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Qualcomm's wireless tech patents give a bright future



RELATED SYMBOLS: (QCOM)

Jan 29, 2003 (Knight Ridder Newspapers - Knight Ridder/Tribune News Service via
COMTEX) -- If Irwin Jacobs is looking just a bit smug these days, he has a
reason. To put it mildly, the co-founder and chief executive of Qualcomm is on a
roll.

Qualcomm owns some core mobile communications technology, and the San Diego
company seems well on the way toward erecting what amounts to a tollbooth on one
of tomorrow's key information highways.

The technology is called CDMA, which stands for Code Division Multiple Access.
CDMA breaks speech into small digital packages for transmission over the
airwaves, identifying each one so the receiver can pull in the correct packages
and reassemble them into a coherent voice. It's an efficient way to get more
conversations into a given amount of spectrum.

After extended debates over next-generation wireless standards, CDMA and its
successors are making strong headway. Years of development, evangelism and tough
tactics by Jacobs and his colleagues are looking like a solid investment.

Currently, most of the world uses GSM, which is shorthand for Global System for
Mobile communications. GSM is also a digital technology, but uses what's known
as "time division multiple access" (TDMA), which crams less data into the
spectrum. (The U.S. has had a hodgepodge of standards, including both CDMA and
GSM.)

"The argument is over," Jacobs said in an interview last week. While many
standards will be in use for a long time to come, he said, CDMA and its
derivatives are increasingly going to be part of our mobile future. And that
means a steady stream of hefty royalties for Qualcomm, which licenses its
technology widely.

The market seems to agree. Last week, Qualcomm did something unusual for a tech
company in these tough times: Excluding investment losses, Qualcomm reported
record profits for the recently ended fiscal quarter - $241 million on sales of
$1.1 billion, up from a net of $139 million on revenue of $699 million a year
earlier.

Tomorrow's networks are being designed for much faster connections, largely for
data traffic that many believe will dominate usage. Qualcomm has pitched its own
vision of the future based on CDMA, and even its chief rival is moving to a
standard that uses a form of the technology.

Which means, as Jacobs says, that some form of CDMA could eventually be part of
just about every wireless communications device.

There have been ongoing efforts, notably in Europe and China, to come up with
next-generation mobile technology that has all the advantages of CDMA while not
requiring the payment of royalties to Qualcomm.

But Andrew Seybold, a Los Gatos, Calif., expert in mobile communications whose
family owns Qualcomm stock, said it's hard to imagine anyone building a
CDMA-like system that doesn't use Qualcomm's core technology in some way.

Qualcomm, for its part, has been notoriously hard-nosed about asserting patent
infringement when someone claims a new approach. It has won enough cases to have
persuaded just about every company in the business to sign license agreements of
some sort.

Jacobs calls it an "open question" whether anyone can come up with
cost-effective technology that gets around Qualcomm's patents. Even if they can,
he asks rhetorically, does it end up cheaper, given the cost of development and
the potentially inferior performance, simply to pay licensing fees?

Emerging mobile standards aren't solely the province of Qualcomm, Jacobs and
others note. Many companies have added their own pieces to the puzzle, which
means that royalties will end up being paid (or cross-licensing deals arranged)
to many different parties as time goes on.

A current bane of mobile phone users is the inability to use the same phone
worldwide. "We will never have a single worldwide standard," Jacobs asserts.

Qualcomm has launched a line of chips that will support multiple technologies,
allowing handset makers to sell phones that could work with every permutation of
network and handset. No one is selling such a universal phone right now.

I, for one, would welcome a phone that worked everywhere. But I'd settle for
something that that worked well here in the United States, where lousy service
is endemic. Sometime this year, I expect to move to a service that includes
reasonably fast data connections as well as voice. CDMA-based devices from
Verizon and Sprint are near the top of my list of candidates, even though a
GSM-based system from AT&T's updated network is a possibility.

Jacobs, naturally, is already well down that path. He carries a Handspring Treo,
which combines a Palm-compatible handheld with a phone. He has a separate mobile
phone. And he has a wireless data card he plugs into his IBM laptop, saying the
coverage is good enough to get connected almost everywhere he travels in the
United States.

But such access is expensive today, at least in the United States.

On a recent trip to Japan, I used a CDMA-based data connection for my notebook
computer. The rate was much cheaper than anything equivalent here, so I'll wait
for the U.S. providers to be a little less greedy before I try what Jacobs uses
every day.

But I'm sure I'll be trying it at some point. And barring some stunning
breakthrough from technological left field, some of my money is destined to end
up on Qualcomm's bottom line.

(Visit Dan Gillmor's online column, eJournal (www.dangillmor.com). E-mail
[e-mail]; phone [phone]; fax [phone].)

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By Dan Gillmor
Knight Ridder Newspapers
CONTACT: Visit Mercury Center, the World Wide Web site of the Mercury News, at http://www.bayarea.com/mld/mercurynews

Distributed by Knight Ridder/Tribune Information Services.

(C) 2003 Knight Ridder News.

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