Qualcomm COO Steve Mollenkopf will be promoted to the position of CEO, as the company fights off interest for his services from Microsoft. Current CEO Dr. Paul Jacobs, the son of Qualcomm co-founder Irwin Jacobs, will step aside in March.
Leadership at Qualcomm has historically been a family affair. The elder Jacobs served as CEO from 1985 until 2005, when he passed the position on to his son, Paul, an employee since 1992. Some complained that the junior Jacobs’ promotion was unfair and nepotistic, but others maintained it was fairly earned, as he played a crucial role in developing the company’s wireless technology. As CEO, Jacobs proved more than capable. Under his rule, Qualcomm’s market cap doubled, while revenues increased by more than four times, according to the company.
Qualcomm started out in 1985 as a wireless tech company but today is the world’s largest manufacturer of mobile phone chips. The company also developed 3G solutions from its work in code division multiple access (CDMA), and has since moved ahead into 4G LTE. Mollenkopf joined the company in 1994 and worked initially as an engineer. In 1999 he transitioned to the company’s QCT team, the biggest fabless semiconductor company and supplier of wireless chips by revenue, where he helped evolve and market 3G communication. He led the division from 2008 and was named COO in 2011.
Mollenkopf’s name was high on Microsoft’s short list for its next CEO, according to industry rumor. Fifty-one-year-old Jacobs spent nearly nine years as chief executive and many believed had more years in him. Mollenkopf may have been slated to succeed Jacobs down the line, but the process appears to have been accelerated as reported interest from Microsoft grew.
The move has taken many by surprise, but is not a cause for alarm. Mollenkopf is seen as the company’s showrunner and manager of day-to-day ops, and his job may remain largely the same in his new role. On the other hand, Jacobs’ new post takes him away from the nitty-gritty and as executive chairman, it seems he’ll provide strategic guidance on the future of Qualcomm’s technology.
Mollenkopf’s experience in semiconductors may help to ensure Qualcomm capitalizes on its first mover advantage in 4G. Though a majority of the company’s profits derive from licensing agreements, its semiconductor segment is its bread and butter in terms of revenues. In the quarter ending September 29, 2013, licensing accounted for $1.96 billion, or 30% of revenue. QCT pulled in 69 percent of revenues in the same quarter. For the year ended September 29 2013, the company poured 20 percent of its revenue, almost $5 billion, into research and development; $904 million of that money went towards advancing CDMA-based 3G, OFDMA-based 4G, and other areas.
Qualcomm is well positioned to benefit from increased demand for chips and smartphones. Cellular connections jumped roughly 6 percent this year to 6.8 billion, and 3G connections globally increased 18 percent to around 2.2 billion. All 3G connections stem from CDMA technology. As both a tech licensor and licensee, Qualcomm stands to gain a great deal as smartphones spread into new markets.
Mollenkopf’s main concern as CEO of Qualcomm will be the company’s legal issues in China, followed by the constant threat of the competition. In November, China’s National Development and Reform Commission (NDRC) opened an antitrust inquiry into the company. Qualcomm’s revenues from China reached $12.3 billion in 2013, just over half its total. And although Intel has lagged behind in the past, concentrating on PC over mobile, the technological gap between it and Qualcomm could close quickly.
The decision by the co-founder’s son to step aside in order for Mollenkopf to take the reigns is a clear sign of confidence. Qualcomm turned its back on its family history in order to ensure Mollenkopf stay, and despite the challenges in China, he will be looking forward to taking full control of a very successful company.