In 1989, San Diego upstart Qualcomm asked the
Telecommunications Industry Association to approve using its
technology to upgrade the U.S. cellphone system.
The cellular industry was implementing a 10-year, $10 billion
plan to launch technology that would multiply the calls that
telecom providers could handle.
), founded in 1985 by Irwin Jacobs and Andrew Viterbi, initially
developed a satellite-based data communications system for
transportation -- technology the founders said could transform
cellular communications. The company name is shorthand for
When Jacobs, then chairman and chief executive, asked the TIA
to approve Qualcomm's technology as a cellular industry standard,
many industry experts scoffed.
Qualcomm's technology had never been tested in a major city
and was said to be three years behind a competing U.S. digital
cellular technology called time division multiple access, or
And the TIA had already approved TDMA as an industry standard.
It was backed byAT&T (
) and other giants and in the early stages of deployment.
Jacobs, though, boldly stuck to his guns that Qualcomm's
digital cellular technology, called code division multiple
access, was superior. CDMA, he said, would increase call capacity
more than three times that of TDMA. Skeptics laughed.
"There were very few believers," Jacobs told IBD. "Nobody
found a hole in our technology, but neither was anyone willing to
proceed with CDMA."
No Overnight Success
With rollouts of TDMA infrastructure and phones underway,
Qualcomm was barely in the game.
"During that period I'd often wake up at 4 a.m. and ponder if
there were any technical issues that we were missing," Jacobs
said. "Any time you are trying a new innovation that will impact
a lot of people's businesses, you are going to get a lot of
skepticism. People around the world were arguing that I was
overstating the case."
His firm had to make its case for CDMA. "Qualcomm introduced a
fundamentally new way to think of digital communications," said
George Gilder, author of "Knowledge and Power: The Information
Theory of Capitalism and How It Is Revolutionizing Our World," a
book one-third devoted to Qualcomm. "Because Qualcomm was founded
on a new theory, it was rejected fiercely."
Gilder, an economist, was an early advocate of CDMA, which he
promoted at his Telecosm Forum.
"People would leap up in the audience and denounce me in the
middle of my speeches," he recalled. "They thought it was a scam
and a scandal that violated the laws of physics. They were afraid
of a system they did not really understand and sensed that it
could threaten their future."
Qualcomm pressed on. In the spring of 1989 the company
convinced California-based Pacific Telesis, now part of AT&T,
to help conduct a test of CDMA in San Diego to 50 influential
leaders in the wireless industry.
The test proved that the technology worked, but Qualcomm faced
an even bigger challenge. The technology's bulky components had
to be shrunk to fit into cellphones and other gear. With no one
willing to deploy CDMA, Qualcomm had to build the cellphones,
base stations and chips to prove CDMA's commercial viability.
Qualcomm went public in December 1991, generating $53 million
in much-needed proceeds.
The company's first major commercial breakthrough came in 1992
from South Korea, where a small market test of CDMA proceeded. It
was a fertile market for cellphones. The Asian country was trying
to develop a tech manufacturing base that could compete with
Japan. A year later, Korea announced its national cellphone
system would be based on CDMA. Hong Kong was also on board.
That got the ball rolling. In 1993, CDMA was accepted as a
standard, but its battle against TDMA was just starting, with
cellular heavyweights on both sides. In the end, CDMA would
become the U.S. digital cellular standard instead of TDMA -- and
Qualcomm would be one of the top-performing stocks of the past 30
Qualcomm's December 1991 IPO had a presplit price of 16 and
touched an all-time low of 6.25 the following September. But the
company was about to get its big break.
On Sept. 30, 1992, US West, then one of the Baby Bells from
the breakup of AT&T, became the first U.S. cellular firm to
announce it would deploy Qualcomm's CDMA, calling it "a superior
Tireless Wireless Stock
In one year starting that September, Qualcomm stock soared
593% as other telecom firms also jumped on the CDMA
But the stock's biggest run was five years away.
Despite Qualcomm's progress, CDMA skeptics continued to howl.
And some phone companies feared relying on Qualcomm alone for key
Qualcomm responded by loosening its licensing restrictions,
making CDMA technology available to a range of manufacturers,
many in Asia. It would rely largely on licensing fees and
That model worked. Qualcomm revenue soared from $271 million
in 1994 to $3.3 billion in 1998.
But Qualcomm had still another major hurdle to overcome.
Jacobs knew he was facing an international battle. Getting
into Europe would be a tough challenge. The Continent used a
standard called GSM. There was an understanding among European
governments that GSM, which is a TDMA-based technology, would
remain the single standard for Europe.
), a leading telecom gear maker, was among vendors reluctant to
give Qualcomm the opportunity to promote CDMA as an alternative
Qualcomm was a threat to Ericsson's market dominance. In
addition, Ericsson claimed its own CDMA patents and accused
Qualcomm of violating them.
Thus began an intense court battle, further stalling
Qualcomm's acceptance in Europe. "Europe was developing its own
CDMA standard and wouldn't quite let us get involved with that
activity," Jacobs said. "It created heated discussions. We were
trying to have them use parameters that would allow us to make
chips that would work both in the U.S. and Europe."
A Handshake Lets Data Flow
In 1998, Ericsson introduced a technology that was based on
CDMA, but not compatible with Qualcomm. The war ended on March
25, 1999, when the pair announced a definitive agreement
resolving all disputes and that would allow for compatibility
among the competing technologies.
The settlement sparked Qualcomm stock, which soared 2,600%
from January 1999 to January 2000. Starting from its all-time low
in October 1992 to its peak in January 2000, Qualcomm stock
As part of the deal, Qualcomm agreed to sell its CDMA
infrastructure division to Ericsson. It paved the way for a
global CDMA-based wireless communications system.
It also let Qualcomm focus on what it did best -- advancing
digital technology through its chip designs and software that it
licenses worldwide. "Qualcomm emerged just as the Internet
emerged and ultimately was a leading force in adapting all mobile
technology to the Internet protocol," Gilder said. "Qualcomm
triumphed by moving beyond physics to the new science of
information, transforming the physical scarcity of bandwidth into
an abundance of wireless communications."
Jacobs, now 80, stepped down as CEO in 2005, on the firm's
20th anniversary. He was succeeded by his son Paul, who left as
CEO in March, succeeded by former Chief Operating Officer Steve
Mollenkopf. Irwin Jacobs resigned from the board in 2012. Paul
Jacobs remains as executive chairman.
"The most exciting aspect at Qualcomm is the impact it has had
on the lives of people around world," Irvin Jacobs said,
"providing very good communications at a price people can