Dave:
Please pardon my frustration with some of the so-called expert opinions that pop up on this Forum. Let me give you a perspective. My firm first became interested in Qualcomm early in 1994 when CDMA appeared little more than an interesting science project. Cynical disbelievers, my partner and I trekked out to San Diego, met with management, and then began a research process that has continued non-stop since then. In the summer of 1994 we established a modest position in Qualcomm while I continued to fly around the country meeting with the management of virtually every wireless operator in the country (both CDMA proponents and disbelievers). As the controversy heated up and 1994 turned into 1995, various European companies (read Ericsson) began circulating "white papers" delineating precisely why CDMA was inferior to TDMA. Remember now, as a professional money manager, I have access to the management...not just investor relations personnel...at virtually all the publicly-traded telecom companies, so I am crystal clear about what was being said, and by whom, during this period.
It really does get my blood pressure up when I reread my notes and see the blatant misinformation (read lies) emanating from Ericsson and various other GSM-centric equipment vendors. Despite the controversy, we trusted our own research and by the end of 1995, my firm had committed in excess of $100mm in capital to Qualcomm. Meanwhile, the pressure was rising daily as the background noise increased from the the pundits predicting CDMA's "inevitable failure". Remember that this was an extremely binary debate, with many well-credentialed experts offering highly-technical opinions as to why Qualcomm's CDMA would crash and burn. Industry consultants like Hershel Shostek, and so-called academic gurus like Stanford's Bruce Lusignan, repeatedly predicted plague, pestilence and "near-far" Armageddon for all of those who believed that CDMA would work. I vividly recall engaging Bill Frezza, another so-called industry expert and Ericsson's former director of marketing and business development, in a rather vociferous debate on the then-active Frezza Forum. Tero and others participated in the cacophony of negativity that at times was mind-numbing. So, despite all the apparent risks, and the horrendous implications of being wrong, why did we stay the course?
Through my research efforts, I developed a fairly broad range of industry contacts within the wireless community. We went to pretty extreme lengths. For example, we became Airtouch shareholders to gain access to senior technology and network personnel such as Craig Farrill and Gloria Everett (and, parenthetically, expanded our ATI investment because of them, talented managers like Sam Ginn and Mohan Gyani, and the realization that Airtouch is probably the best managed wireless operator in the world). We met with managers at Ameritech, Sprint, PrimeCo, Southwestern Bell and BellAtantic; we also spoke to technical and managerial personnel at Lucent, Motorola, Hughes, Samsung and Nortel...you get the point. After several thousand hours of research, and the compilation of a multi-year track record, one gets a pretty good feel for who was right and who was wrong, who knew what they were talking about and who was full of bull poo-poo. All of which brings me to Dr. Irwin Jacobs.
I almost cannot comprehend the time, effort and CPU cycles that I have committed to verifying Irwin's answers to my questions. Weeks, months, maybe even years of effort...all looking for one deliberate deception, one clever lie or one outright falsehood. Simply put, throughout this period, I cannot point to a single instance where Irwin has deliberately deceived me. Amazing. Yes, development timetables may have slipped and the company's earnings have not always met my expectations. But these are normal events in the course of any business and certainly do not reflect on management's candor or integrity. Throughout my almost fifteen years in the investment business I have met many smart technical people, many bright businessmen, many shrewd wheeler dealers and most everything in between but few men have earned the faith, confidence and respect that I hold for Irwin Jacobs. You probably won't believe this, but if I ever left the investment business, I would rather work with Irwin for free than to work for most anyone else at any compensation level. I find him inspiring, charming, dogmatic, pathologically ethical and absolutely brilliant...if this sounds like idolatry, so be it. But, the bottom line remains that Irwin has been absolutely candid and absolutely accurate regarding Qualcomm's issues, challenges and opportunities. Within this context, he has been absolutely emphatic about the company's IPR position and his pursuit of convergence.
So, once again, I am reliving the 1996 debate. Only this time the issue is not whether or not CDMA will work, but whether or not ERICY will somehow be able to deploy a CDMA solution without infringing on QC's IPR. On one hand, I have pointed and candid comments from Irwin corroborated by a litany of wireless operators/equipment vendors and our own IPR review. On the other hand, I have Ericsson's somewhat amorphous public position. To this point, I would suggest that you separate ERICY's verbal commentary from its more legally binding publicly-filed documents....I have yet to find, in such a documentary review, any affirmative statements by Ericsson as to its ability to do W-CDMA specifically without QC IPR. Against this backdrop, I have tried to candidly, ethically and openly educate investors on this Forum without sounding like a shill or otherwise embarrassing sources that have discussed the IPR issue with me in confidence. Having crossed swords with so many so-called experts, I will admit to intense frustration when I run across a potentially well-meaning, but woefully out-of-his-league, young lawyer endeavoring to opine on a very complex issue by counting the number of patent filings that cite "rake receiver". To wit, I have had the head of a major European manufacturer of GSM baseband chips (e.g. a major ERICY vendor) tell me flatly that "Ericsson's public position on wideband CDMA doesn't pass the "ha-ha" test". Since this position has been echoed by equipment manufacturers (excluding Ericsson), multiple wireless network operators and explicitly supported by Irwin, the whole W-CDMA debate, to my eye, is very a repeat of late 1996. That is, the "bears" and Ericsson partisans will maintain their position until proven wrong empirically, after which they will attempt to rewrite history and somehow reconstitute the story to suit their new fantasy.
While you are certainly entitled to your opinion, I will obnoxiously and aphoristically state that there really is no debate. Ericsson cannot deploy W-CDMA without QC's IPR and it knows so. This issue will not be resolved in the courts because Ericsson knows that it would lose. What you believe is an active debate I characterize as marketing noise and positioning by the Europeans. The good news is that the screw has turned and we are likely to see resolution of the W-CDMA debate within the next six months. I invite you to compare my comments today with the outcome within this timeframe.
Best regards,
Gregg |
