NPR had an interesting guest this morning: Edward Luce, author of “Time to Start Thinking: America in the Age of Descent”. I’m not about to turn SemiWiki into a politics blog, but there is some precedent in the technology business. I’ve caught myself saying more than once recently that “Motorola is no longer the company I worked 14 years for.”
I started thinking about the decline of Motorola and the history of Qualcomm, and realized these two companies are not only intertwined, but on parallel paths with Qualcomm a few years behind in the sequence of events. (We follow the Qualcomm timeline from a chance meeting between founders in 1959 to present day in Chapter 9 of “Mobile Unleashed”.) Here are several similarities I see:
Both were family run businesses in their heyday. Motorola was founded by Paul Galvin building car radios and then police and military radios. His son Bob took Motorola into semiconductors, TVs, pagers, microprocessors and computers, mobile phones, and other areas. His grandson Chris tried several things including a set-top box acquisition of General Instrument, and set the spinoffs of ON Semiconductor and Freescale into motion before ceding control. Qualcomm was founded by Irwin Jacobs, and successfully run for years by his son Paul, who relinquished the reigns to current CEO Steve Mollenkopf.
Both accumulated large patent portfolios. Motorola’s diversity and programs such as Technical Ladder led to many patent filings. Motorola patents were later a key factor in Sanjay Jha’s approach to Google in divesting its mobile handset operation, now owned by Lenovo. Qualcomm of course is built on mobile patents, tracing back to the Linkabit days and through the creation of CDMA technology.
Both had mostly embedded business models. Although Motorola’s radio business and cell phone business were heavily branded, much of Motorola’s activity was embedded – products inside of something else with somebody else’s logo on the outside. Qualcomm is very similar. Its trucking business was branded, and Qualcomm briefly flirted with its own mobile phones, but went back to an embedded model selling chips to others. Qualcomm is trying to place its Snapdragon brand in front of consumers and has its name on a stadium; Motorola got into Indy Racing, a Tour de France bike team, and NFL communication headsets.
There are some key differences. Motorola’s infamous warring tribes mentality, with divisions competing for resources, is less of a problem at Qualcomm. Focus at Qualcomm is much better, but they are now faced with a question of if and how to diversify or divest. Also, so far at least, Qualcomm is free of bungling missteps from its CEO – Motorola suffered a string of several post-Bob CEOs who made huge gaffes, with the pinnacle being Ed Zander’s schooling by Steve Jobs (Chapter 7 in “Mobile Unleashed”).
Qualcomm is definitely making a lifestyle play with its efforts in healthcare and retail. In many ways this is a play from the Intel playbook: start businesses that can consume chips, then back off when the ecosystem invests. For that reason I don’t think the Qualcomm server play is going to be massive; in fact, some observers question if there is any money to be made at all. The end-to-end nature of mobile and IoT apps suggests there is but the question is how much.
However, the strength of Qualcomm has always been the synergy between its IP operation and its chip operation. Breaking that up would be a bad idea. Qualcomm made a great play in adding Atheros and CSR. Can they add new business and acquisitions without growing into the confused mess that Motorola became?
Qualcomm’s growth has moderated, but the stock hasn’t plummeted. Motorola went from $120 to $20, while Qualcomm has dropped from $81 back to around $50. If Mollenkopf can reignite the engine (and for technical analyst types, it’s at the bottom of a rising channel), things could be looking up. (Disclaimer: I don’t own QCOM, never have.)
I’m optimistic on Qualcomm’s future, but I need to see something besides server chips. The IoT could provide a boost while the mobile industry stabilizes into single-digit growth. As I’ve said before, we better be rooting for Qualcomm, because if they don’t get it right it sets off a ripple effect that impacts many other parts of the supply chain. I invite your read of “Mobile Unleashed” and discussion of how the future may unfold for Qualcomm – and I hope it doesn’t ultimately look like how the story played out for Motorola.