Managed฀Companies."฀CIO฀magazine฀named฀QUALCOMM฀to฀its฀top฀100฀ list...

  • Page 36
    ...'s฀Discussion฀and฀Analysis Report฀of฀Independent฀Registered฀Public฀Accounting฀Firm ฀ Consolidated฀Balance฀Sheets Consolidated฀Statements฀of฀Operations฀ Consolidated฀Statements฀of฀Cash฀Flows Consolidated฀Statements฀of฀Stockholders'฀Equity Notes฀to...

  • Page 37
    ... evaluation by management, investors and analysts of its ongoing core operating businesses, including QUALCOMM CDMA Technologies (QCT), QUALCOMM Technology Licensing (QTL) and QUALCOMM Wireless & Internet (QWI). QSI results relate to strategic investments for which the Company has exit strategies of...

  • Page 38
    ... but we present our 2004 fiscal year as ending on September 30, 2004. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities On July 13, 2004, we announced a two-for-one stock split in the form of a stock dividend. Stock was distributed on August...

  • Page 39
    ... to purchase shares of our common stock at a price not less than the fair market value of the stock at the date of grant. The 2001 Plan provides for the grant of both incentive stock options and non-qualified stock options. Generally, options outstanding vest over periods not exceeding six years and...

  • Page 40
    ...was made prospectively and had the initial one-time effect of reducing royalty revenues recorded in the fourth quarter of fiscal 2004. See Management's Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report for more information. (3) (4) (5) (6) QUALCOMM 36

  • Page 41
    ...; QUALCOMM Technology Licensing, or QTL; QUALCOMM Wireless & Internet, or QWI; and QUALCOMM Strategic Initiatives, or QSI. QCT is a leading developer and supplier of integrated circuits and system software for wireless voice and data communications, multimedia functions and global positioning. QCT...

  • Page 42
    ... strategic investments to promote the worldwide adoption of CDMA products and services for wireless voice and Internet data communications. Our strategy is to invest in CDMA operators, licensed device manufacturers and start-up companies that we believe open new markets for CDMA technology, support...

  • Page 43
    ...the original cost, how long the market value of the investment has been less than its original cost, the performance of the investee's stock price in relation to the stock price of its competitors within the industry and the market in general and analyst recommendations. We also review the financial...

  • Page 44
    ...an increase in its effective tax rate and an adverse impact on operating results. As of September 30, 2004, the Company has recorded gross deferred tax assets of $418 million related to capital loss carry forwards. We can only use capital losses to offset capital gains. Based upon our assessments of...

  • Page 45
    ...and services for wireless voice and Internet data communications. QSI segment assets totaled $400 million at September 30, 2004, compared to $839 million at September 30, 2003. In general, we enter into strategic relationships with CDMA wireless operators and developers of innovative technologies or...

  • Page 46
    ... discount) to allow us to retain ownership of the Vésper Towers free and clear of any local bank security interest. The major classes of assets and liabilities sold in the Embratel sale transaction included: $25 million in accounts receivable, $5 million in inventory, $24 million in other current...

  • Page 47
    ... segment royalties, resulting primarily from an increase in phone and infrastructure equipment sales by our licensees at higher average selling prices, partially offset by the effect of the change in timing of recognizing royalties to an "as reported" method during the fourth quarter of fiscal 2004...

  • Page 48
    ... by corporate and other segments was a result of higher average cash and marketable securities balances, partially offset by the impact of lower interest rates earned on these balances, and $6 million in interest income recorded as a result of a refund from the United States Internal Revenue Service...

  • Page 49
    ... of the FCC auction discount voucher's value to two wireless operators, offset by a $16 million charge related to the write down of notes receivable from an early stage CDMA wireless operator and an early stage media company. Other operating expenses during fiscal 2002 resulted from the write down...

  • Page 50
    ... circuit products and technology research, development and marketing initiatives to support multimedia applications, high-speed wireless Internet access and multiband, multimode, multinetwork products including CDMA2000 1xEV-DO, WCDMA and HSDPA. QTL Segment. QTL revenues for fiscal 2004 were $1,331...

  • Page 51
    ... QIS gross margin largely resulting from the increase in fees related to our expanded BREW customer base and products, offset by a $30 million increase in QWI research and development and selling, general and administrative expenses. QWI's operating margin percentage remained flat in fiscal 2004 as...

  • Page 52
    ... equipment sales during the fourth quarter were recognized upon shipment, a $12 million increase in messaging services which have higher gross margins than equipment sales and the effect of a $6 million release of warranty reserves resulting from the substantial completion of a QWBS warranty program...

  • Page 53
    ... from operations will satisfy our expected working and other capital requirements for the foreseeable future based on current business plans, including investments in other companies and other assets to support the growth of our business, financing for customers of CDMA infrastructure products...

  • Page 54
    ...our year ended September 30, 2004. We will evaluate the effect, if any, of EITF 03-1 when final guidance is released. Quantitative and Qualitative Disclosure About Market Risk Interest Rate Market Risk. We have fixed income securities consisting of cash equivalents and investments in marketable debt...

  • Page 55
    ...values of these strategic investments totaled $162 million at September 30, 2004. Additional information regarding our strategic investments is provided in Management's Discussion and Analysis of Financial Condition and Operating Results in this Annual Report. Foreign Exchange Market Risk. We manage...

  • Page 56
    ...balance sheets and the related consolidated statements of operations, cash flows and stockholders' equity present fairly, in all material respects, the financial position of QUALCOMM Incorporated and its subsidiaries (the "Company") at September 30, 2004 and 2003, and the results of their operations...

  • Page 57
    ... Accounts receivable, net Inventories Deferred tax assets Other current assets Total current assets Marketable securities Property, plant and equipment, net Goodwill Deferred tax assets Other assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable Payroll...

  • Page 58
    ... share data) Revenues: Equipment and services Licensing and royalty fees $3,514 1,366 4,880 Operating expenses: Cost of equipment and services revenues Research and development Selling, general and administrative Amortization of goodwill and other acquisition-related intangible assets (Note 1) Asset...

  • Page 59
    ... Increase (decrease) in cash resulting from changes in: Accounts receivable, net Inventories Other assets Trade accounts payable Payroll, benefits and other liabilities Unearned revenue Net cash provided by operating activities Investing Activities: Capital expenditures Purchases of available-for...

  • Page 60
    ... of stock options Tax benefit from exercise of stock options Issuance for Employee Stock Purchase and Executive Retirement Plans Reversal of the valuation allowance on certain deferred tax assets (Note 6) Repurchase and retirement of common stock Dividends Stock-based compensation expense Balance at...

  • Page 61
    ...sale of CDMA products, and receives license fees as well as ongoing royalties based on sales by licensees of wireless telecommunications equipment products incorporating its CDMA technologies. The Company provides satellite and terrestrial-based two-way data messaging and position reporting services...

  • Page 62
    ... based on their sales of products incorporating or using the Company's licensed intellectual property. License fees are recognized over the estimated period of future benefit to the average licensee, typically five to seven years. The Company earns royalties on such licensed CDMA products sold...

  • Page 63
    ... of the current year and the estimate for Estimated Licensees at the end of the prior year. Revenues from sales of the Company's CDMA-based integrated circuits are recognized at the time of shipment, or when title and risk of loss pass to the customer and other criteria for revenue recognition are...

  • Page 64
    ..., how long the market value of the investment has been less than its original cost, the performance of the investee's stock price in relation to the stock price of its competitors within the industry and the market in general, analyst recommendations, any news that has been released specific to the...

  • Page 65
    ... if certain events occur indicating that the carrying value of goodwill may be impaired. Software development costs are capitalized when a product's technological feasibility has been established through the date a product is available for general release to customers. Software development costs are...

  • Page 66
    ... during fiscal 2004, 2003 or 2002. Stock-Based Compensation The Company records compensation expense for employee stock options based upon their intrinsic value on the date of grant pursuant to Accounting Principles Board Opinion 25 (APB 25), "Accounting for Stock Issued to Employees." Because the...

  • Page 67
    ... effects of stock-based compensation on net income and earnings per common share have been estimated at the date of grant using the Black-Scholes option-pricing model based on the following assumptions: Stock Option Plans 2004 Risk-free interest rate Volatility Dividend yield Expected life (years...

  • Page 68
    ...diluted earnings per common share because the option exercise price was greater than the average market price of the common stock, and therefore, the effect on dilutive earnings per common share would have been anti-dilutive. Put options outstanding during fiscal 2004 to purchase 3,000,000 shares of...

  • Page 69
    ...U.S. Treasury and federal agency securities Corporate bonds and notes Available-for-sale: U.S. Treasury and federal agency securities Foreign government bonds Corporate bonds and notes Mortgage and asset-backed securities Non-investment grade debt securities Equity mutual funds Equity securities 520...

  • Page 70
    ... federal agency securities, foreign government bonds, mortgage and asset-backed securities and corporate bonds and notes. The unrealized losses on the Company's investments in investment grade debt securities were caused by interest rate increases. Due to the fact that the decline in market value is...

  • Page 71
    ... in other assets, result from arrangements in which the Company has agreed to provide its customers or certain CDMA customers of Telefonaktiebolaget LM Ericsson (Ericsson) with long-term interest bearing debt financing for the purchase of equipment and/or services. Finance receivables were comprised...

  • Page 72
    ... units for annual testing purposes. Goodwill was allocable to reporting units included in the Company's reportable segments at September 30, 2004 as follows: $268 million in QUALCOMM CDMA Technologies, $73 million in QUALCOMM Technology Licensing and $15 million in QUALCOMM Wireless & Internet. The...

  • Page 73
    ... method investments and the Company's underlying equity in the net assets of those investees, consisting of acquisition related goodwill and intangible assets accounted for in accordance with FAS 142, were not significant at September 30, 2004 and 2003. At September 30, 2004, effective ownership...

  • Page 74
    ...its debt and equity investments in Leap Wireless during fiscal 2002. The Company also recorded $59 million in losses related to changes in the fair values of Leap Wireless derivative instruments for fiscal 2002. In fiscal 2004, Leap Wireless emerged from bankruptcy. As a result, the Company received...

  • Page 75
    ... other Deferred revenues Unrealized losses on marketable securities Unused net operating losses Capital loss carryover Tax credits Unrealized losses on investments Total gross deferred assets Valuation allowance Total net deferred assets Purchased intangible assets Deferred contract costs Unrealized...

  • Page 76
    ...the Company's outstanding shares of common stock. Upon exercise, holders, other than an Acquiring Person, will have the right, subject to termination, to receive the Company's common stock or other securities, cash or other assets having a market value, as defined, equal to twice such purchase price...

  • Page 77
    ... stock options to be granted to non-employee directors at fair market value, vesting over periods not exceeding five years and are exercisable for up to 10 years from the grant date. At September 30, 2004, options for approximately 3,232,000 shares under both plans were exercisable at prices...

  • Page 78
    ... is ongoing. On July 16, 2004, the Court granted the Company's summary adjudication motion, dismissing plaintiffs' breach of contract claims. Durante, et al v. QUALCOMM: On February 2, 2000, three former QUALCOMM employees filed a putative class action against the Company, ostensibly on behalf of...

  • Page 79
    ... hearings relating to the patents in the case are under way. Discovery in the matter is continuing. Other: The Company has been named, along with many other manufacturers of wireless phones, wireless operators and industry-related organizations, as a defendant in purported class action lawsuits (In...

  • Page 80
    ...provides satellite and terrestrial-based two-way data messaging and position reporting services to transportation companies, private fleets, construction equipment fleets and other enterprise companies. â- â- â- QUALCOMM Strategic Initiatives (QSI) - manages the Company's strategic investment...

  • Page 81
    ...$ 31 2003* 2002* Generally, revenues between segments are based on prevailing market rates for substantially similar products and services or an approximation thereof. Certain charges are allocated to the corporate functional department in the Company's management reports based on the decision that...

  • Page 82
    ... 2002. Effectively all interest expense (Note 5) was recorded as corporate expense in reconciling items in fiscal 2004, 2003 and 2002. The Company distinguishes revenues from external customers by geographic areas based on customer location. Sales information by geographic area for the years ended...

  • Page 83
    ... related to the Vésper Operating Companies, TowerCo or the SMP licenses recorded on its consolidated balance sheet. Revenues of $36 million, $123 million and $125 million were reported in the loss from discontinued operations during fiscal 2004, 2003 and 2002, respectively. Pro forma results...

  • Page 84
    ...and the full year based upon respective average shares outstanding. Therefore, the sum of the quarterly earnings per share amounts may not equal the annual amounts reported. Prior to the fourth quarter of fiscal 2004, the Company recorded royalty revenues from certain licensees based on estimates of...

  • Page 85
    ...MARK฀JACOBS฀ Member:฀Strategic฀Committee Title:฀Chairman฀of฀the฀Board฀of Directors฀and฀Chief฀Executive฀Offi ฀cer,฀ QUALCOMM฀Incorporated฀ ฀DR.฀RICHARD฀C.฀ATKINSON Member:฀Audit฀Committee,฀ Compensation฀Committee฀ Title:฀President฀Emeritus฀of...

  • Page 86
    ...,฀India Jakarta,฀Indonesia London,฀England Madrid,฀Spain Melbourne,฀Australia Mexico฀City,฀Mexico Moscow,฀Russia฀ Mumbai,฀India Munich,฀Germany฀ Munster,฀Germany New฀Delhi,฀India฀ Nuremberg,฀Germany Osaka,฀Japan Paris,฀France Rome,฀Italy São฀Paulo,฀Brazil...