HONEY, IT’S ME. GUESS WHAT?
                                                    CHECK
                                    ...
ACTION      THE THIRD GENERATION




SPEAKS   OF WIRELESS COMMUNICATIONS
                   IS HERE




LOUDER
AND IT’ S GROWING




Q U A LC O M M   2002 ANNUAL REPORT                       PAG E   01
near doubling of voice capacity.




3G IS REAL
             REAL
                  fast data speeds.
             REAL
  ...
03
                                                            PAG E
AND 3G CDMA PROVIDES
THE REAL EDGE
QUALCOMM Incorpora...
IT’S UNLEASHING AN AVALANCHE OF NEW WI
05PAG E
                                                                      With the commercial introduction of third-
 ...
HIGH-SPEED MOBILE DATA
SERVICES HAVE ARRIVED
The power of the third generation of devices is    In a growing number of reg...
07PAG E
Navigation                             Emergency Services                      eCommerce                          ...
09
3G IS HAPPENING IN NORTH AMERICA




                                                                                  ...
IT’S HAPPENING IN CHINA
ONE OF THE FASTEST-GROWING MARKETS
CDMA is growing in China, the world’s largest wireless market. ...
Q U A LC O M M   2002 ANNUAL REPORT   PAG E   11
13
IT’S HAPPENING IN SOUTH KOREA




                                                                                     ...
IT’S HAPPENING IN JAPAN
GROWING DEMAND FOR MORE MULTIMEDIA
Many subscribers to Japan’s newest 3G CDMA network have handset...
Q U A LC O M M   2002 ANNUAL REPORT   PAG E   15
17
IT’S HAPPENING IN INDIA




                                                                                           ...
THE THIRD GENERATION OF WIRELESS TECHNOLOGY
IT’S MORE THAN JUST TALK IT’S THE WAVE OF THE FUTURE AND QUALCOMM IS ENABLING ...
19
THE WORLD’S LEADING SUPPLIER OF CDMA CHIPSETS




                                                                     ...
QUALCOMM PROVIDES HIGHLY INTEGRATED
PRODUCTS, SOFTWARE AND SERVICES TO THE
WORLD’S LEADING CDMA MANUFACTURERS
QUALCOMM’s c...
21
                                                                                                                       ...
QUALCOMM’S BREW SOLUTION IS FUELING THE GROWTH OF A WHOLE
NEW INDUSTRY FOR APPLICATION DEVELOPERS
23
                                                                                                         PAG E
DRIVING ...
BREW DISTRIBUTION SYSTEM
A centralized marketplace for acquiring, sharing and
managing applications.




                 ...
25
BREW DRIVES FUTURE 3G GROWTH




                                                                                      ...
QUALCOMM’S INNOVATIVE PATENT PORTFOLIO
PROVIDES A GROWING REVENUE STREAM THAT
SERVES AS A SOLID FOUNDATION FOR GROWTH
EXTE...
27
PROMOTING CDMA GROWTH WORLDWIDE




                                                                                   ...
QUALCOMM IS ON THE MOVE
IF YOU WANT TO RUN A MISSION-CRITICAL BUSINESS APPLICATION
IN A WIRELESS ENVIRONMENT, WE CAN MAKE ...
29
IT’S MORE THAN JUST TALK




                                                                                          ...
QUALCOMM
WHERE TECHNOLOGY HAS A HUMAN FACE
QUALCOMM has earned a distinguished reputation that goes beyond CDMA. The Compa...
31
                                                                                                                       ...
TO OUR STOCKHOLDERS,
We are pleased with the substantial progress achieved this year in each of our
                      ...
33
                                                                                                                       ...
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qualcomm annual reports 2002

  1. 1. HONEY, IT’S ME. GUESS WHAT? CHECK IT OUT IT’S REALLY HAPPENING! 2002 ANNUAL REPORT
  2. 2. ACTION THE THIRD GENERATION SPEAKS OF WIRELESS COMMUNICATIONS IS HERE LOUDER
  3. 3. AND IT’ S GROWING Q U A LC O M M 2002 ANNUAL REPORT PAG E 01
  4. 4. near doubling of voice capacity. 3G IS REAL REAL fast data speeds. REAL REAL cost-effective networks. REAL colorful multimedia devices. REAL useful wireless data applications.
  5. 5. 03 PAG E AND 3G CDMA PROVIDES THE REAL EDGE QUALCOMM Incorporated (www.qualcomm.com) is a leader in developing and delivering innovative digital wireless communications products and services based on Code Division Multiple Access (CDMA) digital wireless technology. Headquartered in San Diego, California, QUALCOMM is included in the S&P 500 Index and traded on The NASDAQ Stock Market® under the ticker symbol QCOM. ENABLED BY QUALCOMM 2002 ANNUAL REPORT Q U A LC O M M
  6. 6. IT’S UNLEASHING AN AVALANCHE OF NEW WI
  7. 7. 05PAG E With the commercial introduction of third- T H E T H I R D G E N E R AT I O N I S H E R E About one out of every five wireless generation (3G) CDMA technology, QUALCOMM handsets sold today is based on CDMA, the is enabling a whole new wave of fully integrated breakthrough digital wireless technology wireless multimedia devices. pioneered by QUALCOMM. (Source: EMC World Cellular Database, November 2002) These devices offer attractive color screens, fast Internet downloads and useful interactive capa- There are more than 135 million CDMA bilities like navigation services and full-color, subscribers worldwide as of September 2002. full-motion games. (Source: www.cdg.org) These devices come in many forms: flip- There are nearly 26 million reported 3G CDMA phones, color phones, smart phones, video and subscribers around the world as of November 30, still camera phones, wireless PDAs and high- 2002. (Source: www.3GToday.com) speed wireless modems. More and more such devices are being intro- RELESS PHONES AND DEVICES duced as manufacturers ramp up to feed the public’s growing need for speed. Wireless is more than just talk now. High-speed data is here. It’s commercial. It’s accepted. And demand is growing. 3 4 M A N U FA C T U R E R S Over 200 end-user 3G CDMA devices have been commercially introduced in Asia, the Americas and Europe. (Source: www.3GToday.com, December 2002) 2002 ANNUAL REPORT Q U A LC O M M
  8. 8. HIGH-SPEED MOBILE DATA SERVICES HAVE ARRIVED The power of the third generation of devices is In a growing number of regions, you can even unlike anything the wireless industry has ever be located by emergency services workers when seen. The handset is no longer a simple device you need them. The devices that deliver these types for voice communications. It has become a multi- of exciting new services have arrived, enabled by media platform operating up to 10 times faster QUALCOMM technology. than traditional wireless phones. Read e-mail. Surf the wireless Internet. Enjoy a host of And this is only the beginning. graphics-rich games.
  9. 9. 07PAG E Navigation Emergency Services eCommerce Entertainment AND MANY MORE ARE ON THE WAY 32 WIRELESS OPERATORS IN 16 COUNTRIES HAVE DEPLOYED NETWORKS BASED ON 3G CDMA TECHNOLOGY (as of December 2002) More and more wireless manufacturers are choosing Wireless infrastructure equipment is the foundation for wireless networks. It’s comprised of a series products that use QUALCOMM chips for their voice of radio base stations that cover regions of service. Each base station sends and receives the wireless and high-speed data networks and devices. By all signals that move between phones and switches on the network. Inside each base station are many measures, QUALCOMM offers the smartest and “chipsets” (integrated circuits with system software) that act as the brain for the whole operation. fastest-to-market solution today. 2002 ANNUAL REPORT Q U A LC O M M
  10. 10. 09 3G IS HAPPENING IN NORTH AMERICA PAG E THE LEADING WIRELESS TECHNOLOGY With 65 million people served* the CDMA technology pioneered by QUALCOMM supports over , CDMA SUBSCRIBER GROWTH N O RT H AM ER ICA 46 percent of all wireless telecommunications subscribers in the United States and Canada*. And it enables operators to nearly double their network voice capacity and provide subscribers with high- 65M speed data services. Recognizing those economic benefits, a number of North American operators 52M successfully made the transition to 3G CDMA this year. 34M VERIZON WIRELESS MONET MOBILE In January 2002, Verizon Wireless launched its In October 2002, Monet Mobile launched the 20M Express Network in major markets, delivering first commercial CDMA2000 1xEV-DO network. high-speed data services based on 3G Monet’s CDMA2000 1xEV-DO launch marked the CDMA2000 1X. debut in the United States of commercial broad- band wireless data services, supporting fixed 1999 2000 2001 2002 Verizon Wireless is the largest CDMA carrier in and mobile wireless Internet access at multi- North America. By September 2002, Verizon megabit peak rates. Notes: North American CDMA subscriber figures Wireless served 31 million customers. including U.S. and Canada. 1999-2001 data as of 12/99, 12/00, 12/01. O T H E R N O R T H A M E R I C A N O P E R AT O R S 2002 data as of 11/02. S U C C E S S F U L LY M A D E T H E T R A N S I T I O N T O Source: EMC Worldwide Cellular Database, 11/02. Also during 2002, Verizon conducted a trial of 3G CDMA INCLUDING: CDMA2000 1xEV-DO, the “data-optimized” wire- Aliant Mobility less technology recognized by the International Bell Mobility Telecommunications Union as a 3G standard. Cellular South Kiwi PCS (Comscape U.S.A.) SPRINT PCS Leap Wireless In August this year, Sprint PCS launched its Metro PCS nationwide CDMA2000 1X network featuring MTS SM Sprint PCS Vision and PCS Wireless Telus Mobility SM Web services. U.S. Cellular 2002 ANNUAL REPORT By September 2002, Sprint PCS and its affili- * Source: EMC World Cellular Database, November 2002. Percentages based on total number of approximately ates’ networks served over 16 million people. 65 million CDMA subscribers, and total number of North American wireless subscribers of over 140 million. Q U A LC O M M
  11. 11. IT’S HAPPENING IN CHINA ONE OF THE FASTEST-GROWING MARKETS CDMA is growing in China, the world’s largest wireless market. Seventeen domestic Chinese CHINA UNICOM CDMA WIRELESS SUBSCRIBER GROWTH IN 2002 telecommunications equipment manufacturers are now licensed by QUALCOMM to develop, manufacture and sell 3G handsets and/or infrastructure equipment. 5.0M Also this year, China Unicom agreed to CHINA UNICOM This year, China Unicom completed the first offer BREW applications to a portion of its phase of the nationwide rollout of its multibillion subscriber base. 2.8M dollar “Horizon” network based on QUALCOMM’s industry-leading CDMA technology. As 2002 drew to a close, more than a billion 1.6M dollars in CDMA2000 1X equipment contracts China Unicom completed the first phase of its were awarded to participating vendors including 0.73M CDMA network deployment under budget. The ZTE, Motorola, Lucent, Nortel and Ericsson. project yielded a network capacity of approxi- mately 16 million subscribers*. Jun Aug Oct Jan As part of the second phase of the project, the entire network is now being upgraded to * Source: China Unicom. CDMA2000 1X. When completed in the second quarter of 2003, the network will have the capacity to serve over 31 million subscribers*.
  12. 12. Q U A LC O M M 2002 ANNUAL REPORT PAG E 11
  13. 13. 13 IT’S HAPPENING IN SOUTH KOREA PAG E WHERE CDMA COMES FIRST South Korea staked out its position as a wireless leader with one of the first commercial launches CDMA SUBSCRIBER GROWTH S O UT H KOR EA of CDMA cellular phone service back in 1995. Another landmark occurred in 2000 when the world’s first commercial 3G network based on CDMA2000 1X technology launched. The tradition continued 32M 30M this year when two operators launched the first “data-optimized” high-speed wireless CDMA2000 27M 1xEV-DO networks. 24M South Korea’s high-speed wireless networks helped drive demand for new feature-rich devices. Approximately 80 percent of all handsets sold this year featured color screens and there was a surge of interest in advanced camera-embedded phones and devices featuring position location capabilities enabled by QUALCOMM’s market-leading gpsOne™ technology. SK TELECOM (SKT) KT FREETEL (KTF) 1999 2000 2001 2002 Data revenues at South Korea’s largest Average revenue per user (ARPU) data CDMA2000 1X wireless carrier increased increased sixfold when KTF launched the first 1999-2001 data as of 12/99, 12/00, 12/01. 2002 data as of 11/02. dramatically as millions took advantage of commercial wireless Internet service based on Sources: SK Telecom web site, KT Freetel web site, LG Telecom web site,11/02; EMC Worldwide Cellular “NATE” for wireless Internet access and “NATE QUALCOMM’s BREW applications platform. Database, 11/02. Drive” for navigation and location services. CDMA2000 1xEV-DO launched in May and This year’s CDMA2000 1xEV-DO upgrade allows enables a high-speed, high-quality streaming fast data services in over 80 cities nationwide. video-on-demand service featuring an enhanced multimedia e-mail service with pictures. SKT features a host of 1xEV-DO capable devices including a high-speed wireless modem card LG TELECOM from GTRAN and cutting-edge handsets from In May 2002, LG Telecom launched a nationwide Samsung and SK Teletech. CDMA2000 1X network offering a wide array of wireless Internet services under the umbrella 2002 ANNUAL REPORT brand “ez-i.” Q U A LC O M M
  14. 14. IT’S HAPPENING IN JAPAN GROWING DEMAND FOR MORE MULTIMEDIA Many subscribers to Japan’s newest 3G CDMA network have handsets with built-in cameras. The CDMA SUBSCRIBER GROWTH JAPAN country’s second largest operator, KDDI, is rapidly gaining market share and improving customer loyalty thanks to a growing number of innovative devices and services. 13M 10M The newest handsets record and send video KDDI More than one million camera-embedded phones “Movie Mail” in 5-, 10- and 15-second increments. 7M were sold during the first six months of service Users can input text over the images, create a for KDDI’s 3G CDMA network (called “au”). voice-over track and a GPS attachment that 3M provides a map detailing the precise location of By year’s end, coverage extended to approximately the sender. 90 percent of Japan and testing was underway 1999 2000 2001 2002 for an evolution to the next-generation high-speed NTT DoCoMo data-optimized service (CDMA2000 1xEV-DO). “Photo Mail” users can send images to PCs and Internet-enabled phones such as the Notes: The 2002 figure includes 136,000 FOMA subscribers as reported on the NTT DoCoMo web site. Over 100 applications based on QUALCOMM’s FOMA handsets used by Japan’s NTT DoCoMo, The 1999-2001 data as of 12/99, 12/00, 12/01. The 2002 data as of 11/02. gpsOne technology are now available in Japan. the first commercial network based on WCDMA Sources: KDDI web site, NTT DoCoMo web site, 11/02. KDDI’s “eznavigation” provides emergency (Wideband CDMA) technology. services, a child finder, detailed navigational maps, and many other applications for con- sumers and enterprises.
  15. 15. Q U A LC O M M 2002 ANNUAL REPORT PAG E 15
  16. 16. 17 IT’S HAPPENING IN INDIA PAG E ASIA’S GROWING WIRELESS MARKET Jammu and Kashmir QUALCOMM’s global development team works with wireless operators everywhere to make phone Himachal service more accessible and affordable. This is particularly important in the second most populous Pradesh country in the world. Chandigarh Punjab RELIANCE Haryana Arunachal India’s largest private company, Reliance, is Pradesh Delhi investing $5 billion for the deployment of Sikkim Uttar Pradesh a limited mobility CDMA2000 1X network in Rajasthan Nagaland Assam 18 “circles,” covering approximately 95 percent of India’s population. Meghalava Manipur Bihar South Korea’s LG Electronics signed a $100 Mizeram Tripura million contract to supply phones to the network. West Bengal Madhya Pradesh Gujarat BSNL Diu Bharat Sanchar Nigam Limited (BSNL) also Daman selected CDMA for its limited mobility service. Dadra and Nagar Haveli Orissa Maharashtra TATA T E L E S E R V I C E S Tata TeleServices recently launched CDMA CDMA Coverage services in several Indian cities including Delhi, Launched or Planned Andhra Chennai and Coimbatore (in the state of Tamil Pradesh Goa Nadu), Bangalore (in the state of Karnataka) and Hyderabad (in the state of Andhra Pradesh). As Karnataka 2002 drew to a close, additional launches were Andaman and planned in the state of Gujarat. Nicobar Islands 2002 ANNUAL REPORT O T H E R C D M A O P E R AT O R S D E P L O Y I N G C D M A 2 0 0 0 1 X T E C H N O LOGY I N C LU D E : Tamil Nadu HFCL Kerala MTNL Shyam Q U A LC O M M
  17. 17. THE THIRD GENERATION OF WIRELESS TECHNOLOGY IT’S MORE THAN JUST TALK IT’S THE WAVE OF THE FUTURE AND QUALCOMM IS ENABLING IT
  18. 18. 19 THE WORLD’S LEADING SUPPLIER OF CDMA CHIPSETS PAG E QCT has succeeded in bringing nine successive A N I N D U S T R Y- L E A D I N G B U S I N E S S M O D E L Serving wireless network and handset manu- TO DATE, QUALCOMM HAS SHIPPED OVER generations of technology to market, earning 725 MILLION CDMA CHIPS TO facturers worldwide, QUALCOMM CDMA the distinction of becoming the world’s leading MANUFACTURERS AROUND THE WORLD Technologies (QCT) has become the world’s supplier of integrated circuits to the wireless leading developer and supplier of CDMA communications industry. chipsets, system software, tools, training and technical support. CUMULATIVE 3G MSM SALES (UNITS IN MILLIONS) 2001 2002 To meet the continually evolving needs of its Q1 0.5 12.0 customers, QCT has innovated an unparalleled Q2 1.0 20.0 technology roadmap that provides continuous Q3 2.0 31.0 upgrades, feature enhancements and technical Q4 6.0 46.0 support for future generations. Cumulative shipments of QUALCOMM CDMA2000 1X MSM chipsets and system software, rounded to nearest millions. Device Capabilities PROVIDING INCREASINGLY INTEGRATED FEATURES AND FUNCTIONALITY IN Increasing MSM SUCCESSIVE GENERATIONS OF Applications 6500 Support for CHIPSET SOLUTIONS Enhanced MSM Multimedia & 6300 Positioning Features MSM MSM MSM 5500 6100 6250 Greater Functionality MSM MSM MSM Integration 5100 6050 6200 Higher Data MSM MSM MSM Speeds 6000 5105 5200 Enhanced Product MSM MSM Segmentation MSM MSM 3300 5010 MSM 5000 3100 radioOne™ 2002 ANNUAL REPORT Support for 3000 Multimode, (ZIF) Architecture Multiband Devices MSM3000 Series MSM5000 Series MSM6000 Series CDMA2000, Multimode cdmaOne™ CDMA2000, WCDMA 1X, 1xEV-DO, 1X/GSM/GPRS, IS-95A/B 1X, 1xEV-DO, WCDMA WCDMA/GSM/GPRS, Q U A LC O M M 1X/1xEV-DO/GSM/GPRS Generations of Mobile Station Modem™ (MSM™) Chips
  19. 19. QUALCOMM PROVIDES HIGHLY INTEGRATED PRODUCTS, SOFTWARE AND SERVICES TO THE WORLD’S LEADING CDMA MANUFACTURERS QUALCOMM’s complete chipset and system software solutions embody the most advanced wireless GROWTH DRIVERS technologies, including cdmaOne, CDMA2000 1X, CDMA2000 1xEV-DO and WCDMA/UMTS. The QUALCOMM’s MSM5xxx family of chips Company supports 3G CDMA and is active in the standards arena, in chip and software development achieved market acceptance in 2002, leading and in testing activity aimed at helping these technologies achieve fast time to market with high the way for 3G deployments worldwide and voice and data performance. enabling the wave of multimedia devices now coming to market at an ever-growing pace. QUALCOMM NOW SUPPLIES 3G CDMA2000 1X CHIPSETS TO We achieved on-time sampling of the 9th gener- 50 MANUFACTURERS WORLDWIDE ation MSM6xxx family of radioOne™ chipsets which is key to the development of multimode devices that are expected to come to market in the coming year. Increasing demand for color screens and high- speed wireless data services resulted in a strong take-up rate for multimedia features and gpsOne, the industry-leading position location technology. Additional information about all QCT products and technologies is available on the web at e http://www.cdmatech.com. On ma 1X cd 000 V-DO A2 xE M V CD 01 V-D 200 1xE S A M 0 200 CD MT MA MA/U CD CD x M1 W GS
  20. 20. 21 PAG E THE WORLD’S LEADING DEVELOPER OF CDMA TECHNOLOGY QUALCOMM is driving the data revolution with breakthrough technologies that are enabling a broad range of new handsets, applications and data services. D I R E CT C O N V E R S I O N T E C H N O LO GY ENABLING THE WIRELESS INTERNET gpsOne is part of QUALCOMM’s Launchpad™ appli- This year QUALCOMM introduced a revolutionary new way to process wireless signals involving fewer cations platform, a suite of integrated multimedia steps and delivering considerable cost savings. and positioning technologies aimed at supporting Called radioOne™ the new chipsets are slated to the development of a wide variety of wireless data- , enabled devices for all consumers. It includes a perform receive and transmit functions for next- wide range of built-in multimedia, connectivity, generation CDMA2000 1X and WCDMA/UMTS storage and user interface functions. wireless devices. This will fuel development of smaller phones and devices that consume less BY power including multimode, multiband phones MORE THAN 5 MILLION 200 TH gpsOne-ENABLED DEVICES ARE FO WOR 5, E capable of global roaming. RL LD NOW IN COMMERCIAL USE O SE WI RV CAT DE IO ICE MA S W N-B R P O S I T I O N I N G T E C H N O LO GY ILL ASE KET . 002 D BE VA MOBI The most widely deployed positioning technology in 8, 2 LU ED LE r1 $2 the world today, QUALCOMM’s gpsOne solution was AT e tob 0 chosen for the first two E-911 services in the United Oc BIL es, States. It works in challenging terrain, like concrete- Tim LIO and-steel high-rises or shopping malls. And it rea N provides impressive accuracy during emergency Ko the situations or when using GPS-enabled commercial or applications. o. f tC ne ter In hk e: urc 2002 ANNUAL REPORT So Q U A LC O M M
  21. 21. QUALCOMM’S BREW SOLUTION IS FUELING THE GROWTH OF A WHOLE NEW INDUSTRY FOR APPLICATION DEVELOPERS
  22. 22. 23 PAG E DRIVING DATA USAGE IS GOOD FOR BUSINESS QUALCOMM Internet Services (QIS) was formed to support and accelerate the emergence of a genuinely useful wireless Internet, building on QUALCOMM’s Binary Runtime Environment for Wireless™ (BREW™) applications platform. With BREW, QUALCOMM has created a complete technical and business solution that directly addresses the needs of the wireless industry. BREW enables hardware manufacturers and The complete BREW solution includes the BREW SDK™ (software development kit) for software developers to create a multitude of applications and services rapidly. developers, the BREW applications platform and porting tools for device manufacturers and the Wireless operators can generate added revenue BREW Distribution System (BDS) that is con- by offering their customers a continuously trolled and managed by operators—enabling growing catalog of the latest applications. them to easily get applications from developers to market and coordinate the billing and With BREW, consumers can quickly and easily payment process. download and run the applications they choose on their wireless devices, from location-based BREW is a product of QUALCOMM Internet services to messaging, games, streaming audio, Services (QIS), a division within the QUALCOMM video and more. Wireless & Internet (QWI) Group. QUALCOMM’s BREW platform is part of a complete end-to-end solution for wireless 2002 ANNUAL REPORT applications development, device configuration, application distribution and billing and payment. Q U A LC O M M
  23. 23. BREW DISTRIBUTION SYSTEM A centralized marketplace for acquiring, sharing and managing applications. QUALCOMM DEVELOPERS MANAGES THE MARKETPLACE AND SHOWCASES THE DEPTH MARKET APPLICATIONS DIRECTLY AND DIVERSITY OF BREW APPLICATIONS TO OPERATORS WIRELESS SERVICE PROVIDERS DEVICE MANUFACTURERS CHOOSE FROM A WIDE ARRAY OF APPLICATIONS TO OFFER INTEGRATE AN ASSORTMENT OF APPLICATIONS ACROSS SUBSCRIBERS AND MANAGE EVERY ASPECT OF APPLICATION MULTIPLE DEVICES AT ANY STAGE OF DEVICE DEVELOPMENT DISTRIBUTION FROM ACQUISITION TO BILLING BRAND LICENSORS & CONTENT PROVIDERS G R O W I N G M A R K E T A C C E P TA N C E Five wireless operators have launched or are planning commercial IDENTIFY OPPORTUNITIES TO EXTEND THEIR REACH INTO services based on BREW. THE WIRELESS WORLD Ten additional wireless operators are in various stages of evaluation. Thirty different models of BREW-enabled wireless handsets are commercially available worldwide. Thirty manufacturers have contracted to port BREW to their devices or have committed to developing BREW handsets or devices. Y O U R W I R E L E S S A P P L I C AT I O N S D E V E L O P M E N T PA R T N E R
  24. 24. 25 BREW DRIVES FUTURE 3G GROWTH PAG E The combination of 3G high-speed data networks and the growing portfolio of BREW applications presents a powerful formula for enabling wireless operators to attract customers in both consumer and enterprise markets. making a standard wireless call. QUALCOMM’s COMMERCIAL MILESTONES THIS YEAR North America’s largest unique BREW-enabled solution will allow VERIZON WIRELESS. wireless operator now offers more than 100 users to initiate private (one-to-one) calls as BREW™ applications via its nationwide service well as group (one-to-many) calls. SM called “Get It Now .” Five manufacturers are currently providing phones to the network and QUALCOMM and Nextel Communications four gpsOne-enabled devices are planned. entered into an agreement for the development and deployment of a direct connect product After just one year of offering BREW services, for global wireless operators using CDMA K T F. KTF achieved significant results in South Korea, networks. When deployed, CDMA users will attracting more than 2.2 million subscribers have the iDEN® interoperability necessary for and seeing dramatic increases in revenues. KTF Nextel’s Direct Connect™ service. maintains a current catalog of approximately 350 applications. Twenty-four BREW-enabled phones Among the E N T E R P R I S E A P P L I C AT I O N S . are currently offered. business applications taking advantage of BREW-enabled handsets is OmniOne™ the , Japan’s second largest wireless operator digital wireless communications system that KDDI. counts over 2 million subscribers as of provides a flexible, low-cost way for large November 2002 to its “eznavigation” service, trucking and logistics companies to extend which includes a BREW gpsOne application. their fleet management solutions to affiliates, partners and owner/operators. The second largest wireless CHINA UNICOM. operator in China will offer BREW to a portion of Adding to the momentum in A L LT E L B R E W. its subscriber base. The operator also signed a the U.S. for color screen devices, ALLTEL joint venture agreement with QUALCOMM to sup- launched BREW service in some markets with port the domestic BREW developer community the Toshiba CDM-9500 color phone. ALLTEL is and manage the applications they produce. also offering the Kyocera 3035 BREW phone to 2002 ANNUAL REPORT its subscribers. More than 30 BREW applications Promising the first Q C H AT ™ O N T H E H A N D S E T. are currently available across the two phones. CDMA-based push-to-talk service, QChat soft- ware allows communications without actually Q U A LC O M M
  25. 25. QUALCOMM’S INNOVATIVE PATENT PORTFOLIO PROVIDES A GROWING REVENUE STREAM THAT SERVES AS A SOLID FOUNDATION FOR GROWTH EXTENSIVE INTELLECTUAL PROPERTY CUMULATIVE U.S. PATENTS AND QUALCOMM owns patents that are essential to all APPLICATIONS CDMA wireless standards. To date, the Company QUALCOMM HAS SIGNED OVER 55 ISSUED TOTAL BILATERAL WCDMA/UMTS AGREEMENTS WITH has more than 2,400 U.S. patents and patent appli- January 1999 245 815 THE WORLD’S LEADING MANUFACTURERS cations applicable to CDMA and other technologies. January 2000 388 1,264 January 2001 531 1,582 Through the efforts of QUALCOMM Technology September 2002 888 2,451 Licensing (QTL), the Company has licensed its essential CDMA patent portfolio to more than 115 telecom equipment and consumer electronics This year the Company added the last two remaining QUALCOMM TECHNOLOGY LICENSING (QTL) manufacturers worldwide. major wireless infrastructure equipment manufac- QTL generates revenue from license fees for our turers to its list of 3G licensees. CDMA (e.g., cdmaOne, CDMA2000, WCDMA/UMTS QUALCOMM earns revenues from license fees and TD-SCDMA) technologies and patents as well and royalties collected for the use of its intellectual An agreement with Siemens covers 3G WCDMA/ as ongoing royalties based on worldwide sales by property. This high-margin business accounted for UMTS and TD-SCDMA infrastructure and licensees that design, manufacture and sell products over 62 percent of the Company’s pro forma earn- subscriber equipment. incorporating our CDMA technology. QTL revenues ings before taxes in fiscal 2002. comprised 28 percent, 29 percent and 22 percent of total consolidated GAAP revenues for QUALCOMM An agreement with Alcatel covers 3G WCDMA/ in fiscal 2002, 2001 and 2000, respectively. UMTS and TD-SCDMA infrastructure equipment. Q U A L C O M M H A S A G R E E M E N T S T H AT E N A B L E T H E C O M PA N Y T O E A R N R O YA LT I E S O N A L L 3 G CDMA TECHNOLOGIES CDMA2000 1X CDMA2000 1xEV-DO CDMA2000 1xEV-DV WCDMA/UMTS TD-SCDMA
  26. 26. 27 PROMOTING CDMA GROWTH WORLDWIDE PAG E products or possess unique capabilities or technology. QUALCOMM makes strategic investments to pro- The Company also makes strategic investments mote the worldwide adoption of CDMA products in early-stage companies that possess unique and services for wireless voice and Internet data capabilities or technology, as well as venture funds communications, including CDMA wireless operators or incubators, to support the adoption of CDMA and licensed manufacturers that support the and use of the wireless Internet. design and introduction of new CDMA-based QUALCOMM IS COMMITTED TO MAKING GLOBAL ROAMING A REALITY Our Company accelerated multimode chip development to enable phones that will communicate globally. There was much progress this year in the effort to build bridges between technologies and bring the various players in the wireless world together. The second-generation technology that is most widely deployed today in Europe and other parts of the world is not based on CDMA. However, the major versions of the third-generation standard are based on QUALCOMM’s intellectual property. The 3G standard (as defined by the International Telecommunications Union) includes CDMA2000, WCDMA and TD-SCDMA. THE BEST OF BOTH WORLDS BRIDGING THE GAP One promising technology added to the CDMA QUALCOMM CDMA Technologies (QCT) successfully evolutionary path this year is called GSM1x. This demonstrated live voice and data calls using a technology will make it possible for a GSM operator single-mode WCDMA/UMTS chipset. The division to upgrade to 3G CDMA in existing spectrum while also successfully sampled its MSM6200 and retaining its network systems and services. MSM6300 multimode chipsets that will enable operators and manufacturers to transition from GSM1x works by using existing GSM core 2G technologies to today’s 3G CDMA solutions. 2002 ANNUAL REPORT infrastructure together with CDMA radio access equipment. Combining the strength of the existing GSM network with the increased capacity and cost efficiencies of CDMA, this technology offers GSM operators an attractive alternative path for transi- tioning to 3G CDMA. Q U A LC O M M
  27. 27. QUALCOMM IS ON THE MOVE IF YOU WANT TO RUN A MISSION-CRITICAL BUSINESS APPLICATION IN A WIRELESS ENVIRONMENT, WE CAN MAKE IT HAPPEN FOR YOU QUALCOMM WIRELESS BUSINESS SOLUTIONS® Our specialized equipment and services include E X PA N D I N G M A R K E T S (QWBS) Heavy equipment industry driver authentication, remote and installed vehicle QWBS has provided wireless data communica- Private fleets and trailer monitoring, panic buttons and tamper- tions to the transportation industry since 1988. Europe activated alerts. QUALCOMM continues to be the industry leader More than 2,000 fleets in the North American in providing value-added wireless data solutions Free Trade Association (NAFTA) region rely on MAJOR CLIENT WINS and has shipped over 450,000 OmniTRACS® and Safeway (in the U.K.) QUALCOMM to increase safety and security with related products to businesses in 39 countries United Rentals (the world’s largest heavy secure messaging, emergency notification and on four continents. equipment rental company) shared data capabilities. Thirty-four of the top 35 U.S. truckload fleets rely PepsiCo (owner of Frito-Lay, the leading This year QWBS served as technical integrator on the system for their mobile data communications. multinational snack chip company) on a winning team awarded $2.5 million from QUALCOMM’s U.S. Network Management Center the U.S. DOT for hazardous materials trans- (NMC) processes over a million transactions per portation safety and security operations DRIVER AND VEHICLE SECURITY day, making it one of the world’s largest wireless Since 1988 QUALCOMM has empowered testing including vehicle tracking and disabling, data networks. customers with mobile communications systems cargo seals, driver authentication/biometrics that increase load, driver and vehicle security. and other safety and security features. E X PA N D I N G P R O D U C T O F F E R I N G S QUALCOMM is uniquely positioned to support OmniExpress® provides terrestrial voice, two-way high-value cargo monitoring and homeland data and GPS vehicle positioning. security initiatives. Our systems provide reliable, OmniOne (a BREW application) targets owner nationwide driver communication and vehicle operators and small affiliate fleets. tracking in real time. The FleetAdvisor® fleet management system This year QWBS supported local and national provides a turnkey solution for increased driver homeland security efforts through the advanced and vehicle productivity and improved customer security features provided by its OmniTRACS service. Versatile on-board applications automate satellite-based mobile communications and U.S. Department of Transportation (DOT)-compliant tracking system. logs, arrival and departure information, state mileage tracking and shipment updates.
  28. 28. 29 IT’S MORE THAN JUST TALK PAG E IT’S MAKING HIGH-SPEED WIRELESS DATA A PRACTICAL REALITY QUALCOMM IS A COMPANY OF INNOVATIVE THINKERS AND BUSINESS VISIONARIES QUALCOMM Digital Media develops technologies to support the secure transmission and management ON THE FRONT LINES OF THE DIGITAL WIRELESS REVOLUTION, WE’RE LEADING THE CHARGE of voice and data for a variety of media applications, including electronic direct-to-theater delivery of digitized motion pictures (“digital cinema”) and highly secure wireless cellular systems for the government. N E W T E C H N O L O G Y F O R T H E D I G I TA L A G E W I R E L E S S T E C H N O L O G Y F O R N AT I O N A L PRODUCT LAUNCHES AND HOMELAND SECURITY High-quality image compression Deployment on commercial networks (Verizon Secure CDMA cellular systems Security architectures for content Wireless & Alltel) of the world’s first CDMA wire- Multilevel security for CDMA devices Distributed multimedia management systems less phone certified for top-secret communications Mobile satellite data communications and tracking systems for the U.S. government Advanced R&D for the U.S. government 2002 ANNUAL REPORT Q U A LC O M M B R I N G I N G digital encryption and asset security and vehicle secure communications to S U P P LY I N G DELIVERING compression solutions to the movies. tracking to support the U.S. government. the U.S. government.
  29. 29. QUALCOMM WHERE TECHNOLOGY HAS A HUMAN FACE QUALCOMM has earned a distinguished reputation that goes beyond CDMA. The Company is powered OTHER AWARDS AND HONORS by people with the ability to shape new concepts into breakthrough technologies. We call it the spirit AARP’s “Best Company for Workers Over 50” of invention. Our people are inventors at heart with a thirst for education and lifelong learning. BestJobsUSA.com’s “Employer of Choice 500” QUALCOMM is committed to meeting that need by providing a wide range of support services to the Black Collegian’s “Top 50 Companies in America people inside our Company and the communities where we work and live. for Diversity” Business Ethics’ “100 Best Corporate Citizens” QUALCOMM EMPLOYEES COME FROM Business Week’s “Hottest of the Hot” ACKNOWLEDGED BY THE OVER 100 DIFFERENT COUNTRIES AND SPEAK U . S . S E C R E TA R Y O F L A B O R Electronic Business’ “Global 1000” MORE THAN 50 DIFFERENT LANGUAGES The Department of Labor awarded QUALCOMM Fabless Semiconductor Association “Best the 2002 Secretary of Labor’s Opportunity Award. Financially Managed Company” Each year, the Department awards the Secretary Fortune’s “100 Best Companies to Work for of Labor’s Opportunity Award to one company that in America™” has an exceptional equal employment opportunity Fortune’s “100 Fastest-Growing Companies (EEO) program. The Department chose QUALCOMM in America™” from a field of very impressive nominees. Fortune’s “2002 America’s Most Admired QUALCOMM has made outstanding efforts to Companies” develop and maintain an exemplary EEO program. Fortune’s “America’s 10 Most Admired Companies” (3rd place in network communications industry) Industry Week’s “100 Best Managed Companies” Training Magazine’s “Top 100 Training Organizations” Wireless Future Magazine’s “Fifteen of the Future”
  30. 30. 31 PAG E FINANCIAL HIGHLIGHTS QUALCOMM’S BUSINESS MODEL CONTINUES TO GENERATE SIGNIFICANT CASH FLOW* GA A P CA S H , CA S H E Q U I VA L E N T S , A N D G A A P R E V E N U E A N D G R O S S M A R G I N (dollars in millions) G A A P R E S E A R C H A N D D E V E L O P M E N T (dollars in millions) M A R K E TA B L E S E C U R I T I E S (dollars in millions) 30% 37% 53% 61% 63% 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 $303 $1,685 $2,521 $3,348 $3,937 $3,197 $2,680 $3,040 $349 $381 $340 $415 $452 $2,581 $3,176 G A A P R E V E N U E B Y S E G M E N T (dollars in millions) G A A P D I L U T E D N E T I N C O M E ( L O S S ) (per share) P R O F O R M A D I L U T E D N E T I N C O M E (per share) $1,239 $1,591 $1,365 $705 $847 $782 QCT $432 QTL $821 $439 $426 QWI $126 $107 QSI $36 2002 ANNUAL REPORT Other 2000 2001 2002 1998 1999 2000 2002 1999 2000 2001 2002 $.18 $.31 $.79 $.44 $.80 $.92 $.88 $.98 2001 $(.76) Q U A LC O M M * Financial results include the results of our terrestrial wireless consumer phone business and our terrestrial wireless infrastructure business prior to the sale of these businesses. In February 2000, we completed the sale of our terrestrial wireless consumer products business to Kyocera Wireless. In May 1999, we completed the sale of our terrestrial wireless infrastructure business to Ericsson.
  31. 31. TO OUR STOCKHOLDERS, We are pleased with the substantial progress achieved this year in each of our QUALCOMM HAS A HIGHLY FOCUSED businesses. QUALCOMM has outperformed most communications technology BUSINESS STRATEGY THAT HAS ENABLED companies, largely because of the strong acceptance of CDMA2000 by CDMA operators and their customers. We continue to lead the industry in the devel- OUR COMPANY TO STRENGTHEN ITS opment and delivery of digital wireless solutions based on CDMA, including CDMA2000 and WCDMA, both based on the innovative technology we pioneered POSITION IN THE MARKETPLACE THIS over a decade ago. Based on results to date for operators in South Korea, YEAR EVEN THOUGH THE TELECOM Japan, and North America, third-generation (3G) features are proving very pop- ular with customers and enterprises, resulting in an increase in average revenue SECTOR CONTINUED TO FEEL THE IMPACT per user (ARPU). OF A STRUGGLING ECONOMY. CDMA was first envisioned as a new way to make wireless voice calls more efficient and reliable. It has rapidly evolved into a new way for people to learn, A key reason for this rapid acceptance is the economic benefit that CDMA2000 play, navigate and work. Users are finding that their always-on wireless con- provides to wireless carriers. They can upgrade their existing networks, nection to the Internet—supporting a growing number of applications and content increasing voice and data capacity, coverage and quality with moderate expen- —makes life safer and easier, more productive and just plain fun. QUALCOMM ditures for infrastructure equipment. With chips and software supplied by was first-to-market with the best high-speed wireless data solutions for enabling QUALCOMM, the upgrade for phones and infrastructure is relatively easy and these new services. low-cost and is backwards-compatible, allowing subscribers to use both old and new phones and to roam seamlessly among CDMA networks. With our T H E T H I R D G E N E R AT I O N I S H E R E newest generation of chips and software, roaming will be extended to most 3G CDMA technology is now in commercial operation with 32 operators in 16 second- and third-generation networks, including GSM. countries. New systems are being installed in countries such as India and Indonesia, and existing systems are being upgraded from second-generation NEW NETWORKS cdmaOne to third-generation CDMA2000 1X and 1xEV-DO. QUALCOMM has a highly focused business strategy that has enabled our Company to strengthen its position in the marketplace this year even though the telecom sector continued to feel the impact of a struggling economy. Second-generation network rollouts were scaled back and subscriber growth slowed down as many operators found it difficult to raise the capital they needed to invest in new equipment for their networks. This was in stark contrast to what is happening with QUALCOMM and CDMA technology. Dr. Irwin Mark Jacobs (left) Chairman & CEO The primary CDMA markets in South Korea, Japan and the Americas have per- Anthony S. Thornley (right) formed very well and we saw evidence of that this year with the launch of new President & COO networks and the introduction of many new phone models and other devices based on 3G CDMA technology. We also made substantial progress this year in cementing relationships that will ensure continued growth for our Company in many key new markets including China, India, Latin America, throughout Asia, and hopefully, soon in Europe.
  32. 32. 33 PAG E Our BREW initiative provides support for software developers, device manufac- As part of our ongoing effort to promote and support the spread of CDMA tech- turers and wireless operators, arming them with technology tools and an nology, QUALCOMM’s global development team works closely with operators and end-to-end business model to bring new applications to worldwide markets, equipment manufacturers throughout the world to make sure that the transition to independent of network technology. This year BREW really took off, with opera- third-generation services is fully supported and economically successful. tors in South Korea, Japan and the Americas launching wireless data services, all with strong customer acceptance. We are evolving BREW to even further NEW OPPORTUNITIES support manufacturers to more rapidly test and bring to market phones and One way that we provide support is through working closely with operators and devices that utilize the broad range of advanced capabilities enabled by our manufacturers on our technology roadmap including our rapidly evolving CDMA chips and system software. With instant messaging, music downloading, games, chipsets and our BREW (Binary Runtime Environment for Wireless) platform. mobile commerce, mapping and navigation, personal information management QUALCOMM CDMA Technologies achieved record sales this year as a result (PIM) functions, browsers, security and a range of vertical business applications, of steadily increasing demand for our industry-leading chipsets (integrated BREW-based services have proven to increase operator revenues and customer circuits and system software) which provide our customers with advanced retention rates. capabilities and compelling economics. Our Company is privileged to employ many of the best CDMA engineers in NEW TECHNOLOGIES AND DEVICES the world today, enabling us to amass a rapidly growing patent portfolio. The One of the more exciting examples of this was the commercial launch of QUALCOMM Technology Licensing arm of our business collects royalties and navigation services via BREW-enabled phones using QUALCOMM’s gpsOne licensing fees from manufacturers who utilize our CDMA patent portfolio for technology. Network software developed by our SnapTrack subsidiary the design and production of infrastructure equipment for networks, phones communicates with the QUALCOMM chipsets in wireless phones to enable and other devices such as wireless modem cards and PDAs. This year we location-based services like personal navigation. Today there are more achieved a significant milestone in the licensing business when agreements than five million gpsOne-enabled devices in commercial use in Asia and were signed with both Alcatel and Siemens, signifying that QUALCOMM has North America. now become a technology partner and often a key supplier to virtually every major manufacturer in the wireless industry. Several wireless operators in the U.S. are selling gpsOne-enabled phones to meet the E-911 wireless safety obligation mandated by the federal government. The CDMA technology we pioneered now accounts for approximately 20 percent Using QUALCOMM’s powerful technology, Sprint PCS and Verizon Wireless are of the worldwide wireless communications market, and the percentage is already achieving the enhanced safety of E-911 services in many regions of the growing. CDMA technology has been adopted by almost all companies for United States. QUALCOMM’s gpsOne technology has quickly become the third-generation networks for good reason: It provides higher quality and more world’s most widely deployed position location system for mobile phones. efficient use of expensive spectrum for both voice and data, is cost-effective, and enables a broad range of devices and services. Other noteworthy technology breakthroughs at QUALCOMM this year included 2002 ANNUAL REPORT the on-time shipment of our multimedia chipset with features that support digital camera phones and streaming video and music downloads. We began N E W A P P L I C AT I O N S A N D S E R V I C E S sampling our MSM6xxx family of chips based on radioOne technology, which Now that the high-speed wireless “pipeline” has been enabled, QUALCOMM eliminates the intermediate frequency components, simplifying and reducing is working with operators, device manufacturers and software developers the cost, space, and power for phones and devices, especially those that sup- worldwide to ensure an increasing flow of applications tailored to consumers’ port multiple frequency bands, position location and Bluetooth™. radioOne also individual needs for information, entertainment, commerce, business and security. Q U A LC O M M

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