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Qualcomm Incorporated

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About Qualcomm Incorporated

QUALCOMM is a leading designer and supplier of computer chips that mobile phone and wireless carriers depend on to get signals straight. The company pioneered the commercialization of the code-division multiple access (CDMA) technology used in digital wireless communications equipment and satellite ground stations mainly in North America. It generates most of its sales through the development and marketing of semiconductor chips such as its Snapdragon line and system software based on CDMA and other technologies. Its biggest customers have been suppliers to mobile phone makers Samsung and Apple. In 2018, QUALCOMM ended its $47 billion bid to buy NXP Semiconductors after the Chinese government failed to approve the deal.

Operations

While CDMA is QUALCOMM’s flagship technology, it has makes products based on Orthogonal Frequency Division Multiple Access (OFDMA), which allows multiple access on the same channel, and Wideband Code Division Multiple Access (WCDMA), designed to ease the transmission of multimedia content.

QUALCOMM CDMA Technologies (QCT) is the company's biggest business segment, generating more than 75% of revenue. Its QUALCOMM Technology Licensing (QTL) unit brings in the rest.

The company outsources manufacturing to contractors, primarily Global Foundries Inc., Samsung Electronics, Semiconductor Manufacturing International Corp., Taiwan Semiconductor Manufacturing Co., and United Microelectronics Corp.

Geographic Reach

QUALCOMM, based in San Diego, California, gets about two-thirds of its revenue from customers based in China (including Hong Kong), while customers based in South Korea supply about 15% of revenue.

Sales and Marketing

More than 50% of QUALCOMM’s revenue come from five customers: Apple Inc. (and its supplier Hon Hai Precision), Samsung Electronics, GuangDong OPPO Mobile Telecommunications Corp. Ltd., and Vivo Communication Technology Co.

Financial Performance

QUALCOMM halted a three-year string of falling revenue in 2018 (ended September), but the company’s bottom line took a hit from the US Tax Cuts and Jobs Act of 2017.

Sales edged 2% higher to $22.7 billion in 2018 from $22.3 billion in 2017, on a 4.5% increase in QCT sales while licensing sales fell about 5%. The company reported higher sales of radio frequency front-end (RFFE) components and Mobile Station Modem (MSM) integrated circuits. The company’s products fetched lower prices on average in 2018 compared to 2017.

QUALCOMM had a net loss of about $4.9 billion due to a $5.7 billion charge for income tax expense for repatriated earnings and profits of US-owned foreign subsidiaries. Also included were a $2 billion fee paid to NXP for terminating the acquisition and a $1.3 billion fine paid to the European Commission.

The company’s cash and equivalent balance dropped to $11.8 billion in 2018 from about $35 billion in 2017 because of costs related to the proposed NXP acquisition and an increased in money spent on stock buybacks year-to-year. In 2018, operations generated $3.9 billion and investment activities provided $4.4 billion while investing activities used $31.5 billion.

Strategy

QUALCOMM’s revenue suffered when Apple went with another manufacturer for mobile phone modems. What’s more, the companies have been in court, suing and counter-suing over who owns what technology. They continued the courtroom battle into 2019.

Two other corporate battles were settled in 2018, leaving the company with one win and one loss. The win came when Broadcom dropped its bid to buy QUALCOMM when the US government rejected it on national security concerns. In a different takeover battle, QUALCOMM ended its pursuit of NXP due to a slow by regulatory review and tepid response from NXP shareholders. QUALCOMM had to cough up a $2 billion termination fee.

On the product side, QUALCOMM is ready to furnish manufacturers with technology for 5G wireless networks, which are to be much faster and more powerful than previous wireless technologies. The company has worked to develop 5G technology for about a decade (it holds 15% of 5G patents, a higher percentage than any other company) and the toil is nearing payoff. The next generation of wireless networking has promise of providing faster communication with less latency, unleashing a host of new and powerful applications. The first 5G networks could launch in 2018 with more rolling out over the next several years. If it plays out like previous wireless generations, it means big business for QUALCOMM.

Mergers and Acquisitions

QUALCOMM acquired Scyfer B.V., a company that developed artificial intelligence technologies, in 2017. Qualcomm added Scyfer’s applications to end-use devices such as smartphones, cars, and robotics to ensure that processing can be done with or without a network

QUALCOMM and TDK formed a joint venture in 2017 to provide chips for mobile devices and internet of things applications. The entity, called RF360 Holdings, combines QUALCOMM’s chip expertise with that of TDK in filters. Application areas are mobile devices, automotive, and drones. The ownership of the joint venture is split 51% by QUALCOMM and 49% by TDK.

Company Background

Professors Irwin Mark Jacobs and Andrew Viterbi founded digital signal processing equipment company Linkabit in 1968. M/A-COM acquired the company in 1980. Led by Jacobs, Viterbi and five other executives left M/A-COM Linkabit in 1985 to start engineer-focused QUALCOMM (for "quality communications") to provide contract R&D services. The company's first home was located above a strip mall pizza parlor in San Diego. CEO Jacobs dreamed of modifying code-division multiple access (CDMA) -- a secure wireless transmission system developed during WWII -- for commercial use.

In 1988 QUALCOMM introduced OmniTRACS, a satellite-based system that tracks the location of long-haul truckers. By 1989, when QUALCOMM unveiled its version of CDMA, the company was working on military contracts worth $15 million.

In 1990 the company interrupted the Cellular Telecommunications Industry Association's (CTIA) plans to adopt a rival technology called time-division multiple access when communications service providers NYNEX (now part of Verizon) and Ameritech (later part of SBC Communications and now part of AT&T) adopted QUALCOMM's maverick technology. QUALCOMM initiated a CDMA public relations blitz and by 1991 Motorola, AT&T, Clarion, and Nokia had signed product development and testing agreements.

The company went public in 1991 and introduced the Eudora e-mail software program (named for "Why I Live at the P.O." author Eudora Welty), which it licensed from the University of Illinois. That year QUALCOMM and Loral Corporation unveiled plans for Globalstar, a satellite telecommunications system similar to the Iridium system. The CTIA adopted CDMA as a North American standard for wireless communications in 1993.

Qualcomm Incorporated

5775 MOREHOUSE DR
San Diego, CA 92121-1714
Phone: 1 (858) 587-1121

Stats

Employer Type: Publicly Owned
Stock Symbol: QCOM
Stock Exchange: , NASDAQ
Executive Chairman: Paul E. Jacobs
CEO and Director: Steven M. Mollenkopf
EVP Human Resources: Michelle Sterling
Employees (This Location): 277
Employees (All Locations): 35,400

Major Office Locations

San Diego, CA

Other Locations

Tempe, AZ
Buffalo, CA
Carlsbad, CA
San Diego, CA
San Jose, CA
Santa Clara, CA
Boulder, CO
Orlando, FL
Cumming, GA
Andover, MA
Boxborough, MA
Concord, MA
Rochester Hills, MI
Cary, NC
Clemmons, NC
Raleigh, NC
Bridgewater, NJ
Las Vegas, NV
Austin, TX
Hyderabad, India
New Delhi, India
Brasilia, Brazil
Oakville, Canada
Ciudad De Mexico, Mexico
Taipei City, Taiwan
Cambridge, England