Charming Dr. J post on RagingBull, my Dealer
RagingBull is just that--a bunch of Q-bulls. It's a great place to go get irrationally psyched and live in a dream world. So many of them are blabbing away--100 next week. Yeah, right! But read this one. It's fun.
ragingbull.com
Irwin Jacobs and his wife, Joan, blended right in. Nary a head turned as we made our way to our table at Donovan's Steak & Chop House in La Jolla. Here was the boss of arguably the most successful startup San Diego has ever seen, a $4-billion-a-year venture that has made thousands of employees and local residents millionaires and Jacobs a billionaire three times over--yet he was nearly invisible. Though their name is on the Irwin and Joan Jacobs School of Engineering at UCSD, the Joan and Irwin Jacobs Radio Broadcast Center at the local PBS station, and the Joan and Irwin Jacobs Theater at the Museum of Photographic Arts, the Jacobs themselves stirred barely a ripple of recognition.
Jacobs remains an enigma, even here in his hometown. He's not like Andy Grove, Scott McNealy, Larry Ellison, or Steve Jobs--public figures all. Even though Jacobs has accomplished as much as any of these Info Age barons, he's largely unknown outside the insular world of the cellular industry. San Diego itself is one reason; until recently, it has been a high-tech backwater. Another reason is that Jacobs has never worked high tech's Borscht Belt--the endless round of Silicon Valley gatherings and high-tech conferences. Instead, he has focused relentlessly on getting Qualcomm's so-called CDMA (code division multiple access) technology established as the world's digital wireless standard.
But notoriety is coming. Last year Qualcomm leaped into the public eye when its stock outgrew all other major issues on the Nasdaq and NYSE, rising 2,621%. It surged because Qualcomm earned $420 million on $3.9 billion in sales and because Jacobs is close to achieving his standard-setting goal. What's more, wireless these days is hot: both digital voice, which continues to grow rapidly, and wireless data, which now seems the Next Big Thing.
Qualcomm's technology, it turns out, is almost ideal for the wireless Internet. Not just phones could incorporate it, but all sorts of mobile devices--portable computers, Palm units, even cars. If Jacobs has his way, Qualcomm will supply both know-how and chips for all these, emerging as a kind of Intel of the wireless era.
The buzz began last spring, when Qualcomm reached an agreement with Ericsson and other major European wireless companies on a unified standard for next-generation phones and networks. Service providers like Vodafone had been pushing for this so-called third generation, or 3G, standard to supersede the multiple ones that exist now. They're betting that a unified standard will have the same galvanizing effect on wireless that the rise of the IBM PC had on personal computing. It should bring down the price of phone gear, increase the variety of software and services--and cause an already booming market to explode.
Qualcomm had spent ten years playing David to the rest of the industry's Goliath. CDMA still has the fewest users of any major cell-phone technology, though it also has the fastest-growing market share and, according to Jacobs, is by far the best.
Now, thanks to the 3G accord, literally billions of phones and other devices will incorporate CDMA. Because Qualcomm holds the vast majority of CDMA patents, that means money for the company--lots of money. Qualcomm collects a royalty of about $10 for each CDMA phone sold, a figure that may shrink in the future, but won't go away. Multiply $8, $6, even $4 by the billions of devices people will buy, and you get immense sums--nearly all profit. This prospect helps explain why investors stampeded into Qualcomm stock last year.
Still, Jacobs can't simply sit back and collect royalties like some retiree clipping coupons. Nor can Qualcomm's 7,000 employees, most of whom are now millionaires, simply hang out at Black's Beach all day. The company faces the formidable challenges of staying at the forefront of wireless technology against competitors like Nokia and Motorola, and keeping its rapidly growing chip business humming against an even more fearsome rival--Intel. That's why this year will be critical to Qualcomm's future, and why, after the initial euphoria over Qualcomm's coming riches, investors in recent months have taken the stock price down by 50% from its late-December high of $200 a share. They are waiting to see if Jacobs, like David, can make the transition from fearless upstart to wise and powerful king.
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Just porchin', cruisin', and packin',
John |
