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16:55 ET Qualcomm (QCOM) : Posts Q3 net of $0.24 a share, $0.02 better than the Multex consensus. Revs rose 10% to $721 mln (consensus $697.29 mln). For Q4, co sees EPS of $0.26-$0.27 on a 10-13% sequential rev increase (consensus $0.24).
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QUALCOMM Announces Third Quarter Fiscal 2002 Results with Record Shipments of MSM Phone Chips
SAN DIEGO--(BUSINESS WIRE)--July 25, 2002--QUALCOMM Incorporated (NASDAQ: QCOM - News):

QUALCOMM's third quarter fiscal 2002 earnings conference call will
be broadcast live on July 25, 2002 beginning at 2:30 p.m. Pacific
Daylight Time on the Company's web site at: www.qualcomm.com.
This conference call may contain forward-looking financial
information. The taped audio replay will be available for five
business days. To listen to the replay, U.S. callers may dial
[phone] and international callers may dial [phone].
Both U.S. and international callers should use reservation number
20713120.

QUALCOMM Incorporated (NASDAQ: QCOM - News) today announced its third quarter fiscal 2002 results ended June 30, 2002. Pro forma revenues were $721 million, an increase of 10 percent compared to $657 million in the year ago quarter and 9 percent compared to $659 million in the second quarter of fiscal 2002. Pro forma earnings per share were $0.24 in the third quarter of fiscal 2002, an increase of 20 percent compared to $0.20 per share in both the year ago quarter and the second quarter of fiscal 2002(1) (see Pro Forma Condensed Consolidated Statements of Operations Schedule for pro forma adjustments). GAAP reported revenues for the third quarter of fiscal 2002 were $771 million compared to $657 million in the year ago quarter and $696 million in the second quarter of fiscal 2002. GAAP reported loss was $14 million or $0.02 per share in the third quarter compared to a loss per share of $0.26 in the year ago quarter and earnings per share of $0.05 in the second quarter of fiscal 2002.

GAAP reported losses for the third quarter were primarily due to $194 million in charges related to Leap Wireless investments. Due to the significant decline in the market value of the Leap Wireless marketable securities during the third quarter and the percentage decline relative to their cost, we transferred $167 million in cumulative unrealized losses recorded in equity to the earnings statement for the third quarter of fiscal 2002. This reclassification was made in accordance with the guidelines for "other than temporary losses" as required by Financial Accounting Standard (FAS) 115. We also recorded $27 million in FAS 133 losses related to Leap Wireless warrants.

"The continued strength of commercial 3G CDMA2000 1X deployments is evident in our third quarter results, which exceeded our expectations for pro forma revenues and earnings," said Dr. Irwin Mark Jacobs, chairman and CEO of QUALCOMM. "We achieved record shipments of MSM phone chips, CSM equivalent voice channels and gpsOne position location-enabled devices. We also reached a milestone of one million BREW users during the quarter and were pleased to see the commercial launch of two new BREW-enabled networks at KDDI in Japan and Verizon Wireless in the United States. As part of the rapid evolution with CDMA to high speed, low cost data, we experienced the first deployment of CDMA2000 1X EV-DO (data optimized) 2.4 Mbps service by SK Telecom and KTFreeTel at the World Cup games in South Korea."

"In today's environment where every capital expenditure dollar counts, we believe the combination of a CDMA2000 1X network and BREW applications provides CDMA carriers clear economic and service quality advantages over their competitors. We will continue to work closely with our chip customers, as well as the wireless carriers and applications developers, to rapidly deliver 3G CDMA of their preference to users across the globe," said Dr. Jacobs.

Pro forma revenues increased to $721 million in the third quarter of fiscal 2002 from $657 million in the year ago quarter, and $659 million in the second quarter of fiscal 2002. The increase in revenues compared to the year ago quarter is primarily related to an increasing demand for CDMA products across all major regions of CDMA deployment, with the exception of Latin America which has been impacted by the economic downturn in that market. Key drivers of demand are third generation ("3G") CDMA2000 products, Binary Runtime Environment for Wireless(TM) (BREW(TM)) applications and gpsOne(TM) position location capabilities.

Pro forma gross margin for the third quarter of fiscal 2002 was 67 percent compared to 65 percent in the year ago quarter and 67 percent in the second quarter of fiscal 2002. The increase in pro forma gross margin from the year ago quarter resulted from improved gross margins in the QUALCOMM CDMA Technologies (QCT) business segment, primarily resulting from a change in product mix toward the higher end devices utilizing our 3G CDMA2000 1X Mobile Station Modem (MSM(TM)) phone chips and an increase in royalty revenues in the QUALCOMM Technology Licensing (QTL) business segment.

Pro forma R&D expenses were $114 million in the third quarter of fiscal 2002 compared to $106 million in the year ago quarter and held constant to the second quarter of fiscal 2002. The increase in R&D expenses compared to the year ago quarter was primarily due to QCT product initiatives to support high-speed wireless Internet access and multi-mode, multi-band, multi-network chipsets using our radioOne(TM) direct conversion architecture.

Pro forma selling, general and administrative expenses were $99 million in the third quarter of fiscal 2002 compared to $102 million in the year ago quarter and $97 million in the second quarter of fiscal 2002. The decrease in SG&A expense compared to the year ago quarter was primarily due to a reduction in bad debt expense, partially offset by the effects of increased head count and related expenses for our support and marketing efforts related to the BREW application development platform.

Pro forma investment income was $28 million for the third quarter of fiscal 2002 compared to $24 million in both the year ago quarter and the second quarter of fiscal 2002. Pro forma investment income is primarily comprised of interest income on corporate cash and marketable securities. The increase in interest income as compared to the year ago quarter was a result of higher average balances of cash and marketable securities.

The Company's pro forma annual effective income tax rate for fiscal 2002 is estimated to be 35 percent.

QUALCOMM Strategic Initiatives (Excluded from Pro Forma Results)

The QUALCOMM Strategic Initiatives (QSI) segment includes our strategic investments and related income and expenses from non-core businesses including the Vesper Companies. QSI revenues were $49 million in the third quarter of fiscal 2002, primarily related to the consolidation of the Vesper Companies. QSI losses before taxes for the third quarter of fiscal 2002 were $285 million compared to $119 million in the second quarter of fiscal 2002, an increase of $166 million primarily due to the $167 million charge to record the difference between cost plus accrued interest and market value of Leap Wireless stock and bonds. Financial Accounting Standard (FAS) 133 losses, principally related to Leap Wireless warrants which have been marked to market through the earnings statement on a continuing basis, decreased by $22 million compared to the second quarter of fiscal 2002. Vesper operations improved in the third quarter of fiscal 2002 with an $11 million decrease in our share of losses. The decrease in QSI losses for Vesper and FAS 133 were offset by expanded Inquam operations to introduce CDMA2000 1X service in Europe ($3 million); suspension of recognizing interest income on Leap Wireless bonds ($8 million); increased expenses ($5 million), primarily for our support of the Pegaso sale to Telefonica; and increased unrealized and realized losses in other assets ($18 million), including the write-off of our Wingcast assets.

The financial markets for telecommunications investments, in general, have been very unfavorable for some time, but particularly in the most recent fiscal quarter. As a consequence, losses from investments recorded in the quarter are significant. We are working with the companies in which we have invested to achieve the objectives we established at the time of making the investments. In many cases, recovery from the current valuations may take considerable periods of time or may not occur at all, but we remain optimistic about the business models and strategies being executed by Leap Wireless and Vesper, which have given rise to the most significant losses in the current quarter. The cash invested and unfunded commitments balance for QSI is updated quarterly (see QUALCOMM Strategic Initiatives (QSI) Key Investments Schedule or www.qualcomm.com on the Investor Relations page under "Segment Reporting").

Business Outlook

The following statements are forward-looking and actual results may differ materially. Please see below for a description of certain risk factors and QUALCOMM's quarterly reports on file with the Securities and Exchange Commission (SEC) for a more complete description of risks. We will disseminate our quarterly business outlook, based on current expectations, in conjunction with our quarterly earnings release and conference call. We will not provide further material guidance on analysts' financial models beyond the information provided in our quarterly earnings release and conference call.

Outlook information is presented on a pro forma basis and excludes the QSI segment.

Fourth Quarter Fiscal 2002

Based on the current business outlook, we expect fourth fiscal quarter pro forma revenues to increase by approximately 10-13 percent compared to the third quarter of fiscal 2002. We expect fourth fiscal quarter pro forma earnings per share to be approximately $0.26-$0.27. This estimate assumes shipments of approximately 18-19 million MSM phone chips during the quarter, including approximately 15 million 3G CDMA2000 1X MSM phone chips.
Fiscal 2002

Based on the current business outlook, we expect pro forma revenue growth for fiscal 2002 to be approximately 7-8 percent and pro forma earnings per share to be approximately $0.93-$0.94.
Cash Flow

QUALCOMM's cash, cash equivalents and marketable securities, excluding QSI, totaled approximately $2.6 billion at the end of the third quarter of fiscal 2002. The following table presents selected cash flow information, including cash equivalents and marketable securities, for the third quarter and first nine months of fiscal 2002 (in millions):

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