[Corrected 11/11/09, 3:15 pm. See below] Qualcomm chief operating officer, Len Lauer, says the San Diego wireless chipmaking giant is working across a broad front of technology development to accommodate a surge in wireless data traffic.

“The mobile Internet has arrived,” Lauer says in the opening keynote talk yesterday at the 2009 3G CDMA Americas Regional Conference. With more than 4 billion wireless subscribers around the world now—including 885 million 3G phone users—Lauer says the growth in wireless data is reflected by a roughly one-third increase in revenue reported over the past year by Verizon, AT&T, and other major carriers.

[Corrects to say Lauer was comparing monthly data traffic in 2014, not monthly growth in data traffic] By 2014, or just five years, Lauer says  worldwide mobile data traffic in one month will exceed total mobile data traffic for all of 2008.

Qualcomm founder and former chairman and CEO Irwin Jacobs and his son Paul Jacobs, who is Qualcomm’s current chairman and CEO, sounded a similar theme when they warned of capacity constraints last month during a keynote appearance at the CTIA Fall 2009 conference in San Diego.

In addition to the increasing demand for mobile data from smart phones and netbooks, Lauer says the trend can only accelerate as new wireless device categories proliferate, especially in what he calls machine-to-machine (M2M) communications. Examples of M2M technology developers include CardioNet, a Pennsylvania wireless health company that uses wireless sensors to continuously monitor heart patients for irregular heartbeats; wireless smart grid technologies being deployed by electric utilities (including San Diego Gas & Electric), and eBook devices like Amazon’s Kindle.

“Other operators are seeing this as a viable market, but it is going to take awhile to develop,” Lauer says, citing estimates that 229 million M2M cellular connections are forecast for 2013. “We do see from Qualcomm’s standpoint this being a very large opportunity for our chips.”

To cope with the surge in wireless data traffic, Lauer outlined a range of technology advances that Qualcomm has underway:

—The latest generation of advanced wireless receivers, which include updated revisions to the EV-DO (Evolution Data Optimized) telecommunications standard (part of Qualcomm’s CDMA2000 family), operate …Next Page »

Comments | Reprints | Share:        

Following a three-year inquiry and a seven-day hearing, the Korean Fair Trade Commission has fined Qualcomm $208 million and ordered the San Diego wireless chipmaker to end its unfair business practices in South Korea. In a statement, Qualcomm says it disagrees with the ruling and plans to appeal. Korean press reports say it is the largest fine to be imposed on a single company by the South Korean antitrust watchdog. In financial results released yesterday, Qualcomm said it was anticipating the fine. The company reported sales of $2.74 billion in the third quarter that ended June 28.

Comments | Reprints | Share:        

While tech deals remained scarce last week in San Diego, Qualcomm served up some of the biggest news by launching the delayed expansion of its Media Flo network and signaling an increase in its wireless chip sales, at least in the current quarter. More on all that, and the rest of last week’s San Diego business and technology news below:

—MadCap Software CEO Anthony Olivier says the four-year-old startup has had no trouble staying ahead of rivals, such as Adobe, that develop competing software offshore. “Generally, you get lower costs” by moving software development offshore, Olivier says, “but you don’t really get innovation.” MadCap, which specializes in authoring software that is used to create technical user guides, introduced new versions of its software this past week.

—Just in time for the summer travel season, San Diego-based TelCentris said an update of its VoxOx universal communications service makes it easier to place low-cost international calls through a clever adapation of its text messaging service.  For example, if you’re abroad and send a text message of the U.S. phone number you want to call to a special access number, the VoxOx system automatically dials that phone number and connects it to your cell phone, sparing you often sky-high international rates.

—Following a four-month delay in a nationwide plan to convert to digital TV broadcasts, San Diego’s Qualcomm was finally able to expand its satellite-based Flo TV network to more U.S. cities, including Boston, Houston, San Francisco, and Miami, when the switchover to digital finally took place last week. Qualcomm invested at least $800 million to buy the broadcast spectrum for what was UHF channel 55 for its Flo TV service. But the company’s plans to expand Flo TV coverage got postponed at the beginning of the year when Congress decided to delay the digital TV conversion until June 12.

—The Campo Band of Mission Indians plans to add 100 electricity-generating wind turbines on its reservation, about 60 miles east of San Diego, in a renewable energy venture that will add 160 megawatts to the local power grid. If the project is completed in 2012 as expected, it will generate enough electricity at peak production for more than 100,000 homes. Chicago-based Invenergy will build and operate the estimated $300 million facility for the 351-member tribe.

—One of the main engines of San Diego’s tech economy transmitted some mixed signals last week in its financial outlook. Qualcomm raised its guidance for the fiscal third quarter that ends June 28, based on expectations of slightly higher revenue and increased shipments of CDMA-based devices. But the average sale price of CDMA devices is slipping, and Qualcomm said it expects sales of its chipsets to decline through the summer, as cell phone sales remain sluggish.

—Venture capital partners around the world are expecting some enormous shifts in their business, beginning with a retreat among the pensions, endowments, and institutional investors who usually account for much of their investment capital. But VCs in the U.S. anticipate that foreign investors will largely fill the need for more capital, according to a survey of 725 VC partners released last week by the National Venture Capital Association and Deloitte.

Comments | Reprints | Share:        

San Diego wireless giant Qualcomm (NASDAQ: QCOM) and Irvine, CA-based Broadcom (NASDAQ: BRCM) said last night they have agreed to end their wide-ranging patent war and enter a broad cross-licensing deal.

As part of the global settlement, which terminates litigation in federal court as well as formal disputes before trade commissions in Europe and South Korea, Qualcomm has agreed to pay Broadcom $891 million over the next four years. Qualcomm says its first payment, for $200 million, will be paid to Broadcom before June 30.

That could put a ding in Qualcomm’s net income next quarter, but it seems doubtful shareholders will mind. A J.P. Morgan analyst said last week that settlement payments would have little impact on Qualcomm’s future earnings.

When Qualcomm announced Wednesday that it was postponing the release of its earnings for the second that ended in March (because it was in advanced settlement talks with Broadcom), the San Diego company added it would meet or exceed its prior guidance for quarterly revenue and operating income (excluding the cost of its deal with Broadcom.) In last year’s second quarter, Qualcomm reported operating income of $766 million on $2.6 billion in revenue—and the company said earlier this year it expected second-quarter revenue to fall between $2.25 billion and $2.45 billion.

The agreement also relieves both Broadcom and Qualcomm of substantial legal costs—in a battle where Qualcomm wasn’t faring particularly well. The company suffered its worst setback in mid-2007 when San Diego federal judge Rudi Brewster issued a blistering, 54-page ruling that found Qualcomm and its trial counsel had committed “gross litigation misconduct” by withholding tens of thousands of relevant documents from Broadcom during a patent infringement trial. That decision against Qualcomm was largely upheld by a federal appellate court last December.

Strategically, the benefits of reaching a comprehensive settlement with Broadcom would seem to far outweigh the financial impact on Qualcomm’s earnings—especially since Qualcomm said terms of the agreement “will not result in any change” to its licensing revenue model for its 3G and 4G wireless technologies. And Qualcomm’s licensing revenue is the central engine of its success.

After fighting for more than a decade to establish its CDMA (for Code Division Multiple Access) wireless digital standard, Qualcomm attained its first strategic breakthrough in 1999, when it settled a wide-ranging patent dispute with Sweden’s Ericsson. In that deal, Qualcomm agreed to sell its CDMA wireless infrastructure business to Ericsson and Ericsson agreed to support a single worldwide CDMA standard.

At that time, Qualcomm also settled on a corporate strategy that focused its business on wireless innovation, which enabled the company to generate enormous revenue through technology licensing deals.

In July, Qualcomm struck a surprise settlement agreement with Nokia, the world’s largest mobile phone maker, that ended a similar high-stakes licensing dispute. That deal enables Qualcomm and Nokia to share many more technology patents than they did before. Qualcomm also licensed its technology to Nokia and Nokia allowed Qualcomm to incorporate its technology within its mobile phone components; buyers of those components will pay Nokia’s royalty fees rather than Qualcomm’s.

Broadcom posed the last major challenge to Qualcomm’s licensing model.

“We believe that this resolution is positive for both Qualcomm and Broadcom, our customers, our partners and the overall industry,” Paul E. Jacobs, chairman and CEO of Qualcomm, and Scott A. McGregor, president and CEO of Broadcom, said in a joint statement.

“The settlement will allow us to direct our full attention and resources to continuing to innovate, improving our competitive position in this economic downturn, and growing demand for wireless products and services,” Jacobs said.

Comments | Reprints | Share:        

When Qualcomm co-founder and longtime chairman and CEO Irwin Jacobs stepped down as chairman of the wireless giant last month, he said he was taking another shot at retiring. Jacobs, who turned 75 in October, told The San Diego Union-Tribune after Qualcomm’s annual shareholders meeting that his first attempt at retiring didn’t take, presumably because he remained active at Qualcomm (NASDAQ: QCOM) after his son Paul succeeded him as CEO four years ago.

As a retiree, though, Jacobs has still been keeping a fairly busy schedule. In February, he gave an extended lecture at MIT’s School of Engineering on “providing chips and technology for a world with 4 billion cellular customers,” in which he provided some intriguing up-to-date industry analysis, which has been embedded at the bottom of this report. And on Friday, Jacobs was a speaker at the La Jolla Research and Innovation Summit, which was organized by Connect, the San Diego nonprofit that promotes technology innovation, as a showcase of local technology for venture investors.

“I was asked to forecast,” Jacobs told the San Diego audience, “but I must admit I’m a terrible forecaster. When I started Qualcomm in ‘85, I told my wife we might have as many as 100 employees if everything goes right.” Today Qualcomm has a global workforce of roughly 14,000 employees, including more than 9,000 in San Diego.
In discussing Qualcomm, Jacobs also steered clear of making any forecasts, although he made several interesting historical observations.

—At Qualcomm, he said, “We made a strategic decision early on that we really wanted to focus on innovation.” Because it was difficult in the beginning, however, for Qualcomm to gain market acceptance for its CDMA digital wireless technology, it became necessary for the company to make its own handsets and related cellular equipment. Once Qualcomm became established, Jacobs said, “We sold off the handset division to concentrate on the chips and software.”

—”All phones are getting smart,” Jacobs said. He held up a copy of the New York Times business section with a story headlined, “Laptops? They Are So Yesterday. Try a Netbook” and described the progression of smaller and more powerful computers from desktops to laptops and netbooks. At the same time, he noted that mobile phones are progressively getting bigger and more powerful, “So they’re going to meet in the middle, where we’re getting colliding galaxies here or something.”

—Amazon’s Kindle “will be the only way you read a book in the future,” Jacobs said. “It’s got a Qualcomm chip in it, and all the data going to Amazon goes through our data center.”

In his February lecture at MIT, Jacobs repeated one of the mantras that kept him excited during the early days at Qualcomm. “I always said we’ve got at least 10 years of excitement ahead of us, and every year of that 10 years moves out a year,”Jacobs said.

His MIT lecture is embedded below, or you can watch on MIT’s website by clicking here.

Comments (1) | Reprints | Share:        

San Diego wireless giant Qualcomm (NASDAQ: QCOM) has reached a licensing agreement with Beijing Tianyu Communications Equipment Co., China’s biggest cell phone maker.

Under the deal, Tianyu has obtained worldwide rights to develop, manufacture and sell Qualcomm’s proprietary CDMA2000 and WCDMA subscriber units and modem cards. Qualcomm said Tianyu will pay royalties at its standard worldwide rates. Tianyu manufactured about 24 million handsets this year.

The China Daily reports today the deal represents a shot in the arm for China’s CDMA business, which has been transferred recently from China Unicom to China Telecom as part of the country’s telecom restructuring.

China Telecom launched its CDMA service yesterday and vowed to invest nearly $11.7 billion to upgrade its network and buy handsets. Qualcomm’s CDMA technology was previously used for years by China Unicom.

Comments | Reprints | Share:        

San Diego’s Novatel Wireless said today Brad Weinert resigned Monday, after serving 16 months as president of the broadband wireless company. A statement by Novatel chairman and CEO Peter Leparulo said Weinert has been an important contributor to the company’s growth since 2003. Weinert joined Novatel in 1998, and worked in various jobs until 2002, when he joined OKbridge, a San Diego online startup. He rejoined Novatel in 2003 as vice president of business development and was named chief operating officer in 2006.

Comments | Reprints | Share:        

The economic downturn means it’s likely the wireless industry will stay with third-generation, or 3G, technologies for the foreseeable future, Qualcomm’s top executives said last night during a panel discussion.

Qualcomm CEO Paul Jacobs said customers of the San Diego wireless giant have pushed out their chip orders for 3G technologies because of the economic downturn, but the company is looking for a business rebound in the second half of 2009. He cited the “uncertainty of consumer demand” as a key underlying issue, but Jacobs also noted that sales of 3G handsets based on Qualcomm technology have increased 25 percent over last year.

The panel discussion at Qualcomm’s corporate headquarters, in the 534-seat Irwin M. Jacobs Qualcomm Hall, was billed as a “town hall” meeting by CommNexus, the San Diego telecom industry association that organized the event. “It’s meant to disseminate ideas, share knowledge, and build networks with industry peers,” CommNexus CEO Rory Moore told the audience.

Jacobs, who was named as Qualcomm CEO in 2005, is the son of Qualcomm founder and chairman Irwin Jacobs. The second-generation CEO was joined by his second-in-command, former Sprint executive Len Lauer, who was named as Qualcomm COO in August, and by Steve Mollenkopf, who also was named in August to head the all-important QCT, Qualcomm CDMA Technologies.

So in a way, the event featured the 2.5G version of Qualcomm management discussing 3G technologies and the prospects for 4G products and services.

But for all the discussion about digital wireless technology, the Qualcomm chips in the Blackberry Storm and Qualcomm software in Google’s Android operating system, about USB dongles, and LTE versus WiMax, what may have been the most interesting question didn’t come until the end.

“What do people misunderstand about Qualcomm?” asked Iain Gillott, the wireless industry expert who was recruited as moderator for event.

“From a PR point of view, I think the way we are most misunderstood is from the newspaper headlines and everyone attacking our licensing model,” said Lauer, referring to industry complaints about the high cost of Qualcomm’s licensing deals. “What they miss underneath that is all of the innovation and research and development we do… opening mobile radios to new apps and services.”

CEO Jacobs added that because of Qualcomm’s patent lawsuits against Nokia and Broadcom, “You think this is a litigious company, but we did not go out and sue everyone first… Our (business) model is built around licensing. We have one of the broadest models. We don’t sell cell phones to end users. We work with partners. We consciously developed this strategy of working through partners and we go to our partners and say we’re here to be a good partner with you.”

It was an interesting moment of executive self-reflection, especially since a federal appellate court last week upheld most of a lower court’s findings against Qualcomm in a patent dispute dating to 2003. The court found substantial evidence that Qualcomm had deliberately withheld its proprietary video compression technology from a standard-setting industry group, a move that left room for Qualcomm to later file a patent-infringement lawsuit against Broadcom, a rival chipmaker in Irvine, CA.

Comments (4) | Reprints | Share:        

Japan’s second-largest cellular operator, KDDI, is adopting the next-generation, Long-Term Evolution, or LTE, wireless standard founded on San Diego-based Qualcomm (NASDAQ: QCOM) technology. KDDI is deploying LTE equpment from Hitachi and Nortel that will provide an overlay to its existing CDMA mobile network.

Comments | Reprints | Share:        

The phrase “preaching to the choir” came to mind as I listened to the speakers today at the 3G CDMA North America Regional Conference, which is being held this year in downtown San Diego at the U.S. Grant Hotel.

Seated in the audience around me were representatives of wireless carriers, equipment makers and device venders that have all based their products on CDMA, the digital wireless technology also known as Code Division Multiple Access. Many listened while scrolling casually through the electronic messages on their presumably CDMA-based gadgets, their faces illuminated by the light from their hand held devices.

The conference, organized by CDG, the CDMA Development Group, has always been a CDMA family affair—focused exclusively on the proprietary digital wireless technology developed by San Diego-based Qualcomm.

James Person, CDG’s chief operating officer, kicked off the conference by announcing there are now 475 million worldwide subscribers to the CDMA family of technologies. While that number has been growing, it represents about 18 percent of the global market because most of the world uses rival wireless technologies based on GSM, or the Global System for Mobile Communications. In North America, there are about 140 million CDMA-based subscribers, who account for 51 percent of the wireless market—with most of those customers using CDMA-based networks operated by Verizon Wireless and Sprint.

Considering how competitive the U.S. market has been over the past 20 years, it seemed like Person was over-reaching—or perhaps just talking to the CDMA faithful—when he said, “In North America we are the dominant technology, and we think it will continue that way.”

Such comments reflect a confidence in the future of CDMA technology that is frequently expressed by CDMA insiders. They also say that it’s easier for CDMA-based networks to make the transition to next-generation technologies such as EV-DO (Evolution-Data Only)—which also provides superior bandwidth for data-intensive applications, such as Web-browsing and online gaming.

It’s reminiscent of arguments that Sony’s Betamax videotape format was technically superior to JVC’s VHS standard, and we all know how that ended.

The key to CDMA’s future only became clear to me after presentations by executives for Sprint and Verizon Wireless, who laid out their efforts to create “open ecosystems” for encouraging other “third party” developers to invent new CDMA-based products and services.

“Rather than us defining where we want our customers to go, our customers now have the choice to decide where they want to go in an open ecosystem,” said Kevin Packingham, Sprint’s senior vice president for product and technology development. By enabling third parties to develop new applications for Sprint’s wireless customers, Packingham said, “I don’t need to create a new messaging portal for our customers. All I need to do is make it possible for our customers to plug into their own messaging system.”

Since Sprint launched its strategy in 2001, Packingham says the carrier has registered more than 135,000 software developers and certified more than 200 wireless devices for use on its networks.
Verizon started a similar effort a year ago under Tony Lewis, Verizon’s vice president for open development, who proclaimed yesterday, “My job is to fuel innovation, to get out there with the partners.”

It seems like a smart approach, although it could take years to play out. It’s also hard to tell if it’s really going to work when everyone in the audience is nodding their head in approval.

Comments (1) | Reprints | Share:        

As the CDG North America Regional Conference convenes in San Diego today, Perry LaForge, the trade association’s chief executive, says he has a lot to feel good about.

LaForge says he started working on behalf of CDMA, or code-division multiple access, after getting a preview of the wireless technology in 1988, when San Diego’s Qualcomm was barely three years old. It wasn’t until 1989 that Qualcomm co-founder Irwin Jacobs actually demonstrated his concept to the telecommunications industry.

“I pulled together the initial carrier consortium,” says LaForge. “I worked with the Japanese and Koreans… We convinced Samsung and LG to produce cell phones based on CDMA.”

LaForge’s has a bigger and more formal role now as head of the CDG, the CDMA Development Group. Looking back over the past 20 years, he says, “I think we have fundamentally changed the wireless landscape…We fundamentally changed an industry” that had already committed to a rival wireless technical standard. “It’s something that I take a great deal of pride in.”

The CDG represents roughly 100 leading CDMA operators and wireless equipment manufacturers. Yet as several hundred people gather for the two-day conference, industry questions about the viability of CDMA still seem to linger.

Even though Qualcomm ranks today as the world’s second-biggest maker of wireless chips, the rival GSM Association (for Global Systems Mobile communications) says 82 percent of the global market for mobile devices is based on its digital technology standard.

Despite GSM’s global dominance, and a broader migration to next-generation GSM technologies, LaForge maintains that CDMA operators continue to upgrade their networks to provide capacity for escalating voice and bandwidth-intensive data traffic

“There’s a lot of talk about 4G systems, but one thing I suspect is that when there are economic downturns that people tend to hunker down with the systems they have,” LaForge says. CDG members also have worked aggressively to reduce costs, getting the cost of CDMA handsets below $30 apiece, LaForge says.

The global economic downturn became apparent at Qualcomm earlier this month when the chip maker reported a 22 percent drop in profit in the quarter that ended in September.

Qualcomm CEO Paul Jacobs told analysts last week that in the face of slowing demand, the company has stopped developing a next-generation wireless technology called Ultra Mobile Broadband, or UMB. Jacobs says the chip maker will put its resources into another high-speed technology called Long Term Evolution that Verizon Wirelss and other major customers have backed.

Jacobs indicated, though, that he expects the wireless industry to go through a pause, rather than a downturn, amid the broader financial crisis—a sentiment that LaForge echoed in our conversation yesterday.

“The macro-economic environment obviously impacts a lot of different sectors,” LaForge said. “But a lot of folks believe that the wireless industry in general will probably fare better than other sectors.”

Comments (1) | Reprints | Share:        

A federal judge in Santa Ana ruled yesterday that San Diego’s Qualcomm is in contempt of an order he issued in December to prevent Qualcomm from infringing on two patents held by rival Broadcom of Irvine, CA.

The ruling is the latest salvo in a continuing legal battle that involves at least four lawsuits between the rival Southern California chipmakers over patents covering various chip designs.
In a statement issued this morning, Broadcom’s David Rosmann pounced on the implications of the ruling, saying, “This is the second time that Qualcomm has been found in contempt of the same federal court injunction.”

U.S. District Judge James Selna issued a similar contempt order in August, declaring there was “clear and convincing evidence” showing that Qualcomm had defied his Dec. 31 order.

In his statement, Rosmann, Broadcom’s vice president for intellectual property litigation, said provocatively that “Qualcomm’s ongoing contempt reflects a remarkable disregard for a system meant to protect intellectual property rights.”

But in his order, Selna notes that he did not impose monetary sanctions on Qualcomm “in light of remedial efforts” Qualcomm has undertaken. Just the same, Selna rejected Qualcomm’s continuing legal argument, which is that the company should only be held liable to pay royalties to Broadcom where Qualcomm’s patent-infringing chips were installed in a radio unit, i.e., a wireless phone. Selna says Qualcomm is liable for the chipsets, period.

The judge ordered Qualcomm to pay Broadcom its gross profits within 60 days on any infringing chips that cannot be recovered or destroyed. Selna also ordered Qualcomm to pay Broadcom’s attorneys fees in the matter.

The injunction Selna issued in December prohibits Qualcomm from making, using, selling, importing, and developing certain next-generation chips capable of operating on CDMA2000 and EV-DO networks. The injunction also provides a sunset period that allows Qualcomm to continue to sell legacy EV-DO chips to certain customers through January 31, 2009, provided that it pays a royalty to Broadcom.

In its statement today, Broadcom says Judge Selna found that Qualcomm violated both provisions of the injunction by selling and offering to sell the prohibited EV-DO chips and by failing to pay royalties on legacy EV-DO chips..

The dispute arises from an infringement suit that Broadcom filed against Qualcomm in 2005. A Santa Ana federal jury determined in 2007 that Qualcomm had infringed on three fundamental patents held by Broadcom and awarded $19.64 million in damages for past infringement.

Qualcomm has appealed that case and in a statement issued this afternoon, Qualcomm’s seems to take the defiant position that—despite the 2007 verdict—the company can’t be found in contempt if did not infringe on Broadcom’s patents.

“As the court recognized, the outcome of this issue turns on a legal question of whether there can be a violation of the court’s injunction in the absence of an infringement or acts leading to infringement,” Qualcomm said. “We respectfully disagree with the court’s conclusions. We are analyzing our options.”

In a separate ruling yesterday, Selna granted Qualcomm’s request to amend counterclaims it has filed against Broadcom in the case. And so the battle rages on.

Comments | Reprints | Share: