A Tech Great Takes a Swing at the Internet of Things

After another splashy CES performance, what might the future have for Qualcomm?

Jan 14, 2014 at 10:30PM

One of the most buzzed-about topics at this year's Consumer Electronics Show was the "Internet of Things," and few companies seem more aware of that than Qualcomm (NASDAQ:QCOM). The company that blew its keynote out of the water last year came back with even crazier plans for the future. While it might seem more exciting than ever to be a part of Qualcomm, the company is also about to experience some changes in its executive leadership. What should investors think about all this hoopla?

Year of the Snapdragon
It's safe to say that Qualcomm has put its chips in a number of pots this year. For starters, its new Snapdragon 802 model is a system-on-a-chip aimed at taking over the "Internet of your living room," so to speak. The HD processor is meant to power smart televisions, smart set-top boxes, and smart digital media adapters, and allows users to play as many as four HD videos at once, on the same TV no less. Basically, it's designed to turn your living room into something straight out of the Home of the Future.

Additionally, Qualcomm is taking it to the streets with an infotainment chipset for your car, the Snapdragon 602A. The list of possibilities here seems practically endless -- the 602A is capable of 3-D navigation, along with face and gesture recognition, and can also moderate a vehicle's temperature and the state of its longevity. Home of the Future, meet the Car of the Future.

Last but definitely not least, Qualcomm's Internet Processor seeks to calibrate your house for the future by creating a Smarthome platform aimed at connecting you to everything within your home, all the time, all via one suite of products. Presumably, the goal here is to make life smoother and more efficient as a result. The possibilities for these products, according to Qualcomm's press release, include access to home security, health monitoring, and managing a single home's energy use. All this always-on innovation might soon make it more difficult to have a digital detox every once in a while, but Qualcomm is hoping it translates into megabucks on its end.

Exit Paul Jacobs
With the exciting possibilities brewing for Qualcomm, it might seem like an odd time for CEO Paul Jacobs to relinquish his role to President and Chief Operating Officer Steve Mollenkopf. Son of Qualcomm co-founder Irwin, Jacobs has been CEO since 2006 and seemed genuinely excited about the company's prospects during its most recent quarterly results presentation. So why has he decided to leave now, when it looks like everything could soon change dramatically?

Turns out, the decision may have been made for him. A recent Fortune article explained that Qualcomm's board of directors had eyed Mollenkopf as the company's next CEO for quite a while. They were forced to act quickly upon realizing that Microsoft might be considering Mollenkopf as a Steve Ballmer replacement. Mollenkopf will take the reins in March, while Jacobs plans to remain as an executive chairman.

Considering the company's aspirations for the near future, Mollenkopf seems like a good pick for new CEO. In 2011 he helped lead a $3.1 billion acquisition of Atheros Communications, the company's largest acquisition ever and a solid step away from the cellular space. Now it's all just a matter of making that connect to the "Internet of Things."

Steering away from smartphones
Another reason for Qualcomm to speed up splitting its revenue is concern over smartphone markets. In a November 2013 study, the International Data Corporation reported that smartphone saturation could be on the horizon for a number of mature markets; the average selling price per smartphone was expected to drop in several key worldwide markets by 2017, including Asia and Europe. This could take a lot of the wind out of the sails at Qualcomm, which made the bulk of its 2013 revenue through selling circuit products for wireless devices (particularly mobile phones and tablets), as its customers (the manufacturers) start to seek cheaper ways to make cheaper phones.

It's not like any of this comes as news to Qualcomm. The company has been funneling money into learning how to best steer itself away from mobile phone reliance since at least 2011 (when it bought out Atheros). Research and development expenditures have steadily grown since then, from $3 billion in 2011 to $5 billion in 2013. It's clear the company has something big up its sleeve, and with Mollenkopf at the helm and a bevy of exciting new (nonmobile-phone-related) products in the wings, operation diversification just might work.

What's up next
It'll be interesting to see exactly how the public reacts to Qualcomm's take on the Home of the Future. Wall Street hasn't reacted with too much gusto thus far- it sent the company's stock up from $72.70 on Jan. 6 to $73.90 on Jan. 9.  There might be more of a positive response once Mollenkopf officially takes the reigns, but for now, even a baby step in the right direction can be promising for a company working hard to reinvent itself.   

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Fool contributor Caroline Bennett has no position in any stocks mentioned. The Motley Fool owns shares of Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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