Nov. 12 (Bloomberg) -- Qualcomm Inc. Chief Executive Officer Paul Jacobs said he's stopped hiring and is eliminating some research projects after a ``dramatic'' contraction in chip orders from mobile-phone makers.

``We have basically shut off our new hiring growth,'' Jacobs said in an interview in New York today. ``Before it was, `Let's let a thousand flowers bloom,' now we're going to do a bit of pruning. We've shut down some projects.''

Jacobs, who heads the biggest maker of mobile-phone chips, said orders dropped off in October because handset manufacturers cut back on their stockpiles of unused parts, a reduction that will last for about two quarters. Consumer demand for mobile phones with Qualcomm chips is holding up, he said.

``The end market, while it's slowing a little bit, isn't that dramatic,'' said Jacobs, 46. Still, there is ``some uncertainty'' in the company's earnings projections.

Revenue this quarter may fall as much as 6 percent from a year earlier, the first decline in seven years, Qualcomm said last week. Annual sales increased 22 percent on average in the past six years as Qualcomm benefited from increasing use of its chips in mobile phones that provide high-speed Internet access.

Qualcomm, based in San Diego, fell $2.50, or 7.1 percent, to $32.57 at 4 p.m. New York time on the Nasdaq Stock Market. The stock has declined 17 percent this year.

`A Lot of People'

Qualcomm increased its workforce by 20 percent last year to 15,400 after gains of 14 percent in 2007 and 20 percent in 2006. Jacobs is now reassigning engineers to projects with higher chance for commercial success, while shutting down others including a high-speed wireless Internet technology program.

``We've had this fairly dramatic growth in research and design over the last couple of years and we've got a lot people,'' he said. ``We don't plan to do a major layoff across the company, but we have contingency plans in case the economy gets worse.''

The Qualcomm unit that focuses on creating new businesses has weighed on profit. The company is working on improving that and expects the unit to contribute to earnings in about two years, Chief Operating Officer Len Lauer said in the interview.

Qualcomm is also targeting the market for new types of devices that fill the gap between computers and mobile phones. The company developed a design, based on its chips and Opera Software ASA's browser, for a portable device that consumes less power than a laptop and accesses the Web using mobile-phone networks.

The first models based on that design will go on sale in the first half, Jacobs said.

Licensing Revenue

Unlike other chipmakers, Qualcomm gets most of its profit from licensing its technology, called code division multiple access, or CDMA. Patents, which Qualcomm licenses to phone makers and service providers, accounted for 29 percent of sales and 63 percent of earnings in 2007.

Handset manufacturers using Qualcomm's technology pay the company a percentage of the price of the phone. Service providers using CDMA, including Verizon Wireless, also pay Qualcomm. In July, Qualcomm struck a deal with Nokia Oyj, the largest maker of mobile phones, to end a legal dispute over royalty charges.

Qualcomm will continue to earn licensing revenue even when new networks are built using different technology, Jacobs said. The company is conducting research that will cover those new standards, he said.

``In the technologies that we know about today, we feel we have a good position,'' he said. ``There was this wish that somehow the world would change and intellectual property would no longer be important, but companies are putting huge amounts of money into research and so they're looking for a return.''

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net

Last Updated: November 12, 2008 16:07 EST