Qualcomm's Irwin Jacobs
After building a San Diego industry, he's taking on the world

By Timothy J. McClain

Irwin Jacobs, 63, didn’t start out to rule the world of wireless telecommunications. But the chairman and chief executive of Qualcomm Inc. sure is headed that way. He already rules the industry he created in San Diego as Qualcomm's hiring of 1,711 people in 1996 alone attests. And the late-to-the-party CDMA technology he pioneered is winning rapid global acceptance, displacing more established competitors along the way.     Jacobs started out as a teacher, serving as an assistant/associate professor of engineering from 1959 to 1966 at MIT, where he also coauthored a textbook on digital communications that remains in use today. Like other leaders of San Diego’s growing high tech economy, he was drawn here by UCSD, taking in 1966 a position as a professor of computer sciences and engineering.     In 1968, Jacobs and long time associate Andrew Viterbi founded Linkabit, a now legendary San Diego telecommunications company that has spawned more than a dozen firms. Jacobs recalls the move from academia to the private sector was "a bit scary but also invigorating." Nevertheless, he initially worked for the company only one day a week Viterbi, now Qualcomm's vice chairman, was the full-time employee and when Jacobs decided to give it his full attention, he did so on a one year sabbatical that would allow him to return to teaching.     Working for the government, and initially focusing on defense projects, Linkabit grew quickly and in 1980 merged with M/A Com. Jacobs, uncomfortable with the new operating style, left the merged company on April 1, 1985, promising to retire with what the Wall Street Journal estimates was a $25 million payday. Retirement lasted three months.     "I was looking to have fun and do something productive," Jacobs says about founding Qualcomm. "On the business side, the biggest thrill is going from concept to development to a product that is being used. Right now it is a tremendous thrill to go over to the factory and see all the phones being shipped out every day." (His Qualcomm Personal Electronics joint venture with Sony, owned 51 percent by Qualcomm, is producing more than 200,000 telephone handsets a month and targeting 4 million for 1997.)     Still, when Jacobs started Qualcomm, he never expected it to grow this large. At last count he has 7,000 employees, owns about 1 million square feet of office and industrial space, leases 185,000 square feet and is planning to build another 250,000 square feet. "I assured our first vice president of engineering we would never go beyond 150 engineers," he says. "Now we are over 2,000. Each year I would tell everybody the growth will slow down. I don’t try to make those predictions anymore. The opportunities are large and we still have enthusiasm for going out and winning our share."     While Qualcomm will continue to grow in San Diego Bruce Ahern, publisher of the Technology Directory, says the industry's annual job growth is approaching 50 percent Jacobs cautions that while San Diego will always be home, some manufacturing will be located for political reasons in nations where Qualcomm does business and that a shortage of good software people in the United States may be alleviated by tapping the labor supply in Ireland or India.     For all its accelerating growth revenues leaped 110 percent to $813.8 million in the fiscal year ended Sept. 30 Qualcomm remains tiny when compared with a Motorola or Ericsson. And while its 7,000 jobs are huge by San Diego standards, a company like AT&T has 130,000 employees and annual revenues of $52.2 billion. And AT&T also is supporting a rival technology. Jacobs isn’t interested in being taken over "Linkabit ... was not the most perfect experience" and Qualcomm has stock and voting procedures in place to discourage that from happening. Still, "any time you are in business, any of those arrangements are possible," Jacobs says. "We are not going to encourage someone to come in and buy us out."     Similarly, Jacobs looks to grow products that Qualcomm develops rather than purchasing outside. (It did, however, buy the popular Eudora e-mail program.) "Our primary focus is to develop our ideas inside the company and try to make sure people here have the freedom to bring in ideas and try new things."     Jacobs the engineer is something of a rarity in making the transition from inventor to businessman. (Friends say Viterbi and Harvey White, Qualcomm president, both of whom get cofounder billing in company documents, are keys to the management team.) With Qualcomm six times the size of Linkabit, Jacobs' management style has required some fine tuning.     "We try to keep the same type of internal philosophy: To value people highly, give them good working conditions and good training programs and keep a free circulation of ideas," he says. "The major difference is I used to be able to fairly easily wander the corridors and over the course of a few weeks pretty much see everybody. Now it is hard to get to all the buildings. So I substitute other approaches. We have a very extensive use of internal e-mail and I am a member of many e-mail groups. I can respond and participate in discussions without physically being present. And I can maintain those e-mail contacts when I’m on the road."     Jacobs controls 3 million Qualcomm shares worth about $150 million and could call it quits anytime. Yet he cannot slow down. "I keep telling my wife (Joan) that next year we will take it easier," he says. "She says I have been saying that for 44 years. It is just too exciting. I do take time for culture, reading, certainly family. But the thing that is really exciting is to grow products and markets, to employ people and to have an impact."     Under Jacobs' leadership, Qualcomm is an aggressive participant in community activities. Some of his fellow high tech leaders in San Diego have been criticized for their hard working myopia that keeps them focused solely on the task at hand. Jacobs says those executives must find the time to become part of the community. After all, he says, the community's schools, cultural institutions, government and other amenities help keep top employees.     "It is a balancing act," Jacobs concedes. "If you are a public company, you have to make sure you are doing things that help your shareholders. Having said that, some use of funds can be, even if not immediately profitable, used so you become more profitable. It is something you have to consider important or it will continually be deferred."     While "extraordinary" sums up Jacobs' support of the arts - he and publisher Ellen Revelle Eckis kept the San Diego Symphony afloat for months while it tried to work out its financial problems - the word is also appropriate for his ability to build worldwide CDMA acceptance.     "He is the right combination of the technically attractive person and a technically credible person who can communicate with technical and non-technical people alike," says Martha Dennis, who was Linkabit’s 161st employee and is now a vice president with spinoff PCSI Wireless Systems. "He engenders trust."     Indeed, in 1986, when the wireless industry realized soaring demand would outstrip the capacity of analog cellular (i.e. in 1983 U.S. cellular users totaled fewer than 200,000, compared to 45 million in 1996 and an estimated 150 million by 2001), it started a hunt for a digital replacement. By the time Jacobs got his CDMA to the table, the industry was down the road with TDMA, while Europe was favoring a noncompatible version of TDMA called GSM. Yet through Jacobs' persistence, and the demonstrable advantages of his technology, in 1983 CDMA was given costandard status nearly two years after TDMA landed the coveted designation.     While it has licensed its CDMA technology to dozens of manufacturers, Qualcomm itself is actively working places like Delhi and Madurai, India, not to provide the better known talk in the car wireless but to build wireless networks in places that lack a mature traditional land line telephone system. The ability to do that is important. More than half of the world's population lives two hours-plus travel time from the nearest telephone. Yet as Bill Otterson, director of UCSD Connect notes, if those people and their countries are going to fully participate in the growing global economy, they need to be able to communicate. "Now that the world is opening up people need telephones," Otterson says. "And they need wireless because it costs too much to lay wires. (Jacobs') wireless hit at the right time, when the world economy was changing."     Serving the telephone needs of countries like India, Brazil, China and Indonesia is going to take a long time and require lots of equipment. For royalties and to prevent a Beta/VHS nightmare, Qualcomm has cut 48 licensing deals, allowing others to build and sell CDMA equipment. It also is aggressively seeking a serious manufacturing role of its own.     "Qualcomm has an opportunity to move from a niche technology player to a global telecommunications equipment powerhouse," says Gregory Geiling, a Wall Street analyst with J.P. Morgan Securities Inc. "That is an opportunity that doesn’t come along very often and Qualcomm is on the cusp of making that transition. That is the most important part of the story. Qualcomm's a good stock to own for the next two years, but it is a better stock to own for the next 20."     And Jacobs isn’t just confining his potential wireless empire to terra firma. He's into space, both cyber and the black vacuum that surrounds this planet.     Looking to the heavens, Qualcomm is a 7.2 percent owner of Globalstar, a $2.5 billion venture that’s gearing up to launching late this year 48 low earth orbit satellites. By late 1998, globe-trotting executives willing to shell out $750 to $3,000 for a wireless phone could make or receive calls on a single number, whether sitting in a Manhattan cab or an Amazon canoe.     In cyberspace, Qualcomm already controls the powerhouse e-mail program, Eudora. Recently it found a way to put the software into its vaunted OmniTracs, a truck-tracking package with 185,000 units sold in 33 countries. In the OmniTracs set-up called "CabCard," drivers can send and receive personal electronic mail messages using a prepaid card account, a fine amenity for an industry in which the long periods away from family are shrinking the pool of qualified workers.     Back in San Diego, Jacobs' influence reaches beyond his employees and their families. The local telecommunications industry he is widely credited with creating is about to replace all the 35,000 defense jobs San Diego lost in the early 1990s. Not even a blip on that job-count list so far is NextWave, a company populated with former Qualcomm employees. NextWave, in a fierce bidding contest, spent $4.2 billion to buy from the federal government the rights to sell wireless telephone service in 63 markets. Qualcomm provided $30 million in funding for the venture, later converting two-thirds of that to equity. NextWave also agreed to buy 50 percent of its equipment from Qualcomm, which will provide the systems and 100 percent financing. NextWave alone, notes Otterson, will have to become a $5 billion company to pay off those licenses. Ahern says NextWave will increase the telecommunications synergy and "generate dozens and dozens of new firms nearby."     Jacobs' life does not lack for challenges. His core technology, Code Division Multiple Access, remains under attack from rivals, principally Time Division Multiple Access, or TDMA, and a TDMA variety called Global System for Mobile communications. What Jacobs managed to do with CDMA was steady the power fluctuation problems of what had been primarily a military satellite technology. His patented solution is engineering and software intensive - trade publications have lamented that it takes an engineering graduate to troubleshoot a system problem - and detractors say that under full load it will fail to work as advertised.     Indeed, GSM, which Pacific Bell Mobile Services is using for its digital service in San Diego, is already used by more than 60 million people in Europe. And it has no shortage of supporters in the United States. For example, Western Wireless last month won a bid at auction to provide cellular service at 100 locations in 23 states and will use GSM as the technology of choice. Jeffrey Hines, an analyst with First Call Research Network, a staunch supporter of GSM and Ericsson, writes that if CDMA "were so great, wouldn't everyone use it?" Hines also concludes that "at the end of the day it is likely that all of the major digital standards being deployed in the U.S. will have similar cost, quality, etc., characteristics. We also note that GSM remains, in our opinion, truly the only worldwide de facto digital wireless standard."     And while nine of the top 12 wireless providers have chosen CDMA as their digital technology, AT&T is one that did not.     Competitors in the truck-tracking business, perhaps taking note of what analysts say are Qualcomm's 40 percent gross-profit margins on Omni-Tracs, are moving aggressively with pricing.     In outer space, the Iridium satellite telecommunications venture is further along than Globalstar and some analysts have questioned, with the growth of ground-based wireless networks, how big the market is for folks who want to be able to call the office from a jungle. A Globalstar failure, Qualcomm says in company documents, would have a "material adverse effect" on business.     None of this much troubles people like Bob Rosenberg, president of the New Jersey-based Insight Research Corp., which consults with major telecommunications companies. "Right now Jacobs is in the catbird seat," Rosenberg says. "I think that essentially CDMA has won the battle. By far most of the (new carriers) have selected CDMA." Analyst Geiling looks not at the engineering, but at the companies, such as Sprint, that are investing hundreds of millions of dollars in CDMA networks. "That right there is an enormous vote of confidence," he says.     At the core of CDMA's promise is its ability to greatly increase the amount of data that can be transmitted across a radio wave. Systems up and running are handling five times the amount of traffic as cellular analog networks, and Jacobs has repeatedly said that 15 times is a realistic target. As numbers get near that point, CDMA providers are able to add new customers without adding new equipment, leaving competitors to eat their own static.     The dizzying pace of this industry also parallels Jacobs' desire on the highway where he admits to testing the engineering performance of his late-model Lexus. So, what’s the fastest he has ever driven? "Over in Europe, probably 160 kilometers, about 110 to 120 miles per hour," he says. Seems about right, given the speed with which Qualcomm is taking on the telecommunications world.

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