I have to say I wouldn't be surprised to find out that our chip collaborator is Qualcomm.
This line alone ...
"Qualcomm has always been willing to make bets — as it did with CDMA — on what it believed was best in the long run, even though it might not be perceived by others as the right thing to do."
Just take a look at that Patent Wall in the first photo, yes it is two storeys high.
Can Qualcomm reconnect?
Strategic review wrapping up on whether to split the company
By
Mike Freeman | 7:44 p.m. Dec. 4, 2015
Patents issued to Qualcomm are displayed on the Patent Wall at the company’s headquarters in Sorrento Valley.
— K.C. Alfred
Thirty years ago, Irwin Jacobs left his previous company, Linkabit, to co-found Qualcomm. He didn’t have high expectations.
“I told my wife at the time that maybe we would get up to 100 people,” said Jacobs, 82, Qualcomm’s retired chairman and CEO emeritus. “We had done really well with a lot of technology breakthroughs at Linkabit, but you couldn’t expect that” to happen again.
It did.
Today, Qualcomm ranks among San Diego County’s largest employers with roughly 13,000 local workers and about 30,000 worldwide. Its technology powers most of the 3.4 billion active smartphones on the planet. It’s one of only two Fortune 500 companies with headquarters in San Diego County, along with Sempra Energy.
Over the years, the company has become woven into the fabric of the region — from its name on Qualcomm Stadium to its support for the UC San Diego; from Joan and Irwin Jacobs’ $120 million pledge to the San Diego Symphony to the Qualcomm Foundation’s work with food banks and Girl Scouts; from the millions that former executives have donated to UCSD Health Services to the thousands of volunteer hours put in by company employees in the QCares program.
Yet Qualcomm is at a crossroads. In September, the company announced that it would lay off 1,314 workers in San Diego — and more elsewhere — in a drive to cut $1.4 billion in costs as the smartphone market matures. Its share price has tumbled roughly 30 percent this year.
The van in which some of the first CDMA tests were done is displayed at the Qualcomm Museum on the Qualcomm campus in Sorrento Valley.
— K.C. Alfred
Under pressure from an activist investor, the company is exploring whether to split its technology licensing division — which produces most of its $5.3 billion annual profit — from its wireless chip business, which accounts for the bulk of its $25.3 billion in revenue. It’s expected to complete its strategic review by the end of the year.
Any moves that the company makes in its strategic review are likely to ripple through San Diego.
Computer models for the region’s economy show that each Qualcomm job results in 1.6 additional jobs locally. The recent layoff of 1,300 Qualcomm workers could cause an additional 2,080 jobs to be lost and reduce the county’s annual economic output by $432 million, said Kelly Cunningham, economist with National University System Institute for Policy Research.
Compare that with the potential impact of the Chargers leaving San Diego, which would be much smaller, said Erik Bruvold, president of the National University System Institute for Policy Research.
That’s because the Chargers bring relatively few new dollars from outside the region into the community, he said. The team is largely serving local demand.
Related:
Qualcomm, UC San Diego maintain tight bonds
“Absent the Chargers, the dollars spent at Qualcomm Stadium by San Diegans aren’t going to be taken out to the backyard barbecue and burned,” Bruvold said. “They are going to be spent on other entertainment — going to the movies, going out.”
Conversely, Qualcomm is selling wireless technology to the world and bringing back new dollars to San Diego. A 2012 study by the San Diego Regional Economic Development Corp. estimates that Qualcomm adds $4.53 billion in direct and indirect economic activity annually to the region.
That is equivalent to the region hosting one-and-a-half Summer Olympic Games every year, according to the study.
Despite current struggles, Qualcomm executives are optimistic about where the company is headed. Not only is the smartphone market still expanding globally — albeit at a slower pace — but Qualcomm’s wireless technology is finding its way into new industries such as autos, health care devices, drones, connected cameras, data centers and robots.
Recent restructuring moves aim to position the company to take advantage of these markets — as well as be more competitive in the maturing smartphone market, said Chief Executive Steve Mollenkopf.
“When you look at the company five years from now, I think the core athletic ability of Qualcomm — which is combining communication systems and computing at scale — is going to be relevant,” he said. “The number of industries that will need that (expertise) is growing.”
Homegrown success
To rise from nothing to a Fortune 500 company is unusual anywhere outside of perhaps the Silicon Valley. It is particularly rare in San Diego.
Led by the biotech industry, the region’s technology economy is built on entrepreneurs launching startups to prove new technologies, bulking them up, selling them and starting over again.
“You see an endless number of companies that are shining stars in San Diego get acquired over the years,” said Mark Cafferty, president of the San Diego Regional Economic Development Corp. “Sometimes that works out OK for the region, and sometimes you look up and the buildings are empty.”
Still, it’s considered a good model because 90 percent of new jobs are created by companies 5 years old or younger, says the Kauffman Foundation.
But there are benefits to having larger, brand-name firms. Qualcomm, which recruits employees nationwide, has brought gravitas to San Diego’s high-tech job market, said Rory Moore, head of startup incubator EvoNexus and co-founder of Peregrine Semiconductor.
“Qualcomm provided the community with a huge anchor where talent could be attracted,” he said. “Irwin and the founders created a company that attracted top talent, and over time they had the capital and the environment to keep top talent. That was really good for the community. It created a strength in San Diego for engineering excellence.”
Qualcomm became a homegrown success in part by design. In 1980, Irwin Jacobs sold Linkabit to a larger firm. He stayed on but after a few years, management changed and things started to go downhill.
“That was somewhat of a lesson,” he said. “I was very determined that we would try to grow (Qualcomm) ourselves.”
There was another factor at play, too. At the time, Qualcomm’s core technology was widely ridiculed by most of the wireless industry. A Stanford University professor famously claimed Code Division Multiple Access (CDMA) violated the laws of physics. Jacobs’ promise that CDMA would vastly expand the capacity of cellular networks was dismissed as hype.
“Nobody believed in what the company was doing,” said Bill Davidson, a former senior vice president of Qualcomm. “I would like to say there was a great story of turning down acquisition offers. But in fact, nobody came knocking.”
A handful of wireless operators were intrigued by CDMA’s potential to handle many more subscribers than rival technologies. That kept the company alive. When it became clear that CDMA was real, the stock exploded, making Qualcomm too expensive for other companies to gobble up.
Donald Hutson, Sr. Support Staff Engineer works on drone technology in the research robotics lab at Qualcomm.
— K.C. Alfred
“If Ericsson or Nokia or Motorola could go back in time and predict that CDMA would be as successful as it was, it would have been a very smart move for them to have acquired us,” said Steve Altman, retired president of Qualcomm.
The success created wealth for many of the company’s investors, executives and employees who had stock options and have been dubbed “quillionaires.” While it’s hard to measure, that wealth has spread into San Diego.
Altman and his wife, Lisa, donated $10 million to UC San Diego Health Sciences to help build the Clinical and Translational Research Institute. Former executive Rich Sulpizio and his wife Maria gave $10 million to UC San Diego to help construct the Sulpizio Cardiovascular Center. Joan and Irwin Jacobs have pledged to give away half of their wealth.
In addition to the San Diego Symphony and UC San Diego, they’ve made major contributions to San Diego Public Library, the Salk Institute for Biological Studies, San Diego State University, High Tech High Foundation, the Jewish Community Foundation of San Diego and other local organizations.
A bit under the radar are ex-employees like Jeffrey Belk, a former senior vice president who left in 2008 after 14 years. He serves on the boards of nonprofit organizations and for-profit companies. The head of ICT168 Capital, he also funds startups including local software firms Velocity Growth, Annai Systems and StackIQ.
In an interview, Belk reeled off the names of a half-dozen other ex-Qualcomm staffers who are doing similar things.
“This is just people in my circle,” he said. “If you pulled on threads, you could come up with a lot of different names. It is really rare to find someone who left and just sat on the beach.”
Challenging times
Qualcomm’s missteps this year include Samsung ditching the San Diego company’s Snapdragon processor in its Galaxy S6 smartphones, trouble collecting patent license royalties in China and anti-monopoly investigations by governments around the world.
Where does Qualcomm go from here? Its path will become more clear after it finishes its strategic review at year’s end.
Qualcomm has considered a split twice before. Its board of directors rejected the idea both times, concluding that the two divisions rely on each other.
Some Wall Street analysts think splitting the company could make the chip business and/or the licensing division attractive takeover targets for rival firms.
The company’s shares are trading at about $50.Bank of America/Merrill Lynch analyst Tal Liani recently calculated that a “conservative” sum-of-the-parts valuation for Qualcomm is $65 per share.
Qualcomm executives likely are under pressure from at least some investors to break up the company to unlock this value.
“Qualcomm’s biggest threat right now isn’t the (smartphone) market. Their biggest threat is Wall Street,” said Jim McGregor, head of technology consulting firm Tirias Research.
“Wall Street is looking at (low) annual growth rates in semiconductors,” he continued. “So they’re pushing for mergers. They’re pushing for breakups. They’re pushing for things that are going to make them money. It is not going to benefit the industry.”
Given its current stock price, Qualcomm is clearly worth more in pieces than it is together, said Timothy Arcuri, managing director with Cowen & Co.
Still, he handicaps the possibility of a split as “fairly low.” That’s because patent licensing pays for the research and development in Qualcomm’s chips that push the mobile industry forward.
According to current and former executives, Qualcomm has always been willing to make bets — as it did with CDMA — on what it believed was best in the long run, even though it might not be perceived by others as the right thing to do.
“For us, we have the right plan,” Mollenkopf said. “We need to focus on the things that we started this year, get them done. Our ability to continue to drive the industry, and now multiple industries — it will happen.”
