Qualcomm Inc (QCOM)

[khemara_qc]

Something brew-ing
LI WEITAO
2005-06-27 06:56

http://www.chinadaily.com.cn/english/doc/2005-06/27/content_454787.htm

When Steve Altman joined CDMA technology pioneer Qualcomm in 1989, CDMA seemed to be an unproven technology.

"We were excited about CDMA," says Altman, who has been working at US-based Qualcomm for 16 years.

"But many people didn't believe CDMA would work. And we had a difficult time."

Altman has been elected president of Qualcomm. He assumes the post on July 1.

Now, CDMA is a viable technology. It is now the second-most popular mobile technology in the world.

The runaway success of CDMA, and Qualcomm, is largely due to years of heavy investments in research and development (R&D) and a well-horned IP (intellectual property) strategy.

Altman has been the chief architect of Qualcomm's strategy for leveraging its broad intellectual property portfolio.

QUALCOMM holds more than 3,000 US patents and patent applications for CDMA and other technologies.

And the firm earns money from each CDMA-based terminal or equipment in the world, whatever the makers are.

CDMA is the basis for all 3G (third-generation) mobile communications standards. That could ensure Qualcomm continues to profit from the telecoms industry.

Qualcomm's licensing and royalty fees increased 30 per cent, to US$516 million, in the year's second quarter.

Altman has served as executive vice-president, general counsel and president of Qualcomm Technology Licensing.

Under his leadership, Qualcomm inked more than 125 licensing agreements with the world's largest telecoms and electronics companies.

"I have been involved in almost all business transactions (relating with licensing agreements) in the past 16 years," Altman said.

Patent licensing has become a unique business model for Qualcomm.

The firm's licensing and royalties fees last year accounted for 24 per cent of its total revenues.

Now, Qualcomm is writing the success story for BREW, an application-development platform.

The BREW platform, created by Qualcomm, enables application developers, publishers, content providers, device manufacturers, operators and customers to build applications for mobile devices.

BREW publishers and developers have earned more than US$350 million from the sales of BREW applications and services by the end of May since its launching.

That compares with more than US$240 million registered at the end of last October.

Helped by BREW, "by providing the tools and resources necessary for the development and delivery of wireless content, publishers and developers can concentrate on what they do best creating compelling, fun and useful applications, which translate directly into revenue gains for the mobile marketplace value chain," says Peggy Johnson, president of Qualcomm Internet Services (QIS).

Qualcomm generates revenues from the rapidly growing BREW business by licensing the platform to developers.

Qualcomm's executives declined to offer details about the licensing arrangements.

The firm has yet to make a profit from BREW. And the QIS division, responsible for Qualcomm's BREW solution and Eudora e-mail client, contributed only 12 per cent to Qualcomm's revenues last year.

But the BREW platform is set to become a success.

"We made a significant investment in BREW," said Bob Briggs, vice-president of global business relations and operations at QIS.

"We do have the objective to make profits (from it)."

He did not offer a time frame.

Now, 45 mobile operators in 24 countries are offering, commercially, BREW services.

Altman sees BREW as the next big thing for Qualcomm.

The firm will push BREW hard, to "enable our partners to succeed in the wireless industry," he said.

BREW wins

BREW mainly competes with the J2ME (Java2 Mobile Edition) platform.

Technically, BREW supports mobile phones better than Java, and BREW can enable developers to build better applications.

Another major advantage of BREW is it is the only wireless-data platform available on low-cost handsets.

But BREW was not created to just compete with Java.

Behind the strong push of BREW is Qualcomm's desire to drive up its chip sales.

"We will focus hard on the chip business," Altman said.

Qualcomm's chip business contributed 64 per cent to its total revenues last year.

The trend is software is becoming more and more important than hardware, therefore BREW is helping Qualcomm's chips become more appealing.

With the increasing popularity of BREW, many other chip makers will also be forced to enable their chips to support the platform.

That means chip makers will also pay patent fees to Qualcomm.

Beyond CDMA

Qualcomm's big ambition for BREW does not stop there.

BREW was designed to support CDMA technology. But now Qualcomm is also pushing it into the GSM's space, and in non-brew devices.

GSM is the world's most-popular 2G (second-generation) mobile communications standard in the world, competing with CDMA.

BREW now supports WCDMA, a 3G mobile technology that has evolved from GSM.

That could potentially boost Qualcomm's WCDMA chip sales.

"We expect to do well in the WCDMA chip business," Altman said.

Qualcomm earlier this month introduced a new content delivery system Delivery One.

The new system enables the downloading of non-BREW content, especially Java applications.

That will enable WCDMA network operators to adopt BREW without having to sacrifice popular content and applications.


(China Daily 06/27/2005 page7