Qualcomm Cash Buys Few Kudos - TheStreet

Fittingly, Qualcomm (QCOM) - Get Report promoted a techie and a lawyer to its No. 1 and No. 2 executive spots.

Effective July 1, Paul Jacobs, the head of Qualcomm's wireless and Internet group,

will take over the CEO spot from his father, Irwin Jacobs. Also in July, company attorney Steve Altman will replace Tony Thornley as president.

Irwin Jacobs will take the chairman spot and says he plans to take an active role in the company's strategy. It's no great surprise that the CEO spot stays in the founder's family. And despite the seemingly ample employment opportunities for executives in the wireless technology business, Thornley said in an interview Tuesday that he plans a full retirement and has no further career plans.

Though analysts on a conference call Tuesday cheered the orderly succession plan, investors didn't exactly greet the news warmly.

Qualcomm shares dropped 1% in midafternoon trading. The slightly negative reaction came even as the company threw extra cash at shareholders by bumping up its quarterly dividend Tuesday to 9 cents from 7 cents, and authorizing $2 billion for a new stock-buyback program.

The promotions, however, underscore the company's two-pronged business strategy: Develop wireless technology and then defend intellectual property rights so the royalty streams keep flowing.

Altman, who is referred to as the architect of Qualcomm's patent licensing success, was responsible for the company's first major patent victory. In 1999, Altman and his legal team forced Swedish wireless giant



to cave in and start paying Qualcomm for rights to its code division multiple access, or CDMA, standard.

The legal victory transformed Qualcomm's business. Soon after, other network equipment and handset makers ponied up royalty payments to Qualcomm. Qualcomm then sold both its equipment and phone business so it could focus on developing advanced CDMA chips and collecting licensing royalties.

Altman's promotion indicates that Qualcomm has more intellectual property battles to fight.

For example, China is expected to issue new wireless licenses for advanced network upgrades, allowing faster data services. Officials there are debating whether to use wideband CDMA or a homegrown standard known as TD-SCDMA.

"There will be lots of discussions, but from our point of view it will ultimately be a version of CDMA," said Thornley.

Getting the various network equipment and phone suppliers to recognize the CDMA patents and pay license royalties will fall to Altman.

Also, in an interview Tuesday, the executives confirmed that the company has pulled the plug on its evolution data and voice, or EV-DV, technology development. "We have allocated those resources on to other products," said Thornley.

The status of this future standard was a concern, since all of Qualcomm's big U.S. CDMA customers had decided to go with evolution data only, or EV-DO, as the next generation of fast wireless Internet service. But that upgrade didn't answer voice service requirements that the carriers were looking for. Qualcomm says it has solved the problem by developing a voice-over-Internet-protocol feature called revision A, or Rev A, to accommodate phone conversations over wireless data connections.

Qualcomm slipped 45 cents to $36.94.