On July 1, Paul E. Jacobs will take over as CEO at wireless pioneer Qualcomm (QCOM) from his father and company founder, Irwin Jacobs. Irwin essentially willed the company into being as a champion of the wireless technology CDMA as superior for voice during the changeover in the 1990s from analog to digital systems. Now, Qualcomm is sitting pretty as carriers around the world upgrade to third-generation -- or 3G -- wireless networks, virtually all of which use some form of CDMA. Qualcomm's revenues come from patent royalties and sales of its CDMA chips. (The 3G version is WCDMA.)
Nevertheless, Paul Jacobs will have to clear plenty of hurdles to make the most of the 3G bonanza. Plus, he has to make sure that the types of multimedia services that he has focused on -- video, music, and gaming -- don't distract Qualcomm from its core business of selling CDMA for voice, which is where its wireless customers get most of their revenues. Heather Green, BusinessWeek's Internet editor in New York, spoke recently with the soon-to-be CEO. Following are excerpts from that interview:
Q: China is viewed as one of Qualcomm's big growth markets. The government still hasn't granted 3G licenses there, which delays the creation of a market for your 3G technology. When will we see movement there?
A: By the Beijing Olympics in 2008, we know there will be 3G networks up and running well, and having been in service for a while. So that's the outer bounds of when things might happen. We understand there's desire to leave an opening for TD-SCDMA, which is the technology that's being championed by some Chinese manufacturers.
We also see that there are a bunch of companies over there that are very focused on the export market, [and] we have four definitive agreements signed at our standard royalty rates for WCDMA with Chinese manufacturers. I think [there will be] another point of pressure [when] the government sees that those manufacturers would benefit from having a home market to sell into.
Q: Do you see the focus on content and applications as a change at Qualcomm or a reflection of what's going on in the market?
A: It's a little bit of a change. If you go back to the very beginning of the company, people were very focused on the air interface, the radio part of the phone. I actually started out doing speech compression. I was always focused on the things that used the radio interface, and then that naturally went into data applications, GPS, push to talk, all of these other things that I have worked on.
The industry is going through a change where voice has essentially been commoditized, and the operators are looking for how they can generate additional revenues through data services. That plays to things that I have been working on for a while. Qualcomm has been working on those for a long time.
One thing that has changed is we used to build a radio interface and say what are the applications we can do with it? Now it's almost the other way -- where we envision an application, and we say how do we build the radio interface to optimize that?
Q: It has been hard for some companies that have a core competency in one part of the tech industry to move into other areas. Now, Qualcomm is pushing into more multimedia services, for instance, with its MediaFLO service that will launch late next year with wireless carriers to provide video to the phone.
A: That's why getting good partners is critical. And bringing other partners into the industry is another thing that we're focused on. We didn't used to partner with third-party software developers, now we do. We didn't used to partner with content creators, and now we do.
For instance, as we do things like BREW [binary runtime environment for wireless, a software platform developed by Paul Jacobs to help carriers and software developers create multimedia services for the phone], I went and talked to some of the guys who helped launched Windows at Microsoft (MSFT) who had left and were at this investment company called Ignition Partners. They told me how they had built the development community, and we tried to learn from that.
The mobile phone has advantages over the PC because it's something that you always have with you. And you can do certain things better on the phone. So when you say it's going into a new area, it is and it isn't. A capability gets integrated into a chipset, or maybe we build a service around it, but that is always linked back to the core competency of the phone.
Q: You're taking over for your father. In the past, some of these transitions have worked well, and others haven't. What do you say to analysts and investors who have concerns about this?
A: I expect there to be a lot more scrutiny on me because I am Irwin's son, and that's fine. I have dealt with that my entire career. People have the right to ask why is the person in this leadership position, why did he get there? And so that's fair. It's actually a natural thing.
I think that at the end of the day, you have to answer by execution. It's nothing I can say. It's about showing that the strategies that we have been working on for a long time are successful strategies and continue to drive the financials of the company. We have a very good team, and I feel really good about the strategic positioning of Qualcomm. EDITED BY Edited by Patricia O'Connell