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Welcome to the QUALCOMM Incorporated fourth quarter and fiscal 2005 conference call.

At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session. [OPERATOR INSTRUCTIONS] As a reminder, this conference is being recorded, November 2nd, 2005.

The playback number for today's call is 1-800-633-8284.

International callers please dial area code 402-977-9140.

The playback reservation number is 21245580.

I would now like to turn the call over to Bill Davidson, Vice President of Investor Relations.

Bill, please go ahead.

Thank you.

Good afternoon.

Today's call will include prepared remarks by Dr. Paul Jacobs, Steve Altman, Dr. Sanjay Jha, and Bill Keitel.

An internet presentation and audio broadcast accompanies this call, and you can access it by visiting www.qualcomm.com.

During this conference call, if we use any non-GAAP financial measures as defined by the SEC in regulation G, you can find the required reconciliations to GAAP on our website.

I would also direct you to our 10-K and earnings release which were filed and furnished respectively with the SEC today and are also available on our website.

We may make forward-looking statements relating to our expectations and other future events that may differ materially from QUALCOMM's actual results.

Please review our SEC filings for a detailed presentation of each of our businesses and associated risks and other important factors that may cause our actual results to differ from these forward-looking statements.

Pro forma revenues were $1.56 billion in the fourth fiscal quarter, up 14% year-over-year and 15% sequentially.

Fourth fiscal quarter pro forma net income was $543 million, up 9% year-over-year and 17% sequentially.

Diluted earnings per share were $0.32, up 7% year-over-year and 14% sequentially.

Fourth quarter fiscal pro forma free cash flow, defined as net cash from operating activities less capital expenditures, was $838 million up 31% year-over-year and was 54% of revenue.

Before I turn the call over to Dr. Jacobs, I'd like to mention that we're hosting an analyst meeting on November 8th in London.

The meeting will be simulcast on our website with audio and slide presentations.

Questions from our webcast participants can be submitted prior to the meeting by going to QUALCOMM's Investor Relations website at www.qualcomm.com and following the links to our London webcast.

Now it's my pleasure to introduce QUALCOMM's CEO, Dr. Paul Jacobs

Thank you, Bill.

Good afternoon, everyone.

I'm pleased to report we posted record results for the fourth quarter and full fiscal year.

I'd like to QUALCOMM employees around the world for their dedication, commitment and focus on innovation, execution and partnerships.

Our fiscal 20006 guidance reflects continued acceleration of CDMA throughout the world.

We estimate that CDMA hand-based shipments will grow approximately 30% during calendar 2006 as compared to 2005.

We plan to aggressively increase our R&D investments in fiscal 2006 to capture the many opportunities ahead and maintain or extend our position of leadership in the market.

Together with many partners in the wireless industry, we have established a exceptional track record of helping to bring exciting and innovative wireless solutions to market.

QUALCOMM has put a great deal of focus on ensuring the success of 3-D CDMA network roll-outs in Europe by working closely together with European operators, infrastructure manufacturers and device manufacturers.

By now I'll sure you're all well aware of the release that was issued by multiple parties late last week, alleging that QUALCOMM is violating European Union Competition Law and failing to meet commitments that QUALCOMM made to international standards bodies around the world that would license its technology on fair, responsible and nondiscriminatory terms.

As we have throughout our history, QUALCOMM remains committed to licensing on fair and reasonable terms.

The WCDMA market enjoys healthy competition among many handset suppliers including companies from Korea, Japan, China, the United States and Europe.

As a result of QUALCOMM's proactive licensing of its substantial R&D investments, the availability of chip sets and software from QUALCOMM and its licensees.

QUALCOMM's extensive licensing program has fostered the wide-spread adoption of leading edge technologies, promoted by the competition through the wireless industry, encouraging innovation and technological advancement.

I want to assure you that QUALCOMM will vigorously defend against any claim of unlawful conduct in its licensing or chip set sales practices.

Steve will address this issue further during his remarks.

Through the support of our engineers in QCT we continue to work closely with the European operators during their initial WCDMA network deployments and ongoing optimizations.

These activities date back to the spring of 2001 when we were first to market with the WCDMA test fund.

The European operator infrastructure suppliers have used thousands of our single mode and dual mode WCDMA GSM handsets for the intraoperability tests and ongoing network optimization networks.

To maximum the reliability of the wireless networks, we've worked extensively with European operators and their infrastructure suppliers to work through 3G and 2G hand-off issues.

We support major European manufacturers in the lab with field testing.

Our team continues to co-develop European network launch plans and provide dedicated engineers for handset launch activities with European operators.

We work closely with handset and P.C. card manufacturers throughout development and field testing.

We have also enabled the entrance of nontraditional device suppliers into the European market such as BenQ and [Waway].

QUALCOMM also actively participates in 3GPP standardization for WCDMA and it's evolution.

We contributed to the stabilization of Release 99 and made subsequent contributions for Release 5 with HSDPA.

Most recently, we've been very active with contributions for HSUPA and MBMS as part of WCDMA Release 6.

We continue to invest heavily in R&D in a variety of ways with a keen focus on growing our earnings and extending the market for QUALCOMM's and our partner's products and services.

To accelerate growth we continue to develop and commercialize third generation CDMA-based technologies such as CDMA2000 1x,1xEV-DO, scalable bandwidth EV-DO, WCDMA, HSDPA and HSUPA to support more efficient voice communications, broadband access to the Internet and multimedia services.

At the same time, we're working hard to fulfill the growing demand for affordable, voice-centric CDMA phones within the emerging entry-level market, through the introduction of single chip solutions, streamlined test and certification processes and the application of device procurements.

By integrating the modem, [RF], power management, multimedia and security functions into a single chip, our value platform chip set eliminates discrete components in handset designs, lower development and manufacturing costs, reduce bill material costs and accelerate time to market.

We expect third generation CDMA-based technologies will provide the most advanced, best performing and most economical solution for wide area and global networks well into the foreseeable future.

To expand our market, we continue to develop and commercialize multimode, multiband and multinetwork products that embody technologies such as GSM, GPRS, Edge, Bluetooth, [Watt by USP], FLO, [inaudible] and so on.

We are also continuing to support multiple mobile client software environments in our multimedia and convergence chip sets.

QUALCOMM is no longer just a CDMA company.

QUALCOMM will continue to develop on its own and with its partners new innovations that are integrated into our product portfolio to further expand the market and enhance the value of our solutions.

At the same time, we're very active within the standards bodies such as 3G PP, 3-D PP2, IEEE and OMA to ensure these innovations are universally implemented to support economies of scale and interoberability with existing and future mobile communications services to preserve ongoing investments.

These innovations enable our customers to improve the performance of value of their existing services, offer these services more affordably, and introduce new revenue-generating services well ahead of their competition.

And many of these innovations touch upon the value chain of multiple industries such as mobile telecommunications, information technology, consumer electronics and entertainment.

The mobile phone is becoming the most personal electronic device and the screen that is always with you to watch movies, view television, play video games, run computer applications and simply to make or receive a phone call.

As evidence in the success of data services, QIS, the division responsible for BREW, reached profitability in the fourth fiscal quarter of 2005 and revenues for QIS increased 32% in fiscal 2005 as compared to fiscal 2004.

We've become successful by aligning our business model with others in the wireless industry value chain including equipment manufacturers, network operators, application developers and content suppliers.

The anticipation -- the anticipated addition of Flarion's intellectual property and engineering resources will supplement the resources that we had dedicated over the years toward the development of OFDM, OFDMA technologies and the creation of a substantial OFDMA intellectual property portfolio.

The combination of Flarion's more than 100 issued and pending OFDMA patents and our issued and pending patents related to OFDM, OFDMA, MIMO and multimedia enhancements will make us one of the most active companies in these technologies.

We believe that this combined portfolio of patents applies to most OFDM and OFDMA wireless being proposed, including WiMAX.

Through the acquisition of Flarion, we will be more ale to effectively support operators who might prefer an OFDMA or hybrid OFDM-CDMA, WCDMA network alternative for their services.

We still fundamentally believe that CDMA will continue to provide the most advanced, factory-efficient, wide-area wireless networks for the foreseeable future.

We've also been working on our own OFDMA efforts for many years with internal teams pushing each other to build the best technology for any given application.

There's been a great deal of media speculation regarding WiMAX and the potential for it to eventually develop into an standard addressing wide-area wireless broadband connectivity, potentially completing with 3G CDMA.

I believe that the IEEE 802.16 2004 or Fixed WiMAX may be useful for backhaul and possibly some fix in limited mobility applications, depending on spectrum availability and competition from DSL and cable-based Internet services.

QUALCOMM has performed extensive system simulations of mobile WiMAX, EV-DO Rev A, and HSDPA performance in mobile environments.

Mobile WiMAX does not offer any theoretical or practical advantages compared to 3G CDMA, will require a major investment for testing and [iterations] and will have to compete in a market well supported with a variety of 3G CDMA devices and services, including laptops with embedded DO and HSDPA capability.

There have also been recent media reports on an technology called WiBRO.

Those of you not familiar with the technology, WiBRO is short for wireless broadband, and it is jointly developed by the South Korean Information Ministry and private Korean firms.

WiBRO is a homegrown Korean [patented division duplex] technology using nine megahertz channels.

And it's intent is to provide portable broadband internet access in South Korea.

Three licenses in the 2.3 gigahertz band were awarded by the Korean government last February to Hanaro Telecom, KT -- that is the wireline entity, and SK Telecom.

In April, Hanaro, the second largest wireline carrier in South Korea, returned its WiBRO license, citing deployment costs and stiffer landline competition, requiring it to focus its resources.

Based on recent reports, schedule for WiBRO service launch is now moved from April to June 2006.

We believe infrastructure is currently being tested and there will be a technology demonstration next month.

However, the larger pictures is that cellular operators, SKT and KT Freetel, are aggressively focusing their efforts on EV-DO Rev-A and HSDPA, deploying these technologies to address their core mobile customer bases.

SKT and KTF have more than 12 million EV-DO subscribers today.

These developments further underscore the commercial traction, support and time-to-market benefits of 3G CDMA technologies.

During the quarter, I traveled to several major regions in Asia where I had positive meetings with our partners in both the cellular and broadcast service industries.

In China, Japan and Korea, we're exploring trials and demonstrations of MediaFLO.

Each of these markets will develop its own individual approach to launching a wireless, video service provider.

In some markets, the broadcasting partners may lead, and in others, the main impetus comes from the cellular operator.

In all cases, we've been able to demonstrate the increased efficiency of the FLO system and the direct impact this has on the capital and operating costs associated with running mobile video services.

As evidence of consumer demand, we see the development of existing video technologies such PDMB, SDMB, DVBH, and services like Verizon V-cast and Sprint's TV service, as validation of the business case for MediaFLO.

We remain on page for commercial deployment of MediaFLO USA's nation-wide media delivery network during fourth quarter of fiscal year 2006.

In September, the FCC approved the request by an TV station in New York to shut down its analog broadcast facilities.

This approval paves the way for MediaFLO USA Inc. to deploy MediaFLO services in the New York City market on channel 55 spectrum, adding another very important market to the long list of cities where spectrum will be available as we launch MediaFLO services.

MediaFLO also took another significant step forward in the development of FLO technology with the first demonstration of streaming video delivered over the air to a wireless handset.

Conducted during CTIA wireless IT and Entertainment 2005, the demonstration featured six channels of streaming video at QVGA quality running at 15 frames per second.

I should note that the frame rate of 15 frames per second is a function of the decoder in the chip set not yet being fully optimized.

FLO technology is expected to support up to 20 channels of live video at 30 frames per second in QVGA quality, with an average channel switching time of 1.5 seconds when commercially deployed.

For the upcoming meeting of the FLO forum in Hong Kong next week, we also continue to progress towards a FLO standard.

QUALCOMM MediaFLO USA Inc. belong to a growing list of FLO form numbers, including industry carriers, broadcasters, content providers and vendors, all committed to promoting development and certification of FLO products and services.

Through the FLO forum's efforts, FLO technology specifications will be open and available to a wide range of technology providers and equipment manufacturers.

You can visit floforum.org, their website, for more information.

MediaFLO's initiative exemplifies QUALCOMM's continuing commitment to driving innovation in the wireless industry and meeting the needs of the entire wireless eco-system.

We believe that MediaFLO Technologies and the upcoming deployment of the MediaFLO USA network will usher in a new era of mobile content delivery, creating brand-new market opportunities for mobile television and video while complimenting existing 3G voice and data services.

In closing, we are very pleased to report our return of capital to stockholders in fiscal 2005 was approximately $1.5 billion, up 380% year-over-year.

This includes cash dividends paid of $524 million or $0.32 per share and 27.1 million shares repurchased under the share repurchase program for $953 million.

I would now like to turn the call over to Steve Altman.

Thanks, Paul.

Good afternoon, everyone.

Let me first address the complaints that were filed by multiple parties late last week with the European commission.

I expect to address this issue in more detail at our upcoming analyst conference in London.

While QUALCOMM has not yet been provided with copies of the complaints, as we indicated in our press release, the reported allegations of the complaint are without merit.

We plan to meet with the commission very soon to begin the process of providing the facts that disprove the complaints.

And we look forward to cooperating with the commission to establish that QUALCOMM's activities are lawful, and in fact foster competition.

The claim that QUALCOMM has not lived up to its committment to license it's essential patents on fair and reasonable terms, is the lie by the license agreements that QUALCOMM has entered to with 130 different companies, over 60 of which include WCDMA.

Indeed our patent portfolio is the most widely and extensively licensed portfolio in the industry.

Achieved through bilateral, arm's length negotiations and the operation of free market forces, the large number of QUALCOMM license agreements have well established the value of QUALCOMM's patent portfolio for 3G standards.

That established value is the same for the CDMA 2000 family of standards as it is for the WCDMA family of standards.

It is hard for me to imagine that each of these 130 companies, including the world's leading telecommunications companies, would have signed our license agreements if our terms were not fair, reasonable and reflective of the value of our technology.

Through their coordinated PR campaign attack, these complaintants make a poor attempt to rewrite history by suggesting that if they had known what QUALCOMM's license terms were going to be, they would not have supported adoption of an standard that included QUALCOMM's patented technology.

First, it is widely acknowledged that the original proponents of the WCDMA standard, including some of these complaintants, tried to design around QUALCOMM's patents, but were unable to do so.

Second, two of the complaining companies, Ericsson and Panasonic, had already entered into licenses with QUALCOMM that included WCDMA before the WCDMA standard was approved by any standard-setting organization.

These companies not only knew exactly what QUALCOMM's terms were when they voted in favor of adopting the standard, they had already agreed to them.

Nokia was in active negotiations with QUALCOMM to expand its license to include WCDMA prior to the adoption of the WCDMA standard.

Both Nokia and NEC as well as Texas Instruments signed WCDMA licenses with QUALCOMM shortly after adoption of the standard and before the roll-out of WCDMA.

QUALCOMM's terms did not come as a surprise to any of these five companies.

Further, the effort by these companies to diminish the importance of QUALCOMM's contributions is also inconsistent with the views they expressed when they signed agreements with us.

In press releases jointly issued with QUALCOMM when we announced our WCDMA license agreements, two of the companies, Ericsson and NEC, referred to us as a, quote, 'Pioneer,' end quote, of CDMA technology, including WCDMA.

It is interesting to step back and consider what the companies filing these complaints fail to say.

Five of the companies now say that our intellectual property is less valuable or that they were somehow misled into voting in favor of a WCDMA as a standard.

But they fail to point out that they have known our terms for many years and undoubtedly studied our intellectual property portfolio prior to signing our agreements or voting for adoption of the WCDMA standard.

Further, they all consistently fail to mention how healthy and vibrant competition is, conspicuously omitting their own successes.

Nokia, Ericsson and Texas Instruments publicly claim that they have each sold more chip sets for WCDMA handsets than QUALCOMM.

NEC, a WCDMA licensee, claims to have very significant percentages of the WCDMA chip sold in Japan.

But even with that success, I would note that NEC has now chosen to use our chip set in WCDMA handsets to be sold in Europe.

Panasonic also claims to be a significant supplier of WCDMA hand sets in Japan, but it fails to mention that it does not even sell WCDMA products in Europe.

Broadcom states it has been unsuccessful to date.

It fails to point out that it currently offers an non-integrated two chip solution that is not competitive with the offerings of QUALCOMM and other chip set suppliers.

Broadcom's decision to decline the license offered by QUALCOMM and derail the negotiations through baseless litigation has already been extensively discussed.

Its participation in the complaint with the European Commission is readily understood as yet another attempt to obtain bargaining leverage.

We have never refused to license our essential patent to any company to supply chips, handsets, infrastructure or test equipment.

The number of companies licensed by QUALCOMM that are actively marketing WCDMA chips demonstrates that QUALCOMM has not attempted to exclude any chip set manufacturer.

It is beyond dispute that QUALCOMM does not have anything remotely resembling a monopoly or dominant position on the sale of WCDMA chip sets.

To the contrary, competition for sales of CDMA chips is quite intense.

We have never conditioned a grant of a WCDMA license or a WCDMA discount on the exclusive use of our chips.

The complainant's allegations in this regard are simply false.

We have provided a small discount for using our chips to companies currently selling WCDMA handsets in Europe, which we believe to be nothing more than legitimate and lawful price examination.

Although the complaintants allege that this precludes competition, it is interesting to note that many of those manufacturers, despite being entitled to a small discount if they utilitize our WCDMA chips, have chosen to use our competitor's WCDMA chips.

We believe that our competitors are likewise offering various discounts and incentives to handset manufacturers that choose to use their chip sets.

The allegations that QUALCOMM's licensing program is causing carriers and consumers to face higher prices and fewer choices in WCDMA are also simply false.

The reality is that the average selling price of WCDMA handsets is declining and WCDMA subscriber uptake is increasing, each at a faster rate than GSM experienced during its early commercial years.

Further, there are already many suppliers or WCDMA handsets offering a wide variety of products across a large range of prices and aggressively competing in the market without a large share of the market concentrated among only one or a few suppliers.

These are the hallmarks of healthy, vibrant competition.

This action appears to be nothing more than a case of buyers, or in this case, licensee's remorse.

And an attempt by these licensees to renegotiate their license agreements by seeking governmental intervention.

We will as, Paul mentioned, vigorously defend our position.

And we will make every effort to help the European Commission understand the facts.

Now I'd like to take just a few moments to update you on the growth of CDMA around the world and highlight a number of important achievements in some of our other businesses.

We believe that the North American 3G CDMA handset sell-through remains solid.

Verizon Wireless now offers 60 3G devices.

Sprint/Nextel completed their merger and have already launched EV-DO services in initial markets and expect to extend the service to approximately half the U.S. population by early 2006.

Cingular/ATT Wireless remain on track to launch WCDMA HSDPA service in 15 to 20 markets by the end of 2005.

Popularity of the Verizon's Get It Now service continue to grow, with 4.6 billion text messages and 62 million picture and video messages exchanged during the second quarter 2005 and 36 million downloads of games, exclusive content, ring tones and ring back tones.

There continues to be a healthy competition and significant growth in the Japan 3G wireless market.

N.T.T.

DoCoMo has announced plan to have 24.1 million 3G subscribers by the end of March 2006.

Together, Japanese operators KDDI, DoCoMo and Vodafone have seen nearly 69% year-over-year growth in 3G adoption, increasing the number of 3G subscribers to 38.1 million as of September 2005.

We expect the subscriber numbers in the region to accelerate in 2006 as DoCoMo continues their 2-G to 3G migration at a rapid pace.

In Europe, WCDMA handset pricing continues to decrease, enabling operators to address a larger portion of their subscriber base.

European operators continue to increase the number and variety of 3G WCDMA handsets.

There are now over 200 3G WCDMA handsets available in the European region.

The U.K. and Italian 3G WCDMA markets remain the most competitive in western Europe.

Subsidization rates in the U.K. are unparalleled, with each carrier offering at least one and in most circumstances all of its 3G UMTS handsets free with a two-year contract.

We remain optimistic about consumer adoption in Europe and anticipate demand in unit volume to continue to grow as we look towards the holiday season.

In QTL, we converted the previously announced interim agreement in China into a permanent contract and now have a total of six WCDMA subscriber unit license agreements with Chinese manufacturers.

Each of these agreements are at QUALCOMM's standard royalty rates for WCDMA handsets.

WCDMA royalties recognized during the fourth quarter for licensee sales in the June quarter, has increased to 41% of royalties as compared to 36% in the prior quarter.

This increase percentage is primarily as a result of increased sales of WCDMA handsets in Europe.

In QIS, our focus continues on bringing wireless data solutions to operators around the world.

In August, we announced the acquisition of Elata, a leader in mobile content delivery software, based in the England.

Based on this acquisition, we have expanded our offering for operators that want to consolidate all their existing content delivery systems into a single comprehensive solution.

We are now supporting 56 operators in 29 countries around the world with commercial BREW products and services.

I now turn the call over to Sanjay Jha.

Thank you, Steve.

Good afternoon, everyone.

It is my pleasure to report on some of the results of superb execution at QCT this past quarter and the fiscal year.

We shipped a record 40 million MSM this quarter.

For fiscal 2004 -- 2005, our cumulative total is also a record with 151 million MSM record shipments.

These record shipments in turn led to record revenues for the quarter and for the year.

Only three years ago we were shipping at the rate of 16 million MSM's per quarter.

This quarter we expect to ship approximately three times that amount, between 46 to 48 million MSM's.

Our revenues were driven by continued demand for CDMA 2000 products, including a 95% increase in EV-DO volume quarter-over-quarter, driven by accelerating DO demand at Verizon, KDDI, SKT and Sprint.

Our wideband CDMA shipments increased 43% quarter-over-quarter.

Predictions of stronger second half UMDS demand in Europe appeared to be materializing.

We see Vodafone, EXi 3G, [Tims] and O2 being particularly aggressive this Christmas with their 3G offerings.

We also saw significant increase in demand for our value tier platform driving CDMA in India, Latin America, southeast Asia, and to a lesser extent, China.

We intend to compete for low-end consumers in all of these regions.

QCT's average selling price increased marginally from fiscal quarter '04 -- fourth fiscal quarter '04 to fourth fiscal quarter '05.

In addition, average selling price showed a slight increase over the previous quarter due to a continued shift in product mix to 6500, 6550 and MSM 6250.

Our operating profit margin was up 29% of revenue in the quarter, an increase from 24% versus the previous quarter.

QCT operating profit for the fiscal year was 26%.

Despite a substantial increase in R&D expenditure this year in HSUPA, multimedia, process and design and RF developments.

We expect operating profits for first fiscal quarter '06 to be in line with this current quarter -- I mean, previous quarter -- the fourth fiscal '05.

Over the last four years we have invested heavily in our multimedia capabilities.

These investments were made after close consultation with operators and OEM's and our investments have resulted in 12 mobile handsets utilizing the enhanced multimedia platform MSM 6550 chipset.

With sample in 2004 and 109 mobile handsets based on MSM 6500 chip sets which sample in 2003.

Going forward, we see strong customer interest in our 7000 series platform that includes dual microprocessing for greater computing power in anticipation of convergence of the IT and mobile environments.

We have continued the development of our wideband CDMA portfolio as well.

More than 30 manufacturers have selected our wideband CDMA and HSDPA solutions to power more than 110 handsets, with 30 available in design. [H3G] is now advertising the LGE U880 based on MSM 6250 and Samsung is introducing some of the tiniest wideband CDMA phones, also based on MSM 6250 with carriers globally.

Interim [inaudible] testing for our HSDPA solution has been successfully completed with a number of network infrastructure provided us around the world.

Numerous launches of [inaudible] power devices for HSDPA networks are scheduled for the first half of 2006.

We also introduced our second generation HSDPA chip set, MSM 6280 to support [inaudible] rates of up to 7.2 megabits per second and expect devices based on this chip to be available commercially in the first half of calendar 2006.

QCT's gpsOne continues to be widely adopted by wireless carriers worldwide.

NTT DoCoMo has launched their first assisted GPS-enabled handset by [Sanlo] based on our MSM 6250.

Vodafone KK also launched a QCT gpsONE-enabled handset that is the first assisted GPS handset at any Vodafone property.

Thank you.

And I will now turn the call over to Bill Keitel.

Thank you, Sanjay.

Good afternoon, everyone.

As Bill Davidson mentioned, we filed our Form 10-K report today continuing our standard practice of filing our SEC report in tandem with our earnings release.

In addition, our Form 10-K report includes a certification from our outside auditors in accordance with Sarbanes-Oxley Act, section 404.

We are pleased to report another year of record revenues, earnings per share and operating cash flow.

We achieved these strong financial results during a year of increased R&D investments to expand our engineering base and develop new products for the future.

I'll begin with a brief definition of our pro forma reporting.

Pro forma results exclude the QUALCOMM strategy initiative segment for all periods presented, as well as one time tax benefits.

And provides a comparison to 2004 as if the 2005 method of recording royalty revenue had been in effect for all of 2004.

In fiscal 2006, pro forma results will exclude share-based compensation under FAS 123R.

I'm now highlight for you a number of key items in our fiscal 2005 results.

First, GAAP earnings for fiscal 2005 were a record $1.26 per share, including approximately $0.05 per share attributable to tax benefits arising from our ability to utilize additional capital loss carry-forwards, $0.04 per share from one time tax benefits attributable to fiscal 2004, and approximately $0.01 per share from QSI.

Pro forma revenues increased 13% year-over-year to $5.67 billion and pro forma earnings per share increased 8% to $1.16.

Second, and as Paul mentioned, during the year we returned approximately $1.5 billion in capital to our shareholders through stock repurchases and our growing dividend program.

Our business model continues to generate strong cash flows.

Operating cash flow for fiscal 2005 was $2.7 billion, up 8% year-over-year and a healthy 47% of revenue.

Third, our fiscal 2005 pro forma effective tax rate was approximately 30%, compared to our prior estimate of 28%.

This increase is primarily the result of additional tax related to our one time repatriation of approximately $500 million of foreign earnings in accordance with the American Jobs Creation Act.

And the resulting $35 million additional taxes reduced fourth quarter and fiscal year 2005 earnings per share by approximately $0.02.

We recorded approximately $0.03 earnings per share from gains on our put-option program.

I note this because some investors could look upon the one time tax expense for repatriation and income from selling put-options as nonoperating items.

The put-option income included approximately $18 million realized income and approximately $24 million unrealized mark-to-market income.

Fourth, R&D investment remained a strategic priority this year, as we continued to invest in enhancements of the CDMA2000 technology roadmap, WCDMA chip development, multimedia functionality and other long-term technology developments.

We also continued to increase our investment in new business opportunities, including MediaFLO and QUALCOMM's MEMs technologies.

R&D spending grew to $1 billion in fiscal 2005, an 40% year-over-year increase.

And I'm pleased with the revenue opportunities ahead from the innovative products and services as a result of these increased investments.

Fifth, as Sanjay mentioned, QCT shipped a record 151 million MSMs in fiscal 2005.

QCT's operating margin improved to 29% in the fourth quarter on a higher volume and favorable product mix.

Sixth, our QTL business continues to be positively impacted by the growing adoption of CDMA around the world.

WCDMA royalties grew to approximately 41% of third party royalties in the fourth fiscal quarter, representing handsets shipped during June quarter by our licensees.

Of the $497 million in total QTL revenues in the fourth quarter, $36 million represented intracompany royalties, $18 million were license fees and $443 million were royalties from third party licensees.

QTL's operating margin was 90% for fiscal 2005 and 91% for the fiscal fourth quarter.

Based on royalty reports from licensees, worldwide CDMA handsets shipped in the June quarter were approximately 48 million units, up from approximately 43 million units just in the March quarter.

The average selling price of CDMA handsets was approximately $213.00 for the June quarter and $215.00 for the fiscal year.

Turning to our guidance, for the calendar 2005 CDMA market, we expect shipments of approximately 200 to 205 million CDMA-based handsets.

Based on the 202 million midpoint of this estimate, we anticipate approximately 158 million CDMA2000 and 44 million WCDMA handsets to be shipped worldwide.

We estimate the CDMA phone market will increase to approximately 255 to 270 million unit shipments in calendar 2006, an increase of 26% to 34% over our midpoint estimate for calendar 2005.

Based on the 262 million midpoint of this estimate, we anticipate shipments of approximately 176 million CDMA2000 units and approximately 86 million WCDMA units.

We anticipate fiscal 2006 earnings to be in the range of approximately $6.7 to $7.1 billion, an increase of 18% to 25% over fiscal 2005.

We anticipate pro forma diluted earnings per share to be in the range of $1.43 to $1.47, an increase of 23% to 27% year-over-year, inclusive of approximately $0.03 dilution from the Elata acquisition and the anticipated Flarion acquisition.

We anticipate closing the Flarion acquisition very early in the second fiscal quarter.

We estimate average selling prices for CDMA 2000 and WCDMA phones combined to decrease 2% in fiscal 2006 to approximately $210.00.

We expect a combination of pro forma R&D and SG&A expenses to increase approximately 22% to 27% year-over-year, with the majority of the growth occurring in R&D as we continue to inch invest in the evolution of our technology road maps.

We anticipate our pro forma tax rate in fiscal 2006 to improve to approximately 27%.

Based on the current business outlook, our fiscal 2006 revenue and earnings estimates include approximately $290 to $310 million year-over-year improvement due to the termination of royalty sharing.

This guidance is slightly lower than our prior estimate provided a year ago due to a smaller than expected CDMA market in 2005, notably WCDMA, which in turn results in a smaller base going into 2006.

We estimate GAAP earnings per share will be approximately $1.19 to $1.23 for fiscal 2006.

This estimate includes a loss of approximately $0.06 per share attributable to QSI and a preliminary estimate of approximately $0.18 per share for stock option expense.

Turning to the first quarter, we estimate revenues to be in the range of approximately $1.67 to $1.77 billion, a 20% to 27% increase year-over-year.

We estimate first quarter pro forma diluted earnings per share to be approximately $0.36 to $0.38, a 29% to 36% year-over-year increase.

This estimate includes shipments of approximately 46 to 48 million MSM phone chips during the December quarter and approximately 51 to 53 million CDMA-based handsets shipped in the September quarter at a average selling price of approximately $206.00.

We expect QTL and QCT operating margins to be within approximately plus or minus 100 basis points of Q4 actuals.

We anticipate pro forma R&D and SG&A expenses combined to increase sequentially approximately 7% to 9%.

I also want to share that we expect GAAP and pro forma second fiscal 2005 earnings to sequentially decline from the first quarter by approximately $0.02 to $0.03 per share.

Due to seasonality of chip demand and expenses, as well as increased employees, principally in engineering.

The QUALCOMM Investor Relation website includes a thorough presentation of the many data points shared here on this call.

I look forward to sharing with you additional data points regarding our fiscal 2006 guidance, including regional handset shipment estimates at our London analyst meeting next week.

The meeting will be webcast for those of you not able to attend.

That concludes our remarks.

Operator, we're ready for questions.

[OPERATOR INSTRUCTIONS] Our first question comes from the line of Brian Modoff at Deutsche Bank.

Please proceed with your question.

A couple questions.

Sanjay, can you give us some ideas of your visibility on your business going into the current quarter?

Second, you made a comment in the press release about your fine work in DO being adopted by HSDPA -- can you talk about how you see your [inaudible] for HSDPA?

And then finally, have you approached any operators -- talked to any operators in Europe regarding this complaint filed [inaudible] competitors and any feedback from them?

Thanks.

Brian, we didn't hear you very well.

[inaudible] -- visibility for your business, Sanjay?

The second was, EV-DO's IT contribution to HSDPA?

And the third one, have you had any discussion with carriers, especially in Europe, about the recent litigation?

Could you repeat that from the beginning?

I didn't catch all of it.

Sorry.

Can you hear me now?

Yes, I can.

Okay.

Sorry about that.

The first question was regarding Sanjay, your visibility on the current quarter, i.e. your backlog and how do you feel about the numbers you put out there?

The second question is around the comment you made in the press release around your DO contribution -- or what you developed in DO being significantly adopted in HSDPA.

Can you talk about what your patent portfolio looks like in HSDPA?

And then finally, on this recent complaint filed against you, have you talked to any operators in Europe -- gotten any feedback from them on these allegations?

Well you can do -- why don't you do the backlog and the numbers?

We heard the last question.

I heard the first part of your three questions -- three part question and I will address it.

I feel very comfortable with the guidance that we provided you of 46 to 48 million, Brian.

And unfortunately, I didn't catch any of the second and the third part.

I know the second part was something to do with EV-DO, but I didn't get the detail.

The third question was asking a question whether we had talked to carriers in Europe yet about the E.U. allegations.

We have actually been focused on the manufacturers.

We have had some conversations with various manufacturers.

It's clear that this group of six companies had been going out soliciting other participants.

And that they were turned down by some significant partners of ours who we've had discussions with.

But we're continuing to reach out to our partners around the world about this issue.

Thank you.

Our next question comes from the line of Mike Ounjian at Credit Suisse First Boston.

Please proceed with your question.

Great.

Thank you.

Just looking toward the holiday season here, if we could get a update on whether there's anything we should be concerned about in the way of channel inventories?

And also, just given the continued ramp of the MSM shipments.

Should we be concerned at any point about any capacity constraints?

Or at this point, is there good potential upside to extend demand is there?

Also just to repeat Brian's question, I think the middle one that wasn't heard, I think would be interesting for us also to know.

On EV-DO, I think if I understood the question correctly, was IPR contributions from EV-DO to the HSDPA standard.

Really how much of the EV-DO technology was contributed to the HSDPA standard, given the intellectual property in that that as well.

I'll let Steve take -- or Paul take IPR question.

Go ahead.

Talk to the MSM.

Okay.

So the channel inventory issue -- we believe the channel inventory is very much in the range that we have guided you previously that we consider normal.

We consider 16 to 20 week channel inventory to be normal.

We believe right now the channel inventory is very much in that range.

So we have not seen any sign of any challenge inventory in any particular region.

Your second question was, as we ramp our volume from what used to be 16 million unit run rate per quarter to potentially 46 to 48 million a quarter -- this quarter, do we have any volume constraints from suppliers?

Right now, we are able to meet that demand without any question and we have worked very hard to bring multiple sources for each of our products.

We believe, as our volume ramps up, we will be able to meet most all of our demands.

There may be one chip for one week where we have some difficulty meeting the exact number, but we expect that's the normal operational process.

And we don't see, at the present time, any difficulty in meeting the accelerating demand we see in front of us.

In terms of the EV-DO contributions to HSDPA -- not just modulation techniques, but also protocol techniques have been put into HSDPA but also into GPRS and Edge.

So the investments that we've been making to improve data capability on the CDMA2000 side have found their way into the GSM and WCDMA communities as well.

Great.

Thank you.

Also I'd like to remind everyone that we're looking to take one question from each participant.

And so if you ask more than one, we'll pick which one to answer.

Thank you.

Our next question comes from the line of Daryl Armstrong at Smith Barney Citigroup.

Please proceed with your question.

Thank you very much.

Just wanted to check whether there was any benefit from the ending of the CDMA royalty sharing agreements recognized within the quarter you guys just reported?

Daryl, as I said, the improvement we had in fiscal 2005 was extremely modest.

The benefit has all been targeted in fiscal 2006.

Great.

Thank you.

Our next question comes from the line of Maynard Um at UBS.

Please proceed with your question.

Thank you.

Can you talk a little bit about the strength in the reconciling items EBIT, was that the display business, the QMT?

And if so, when does that become material enough to break out?

Yes, in the reconcile you've got a number of things.

You've got the -- our display technology investments.

You have some corporate R&D investments.

And you also have some MediaFLO, where we're making investments to develop media flow opportunities outside of the U.S. -- outside of the U.S.A. operator side.

I don't see breaking that out into a new segment for the next -- certainly for the next year.

Thank you.

Our next question comes from the line of Hasan Imam at Thomas Weisel.

Please proceed with your question.

Thank you.

A number of the largest CDMA equipment vendors reported pretty weak CDMA infrastructure deployments.

I think one major U.S. vendor, in fact, talked about operators delaying 3G deployments in anticipation of EV-DO Rev A. I was wondering if you could put the network deployment slow downs in perspective?

Particularly as it relates to your CDMA handset guidance, as well as the infrastructure chips of business?

I think we've seen strong demand for DO.

As Sanjay talked about, in terms of chip shipments as you've seen from some of the carriers announcing their results, Verizon in particular just recently did that.

So while there certainly is demand for a DO Rev A that's been articulated by the operators, we think the handset shipments will continue to go forward.

And Sprint in particular also, has announced they built out their network and they're going to continue to do that through this year.

So we think that that is actually continuing to go ahead well.

If I can just make a comment about the CSM shipment, as you know last year, we had record CSM shipment and we thought that that was consistent with the very broad 1x roll-out.

This year we've seen the CSM shipment being relatively strong but certainly not as strong as last year.

Which perhaps is consistent with the view expressed by some infrastructure vendors that you quoted.

But this is the normal cycle.

And the strength that we've seen this year has been more geared towards DO deployment -- Verizon has deployed a significant amount in the United States and of course Sprint is rolling out that deployment.

So I think that we're seeing cyclicality of technology deployment.

I don't think that we see any more than that.

Our next question comes from the line of Brant Thompson at Goldman Sachs.

Please proceed with your question.

I was wondering if you could give us a little more thought around the need to ramp R&D so aggressively into next year.

At what point or how shall we think about where your R&D scale is sufficient enough that that can start to tone down again or level off versus your revenue growth?

Thanks.

Okay.

So although we are going to continue to ramp R&D aggressively, the rate is already starting to slow down in this last fiscal quarter and into next year, though it will grow still greater than revenue, as we're projecting.

It is less.

And the reason why is because the opportunities are ahead of us.

So there's a number of things that are getting integrated into the chip sets now, from new modulation techniques to multimedia capabilities to graphics capabilities to processing, as we look at the new DO Rev A opportunities and beyond that DO Rev B, the idea of running multiple radios at the same time, multiple threads in the processors; all these things are adding new capabilities, generating, we hope, new revenues for all of the participants in the value chain.

So it's really a recognition that the opportunities are strong ahead of us.

And this is fairly traditional for us.

We make large investments in R&D at these technology transitions and then we reap the benefits as those products then ramp to generate large revenues.

Our next question comes from the line of Bill Benton at William Blair.

Please proceed with your question.

Good afternoon, guys.

Could you just talk a little bit about your ASP thinking on the handset side?

Obviously, you're looking for it to to come down and then go back up in your guidance.

Can you talk about your confidence around that and some of your deviation assumptions?

Sure, Bill.

It's Bill Keitel, here.

I think you saw last quarter -- we finished one quarter $231.00, we forecasted $215.00 and we came in at $213.00.

So I felt pretty confident about that forecast.

We came in pretty close.

I feel pretty good about the $206.00 forecast as well.

You get the regional differences going on there.

But we're expecting WCDMA and DO to increase, but at the same time, we're also expecting the low-end to advance.

We've been pushing pretty hard there with our investments and we think we're growing the CDMA market as a result.

So if you look market -- or region by region, I expect Europe to be strong in the next quarter, Latin America to be strong, North America to be strong.

In fact, as I look across all the markets those kind of stand out as the stronger growth.

But I look at each region to have some growth, with maybe perhaps, the exception of Korea.

They might be kind of flattish.

You would expect your deviation to still remain pretty wide?

Or do you expect -- ?

Oh, yes.

The deviation is wide.

In fact, it's getting wider, just as it has for the last several years.

Okay.

Thank you.

Our next question comes from the line of James Faucette at Pacific Crest.

Please proceed with your question.

Mr. Faucette, your line is open.

You may proceed with your question, sir.

I'm sorry.

I just wanted to follow up on that question.

As you look at your ASP improving for next year while you're expecting growth at the low end, have you had to moderate your expectations of growth for some of the emerging markets like India and China?

They have proven they have a bit of a tough year.

If so, what does that do for your longer-term outlook and strategy for the CDMA?

Thank you.

James, I'm going to reserve -- ask me this question again next week in London because we are going to get into our regional breakouts.

But I would say that you've seen some moderation this year relative to our forecast and we have factored that into the 2006 and in our forward plans.

Honestly, it's not that the market isn't going to happen.

It's only the pace at which we get there.

So in the case of those lower-end markets, the Chinas, India and Latin America; we work closely with the operators -- I think we got the products that they want and need.

And we're in a tough battle with GSM..

But nonetheless, I think we're feeling pretty good about this forecast for ASP's next year.

I would say that we saw strength in Latin America and we saw some improvements in India.

We saw some pretty aggressively moves by Tawda in particular in India.

So those two markets look like they're actually doing reasonably well.

China, of course, we're still waiting for 3G licenses.

And I think that the uncertainty around that will continue to have some effect on China Unicom going forward, though we're there trying to help them with their marketing as much as possible.

Our next question comes from the line of Louis Gerhardy at Morgan Stanley.

Please proceed with your question.

Good afternoon.

I think this question is for Bill -- but I just wanted to try to understand any complexities that the EC complaint might trigger here.

And without singling out any one of the complaintants here, do any of them have license agreements that might expire in fiscal '06?

And if so, does that create any reporting complexities if the two parties disagree on royalty rates?

Well, we're operating under agreements, Louis.

So I don't see that complexity.

From time to time we'll have a licensee that will perhaps dispute a amount here or there.

They're generally small.

They come and go.

And it's never anything that even gets up to the point of an accounting question, really.

I don't see anything on the horizon for next year.

I agree with that.

I don't see that being a issue.

Okay.

Thank you.

Our next question comes from the line of Tim Long at Banc of America.

Please proceed with your question.

Thank you.

Question for either Bill or Sanjay.

Could you help us understand the QCT line a little bit?

Looking at the MSM shipments up about 11% sequentially and revenues up about 19% -- last quarter we saw the MSM's be down sequentially and revenues were up about 3% sequentially.

So you talked about modest ASP improvement, Sanjay, both quarters.

But it looks to be something else going on there.

So does modest mean mid to high single digits?

Or are there other -- and it also sound like the CSM's haven't been that strong, either.

Is there just other chip set parts of the business that are doing well that's contributing to the better than MSM growth in that business?

Thank you.

Quarter-over-quarter our ASP improved by 7%, Tim.

And driven really by pretty good, healthy traction in our multimedia and enhanced multimedia chip set, 6100, 6500, 6250, 6550 and 6275.

Does that close the gap for you?

Yes.

I consider that better than moderate.

That's great.

Thank you.

Ladies and gentlemen, due to time constraints we will be taking one more question.

Our final question is from the line of Mike Walkley at Piper Jaffray.

Please proceed.

Great, thanks.

Maybe just another comment for Sanjay, here.

As you look at the strong growth sequentially in you WCDMA shipments, can you talk about your visibility in that versus your predict on handset growth?

Maybe the rate of growth of the two divisions?

That would be just great if you would comment on your growth in WCDMA chips.

Thanks.

I feel very comfortable with the progress that we have made so far this year in getting market share in wideband CDMA.

If you look at all the carriers who are launching 3G handsets and look at how many of the handsets that they're launching that use our chip set, I feel pretty good that we are increasing our presence in the wideband CDMA marketplace.

Now how well these handsets ship and therefore, what is my eventual market share is obviously difficult for me to predict because there are lots of transactional issues; what subsidies do -- carriers provide, what deal do the OEM and carriers do.

That I don't have visibility into and I can't predict.

But in terms of the numbers of handsets being launched and in terms of the handsets being launched with carriers who look to be very aggressive this Christmas -- I feel very, very good.

And as we've shared with you for the last three quarters, we've seen substantial increase in our wideband shipment.

If I look at number of hand sets now being designed, based on our wideband CDMA chip sets, again I feel very comfortable.

If I look at our leadership in HSDPA and then soon to be sampled HSUPA, again, I feel relatively comfortable with the progress we are making in UMTS.

As I have shared with you a number of times, we continue to invest in that technology.

I feel very comfortable that that's the right place to invest and we're seeing results that justify that investment.

Thank you.

Dr. Jacobs, I'll turn the conference back over to you for closing remarks.

At our New York analyst meeting I outlined three themes driving our growth; innovation, execution and partnership.

Now, with the events of Friday, I just want to say that we will respond to our competition in whatever form is necessary.

But I want to assure you that we will remain focused on what's made us strong; and that's leading the industry with technical innovation, executing to the commitments that we make to our partners and helping to drive their businesses and make them strong.

It's been a record year for us.

And with all the opportunities ahead and the growth that we see of our markets ahead of us, we expect an even better 2006.

So I wanted to say thank you all for being with us today.

And hopefully we'll see some of you in London.

Ladies and gentlemen, that does conclude the conference call for today.

We thank you once again for your participation. [OPERATOR INSTRUCTIONS] Thank you and have a good day.