Qualcomm speculates to accumulate
1 min read
When you become a big company, you start experiencing big company problems. One of those problems is how you continue to grow the business and to provide that all important return to the investors.
The problem is exacerbated when you are a dominant player in a defined market; there is only so much additional business available. That is obviously the problem with which Qualcomm ceo Dr Paul Jacobs has been wrestling with over the last few months. It's been one of the company's goals to expand into adjacent markets.
There is no doubt that Qualcomm is a successful company; its latest financial statement shows sales grew by 6% in 2010 to reach almost $11billion. But it operates essentially in the mobile phone world.
Companies supplying the mobile phone industry rely on two things – new subscribers and churn. We are now well on the way to everyone on the planet having a mobile phone, or so it seems. While there are still opportunities to sell people a mobile phone for the first time, many of them will be looking to buy entry level devices which are cost optimised and 'feature light'.
The major opportunity for a company like Qualcomm is in the latter area – churn, the seemingly never ending need to have the latest and greatest mobile phone in your pocket. Currently, the focus is getting people to upgrade to smartphones and that's a business in which Qualcomm has a major interest through its Snapdragon processors.
That there will be growth in demand for smartphones is almost self evident; but the growth may not be as spectacular as expected.
Where there is likely to be major growth is in the provision of connectivity for those devices which are currently isolated.
In order to compete in this broader world, Qualcomm needs more than mobile phone technology; it needs access to technologies such as Wi-Fi, Ethernet and Bluetooth. And that is the reason why Qualcomm has laid out $3.1bn for Atheros.
Broadcom is another example of a company looking to broaden its technology base through acquisition. Last year, it acquired Innovision for its near field communications technology and Gigle for its home networking technology.
Both Qualcomm and Broadcom will be looking to get the economies of scale which all manufacturers crave, by integrating these technologies to create so called combo chips – where one chip will, in their view, fit all.
