3G offers to brighten year for Qualcomm: The chief of the US group is optimistic of an upturn
Financial Times;
Mar 12, 2002, by TOM FOREMSKI
Irwin Jacobs' disposition is decidedly upbeat. It is as if the persistent winter storms that rolled away from Qualcomm's San Diego headquarters took some of the industry gloom with them. The chief executive of the leading mobile phone technology company has had to weather a turbulent year. But the outlook is brighter. The roll-out of third generation mobile phone systems, delayed by the shake-out in the telecommunications sector, seems to be showing signs of life.
As the leading supplier of chips and technology for mobile phones and the associated infrastructure, Qualcomm should profit handsomely from the move to 3G - provided the initial regional services in South Korea due this year, expand globally. Qualcomm's share price has mirrored the troubled wireless sector. From a high of Dollars 71 last May Qualcomm bounced around, then fell 53 per cent to a low of Dollars 33.25 at the end of February.
Nevertheless, Mr Jacobs is in good form. "I'm quite excited by this year," he says. "3G is here and it will be quite exciting to see how it rolls out and how the applications are accepted." Third generation telephony differs from the current 2G and 2 1/2G mobile phone services by offering higher bandwidth. This means that bandwidth-hungry applications, such as video, and photography, could be carried on 3G mobile phone networks.
What is unclear is what kinds of 3G applications are likely to succeed, and how they will be paid for. South Korean mobile operators are the ones adopting 3G first. Some of the Korean applications on 3G will be culturally based, but others should be transferable. "I doubt if US users would want to download cartoon characters, as they do in Korea, but other applications such as messaging, e-mail, stock quotes, photographs are likely to be universally popular," he says.
Position location technology built into the mobile phone is another application that Mr Jacobs believes will be widely used, and will offer revenue opportunities for providing location-based services such as shopping and navigational aids.
Qualcomm was closely associated with CDMA mobile phone technology, which has been broadly adopted in the US but not in Europe, and there have been many years of battles over which technology was better. 3G is different. It is a hybrid standard that includes several different technologies - and Qualcomm's large patent portfolio means it will receive generous licensing revenues.
"The technology wars are mostly over," says Mr Jacobs. Qualcomm's chip business for example, is supporting several different mobile phone technologies, so that it can supply customers that were not CDMA users, and offer a "bridging" technology from older wireless networks to 3G systems. The Koreans are certainly enthusiastic about 3G, and while other countries are more cautious, Qualcomm is hoping China, India and Brazil will be important CDMA and 3G markets.
Its Qualcomm Strategic Initiatives business group makes large investments in overseas companies and application development. "These investments are made on two criteria. They have to be strategic and they have to provide a good return on the money invested," says Mr Jacobs. In January, QSI invested Dollars 200m in Reliance Communications, an Indian telecoms company. And it is considering further investments in Indian software and telecoms equipment companies. It has about Dollars 400m set aside for such investments.
Last year Qualcomm separated QSI from its quarterly financial reports. Although its share price had recently suffered from the fall-out from Enron, Mr Jacobs concedes that in the present environment of investor scrutiny of outside investments, it had been a fortuitous move.
Copyright: The Financial Times Limited 1995-2002
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