POST OF THE DAY
QUALCOMM, Inc.
Lecture Notes

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By BRational
October 12, 2005

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Dr. J charmed and captivated an audience that filled an auditorium to capacity, and another overflow room where the presentation was being telecast. The core audience consisted of engineers� to whom Dr. J was introduced as a shining example of how engineers can create world-class companies and make outstandingly successful CEO's. I had only seen him on TV and Webcasts; the real person has a warm and engaging personality. He talked about the early days, going back to the Linkabit days, and how he started Qualcomm after his first "retirement" upon selling that company. He described the Omnitracs truck location and communication system and service, the technological challenges that had to be overcome, how he made his first major sale (to Schneider trucking, in October 1988), and how the product took off.

Of course the more exciting part was the development of CDMA, which was largely funded by Omnitracs revenues; the skepticism they encountered from a TDMA-dominated establishment (in the US, and GSM in Europe) is now the stuff of technology adoption textbooks. He quickly went through the milestones, from 2G to the ITU 3G challenge, 1X, EVDO, WCDMA, DORA and so on... This wrapped up the first 20 years, and the focus shifted to the next 20 years.

He reviewed some of the big trends that Qualcomm presentations of the past year or two have tended to feature:

(1) wireless taking over wireline in terms of number of subscribers and hence access;

(2) integrated and compact chipsets, which leave plenty of room for application processors such as media, GPS location and so on (we've all seen the standard slide in every presentation, showing all the modules being packed onto that square chip, and the
shrinking size of the modem part relative to the total);

(3) the central role of the mobile handset, and the functionality being packed into it (the slide with the handset in the middle of a circle formed by all the standalone devices now being integrated in handsets);

(4) the rapid evolution of computing power and support functions in the handset processors vis a vis desktops (we have all seen the slide where there is a PC circa 2000 vs. a Samsung EVDO phone, listing the CPU, storage, internet access speed, and so on).

He selected three application areas that he viewed as particularly significant for wireless: (1) location and position capabilities, (2) navigation (he showed KDDI's Navi system); and (3) health monitoring (Korea Freetel), including the new service called Cardionet which leverages the Omnitracs control center.

He then highlighted three ongoing developments as examples of exciting developments that illustrate directions in which the company and the industry might be going:

(1) Media casting (we've seen the slide and slogan "the third screen is always with you", showing the transition from movie theatre, home TV, to the handset screen)�he presented the Media Flo concept (which we have discussed in some length on this board), explaining how it would entail integrated service across multiple networks: the dedicated downlink network with OFDM air interface, and the 3G (EVDO or WCDMA) carrier network for interactive services. With regard to Media Flo, I had not realized that the company had already licensed UHF Channel 55 across the US for the FLO network.

(2) Dynamic home screen/datacasting; this is the ability to customize one's home screen, to include items of interest such as weather, sports scores, traffic reports or stock quotes, the same way one personalizes their PC home page. I personally did not think this was particularly significant, though I assume what is significant is the always-on aspect that allows continuous refreshing of the information.

(3) More immediately, embedding of 3G chipsets in notebook computers, particularly EVDO chips (and WCDMA as well), which will become available in models produced by Lenovo, HP and Dell.

The latter is currently a point of significant PR focus at Qualcomm� a white paper has recently appeared on that, alongside the Why Max? paper I reviewed earlier. It's at http://www.qualcomm.com/enterprise/pdf/Embedded_CDMANotebook.pdf. Other than the importance of embedding WLAN access capabilities within notebooks, the same way wi-fi has become a standard feature, which will drive demand for 3G, the main point the white paper tries to make is that Wi-Max is coming too late to the party�and these are the exact words that Dr. J used in making this point. Keep in mind that Cisco has threatened entry into the notebook connectivity arena by giving WiMax the kind of boost that its Centrino processors have given to wi-fi. Dr. J's point is that 3G connectivity is here and now, and is being embedded in notebooks, so why would anyone want to wait three or more years for WiMax to reach the same stage?

The fact that Dr. J chose to make this particular point shows how close he still is to the strategic aspects of Qualcomm's everyday business. As a long term shareholder, I find this involvement and mastery of the details reassuring.

Another interesting development I must not have paid attention to is promotion of EVDO in the 450MHz frequency spectrum, as a relatively inexpensive way to provide internet access to remote and rural areas; he noted a recent system in the 450MHz in Brazil.

Dr. J also described Qualcomm's role during the two hurricanes in the South. Apparently Omnitracs-equipped trucks were at one point one of the only forms of communication still functioning�because of their reliance on satellite communication, instead of ground-based base stations. He also described the support role the company provided to FEMA, especially during Hurricane Katrina; the company dispatched mobile base stations to quickly re-establish communication lines in hard hit areas. These base stations connect to the core network via satellite, instead of connecting via wireline fiber. He indicated that this capability would be critically needed in case of emergency such as hurricane evacuation.

Overall, there were no revelations that those who follow the company and the wireless sector would not be aware of. However, hearing the story from the founder himself, and seeing the excitement and passion that he brings to the whole subject of wireless communication and its potential to positively impact so many essential aspects of our lives, is truly an inspiration.

BR


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