To: Ramsey Su who started this subject
From: Ruffian Saturday, March 4, 2000 3:16 PM ET
Respond to Post # 7228 of 7233
The Chairman Speaks: Growth For Qualcomm
For years Qualcomm Chairman and CEO Irwin Jacobs worked to commercialize CDMA, demonstrating its viability to the
industry, working through the lengthy standards process and, finally, seeing his dream come to fruition with the
worldwide adoption of the digital technology. Last year, Wall Street took notice: Qualcomm's stock soared, becoming the
best performer in the S&P 500. Jacobs recently talked with Wireless Week Business Editor Monica Alleven about the
financial markets, the agonizingly long process of getting CDMA into China and Qualcomm's future in wireless data.
Wireless Week: How much time did you devote to making CDMA a commercially viable technology?
Jacobs: We started with this concept in about October, November of '88, and I must say it was very intensive work by many
people [to get] through the standards process, which was completed in July of '93. Those were the typical start-up type of
efforts. We weren't quite a startup anymore, but we were putting in long hours with lots of work to make sure that we did
convince the industry that this was a good technology, that we could demonstrate that the chips would be available and then
that we did get a standard completed. Lots of long nights and weekends.
WW: Given what you went through all those years, how does it feel to see the gains in the stock?
Jacobs: When you look at the potential for technology like this, one can make the kind of calculations that, of course, we now
see occurring--as far as the potential market, the potential income, but you just can't dwell on it. It's something you hope will
occur, but until it does occur, you really can't count on it. And so one keeps working hard trying to make it happen. Now, of
course, we have had a very good acceptance, [we] have been recognized by the market. But now you can't look back. You
still keep looking forward, and say, "OK, we've got yet a whole set of additional challenges to take advantage of, to make
happen, and we have to keep working hard at it."
WW: Respond to those who say the stock is over-valued.
Jacobs: The question of value, I think, is one for Wall Street to determine. There are those who say the whole market is
overvalued; others say the whole market is undervalued. One has to look at the market for what it is, and it's clear that the
market, looking forward, is going to continue to increase and increase rapidly. The transition from wired phones to wireless
phones for telephony [is speeding up and] ... CDMA is the fastest growing technology. I believe it will stay that way going
forward.
The market for CDMA is very positive, and then we look ahead to the coming of the wireless Internet, which possibly will be a
much larger business, and there certainly is a great potential, and that is what affects the stock market. They look at a good
opportunity, and how well are you executing. The opportunity is there; now we have to make sure we execute.
WW: Competitors have had difficulty getting reliable CDMA products to market quickly. Is there something inherent in the
technology that makes it difficult?
Jacobs: It certainly is a complicated technology, but it's been well documented as a standard back in 1993, so people have
had that available. Between the demonstration in November of '89 and demonstration in November of '91, we developed our
chips for both infrastructure and for subscribers, and did that while we were completing the basis of a standard, doing a lot of
testing, etc., so with a very capable and dedicated group of people, you can, of course, get things done.
But what has happened since then is one can continue to add capability to the chip. You can't ever stand still. Every year we
come out with yet another version, and in those new versions, you provide more capability, reduce the power, add more
functionality, make them smaller. The threshold that people have to meet in order to have a commercially viable chipset to sell
against us just keeps getting higher, and so I would say that CDMA does have the opportunity to bring in lots of additional,
clever ideas to further improve the chips that you're making, the performance, the functionality and we have been able to
continue to develop additional IPR above and beyond what is in the standard.
It's been hard, I think, for those other companies to not just make a basic CDMA capability but to create the enhanced
capabilities that are necessary to be commercially attractive.
WW: What might slow the growth of wireless data?
Jacobs: I think mostly [it's] just a timing issue. With CDMA, the transition to 1X will provide both capacity improvements and
very significant data rates, enabling an economic and very capable data service. Then beyond that, [we'll face] the transition to
HDR. I think once these services are available, the market will definitely be there to support them. I think people have been
trying to get data, but they haven't really done it effectively in the past. I think these capabilities are going to change that, and so
I see that as the next really large story for wireless.
This year or next year, it will not be a huge business, it will be a growing business. People will be experimenting with the
applications, with the marketing, with what rates to charge, but by the time we look at '01 and the end of '01 and certainly '02,
it's going to become a very major factor in the business.
WW: Qualcomm recently struck an intellectual property deal with China Unicom. Can you tell us about your experiences in
China up to this point?
Jacobs: We have been excited about China [as] a very large potential market, and one with a great need for wireless. We've
been working in China probably ever since about 1992, fairly actively, but never quite managing to get a full opening for
CDMA, for a variety of reasons. We actually had talked with Unicom from the beginning.
Even before there was a Unicom, there was a group of ministries that were getting together to form what has become Unicom.
We talked with them, but we were working more closely with the MPT [Ministries of Post and Telecommunications], which
has now become the MII [Ministry of Information Industry]. Ultimately, the MII took responsibility for Unicom, and now, given
the fact that the ministries are being separated from the commercial businesses, they are separate operating divisions. But the
MII then decided that they wanted to have an agreement with Qualcomm, kind of a framework agreement with Qualcomm
concerning intellectual property and other matters. Chinese manufacturers would then apply, using that framework agreement,
to work out licensing. Then they turned that responsibility over to Unicom. We did complete that negotiation with Unicom, as
we announced, and will be going over momentarily for a formal signing.
The next step will be to sign licensing agreements with Chinese manufacturers, and they will be working hard to then provide a
capability to manufacture both handsets and infrastructure within China, using our ASICs generally, and then there will be
contracts, I think fairly quickly, for manufacturers outside China to get going on building out their infrastructure. They have
talked about supporting 10 million subscribers this calendar year, so there's a lot of work to be done, and as you can imagine a
lot of interest by manufacturers in getting that business. Initially, there will be contracts I think largely with foreign
manufacturersð-U.S. Korean, Japanese, others, European possibly, for equipment, and then a capability within China to also
manufactureð-that will be coming up a little bit later.
WW: Does China currently show up in Qualcomm's financial results?
Jacobs: To date, there have been very minimal sales in China. There have been some; we've sold some phones. There are, I
think, four trial systems running plus some wireless local loop, but it's fairly minimal. Again, if they start building out a system for
10 million users by the end of the calendar year, then we will begin to see the infrastructure sales. We will begin to see ASICs
being sold to manufacturers to build phones for that market and begin to see sales of those phones, so I would say the last
quarter of this calendar year, which is the first quarter of our fiscal year, and the following year should see rather rapidly
accelerating business in China.
WW: What would Qualcomm do with a spectrum license?
Jacobs: Since the court ruled that the FCC was incorrect in not granting us a Pioneer's Preference and then to go ahead and
provide us with spectrum, clearly, we want to see that occur. It's taken them a long time to act on it, so we're hoping that does
occur quickly now. If and when we do get the spectrumð-I don't [mean] "if," it really is "when" at this pointð-it depends on
which spectrum we get. Our first choice would be to work with existing friendly CDMA operators as far as further expanding
service, and we've looked at whether or not we could do that, but that does depend on which spectrum and location and
frequency band, et cetera.
Right now, of course, we think there is going to be significant growth in wireless Internet access, as well as voice. When we do
get the spectrum we will be looking to hopefully be able to use it in working with friendly operators, to look at providing some
of these new services quickly, prove them out, gain further experience and further develop various applications.
WW: What is the status of Wireless Knowledge?
Jacobs: Wireless Knowledge has gone more slowly than we anticipated, for several reasons. One, it did turn out to be fairly
complicated to make sure we had all the security issues and technical issues taken care of well. Also there were issues with
how long it would take to achieve data callsðsome of the delays in the systems and how best to take some of those delays out,
so it would be a good user experience. That was one set of technical issues. Secondly, the operators were a little slower than
we originally anticipated in providing the packet services; it's those packet services that are really now in place and being
expanded but were a little slower coming into commercial service than we anticipated.
WW: What is Qualcomm's biggest challenge in 2000?
Jacobs: We're going through a transition now, first of all from the CDMA that we launched with ... and we evolved that to
IS-95B, which supports higher data rates and is currently in use in Korea and Japan. Next is 1X capability, which will perhaps
be in Korea and Japan before the end of this year and in the U.S. in the next year. [We want] to make sure that those
transitions go smoothly, to make sure that the chips that we develop are there, that the software supports it and that there's a
variety of wireless Internet applications that supplement the ones that we have been using for fixed but provide even more
interest for wireless users.
We recently announced the acquisition of SnapTrack, which supports our ... enhanced GPS capability, and so we see having
position location, both for emergency use but for various applications that depend on your location.
Right now we want to manage as best we can and as quickly as we can to transition to the newer technologies and then onto
HDR. But also make sure that the applications are there to make sure when they get to market, the market is very excited
about it. So that has to do with the fact that the whole industry is recognizing this coming revolution of the expansion of wireless
Internet access, and most companies are talking aboutðeven if they haven't used CDMA to dateðthey're going to use CDMA
for their third generation, but there are some issues about how fast that will occur. A lot of work is being done, finishing
standards and testing those standards. I think there are some opportunities even before then. Some companies might realize that
there's a lot of benefit to moving to CDMA earlier, that the benefits of 1X and HDR can give them a position in this wireless
Internet access earlier, and we're looking at those possibilities, in different frequency bands and different regions. The whole
wireless area continues to expand rapidly, and one just has to run fast to try to stay out ahead.
WW: What keeps you awake at night?
Jacobs: One keeps thinking about all these opportunities and how can we get there before somebody else gets there, how can
we do our job better. There's always something that wakes me up about 4 a.m. >>>
Looks like I'm going to be right about the stock not moving till the HDR and China are clarified. I walked away from reading the above and clearly see the Jacobs is staking QCOM future growth largely on the those two items. I for one did not like the 02 date being mentioned. As you can see from reading the above, in the past and currently, things did not and are not happening as fast as he would like. As we have seen with China, this is not changing. Anyone that owns QCOM now is making a commitment to hold long term and to wait for the issue to resolve themselves, I can wait a year, but two, I don't thinks so. Too much money to made elsewhere. I tell you one think though, QCOM is going to make one great base and it's going to be party sort a like 1999 all over again, not as great a gain, since the stock had a lot of potential already priced in, once QCOM gets going, I see a double will be had in years time.
Greg |
