QUALCOMM REPORTS THIRD FISCAL QUARTER REVENUES OF $1 BILLION; - OPERATING EARNINGS PER SHARE OF $.75, EXCLUDING NON-RECURRING CHARGES - ALL OF THE SHARE AND PER-SHARE AMOUNTS IN THIS RELEASE HAVE BEEN ADJUSTED TO REFLECT THE 2:1 STOCK DISTRIBUTION THAT WAS PAID MAY 10, 1999 TO QUALCOMM STOCKHOLDERS OF RECORD ON APRIL 21, 1999. SAN DIEGO, July 19 /PRNewswire-AsiaNet/ -- QUALCOMM Incorporated (Nasdaq: QCOM) today reported revenues of $1 billion and net income of $59 million, or $.35 per share (diluted), for the third quarter of fiscal 1999 (see Financial Data comparisons, pg. 6). Excluding non-recurring charges of $117 million associated primarily with the sale of the Company's terrestrial Code Division Multiple Access (CDMA) wireless infrastructure business, the Company reported record net income in the third quarter of $135 million, or $.75 earnings per share (diluted). This represents an increase in net income, excluding non-recurring items, of 445 percent over the third quarter of fiscal 1998. Revenues in the third quarter of fiscal 1999 increased 15 percent over revenues of $875 million for the year ago quarter. This revenue growth was due to increased communications systems revenues consisting of sales of Application Specific Integrated Circuits (ASICs), OmniTRACS units and CDMA phones, as well as a significant increase in royalties. "We are pleased to report very strong third fiscal quarter results. Revenues reached the billion dollar mark and we had record net income," said Dr. Irwin Mark Jacobs, chairman and CEO of QUALCOMM Incorporated. "We achieved several important milestones this quarter, including closing the sale of the terrestrial CDMA wireless infrastructure business, attaining the number two position in digital phone market share in the U.S. (according to Dataquest), and shipping over 11 million MSM chips to CDMA phone manufacturers worldwide. We are also pleased to have been selected for inclusion in the S&P 500 index." Pro Forma Results (Excluding Infrastructure Business and Non-Recurring Charges) Pro forma financial information is provided for the purpose of evaluating what the Company's operating results would have been excluding both non-recurring charges and operating results of the terrestrial CDMA wireless infrastructure business. For the third quarter of fiscal 1999, pro forma revenues were $966 million, pro forma gross profit was 42 percent, pro forma net income was $154 million, and pro forma earnings per share were $.86 (diluted). Non-recurring pre-tax charges of $117 million were reported in connection with the sale of the terrestrial CDMA wireless infrastructure business (primarily employee-related costs) and including the write-down of certain infrastructure business related assets not being acquired. Highlights of Financial Performance Communications Systems Communications systems revenues increased 9 percent to $824 million in the third quarter of fiscal 1999 from $759 million in the year ago quarter, with increased sales of ASICs, OmniTRACS units and CDMA phones. Communications systems revenues in the third quarter of fiscal 1998 included significantly higher revenues from Globalstar gateways, terrestrial CDMA wireless infrastructure products and QUALCOMM Personal Electronics (QPE) sales to Sony. Excluding these items in the year ago quarter, revenue growth would have been 49 percent. Communications systems gross margin for the third quarter of fiscal 1999 was 35 percent compared to 24 percent in the third quarter of fiscal 1998, reflecting improved margins in all product areas with the exception of infrastructure products. Total CDMA phone shipments for the third fiscal quarter of 1999 were over 1.7 million units (cumulatively over 12 million). Component shortages limited production growth and margin improvement of the Company's phone products in the third fiscal quarter of 1999. These shortages are expected to continue and could affect the Company's results in the fourth fiscal quarter of 1999. Total MSM phone chip shipments for the third quarter of fiscal 1999 were over 11 million units (cumulatively over 50 million). In addition to substantial growth in the shipment of MSM phone chips, the book-to-bill ratio for the ASICs business was 1.2 for the third quarter of fiscal 1999. The book-to-bill ratio means the Company has $1.20 in ASICs orders for every $1.00 of product shipped. Total OmniTRACS shipments were approximately 12 thousand units (cumulatively over 290,000). License, Royalty and Development Fees License, royalty and development fees for the third quarter of fiscal 1999 were $93 million, including $6 million of license fees, compared to $77 million last quarter and $47 million for the year ago quarter. Contract Services Contract services revenues were $88 million in the third quarter of fiscal 1999 compared to $70 million for the year ago quarter. The increase in revenues was attributable to the development agreement with Globalstar, the activities of which are expected to decline in future quarters. Operating Income/Expenses Operating income excluding non-recurring charges more than quadrupled, increasing 303 percent to $215 million in the third quarter of fiscal 1999 compared to $53 million during the year ago quarter. The increase was attributable to higher revenues and improved gross margins in all product areas with the exception of infrastructure products. Operating income as a percent of revenues more than tripled, increasing to 21 percent for the third quarter of fiscal 1999 from 6 percent in the year ago quarter. Operating expenses (research and development, selling and marketing and general and administrative) excluding non-recurring charges for the third quarter of fiscal 1999 decreased to 20 percent of revenues compared to 23 percent of revenues during the year ago quarter. Taxes The Company's effective tax rate for fiscal 1999 is currently estimated to be 35 percent compared to an effective tax rate of 30 percent in fiscal 1998. The effective tax rate for fiscal 2000 may increase as a result of higher earnings relative to investment tax credits. QUALCOMM Incorporated (www.qualcomm.com) is a leader in developing and delivering innovative digital wireless communications products and services based on the Company's CDMA digital technology. The Company's major business areas include CDMA phones; integrated CDMA chipsets and system software; technology licensing; and satellite-based systems including OmniTRACS(R) and portions of the Globalstar(TM) system. Headquartered in San Diego, Calif., QUALCOMM is a FORTUNE 500(R) company traded on Nasdaq under the ticker symbol QCOM. Except for the historical information contained herein, this news release contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to the risk that the rate of growth in the CDMA subscriber population will decrease; risks associated with the scale-up and operations of CDMA systems; risks associated with component shortages; risks associated with the ability to sustain or improve operational efficiency and profitability; risks associated with developments in current or future litigation; risks related to customer receivables and performance guarantees; risks associated with timing and receipt of license fees and royalties; risks associated with strategic opportunities or acquisitions the Company may pursue; risks associated with international business activities; risks associated with changes in economic conditions of the various markets the Company serves, as well as the other risks detailed from time to time in the Company's SEC reports. QUALCOMM, OmniTRACS and Eudora are registered trademarks of QUALCOMM Incorporated. MSM and Thin Phone are trademarks of QUALCOMM Incorporated. Globalstar is a trademark of Loral QUALCOMM Satellite Services, Incorporated. All other trademarks are the property of their respective manufacturers. Financial Data -- Third Quarter Fiscal 1999 1999 1999 Dollars in thousands 3rd Qtr Non-Recurring 3rd Qtr except per share data As Reported Charges As Adjusted Revenue $1,004,066 -- $1,004,066 Gross Profit 406,399 $(6,180) 412,579 Gross Profit % 40% -- 41% R&D 93,791 -- 93,791 Selling & Marketing 50,460 200 50,260 G&A 54,424 1,162 53,262 Other Operating Expenses 109,345 109,345 -- Total Operating Expenses 308,020 110,707 197,313 Operating Income 98,379 (116,887) 215,266 Operating Income % 10% -- 21% Other Non-Operating Expense 7,690 -- 7,690 Income (Loss) Before Taxes 90,689 $(116,887) 207,576 Net Income 58,948 -- 134,924 EPS (Diluted) $0.35 -- $0.75 Financial Data -- Third Quarter Fiscal 1999 vs. Third Quarter Fiscal 1998 Excluding Non-Recurring Charges/Gains Dollars in thousands except per 1999 1998 Change 1999 1998 Change share data 3rd Qtr 3rd Qtr % 9 months 9 months % Revenue $1,004,066 $875,497 15% $2,877,684 $2,421,904 19% Gross Profit 412,579 250,817 64% 1,030,155 709,277 45% Gross Profit % 41% 29% -- 36% 29% -- Operating Income 215,266 53,353 303% 408,537 169,525 141% Operating Income % 21% 6% -- 14% 7% -- Income Before Taxes 207,576 33,766 515% 318,063 129,741 145% Net Income 134,924 24,740 445% 208,741 96,883 115% EPS (Diluted) $0.75 $0.17 341% $1.29 $0.66 95% Note: 35% effective tax rate has been assumed for fiscal year 1999 number presentations. SOURCE QUALCOMM Incorporated CONTACT: Julie Cunningham, Vice President, Investor Relations of QUALCOMM Incorporated, 858-658-4224, or fax, 858-651-9303, [email protected] Web site: http://www.qualcomm.com