Report of annual meeting from San Diego Daily Transcript follows:
Jacobs: Manufacturing Division Not For Sale
Qualcomm May Ditch
Ailing Infrastructure
Unit
By DAN GALLAGHER
San Diego Daily Transcript
Feb. 23, 1999
Qualcomm Chief Executive Officer Irwin Jacobs
denied Tuesday his company is considering selling its
phone-manufacturing division but confirmed it is
evaluating "possibilities" for its ailing infrastructure
unit, which makes base stations and other equipment
for wireless networks.
During the company's annual shareholders meeting,
Jacobs and other company officers gave an upbeat
assessment of Qualcomm's performance in 1998, a
year in which the San Diego-based wireless company
saw nearly 60 percent revenue growth and record
earnings of $108.5 million, or $1.57 per share. In
particular, Jacobs highlighted the coming launch of
new models of wireless phones, including the new
Thin Phone, a four-ounce device capable of receiving
calls, pages and data transmissions that Qualcomm
debuted at an industry trade show earlier this month in
New Orleans.
Much of the interest among shareholders, however,
centered around troubles at the company's
infrastructure unit, which was partially responsible
for Qualcomm laying off 700 employees in a
cost-cutting move last month. Some investors were
also curious about rumors swirling around Wall Street
that the company may sell off its burgeoning phone
business in order to focus its efforts on manufacturing
chips that can be used in any digital phone employing
the company's proprietary Code Division Multiple
Access (CDMA) technology.
"We have no plans to sell off our telephone business,"
Jacobs said in response to a question from a
shareholder. "Demand is exceedingly strong and the
unit is in very good shape."
Qualcomm shipped more than 7 million digital phones
during 1998, according to company figures. Although
the company lags far behind industry giants like
Nokia, Ericsson and Motorola in terms of total
market share, Qualcomm holds a dominant position in
the sale of CDMA handsets, according to Pete
Peterson, an analyst with Volpe Brown Whelan &
Co. in San Francisco. The company's relative small
size, however, is likely what has given rise to rumors
that its phone business could be for sale, Peterson
said.
"The reason people are speculating about this is
because of the belief that the handset market requires a
wide breadth of product that Qualcomm can't
produce," Peterson said. "But the company is in a very
competitive position as it relates to CDMA."
According to industry figures, there are about 27
million wireless subscribers using CDMA phones in
the world. That figure is projected to grow to 80
million by the year 2003, according to Qualcomm's
estimates. Since Qualcomm is the main patent holder
for CDMA, phones sold by other manufacturers
generate royalty revenues for the company as well.
With regard to the infrastructure business, Jacobs
affirmed previous company statements that Qualcomm
is seeking a potential partner, or possible buyer, for
the unit. The division has been plagued by troubles in
foreign markets, where economic troubles have
limited payments for equipment. Jacobs noted,
however, that the division is doing much better since a
recent restructuring which trimmed about 35 percent
of the unit's staff.
"There are still some valuable aspects to the business,
and we want to keep those," Jacobs said.
Other investors were interested in the company's
ongoing patent dispute with Swedish phone-maker
Ericsson. Over the weekend, reports surfaced of a
possible settlement of the lawsuit, which was filed by
Ericsson in 1996 claiming that Qualcomm's CDMA
patents infringe on its own. According to rumors
reported in the Wall Street Journal and other national
publications, the two firms are close to a deal that
would allow Ericsson access to Qualcomm's CDMA
patents, with Qualcomm gaining an entree to
Ericsson's patents on Global System for Mobile
Communications (GSM), a competing wireless
standard used extensively in Europe.
Jacobs confirmed that the two firms were in talks, but
did not elaborate on the details.
"The talks have been increasing in intensity as the trial
deadline has loomed," Jacobs said. "There's still
some business issues to be worked through, so its not
a done deal. But I don't think either company wants to
go through a trial."
The patent-infringement case currently is scheduled to
go to trial sometime in April.
Qualcomm shares closed at $73.62, up $2.25 from
Monday's results.
gallagher@sddt.com |
