Nearly 20 years ago, Qualcomm Incorporated’s founder, Irwin Jacobs, made one hell of a bet. Jacobs, a former professor of electrical engineering at the Massachusetts Institute of Technology, believed that a technique invented for guiding torpedoes during World War II—a highly complex but efficient way of directing traffic in the airwaves—would someday become the basis for a worldwide standard in digital wireless communication.
As Qualcomm developed and patented wireless technology, Jacobs campaigned for the system he favored, known as code division multiple access (CDMA). Slowly, the rest of the world bought in. By the late 1990s, it had become the fastestgrowing global wireless standard. As Qualcomm pushed for CDMA, Jacobs made an equally fateful business decision. Instead of manufacturing its own phones, Qualcomm would license the patents it had stockpiled. Phone makers, like Samsung Group, Ericsson, and Motorola, Inc., would have to forge licensing deals with Qualcomm in order to produce phones with CDMA technology. For a long time, Qualcomm’s strategy worked beautifully. In 2007 Qualcomm’s licensing business has generated $2.77 billion— 31 percent of the company’s total revenue.
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