qualcomm annual reports 2001


Published on

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

qualcomm annual reports 2001

  1. 1. 2001 ANNUAL REPORT >>
  2. 2. p01 QUALCOMM is the engine for advances in the wireless industry QUALCOMM employees innovated and commercialized a revolutionary wireless communications technology called Code Division Multiple Access (CDMA). This technology spreads digital radio signals across the spectrum in a unique way that allows multiple users to coexist in the same frequency without time sharing. The benefits of this innovation are powerful. CDMA Subscriber Growth History (IN MILLIONS) CDMA enables wireless networks to greatly increase their capacity and broaden their 105.0 coverage areas. Users benefit from higher quality transmissions with fewer dropped calls, improved voice quality and enhanced security. The new generation of this tech- 71.0 nology, called third generation or 3G, is delivering on the promise of the wireless Internet by making always-on, high-speed data both accessible and economical. 41.1 Since its commercial introduction in 1995, QUALCOMM’s patented CDMA technology has 16.0 gained worldwide recognition and has become the engine for advances in the wireless 4.2 industry. LESS THAN 1M 95 96 97 98 99 00 01 More than 100 million subscribers as of September 2001 (Source: CDMA Development Group) > We’ve opened the door to the next generation of wireless communications This year, the third generation of wire- coming online in the United States, media, games and streaming less communications became a reality. Brazil, Japan, Eastern Europe and New video. Color screen handsets are hot It’s here, and QUALCOMM is enabling Zealand and many more deployments items. All this means new opportunities it. Using first-to-market 3G technology are being planned around the world. A for application developers, equipment (called CDMA2000 1X), wireless operators limited deployment of wideband CDMA manufacturers and wireless service in South Korea are now offering com- (WCDMA) has been fielded by NTT providers. The next generation has mercial high-quality voice and high-speed DoCoMo in Japan. arrived. The wireless Internet is being data services to more than two million unleashed. QUALCOMM’s vision and Attractive 3G products and services are people. As this report goes to press, enabling technology are driving it. The here now, including position location additional CDMA2000 1X networks are door is open to a whole new world. with downloadable local maps, multi-
  3. 3. QUALCOMM Incorporated is a global leader in developing, delivering and enabling innovative digital wireless communications products and services based on the Company’s patented CDMA technology. www.qualcomm.com QUALCOMM Technology QUALCOMM CDMA Technologies Licensing QCT QTL QCT is the world’s leading QUALCOMM owns patents developer and supplier of that are essential to all CDMA CDMA chipset solutions wireless standards. To date, used in network infrastructure equipment, QUALCOMM has more than 1,900 U.S. handsets and other wireless devices. patents and patent applications applicable Among the features of the new generation to CDMA and other technologies. Through of QCT products is gpsOne™ wireless posi- , the efforts of QTL, the Company has licensed tion location technology facilitated by its essential CDMA patent portfolio to more SnapTrack®, a wholly owned subsidiary than 100 telecom equipment and consumer of QUALCOMM. QCT provides products, electronics manufacturers worldwide. software and services to the world’s leading CDMA manufacturers.
  4. 4. Headquartered in San Diego, California, Business areas include: QUALCOMM employs 6,500 people in CDMA technology licensing offices at 40 locations in the United States CDMA chipsets and system and around the world. software solutions The BREW wireless application platform QUALCOMM works closely with manufac- Satellite-based and terrestrial turers and wireless service providers fleet management solutions through strategic investments, joint Highly secure CDMA handsets ventures and partnerships to promote and deployment systems for the the benefits of CDMA technology and to United States government and further evolve new technologies and homeland security services worldwide. Digital Cinema products and technologies QUALCOMM is included in the S&P 500 Index and is a 2001 FORTUNE 500® Company traded on QCOM The Nasdaq Stock Market® under the ticker symbol QCOM. >> QUALCOMM Internet Services QUALCOMM Wireless QUALCOMM Digital Media QIS was formed to accelerate QDM develops technologies to Business Solutions QIS QWBS QDM the emergence of a genuinely QUALCOMM introduced its support the processing, trans- useful wireless Internet, first wireless solution in 1988. mission and management of building on QUALCOMM’s new Originally developed for content for a variety of media Binary Runtime Environment for Wireless™ the long-haul trucking industry, the applications, including delivery of digitized OmniTRACS® and OmniExpress® systems (BREW™) applications platform. The BREW motion pictures (“Digital Cinema”) and platform enables hardware manufacturers now provide mobile communications, position highly secure, wireless products for the and software developers to quickly create location and fleet management solutions U.S. government. QUALCOMM has applied new products and applications. Wireless for over 400,000 vehicles in 32 countries. its expertise in image compression, secu- service providers then generate added The QWBS Network Management Center rity, digital communications and network revenues through new data offerings. processes more than seven million trans- system integration to develop an end-to- Consumers benefit by being able to down- actions per day, making it one of the end Digital Cinema delivery and playback load and run exciting new applications on world’s largest wireless data networks. system. Technicolor Digital Cinema, the their wireless devices. joint venture between QUALCOMM and Technicolor®, has launched the commercial rollout of this system in the United States.
  5. 5. p02 TO O U R S TO C K H O L D E R S : >> 2001 was a positive year for CDMA and for our Company Despite a slowdown in the world economy, QUALCOMM Commercially Deployed and Miles Ahead and our CDMA licensees this year entered major new markets, QUALCOMM intends to remain the engine for advances in grew in existing markets and introduced breakthrough products the wireless industry. With people everywhere relying more and ™ including CDMA2000 1X, the Wireless Internet Launchpad and more on mobile communications for business and personal the BREW platform. It was a period of slower growth for older and communications including entertainment, mobile commerce, non-CDMA wireless technologies. information, safety and education, we are constantly innovating to expand and improve the “user experience.” We continue to Our business strategy is based on rapid innovation work closely with CDMA operators, supporting their priorities and careful investment to spur the adoption of CDMA wireless in a timely and predictable fashion while driving down costs to technology worldwide through clear competitive advantage. ensure them an attractive and profitable business. Our intellectual property portfolio is an essential ingredient in all CDMA-based network infrastructure equipment, and wireless A major milestone on our journey took place this year handsets and devices. We build stockholder value by generating when third-generation (3G) CDMA wireless technology became revenues through the licensing of our CDMA technology and a reality. Nationwide 3G networks based on QUALCOMM’s providing expert assistance, by supplying “chipsets” (integrated CDMA2000 1X technology officially opened for business in South circuits, system software and support), which incorporate ever Korea, with commercial launches by multiple carriers rapidly more attractive features for early-to-market, cost-effective attracting millions of subscribers. Sprint, Verizon Wireless and CDMA products and by enabling wireless software applications other carriers are rolling out nationwide CDMA2000 1X networks through the BREW platform. in the United States, launching with an exciting array of hand- sets and applications. cdmaOne™ operators worldwide are ra- With CDMA now the chosen technology for third- pidly evolving their networks to 3G CDMA2000 1X. CDMA hand- generation wireless voice and Internet access, QUALCOMM set production is quickly shifting to CDMA2000 1X, based on Technology Licensing (QTL) this year achieved record revenues pin-compatible QUALCOMM chipsets. This third generation of and earnings. We now have over 100 CDMA licensees with wireless technology is now opening the door to a vast array of more than 50 companies licensed for WCDMA and TD-SCDMA. features and services while unleashing the true power of wire Under the leadership of Don Schrock, QUALCOMM CDMA less Internet access. Technologies (QCT) this year raised the competitive bar further in the development and introduction of new families of chips Wireless service providers everywhere are planning while maintaining growth in chip sales despite the generally the evolution or replacement of second-generation systems by down market. QCT has now shipped a cumulative total of third-generation networks, either CDMA2000 1X in existing and over 525 million chips. new spectrum or WCDMA in new spectrum. We actively support both forms of CDMA but believe that CDMA2000 1X is not only
  6. 6. p03 Dr. Irwin Mark Jacobs Chairman of the Board and Chief Executive Officer first-to-market, but also the most powerful and cost-effective handsets for the network. We continue to provide extensive choice. In support of all CDMA, we have formed a global technical support for the network deployment and are working business development organization that integrates all of our closely with Chinese manufacturers. international efforts. Headed by Jeff Jacobs, this organization The government of India is also dedicated to providing is focused on driving worldwide market growth for CDMA. low-cost communications nationwide. This year, wireless local China Deployments Moving Ahead As part of this loop operators were authorized to provide limited mobility, globalization effort, we have been particularly focused on two allowing mobile services within extensive urban areas, and a markets with sizable growth potential—China and India. We number of wireless local loop licenses were awarded. CDMA are assisting wireless service providers in both of these is, of course, the technology of choice. Plans are underway for markets as they seek to deploy and optimize networks for CDMA base stations across most of India to be connected with the lowest cost. fiber links, making wireless voice and data communications accessible, even in small villages. The Indian markets repre- In July of this year, China surpassed the United States sent future growth opportunity for our Company. As with China and became the world’s largest wireless market with over and other emerging markets around the world, QUALCOMM is 120 million subscribers. The legacy cellular networks there are well positioned to benefit from the growing migration to CDMA based on the older GSM (Global System for Mobile communica- wireless technology. tion) standard. However, China Unicom awarded approximately $1.5 billion in contracts and has now deployed a first phase Content Delivery Made Affordable In addition to nationwide cdmaOne network with capacity for 15 million driving early global implementation of CDMA2000 1X networks subscribers in over 200 cities. Further, China Unicom has and developing WCDMA, we are working to commercialize our announced a second phase, including upgrades to CDMA2000 1X, high data rate technology solution, standardized as CDMA2000 to accommodate an additional 20 million subscribers in 2002, 1xEV-DO (Data Optimized). The architecture for this data- followed by a third phase supporting an additional 15 million optimized technology enables very high-speed Internet access, subscribers by 2003. with burst rates of up to 2.4 Mbps. Wireless communications and the Internet are two of the most important inventions of QUALCOMM has granted worldwide subscriber and our time. Joined together and augmented by BREW applica- infrastructure licenses to a number of Chinese manufacturers. tions, these technologies have the power to improve our lives Shenzhen Zhongxing Telecom Co. (ZTE) received a $120 million in new and meaningful ways. Both CDMA2000 1X and 1xEV-DO first phase infrastructure contract to build CDMA networks support “always on” high data rate secure connections. The serving 1.1 million subscribers in China’s western provinces. door has opened to fast and practical access to e-mail, personal So far, 19 Chinese firms have been approved to produce CDMA information manager (PIM) functions, web browsing,
  7. 7. p04 Dr. Paul E. Jacobs Kimberly M. Koro Donald E. Schrock Chris A. Wolfe Executive Vice President and Senior Vice President and Executive Vice President and Senior Vice President and Group President, QUALCOMM Wireless President, QUALCOMM Group President, QUALCOMM President, QUALCOMM and Internet Group Digital Media CDMA Technologies Group Wireless Business Solutions e-commerce, position location and navigation and multimedia, Another revolutionary technology debut this fiscal with an ever-increasing menu of applications from developers year was our gpsOne position location solution. In response worldwide to be selected by subscribers and downloaded to the to the FCC mandate, QUALCOMM and SnapTrack have been phone using the BREW platform. working for several years on an Enhanced 911 (E911) solution that integrates position location capability into the chips that Constantly Driving More Advances As detailed in drive wireless handsets and devices. Called gpsOne, this tech- the “Technology Roadmap” beginning on page 8 of this report, nology enables wireless service operators to provide police and QUALCOMM’s CDMA chipsets embody the most advanced other public safety officials the ability to locate wireless callers 3G CDMA technologies, including CDMA2000 1X, CDMA2000 in emergency situations. gpsOne provides significant cost, 1xEV-DO and WCDMA modes. Under the leadership of Steve time-to-market, and performance advantages, and has been Altman, the QUALCOMM Technology Licensing business adopted by CDMA carriers around the world. demonstrated our ability to earn royalties on all modes of CDMA by successfully negotiating over 50 licensing agreements Motivated by the tragic events of September 11, the with manufacturers of WCDMA and TD-SCDMA products. A key FCC has been asked to tighten requirements to include the milestone this year was the signing of a new multi-million ability to locate wireless callers inside large structures, including dollar agreement with Nokia, expanding the terms of our existing subway stations, office buildings or schools. Our technology subscriber cross-licensing agreement and adding a new already works wherever cellular calls can be received and/or infrastructure equipment license. Nokia is the world’s leading GPS satellites viewed and generally exceeds the FCC accuracy handset supplier and we look forward to working with them in requirement by directing emergency service workers within 10 the effort to bring new, global 3G wireless solutions to market. to 30 meters of the caller. Given the large installed base of GSM and to help the In 2001, gpsOne was deployed in Japan with great migration of GSM networks to 3G CDMA, we are committed to success and in October Sprint PCS began selling phones delivering multi-mode, multi-band chipsets supporting one containing chips with this technology in the United States. or more flavors of CDMA together with GSM/GPRS. These Other wireless service providers are rapidly coming online. multi-mode, multi-band chips will enable “world phones” The solution is technology-agnostic and works on all types of and other wireless devices to provide truly global roaming wireless networks. To demonstrate, we conducted successful and ubiquitous interoperability without user intervention. tests over GSM networks in Paris, Bonn, London and other locations this year, which included cross-border roaming. A breakthrough initiative in QCT this year was the development of radioOne™ architecture. This innovation In April, a security company initiated gpsOne- eliminates the need for intermediate frequency conversion, enabled service over KDDI’s cellular system in Japan and saving cost, size and power by allowing manufactures to design quickly received 70,000 orders. In the first few days, the multi-band wireless devices with fewer parts, smaller form service was able to locate a little girl lost in a large park in factors and improved talk and standby times. We plan to Osaka. This promising technology has also been deployed introduce radioOne architecture in our 3G MSM6000 family over NTT DoCoMo’s PDC cellular network in Japan. of chipsets in 2002.
  8. 8. p05 Scott J. Becker Jeffrey A. Jacobs Peggy L. Johnson Steven R. Altman Anthony S. Thornley Senior Vice President and Senior Vice President and Senior Vice President and Executive Vice President Executive Vice President, General Manager, QUALCOMM President, Global Development President, QUALCOMM and President, QUALCOMM Chief Operating Officer Wireless Systems Internet Services Technology Licensing and Chief Financial Officer applications. Ultimately, the growing popularity of wireless data Cool Data and Multimedia Applications services will fuel added demand for CDMA, and for higher-end QUALCOMM is driving the convergence of wireless access devices that take advantage of its ever-increasing capabilities. and data applications on several levels. At the chipset level, This growth cycle is key to QUALCOMM’s continued success. QUALCOMM’s Wireless Internet Launchpad suite offers many integrated capabilities for position location, multimedia, stor- Future growth for our Company is also fueled by age, connectivity and user interface functions. To leverage investments in research, development and strategic entrepre- these features, our QUALCOMM Internet Services business, neurial activities. As the recognized expert in CDMA, we play headed by Peggy Johnson, developed the BREW platform. a vital role in creating new industry standards that help move QIS, which was launched this year, became part of the new the technology forward. We incorporate these standards into a QUALCOMM Wireless and Internet Group under the direction range of CDMA chipsets and software. To foster the develop- of Paul Jacobs. ment of compelling new products and services, we invest our financial and intellectual capital into promising early stage The BREW initiative provides developers with a stan- companies and joint ventures. We also make strategic invest- dardized platform that allows rapid development of applications ments in carriers in places like North America, Brazil, South that are downloadable into BREW-enabled handsets and devices. Korea, Australia and elsewhere around the world. As part of The applications they create are distributed with QUALCOMM’s that continuing effort to expedite deployment of CDMA, last assistance to the wireless service providers who can benefit by year we formed QUALCOMM Ventures with a plan to invest up expansion and differentiation of their services. Consumers to $500 million over a four-year period. benefit by having instant access to easily downloadable applica- tions such as games, music players, “nanny cams,” real-time Through a joint venture with Technicolor, QUALCOMM traffic reports, maps, chat and messaging, m-commerce and is applying its technology expertise to digital motion picture personal and Internet information. On the business-to-business delivery and playback. This year we began marketing ABSolute™ side of the market, QUALCOMM subsidiary Wireless Knowledge image compression technology, a highly efficient solution is using the BREW platform to develop enterprise solutions developed specifically for Digital Cinema. This technology greatly such as corporate e-mail and contact management and field reduces the amount of digital information needed to represent asset tracking. Initially a joint venture with Microsoft, Wireless high-quality digital images. From the studio master to the Knowledge acquired Microsoft’s interest and became a theater’s digital projection system, the QUALCOMM Digital QUALCOMM subsidiary in November under the leadership Media (QDM) division has developed a comprehensive solution of Eric Schultz. with the potential to transform the motion picture industry. Carriers, Developers and Manufacturers Agree Under the leadership of Kim Koro, QDM together By aligning our business units and development efforts toward with Technicolor Digital Cinema presented a comprehensive a common goal, QUALCOMM achieves many important synergies. business and technical strategy to the industry this year, and Our CDMA technology expertise improves our chipset designs. demonstrated QUALCOMM’s compression technology at a major Our chipsets are powering new BREW-based wireless data
  9. 9. p06 industry conference. In December, QDM’s technology gained affiliate fleets and subcontractors a powerful, portable commu- national visibility with the first commercial rollout by Technicolor nications tool that enables drivers and dispatchers to receive and Digital Cinema of our digital cinema system featuring a digital send load assignments, status updates and other information. release of the Warner Bros. Pictures’ Ocean’s Eleven movie. Given the challenging business environment and In another key business area, QDM is under contract global economy, we did not achieve our financial goals in 2001. to build initial quantities of highly secure handsets for the U.S. However, our Company posted very solid results this year and government. These handsets operate nationwide on CDMA set the stage for substantial future growth. We remain confi- cellular infrastructure, and can contribute to the homeland dent in our overall business strategy. I’m pleased to report security initiatives. Under the leadership of Scott Becker, this that despite global economic pressures, we expect to grow Fall the QUALCOMM Wireless Systems division demonstrated revenues and profits in 2002 as 2G and 3G CDMA systems are a set of aviation safety solutions taking advantage of the deployed around the world. Globalstar™ Satellite Communications System. Using that After the implementation of the Securities and pipeline and our onboard technology system (called MDSS), Exchange Commission Staff Accounting Bulletin No. 101 this we demonstrated in flight a number of safety and security fiscal year, pro forma revenues were $2.7 billion, flat from applications including live video streaming from cabin and the year ago period. However, two of our core businesses, cockpit to ground. Globalstar offers the highest data rate of Technology Licensing and CDMA Technologies, grew their any mobile satellite telephone system, and is the only satellite- respective pro forma revenues in fiscal 2001. Pro forma earnings based system to use QUALCOMM’s CDMA technology. per share were $0.98 in fiscal 2001, compared to $1.01 in the year Communicating with Drivers and Mobile Assets ago period. QUALCOMM’s cash, cash equivalents and marketable QUALCOMM’s Wireless Business Solutions (QWBS) supplies debt securities totaled approximately $2.4 billion at the end of fleet tracking and communications services primarily to the the fourth quarter, and we have essentially no debt. long-haul trucking industry. High fuel prices and economic QUALCOMM is fully committed to an aggressive conditions have pressured the transportation industry this R&D program aimed at stimulating our market and growing year. However, the division has shipped a cumulative our business. We are continually adapting our Company to total of over 400,000 OmniTRACS satellite-based systems, and meet changes in the environment. As part of that strategy this continued to gain acceptance of our CDMA-based terrestrial year we created two major groups headed by Paul Jacobs and OmniExpress system. We also acquired the assets of the Eaton Don Schrock. We also added chief operating officer responsibil- Corporation Trucking Information Services, which allows us to ities to Tony Thornley, who continues to serve as the Company’s provide enhanced logistics management applications on our chief financial officer. I’m quite proud of our entire executive MVPc™ in-vehicle computer. team and all the employees at QUALCOMM who are working As part of our vertical market strategy, we signed hard to create value for stockholders by growing our business a purchase agreement with Roadway Express, the largest and building on our successes. less-than-truckload carrier in the United States, to supply our Thank you for continuing to support QUALCOMM OmniExpress system. Under the leadership of Chris Wolfe, and its vision. QWBS announced the formation of a wireless heavy equipment consortium and signed industry leaders to broaden the scope of the division. Finally this year, QWBS introduced a new BREW Dr. Irwin Mark Jacobs application called OmniOne™ a low-cost transportation applica- , tion for digital handsets that will provide trucking companies, Chairman & CEO
  10. 10. p07 T E C H N O LO GY L E A D E R S H I P : >> Innovation is the heart and soul of our business QUALCOMM plays a vital role in creating wireless technologies that are transforming global communications. The Company holds over 1,900 patents (issued or pending) and receives royalties from intellectual property by licensing technologies to over 100 manufacturers, including virtually every leading telecom equipment and consumer electronics brand name in the world. Combining engineering know-how with management vision and marketing insight, QUALCOMM has become the world’s leading designer and supplier of CDMA chipsets and system software. These key components are used in network base stations, handsets, modems and a variety of new wireless communications products. We are pleased to name as Distinguished Among them, they hold hundreds of Technology leadership and vision Technical Fellows, Dr. Klein Gilhousen, patents on CDMA and communications The QUALCOMM competitive edge is who served as a founding member of the techniques and devices and are broadly the end result of contributions by many board of directors; Dr. Charles Wheatley recognized as authorities in the field of outstanding engineers. This year, we and Butch Weaver, both of whom joined wireless communications technology. are pleased to provide special recogni- QUALCOMM shortly after its founding. tion as QUALCOMM “Distinguished Technical Fellows” to three innovative engineers for their technical leader- QUALCOMM Technology Leaders ship and key contributions to CDMA. featured from left to right: Butch Weaver, Dr. Klein Gilhousen, Working together with our chief techni- Dr. Roberto Padovani, Dr. Charles cal officer, Dr. Roberto Padovani and Wheatley and Franklin Antonio. our chief scientist, Franklin Antonio, they have helped select, train and inspire many talented engineers to envision and bring to market a broad product and intellectual property port- folio. Our new Distinguished Technical Fellows are executive and senior vice presidents with many years of experi- ence in spread spectrum technology.
  11. 11. p08 >> INVESTING IN R&D: We have a roadmap for the future The standard for the next generation of wireless technology In 1999, the International Telecom- software solutions and development key components for the manufacture munications Union adopted an industry tools for CDMA handsets, networks and of wireless devices. Each is designed standard for the third generation of embedded applications. to deliver choice and flexibility for devel- wireless technology, called IMT-2000. opers and wireless service providers The solutions on this page represent the Third-generation (3G) wireless technol- by addressing specific market require- state of the art in Mobile Station Modem ogy more efficiently supports voice and ments for price point, feature set and (MSM) technology. These chipsets are high-speed data services, delivering roaming capabilities. exciting new features and changing the way we communicate. The IMT-2000 3G standard encompasses three different MSM5100 MSM6100 CDMA operating modes, CDMA2000, WCDMA and TD-SCDMA. Q 1’01 QUALCOMM supports all CDMA 307kbps 307kbps H2’02 CDMA2000 1X CDMA2000 1X modes. CDMA2000 1X is first-to-market. SAMPLES SAMPLES Since it evolved from previous generations Java H/W Bluetooth of commercially deployed and successful New memory USB, MP3 ZIF CDMA systems, CDMA2000 1X is now fully gpsOne gpsOne interface, MIDI, CMX, BREW commercial with a growing variety of MMC, R-UIM streaming video BREW feature-rich handsets. CDMA2000 1X now is the most cost-effective and spectrally efficient third-generation CDMA mode. MSM5105 MSM6050 QUALCOMM supports industry choices, working to enhance CDMA standards and provide early chipsets for Q 4’00 153kbps 153kbps WCDMA and multi-mode phones that Q1’02 CDMA2000 1X CDMA2000 1X SAMPLES work on GSM as well as CDMA networks. SAMPLES The people at QUALCOMM CDMA MIDI, CMX MIDI Technologies are enabling the future of New memory CMX ZIF gpsOne interface communications by working with wireless R-UIM BREW BREW service providers and manufacturers to R-UIM provide the best chipsets, system MSM5000 MSM5010 MSM6000 Q 3’01 Q1’00 14.4kbps 153kbps CDMA2000 1X Q1’02 CDMA2000 1X CDMA2000 1X SAMPLES SAMPLES SAMPLES EVRC Voice ZIF two way SMS two way SMS BREW CDMA2000 1X
  12. 12. p09 MSM6600 307kbps CDMA2000 1X CY’03 (CDMA2000 1X) WCDMA 384kbps SAMPLES GSM/GPRS (WCDMA) KEY Bluetooth Bluetooth A global specification for MIDI, MP3 ZIF gpsOne wireless connectivity. It allows replace- CMX ment of the cables that connect devices BREW with one universal short-range radio link. BREW (Binary Runtime Environment for Wireless) QUALCOMM’s application development platform. CMX (Compact Media Extension) MSM5500 MSM6500 A MIDI-based multimedia software. EVRC (Enhanced Variable Rate Vocoder) 307kbps gpsOne A solution for wireless position CDMA2000 1X CDMA2000 1X (CDMA2000 1X) Q2’01 CY’03 2.4Mbps location technology in a mobile handset CDMA2000 2.4Mbps 1xEV-DO for CDMA cellular and Personal 1xEV-DO SAMPLES SAMPLES GSM/GPRS (CDMA2000 Communications Service (PCS) networks. 1xEV-DO) GSM/GPRS Data Supports Phase 2+ of Bluetooth supports all MIDI, MP3 GSM and GPRS class 12 data services. gpsOne ZIF gpsOne MSM5100 new memory Java H/W Accelerator A new memory features architecture interface. CMX, BREW MIDI (Musical Instrument Digital Interface) A digital music generator technology. MP3 An audio standard enabling high quality music reproduction. MMC (Multimedia Card) An interface MSM6300 enabling removable memory for data storage and transfer. R-UIM (Removable User Identity Module) CDMA2000 1X H1’02 307kbps GSM/GPRS SMS (Short Messaging Service) SAMPLES USB (Universal System Bus) A device controller. Bluetooth MIDI, MP3 ZIF (Zero Intermediate Frequency) gpsOne ZIF new memory Introduced by QCT as radioOne‚ this architecture architecture radically improves the CMX, BREW way radio signals are converted in a CDMA handset. MSM5200 MSM6200 Q 3’01 WCDMA H1’02 384kbps 384kbps WCDMA GSM/GPRS SAMPLES SAMPLES Bluetooth MIDI, MP3 Voice & data ZIF new memory solution, MIDI architecture MP3, BREW CMX, BREW CDMA2000 1xEV-DO WCDMA GLOBAL ROAMING
  13. 13. p10 R E A L 3 G N E T WO R K S : >> The door opened to third-generation wireless technology this year As the year drew to a close, China’s second largest mobile wireless service provider neared completion of its initial $1.5 billion IS-95A CDMA network. China Unicom deployments will cover over 200 cities in the world’s largest wireless market. The first commercial 3G networks based on QUALCOMM’s CDMA2000 1X technology launched in South Korea and will soon launch in the United States. Looking ahead, new 3G deployments are in progress or now being planned in Japan, Brazil, Australia, New Zealand, North America, India, Southeast Asia, Central and South America and other emerging markets around the globe. 3G 3G CDMA means fast & affordable wireless Internet services > Wireless service providers are > Data “throughput” capacity drives increasingly looking toward mobile network economics and “peak” data data as a key driver for future revenue rates affect the user experience. and earnings growth. It follows that QUALCOMM’s CDMA2000 1xEV-DO quality of service and the cost to deliver technology offers the greatest data traffic will be key differentiators. competitive advantage because it is To be competitive, operators must optimized for data throughput. The quickly select and deploy the most ability to offer higher throughput, efficient 3G solutions. peak data rates and, therefore, higher performance service at a substantially lower cost creates significant compet- itive advantage for operators.
  14. 14. 1 p1 KTF also began a trial of QUALCOMM’s The engineers in the QUALCOMM CDMA With Proven high data rate technology. Complying Technologies Group include easy migra- Performance Advantages with QUALCOMM’s HDR specs (the basis tion into the designs of the chipsets that For wireless service providers, the of the CDMA2000 1xEV-DO standard), are at the heart of network base stations promise of increased capacity and the trial successfully enabled streaming and subscriber devices. Making the higher data rates became a reality this video, web browsing and e-mail at fast transition from 2G CDMA to 3G CDMA year. 3G networks are already serving data transmission speeds of up to can be a simple matter of switching millions of paying subscribers. pin-compatible chips and performing 2.4 Mbps. First-to-market with a commercial net- a software upgrade. And An Easy Migration Path work based on QUALCOMM’s CDMA2000 For today’s wireless service providers, From entry-level, “voice-only” networks 1X technology, South Korea’s SK Telecom, CDMA technology offers significant to feature rich, high-end voice/data added over 687,000 people to its sub- competitive advantages. It builds on an solutions, QUALCOMM supports wireless scriber base in just three months, and installed base of over 100 million users. service providers around the globe by estimated it would pass the three million And the path to the future is both easy providing flexible technology choices, milestone by year-end. and economical. which allow for a speedier, cost-effective In the same part of the world, Korea migration path to the 3G world. Telecom Freetel (KTF) deployed a CDMA2000 1X network that is already offering data speeds of up to 153 kbps. is here Cost-Effective Data Delivery for Wireless The Best User Experience for Subscribers Service Providers AIR INTERFACE EFFECTIVE DOWNLOAD TIME PEAK DATA RATE (3-MIN. SONG) TECHNOLOGY NETWORK NETWORK EXPENSE2/MB1 EXPENSE2/MONTH1 GSM 9.6 kbps 41 minutes GPRS $ .42 $ 83 IS-95A CDMA 14.4 kbps 28 minutes WCDMA .07 14 GPRS 57.6 kbps 7 minutes IS-95B CDMA 64.0 kbps 6 minutes CDMA2000 1X .06 12 CDMA2000 1X 307 kbps 78 seconds CDMA2000 1xEV-DO .02 4 WCDMA 2,000 kbps 12 seconds CDMA2000 1xEV-DO 2,400 kbps 10 seconds 1 Assuming 15% traffic volumes at busy hours and 200 Mbytes/month per subscriber per month, 2x5 MHz available for data traffic 2 Assumes dense data traffic environment, >7500 kbps/sq km 3 Network Expense: network operations expenses plus capital depreciation Source: QUALCOMM: “The Economics of Mobile Wireless Data” http://www.qualcomm/main/whitepapers/WirelessMobileData.pdf
  15. 15. p12 REAL 3G DEVICES & SERVICES: >> Exciting new products are entering the market Samsung Video On Demand phone Cyberbank PC-Ephone Yiso FREEWING YM-1031K modem card enabled Useful new features are becoming a reality >> wireless signals can be received but Position Location conventional GPS does not operate. Developed by QUALCOMM and its The solution works on all air interfaces SnapTrack subsidiary, the gpsOne solu- including CDMA, TDMA, GSM, iDEN and tion enables wireless service providers 3G networks. The first gpsOne commer- to offer police and other public safety cial product was deployed in Japan in entities the ability to locate wireless April 2001. Numerous other United emergency E911 callers. Other location States wireless service providers, based services enabled by gpsOne including Sprint, Verizon Wireless, include; personal navigation, mobile ALLTEL, and Qwest will shortly yellow pages, location-based games offer the service. and entertainment, property and stolen vehicle recovery. SnapTrack’s patented architecture offers anytime, anywhere, accurate, high-speed location of a wire- less caller, even inside buildings where
  16. 16. p13 Enabled by QUALCOMM’s 3G CDMA technology, the list of remarkable CDMA2000 1X wireless devices in production numbers more than 70 and is growing rapidly and gaining economies of scale. The Company supplies chipsets, system software solutions and support to the majority of industry leading CDMA manufacturers. In addition, QUALCOMM earns royalty revenues by licensing third parties to design, manufacture and sell products utilizing its patented technology. More than 100 companies are now licensed to manufacture CDMA equipment. The list includes more than 40 makers of base stations and testing equipment for CDMA network infrastructure deployments. And this year, over 40 handset manufacturers have placed orders for chipsets for use inside 3G phones and other devices based on QUALCOMM’s CDMA2000 1X technology. SK Teletech, Sky IM-3100 camera phone CDMA by Multimedia Software User Identity Expanded Data Capabilities QUALCOMM’s Compact Media CDMA2000 1X device manufacturers can In August, QUALCOMM and Nortel Extension (CMX) solution supports now support “Smart Card” products via Networks demonstrated the industry’s playback of MIDI-based music, including Removable User Identity Modules first Mobile Internet Protocol (IP) call. downloadable ring-tones with up to 16 (R-UIMs). As a value-added service, Until now, wireless data users were simultaneous tones, audio, text, anima- operators will be able to store a sub- only able to access “islands” of mobility. tion and graphics on wireless handsets. scriber’s identity in a single removable Mobile IP is a solution that allows card, making global roaming across data to be transferred anywhere across Designed for use across QUALCOMM’s different networks or even countries 3G networks, enabling “always on” Mobile Station Modem (MSM) solutions, easier. Smart Cards allow subscribers access. Users are able to roam freely beginning with the MSM3100, CMX is also to exchange handsets while using the without interruption. a key component of QUALCOMM’s Wireless same card to maintain all personal and Internet Launchpad suite — which billing information. offers powerful, built-in functionality to device manufacturers.
  17. 17. p14 A P L AT FO R M FO R E N A B L I N G T H E W I R E L E S S I N T E R N E T : >> QUALCOMM is giving people a reason to use wireless data Developers are truly unleashing the power of the wireless Internet with new applications and content thanks to a new wireless application development platform from QUALCOMM called BREW (Binary Runtime Environment for Wireless). Developed by QUALCOMM Internet Services, this breakthrough platform provides a standardized framework that supports the development of applications that users can download wirelessly to their BREW-enabled handsets. It’s also a business model for monetizing wireless networks by driving demand for high-speed wireless applications. new applic BREW-ing a New Business Model >> The Store The Retailer The wireless device The wireless service becomes the “store” provider acts as the through which subscribers “retailer,” handling billing make direct purchases of and using applications for applications. market differentiation. The Wholesale Distributor The Supplier QUALCOMM serves as the Third party developers wholesale “distributor” (the are the “suppliers” into middleman) for developers the distribution channel. and carriers.
  18. 18. p15 The door opened wide to the wireless download applications over the air, Kyocera, LG Electronics, PC-Phone, Internet this year when Korea Telecom and streaming video on handsets with Panasonic, Samsung Electronics, SANYO, Freetel (KTF), a leading South Korean color displays. Sharp, Synertek, Telson, Toshiba, and CDMA wireless service provider, rolled ZTE. The growing list of companies support- out the first commercial BREW-enabled ing the BREW initiative includes wireless QUALCOMM recently formed the BREW applications and services to subscribers service providers, device manufacturers Developer Alliance Program to support in November. The service allows KTF and application developers. Service applications developers. Its membership subscribers to easily customize their providers already include ALLTEL, Bell features well known companies inclu- handsets with a variety of wireless Mobility, Bell South in Guatemala, ding Mattel, Primedia, Sega, World applications, including games and Telcel, Iusacell, KDDI, KTF, Leap, Wrestling Federation Entertainment entertainment options as well as LG Telecom, Pegaso, Saskatchewan (WWFE) and many others. messaging and navigation services. Telecommunications,Telcel-Bell South, As BREW-enabled services become When KTF launched its public trial of Telesp Cellular, Unicom Horizon, Verizon commercially available, interest continues the BREW-enabled service in Seoul in Wireless and Vesper. to grow, as demonstrated by the more September, participants were selected Device manufacturers now using the than 10,000 downloads of the BREW from more than 200,000 consumers BREW platform include 3G Cellular, Software Development Kit. Consistent who registered online to try out the new Appeal, AirPrime, Cyberlane, Denso with the QUALCOMM business model services. More than 160 applications are International America, Denso Corporation of promoting CDMA worldwide, BREW is currently available. The user experience of Japan, Etronics, Hanwha, Hitachi, Ltd; expected to drive demand for high-speed includes 3D graphics, the ability to Hyundai, Intercube, KTF Technologies, data and the high-end device market. ations & content BREW Brew In Action >> BREW-enabled wireless handsets and devices will allow users to access an exciting array of down- loadable programs. Clockwise from top left, courtesy of: Com2uS Corporation; Navitime MapData: Copyright Shobunsha Publications; Anicom Software Co., Ltd.; JAMDAT, Mattel, Inc. ©2001; Togabi.
  19. 19. p16 FINANCIAL HIGHLIGHTS: Pro Forma >> (unaudited) The full audited consolidated financial statements for fiscal 2001 can be found in QUALCOMM’s Form 10-K, the Proxy Statement for the 2002 Annual Meeting of Stockholders and on QUALCOMM’s website at: www.qualcomm.com or contact: QUALCOMM Incorporated (858) 658-4813 phone (858) 651-9303 fax During the fourth quarter of fiscal 2001, the Company adopted the Securities and Exchange Commission’s Staff Accounting Bulletin No. 101 (SAB 101) and applied the effect retroactively to the beginning of fiscal 2001. All results presented in this Summary Annual Report are SAB 101 adjusted. SAB 101 changes the timing of revenue recognition related to certain license fees and hardware product sales. Pro Forma Revenue and EBT Pro Forma Research Cash, Cash Equivalents and (IN MILLIONS) and Development Marketable Debt Securities (IN MILLIONS) (IN MILLIONS) R&D REVENUES 2.5 $2,381 % OF REV EBT $2,712 $2,680 $2,095 $409 $2,465 15.3% 2.0 $300 $1,495 1.5 11.1% 8.7% $215 $1,277 $1,214 1.0 $862 0.5 0.0 FY99 FY00 FY01 FY99 FY00 FY01 FY99 FY00 FY01
  20. 20. 7 p1 QUALCOMM is providing the reported and unaudited pro forma (see notes (a) thru (l)) consolidated financial results below so that investors can compare our results from ongoing operations with and without non-recurring charges or credits. Pro forma earnings differ from reported earnings, which are presented in accordance with generally accepted accounting principles. Pro Forma Condensed Consolidated Statements of Operations (unaudited) (in thousands, except per share data) Twelve Months Ended September 30, 2001 2001 2000 % Reported Adjustments Pro Forma Pro Forma Change Revenues $2,679,786 $ — $2,679,786 2,712,035 (1%) Operating expenses: a,b,c,d,e Cost of revenues 1,035,103 (57,197) 977,906 1,067,218 (8%) b Research and development 414,760 (5,938) 408,822 300,130 36% b,d,f Selling, general and administrative 367,155 (5,639) 361,516 281,261 29% Amortization of goodwill and other c,e acquisition-related intangible assets 255,230 (255,230) — — a,e,g,h Asset impairment and related charges 549,783 (549,783) — — i Other 50,825 (61,674) (10,849) — Total operating expenses 2,672,856 (935,461) 1,737,395 1,648,609 5% Operating income 6,930 935,461 942,391 1,063,426 (11%) i Interest expense (10,235) 7,545 (2,690) (2,204) 22% a,e,h,j Investment (expense) income, net (255,999) 530,022 274,023 228,586 20% Distributions on Trust Convertible Preferred Securities of subsidiary trust — — — (13,039) (100%) a,h Other (167,001) 167,001 — — (Loss) income before income taxes and accounting change (426,305) 1,640,029 1,213,724 1,276,769 (5%) Income tax expense (104,501) (320,302) (424,803) (472,838) (10%) (Loss) income before accounting change (530,806) 1,319,727 788,921 803,931 (2%) k Accounting change, net of tax (17,937) 17,937 — — Net (loss) income $ (548,743) $ 1,337,664 $ 788,921 $ 803,931 (2%) Net (loss) earnings per common share: Diluted $(0.73) $0.98 $1.01 (3%) Shares used in per share calculations: l Diluted 755,969 51,188 807,157 800,121 (a) Excludes certain asset impairment and other (e) Excludes certain asset impairment and other (i) Excludes net charges related to an arbitration charges and credits related to the Globalstar busi- charges related to the exited analog-only cellular- decision against the Company, as follows: ness, as follows: $49.3 million in cost of revenues, untethered trailer-tracking management system $61.7 million in other operating expense and $519.0 million in asset impairment and related business, as follows: $4.6 million in cost of $7.5 million in interest expense. charges, $9.9 million in investment income and revenues, $0.4 million amortization of goodwill (j) Excludes $243.3 million in unrealized losses of $47.1 million in other non-operating charges. and other acquisition-related intangible assets, derivative instruments, $147.6 million in unreal- $2.2 million in asset impairment and related (b) Excludes the employer payroll taxes payable ized other-than-temporary losses on marketable charges and $2.3 million in investment expense. for employee income from non-qualified stock securities and other investments, $37.5 million in option exercises, as follows: $3.9 million in cost (f) Excludes $5.2 million in employee termination unrealized other-than-temporary losses in other of revenues, $5.9 million in R&D expenses and charges, a $2.3 million gain on a sale of fixed investments and $0.5 million in net realized gain $2.9 million in SG&A expenses. assets, and $2.4 million in initial public offering on a investment related to the impairment of its charges related to the cancellation of the cost basis in prior periods. (c) Excludes the amortization of goodwill and other QUALCOMM Spinco IPO. acquisition-related intangible assets primarily (k) Excludes $17.9 million for the cumulative net associated with the purchase of SnapTrack as (g) Excludes a $3.1 million adjustment to reduce effect of the adoption of FAS 133 and SAB 101. follows: $1.2 million in cost of revenues and reserves established related to the sale of the (l) The diluted share base used for the reported $254.8 million in amortization of goodwill terrestrial-based CDMA wireless consumer results excludes the potential dilutive effect of other acquisition-related intangible assets. phone business. 51.2 million common share equivalents related (d) Excludes certain credits related to the reduction (h) Excludes certain asset impairment and other to outstanding stock options, calculated using the of reserves established in connection with the sale charges related to the Vesper Companies and treasury stock method, as these shares are of the terrestrial-based CDMA wireless infrastruc- VeloCom, as follows: $31.8 million in asset anti-dilutive. For pro forma results, these shares ture business, as follows: $1.8 million in cost of impairment and related charges, $89.8 million are dilutive and are, therefore, included in the revenues and $2.5 million in SG&A credits. in investment expense and $119.9 million in pro forma per share calculation. other non-operating expenses.
  21. 21. 8 p1 INVESTING IN THE FUTURE: >> The spirit of QUALCOMM is focused on people Leading our industry, our Company and our community “An investment in knowledge always pays the best interest,” said Benjamin Franklin, and that philosophy is evident at QUALCOMM. Built on the spirit of invention, QUALCOMM is committed to continuous learning for its people and is strongly connected to the community at large. With two former professors among its founders, the Company has long appreciated the fact that investing in training and education is essential for corporate growth and competitive advantage in a business where knowledge is the principal currency. To that end, QUALCOMM is comprised of an exceptionally well-educated work force of 6,500 people who come from over 100 different countries and speak more than 50 different languages. That diversity and focus on continuous learning is really central to the spirit of QUALCOMM. speakers and instructors, the Learning Investing in training and education Center creates programs focused on Through its university relations program, results, enabling employees to apply their the Company hires hundreds of college knowledge directly to their work. interns every year and many return as Acknowledging the importance of full-time employees. QUALCOMM also that effort, this year QUALCOMM was educates thousands of industry profes- named to the Training magazine list sionals through its CDMA University and of the “Top 50 Training Organizations BREW Developer Training programs. in America.” Also this year, Human From computer software training to Resource Executive, a leading HR busi- management and leadership skills, the ness magazine, named Dan Sullivan, QUALCOMM Learning Center offers a Ph.D., QUALCOMM’s Executive Vice wide range of classes and resources. President of Human Resources, the By working closely with its business 2001 HR Executive of the Year. units to develop customized curricula and bringing in the most respected experts as
  22. 22. 9 p1 Investing in the community The people at QUALCOMM are QUALCOMM Cares. committed to being good corporate High Tech High. One of the QUALCOMM Corporate Connects our volunteers citizens and good neighbors in the first tuition-free, publicly Giving. Donates a portion with non-profit and privately funded communities they call home. In the spirit of the Company’s funds to organizations serving charter schools of its kind. community causes. a wide range of of volunteerism, last year more than community needs. 1,000 QUALCOMM employees donated approximately 10,000 hours of their time to non-profit causes. That spirit is manifested in a number of QUALCOMM QUALCOMM Kids. QUALCOMM Matching community outreach programs such as: Provides QUALCOMM Grants. Provides dollar- Stadium tickets to for-dollar matching children who might not grants for employee otherwise be able to donations to any qualifying attend a professional non-profit organization. sporting event. Bridging the Digital Divide. QUALCOMM has committed $25 million over five years for programs that will help students prepare for an increasingly technology- driven society. QUALCOMM’s awards and honors include > The 100 Best Companies to Work > Industry Week’s 100 Best for in America™ (FORTUNE) (1999-2001) Managed Companies FORTUNE’s 100 Fastest-Growing Top 100 Companies to Excel in Companies in America™ the 21st Century FORTUNE 500® (1999-2001) S&P 500 Index The FORTUNE 50 NASDAQ 100 Index Forbes 500’s ANNUAL DIRECTORY Deloitte & Touche 500 Fastest The Forbes ASAP Dynamic 100 Growing Technology Companies Electronic Business Top 200 Forbes Platinum 400 Business Week Information Companies Technology 100 Business Week “Hottest of the Hot” The Business Week Global 1000 Dr. Daniel L. Sullivan Executive Vice President, Human Resources