Qualcomm CEO: We didn’t buy Android because we’d be too powerful

Paul Jacobs, chief executive of Qualcomm, said that buying Android wouldn’t have been a good idea a few years ago because it would have made his company too powerful.

Already a powerhouse in chips and cell-phone radio technology, acquiring Android before Google did might seem like a great extension of Qualcomm’s business, which could produce everything from chips to software for mobile devices.

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And in retrospect, it seems like a missed opportunity: Google executive David Lawee said earlier today that the Android acquisition was the company’s most successful deal ever.

But Jacobs, speaking at the 16th annual Stanford Accel Symposium at Stanford University in Palo Alto, Calif., today, said during a question and answer session that the acquisition of Android might have led the company’s partners to conclude that Qualcomm would be too powerful as the go-to company for cell-phone technology and allow it to dictate standards. That could well have limited support for Android, whose rapid adoption today looked like far from a sure thing just a few years ago.

Jacobs’ answer is instructive in terms of the strategy that goes into the thinking of how big companies draw the line on which businesses they should enter.

Google made Android a success because it promoted Android as an open alternative to other mobile operating systems. The suggestion is that an outside player such as Google made the Android message of openness more credible, while Qualcomm’s ownership of such a key technology, given its reputation for aggressive intellectual-property enforcement, would have turned off carriers and developers.

“It would have scared everyone else off and caused them to do things to get around us,” Jacobs said.

Jacobs said he believes that multiple mobile operating systems — not one — will exist well into the future.

“We see all ends of the spectrum,” Jacobs said. “We don’t want to be seen as taking sides.”

Qualcomm is already hugely powerful, selling 100 million wireless chip sets per quarter. Its technologies were used in 700 new phones and mobile devices launched in 2009.

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In selling or licensing technology for semiconductors, hardware, software, and wireless infrastructure, Qualcomm is more vertically integrated than most players in the mobile business. That structure was helpful in the early days when the company was trying to get its major radio innovation, code division multiple access (CDMA), off the ground.

But Qualcomm hasn’t succeeded by purely being a closed technology company. The company was also interested in licensing its technology early on because it didn’t want to repeat the scenario of Sony’s Betamax video cassette recorders, when Sony lost the VCR war to the VHS format because it didn’t have enough partners. Qualcomm now has 180 CDMA licensees.

Jacobs declined to comment on whether Qualcomm was making chips that would support Apple’s iOS, or operating system for mobile devices such as the iPod Touch, iPad and iPhone. Rumors are floating that Verizon is launching the iPhone in January and that it would use Qualcomm’s CDMA chips to do so.

In other comments made at the conference, Jacobs noted the company spends $2.5 billion, or 20 percent of revenues on research and development. Included in that is a program to encourage employees to come up with their own entrepreneurial ideas and create startups within Qualcomm. The company holds a contest once a year to identify and fund the best ideas. The startup process within Qualcomm starts informally and becomes more formal. That’s how the company came up with new technologies such as its focus on augmented reality.

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While many of those ideas are app related, Jacobs said he doesn’t see Qualcomm trying to become a big player in apps. Rather, he sees Qualcomm’s participate in apps as an attempt to create a catalyst for important technologies that others can take and run with.

Qualcomm had hoped that its Flo TV mobile television business would turn into a huge new business, but the service pretty much flopped and Qualcomm is looking for a buyer now. Jacobs said Qualcomm’s subscription business model didn’t work, but he is optimistic that users will embrace live TV on their mobile devices such as tablet computers in the future.

The company has higher hopes for its Mirasol displays, which offer good color viewing even in sunlight. Jacobs said that could become a major leg of Qualcomm’s business at some point.

Overall, Jacobs said that mobile phones are now being used by 5 billion people, including 1 billion people who are using 3G mobile internet smartphones. He thinks that will hit 2.8 billion 3G subscribers by 2014. He also thinks that monthly data traffic on phones will exceed annual 2008 levels by 2014. And he believes 75 percent of all broadband internet subscribers will be mobile versus wired internet subscribers.

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Jacobs predicted augmented reality would take off because it allows users to “create a user interface for the world where there isn’t one.” It layers a digital interface on top of things in the real world. You could, for instance, use an augmented reality interface to use your finger on a touch screen to transfer a photo from your phone to a big screen TV simply by dragging and dropping it.

Jacobs also has high hopes for mobile devices for digesting data from smart power grids. And he believes that personal health applications will become huge on mobile devices, as users will want to monitor their heart rates and other vital signs  in order to predict potential health problems. Those technologies are in testing stages now.