Now that President Trump has prohibited Broadcom’s proposed hostile takeover of Qualcomm and disqualified all 15 of Broadcom’s candidates from standing for election to the board on the grounds of national security concerns, what becomes of Qualcomm? The fate of San Diego’s most famous and important company will have a profound impact on our community and our innovation.
From our view, there was nothing to like, and much to dread, if Broadcom had succeeded in taking control of Qualcomm. These companies are like oil and water. Qualcomm is an innovator; heavily investing in R&D and playing a longer game. Broadcom under CEO Hock Tan has become an operations company, with its acquisitions emphasizing efficiency and short-term profits are paramount. Let Qualcomm or someone else invent 5G, Tan would prefer to buy it instead of make it.
It’s impossible to say what might happen next in this bizarre dynamic, but even if Broadcom is out of the picture there will be other domestic corporate raiders and shareholder activists.
To be sure Qualcomm for the past few years has tested the patience of investors. Its stock is at a similar price with five years ago, while in the same time the NASDAQ index has increased a whopping 235 percent.
Qualcomm has steadfastly maintained its patent licensing model, drawing the ire of regulators and companies around the world who contend they make companies pay a royalty for technology in addition to paying for the state of the art chips and semiconductors. Qualcomm’s tactics have resulted in billions in fines and lawsuits with some of its biggest partners, first Samsung and now Apple.
We are seeing up close how difficult it can be to execute a long term vision amid the herd of what seems like increasing short-term investors. Qualcomm has heard them.
Tan is known for ruthless cost-cutting, and in an effort to fend him off Qualcomm already has promised to shareholders $1 billion in annual savings, which will mean an end to some of the 13,000 jobs in San Diego. In recent days the board has increased its dividend and removed former CEO Paul Jacobs from the executive chairman position, which it has eliminated.
The new chairman is Jeffrey Henderson, who joined in 2016 following an activist effort led by Jana Partners. There will be many more changes in Sorrento Valley in order to reduce the tension with regulators, business partners and shareholders.
Qualcomm has been San Diego’s beacon, an always visible force guiding us in innovation, education, technology, health care and philanthropy. Its founders and employees have championed UC San Diego and other higher ed institutions. The company has contributed millions of dollars and countless hours to build Connect, EvoNexus and our startup ecosystem. They created Qualcomm Life and Qualcomm Technologies, which in turn have helped find and create scores of companies and thousands of jobs. Irwin and Joan Jacobs have contributed hundreds of millions of dollars, and so have other officers, executives and employees.
We understand what’s at stake with the future of Qualcomm. If the U.S. is to remain a leader in advanced wireless communications, 6G and 7G will be invented here. San Diego needs an independent Qualcomm as much as ever.