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The Handset as "Very Powerful Computer"

At an age when many CEOs would be retired and camped out on the golf course, Qualcomm's (QCOM) Irwin Jacobs, 70, is just hitting his stride. The cellular-phone standard he developed, CDMA, is catching fire throughout the world. And demand for Qualcomm's chips, which power 90% of the CDMA devices sold, is so high that Qualcomm has upped its sales and earnings forecasts three times in the last year (see BW Online, 4/6/04, "Why Qualcomm Keeps Ringing").

At a recent interview in his San Diego office, Jacobs discussed the challenges and opportunities facing Qualcomm -- No. 17 in the latest BW50 rankings -- with BusinessWeek Los Angeles Correspondent Arlene Weintraub. Following are edited excerpts from their conversation:

Q: Some chipmakers have set their sights on entering the CDMA chip market, most notably a consortium of Texas Instruments (TXN), Nokia (NOK), and STMicroelectronics (STM). How significant is that threat?

A: They haven't won any notable customers, but it's probable they'll gain some share. We'll work hard to compete with them. We have a few challenges.

Look at the device we call the cellular telephone. It's really becoming a very powerful computer. We need to support the use of the phone above and beyond voice -- data, video, position location, photography, and more. That means extending the range of technical areas in which we're experts. We need to continue to lead the community in terms of introducing those capabilities.

Q: Qualcomm continues to invest heavily in research and development -- almost at levels more typical of tiny startups. Why?

A: There's always a balance in deciding how much to invest in R&D vs. quarterly profits. We're in a field with a great deal of potential for future growth. We need to make sure we're well positioned by continuing to support R&D. That's the path we're on.

Q: After a slow start in India, where CDMA services were launched last year, business is picking up. What happened?

A: The government decided to allow CDMA operators to offer normal cellular service, rather than limited-mobility service. That encouraged [the CDMA carrier] Tata to gain licenses to cover more of India than they originally planned. That raised the whole competitive level in India. Plus, the economic situation in India has been improving. A lot of jobs are going there. All of this has combined to help cell-phone sales.

Q: In January, Verizon (VZ) decided to roll out Qualcomm's technology called EV-DO, which provides high-speed wireless data on laptops and cell phones at speeds comparable to DSL. What do you predict will be the impact on the industry?

A: The other operators are going to have to figure out how to match it. They need to be able to offer higher rates of data. This will encourage them to move more rapidly.

Q: You're on a quest to get CDMA into Vietnam, and you toured the country recently. Why is Vietnam attractive to you?

A: The first thing that strikes you in Vietnam is the preponderance of motor scooters. The streets are just packed with them. You see relatively few bicycles. That means people have enough income to buy expensive devices. If they can do that, we think they'll certainly be able to buy mobile phones.

Q: It took you many years to convince government officials in China to let CDMA into that country. What were the toughest hurdles there?

A: We first tried to set up a joint venture with one of the government factories, but we could never agree on what Chinese law was. Our lawyers said one thing, the Chinese government said something different. We could never work our way through the issues. The other challenge was finding the right organizations with which to communicate.

Q: What did you learn that you're now applying to Vietnam and other target countries?

A: First of all, patience. Secondly, you have to work with the government regulators to understand what the issues are and how to work through them. And you have to work with the local manufacturers to help them build up hardware and software capabilities. We've since increased the number of Qualcomm people we have working in each country. We need to have a presence in these countries.

Q: Much of your job at Qualcomm has been to evangelize CDMA to carriers around the world. Does that come naturally to you?

A: No. My poorest grade in college was public speaking. But I learned as I went along. One thing I always did was allow people to hear and see CDMA. I invited them to come in and kick the tires. Try it out.

Q: Two of your four sons, Paul and Jeff, work in the business. What are the pros and cons of working with family?

A: The great advantage is that you get input that others might not be willing to give you. The disadvantage is that you can't appear to be partial. It causes my sons problems in that many people think they've advanced because of their relationship rather than their quality.

Q: Do you think about retiring?

A: I don't have a timetable. I'm still having fun, and I think I'm making positive contributions. The whole wireless area just keeps expanding. I still find that very exciting.

Q: When you first introduced CDMA as an alternative to the prevailing cellular standard, GSM, you had a lot of skeptics. People thought you were overhyping its capabilities. Did you ever have doubts?

A: It was frustrating to see those claims. There were even a couple of professors at Stanford who said that CDMA violated the laws of physics. I used to joke that CDMA works well everywhere in the U.S. except within a 20-mile radius of Stanford. I believed all along that if the technology had the advantages we said it had, ultimately it would be recognized.

Now when I give talks to management students, I tell them the most important thing they can learn is that businesses never develop as rapidly as one plans on. Better be prepared for the long run.

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