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Qualcomm cashes in on the smartphone

As data demand dramatically rises, Qualcomm Inc. promises to cater toward consumers’ around-the-clock connectivity expectations.

The San Diego-based chipmaker (Nasdaq: QCOM) held its analysts' meeting at its headquarters on Thursday, transplanting the annual event from its typical venue in Manhattan due to Superstorm Sandy's aftermath.

“We don’t want to wait to get online and we want to be able to touch, slide and interact with our data really easily,” said Paul Jacobs, Qualcomm's CEO and chairman, addressing a sea of black suit-clad financial analysts.

But as mobile needs rise, so does Internet traffic. Four-fifths of all searches on a smartphone are spontaneous, compared to a little over half on a PC.

“In the bar you don’t have to get in a fight -- you can solve it right there,” Jacobs said, explaining that pulling out a pocket device on a whim is easier than logging on a PC.

The meeting was slated to take place at the Ritz Carlton Battery Park, which is nestled in one of the main areas hit by the hurricane in late October. The logistics of conducting the event amid repairs was too much, so the company's home base was the next choice.

On Nov. 7 the company reported a 20 percent jump in fiscal fourth-quarter earnings.

Its profit of $1.27 billion for the quarter ended Sept. 30, or 73 cents a share, was up from $1.06 billion, or 62 cents a share, a year earlier.

Revenue spiked 18 percent to $4.87 billion, which can be attributed to the rising popularity of smartphones.

About 5 billion cumulative sales of smartphones are expected between 2012 and 2016, Jacobs noted.

“Technology is spread so widely around the world, it’s bringing people online and improving standards of living,” he said.

As emerging regions jump on board the 3G and 4G train, that means affordability is an increasingly important factor.

“We are doing a lot of work around display technologies to drive cost down,” Jacobs said.

About half of U.S. smartphone owners even use them while watching TV.

“That brings interesting opportunities for a multiscreen experience that all content companies are excited about,” he said.

About 70 percent of people prefer to use smartphones to take pictures every day.

“You always have it with you,” Jacobs said.

Post-capture refocus functions help improve the quality of photos -- an important phone feature that consumers care a lot about.

“All sorts of almost sci-fi things that will make the image the person takes better," he said. "They don’t have to know all the science behind it. They just know 'this' phone takes a better picture than 'that' phone.”

As consumers expect their phones to keep doing more, that opens up opportunities across a large number of sectors.

“We really are focused on where are areas we need to continue to drive innovation in smartphones,” Jacobs said. “Ways to take [research and development] dollars and invest in areas that create separation between us and competition.”

That includes Qualcomm building its own proprietary technology. Its microprocessors, graphics processors and sensors are leading the way, Jacobs noted.

“We are the number one shipper of graphics processors with mobile,” he said.

Qualcomm is focused on optimizing the CPU side, creating an asymmetrical multiprocessing technology that aids with power consumption and thermal management.

The company is coming out on top in precise indoor position location sensor technologies, using WiFi access. There's still more work that needs to be done on the location sensoring side, however.

Looking up a map on a New York street, for example, can cause the screen to do all sorts of gyrations, Jacobs said.

“We will solve that problem," he said. "That work goes on. We are refocusing our spending there with more of a licensing model going forward.”

One place Qualcomm has long put dollars is paying off: in Snapdragon processors. Qualcomm tripled its shipments quarter-over-quarter for its new dual-core MSM8960 system-on-chip as demand for its integrated application processors grew.

“It’s powering a lot of recent flagship devices that are out there,” Jacobs said. “We are really trying to follow a different approach than anyone else, making sure we are as innovative as possible.”

That means lowering the cost, size and power consumption of devices.

While smartphones have represented a tremendous growth sector, they are also trying to create more computing opportunities.

Tablets will lead the growth of the new generation of mobile computing devices, with more than 650 million tablets and laptops estimated to be sold in 2016.

“The same things people demand on smartphones, people demand on computing devices,” he said.

That means a higher-resolution screen, which calls for better graphics processing units, and a more responsive computer, which means better CPUs.

Getting online faster and an enriched media experience are also in demand.

“We’ve focused on putting all those capabilities together into a device that can be thin, sleek and ultra-light," Jacobs said.

A long battery life and thermal efficiency are also key.

"That’s a big engineering challenge to put all this stuff together into a chip," he said.

That means everything must run concurrently, without interference or too much heat.

“These things will go across a wide range of devices, from smallest to largest," he said. "From smartphones up to smart TVs and all different sizes of tablets in between.”

Jacobs says his wife prefers to carry a “phablet” because it’s got a bigger screen and is very portable.

“I think 'different strokes for different folks,' or multiple actually. People will carry multiple devices depending on their size and time of day, so I think our opportunity is really growing,” he said.

There are already more than 500 Snapdragon devices and over 400 designs in development at the moment.

Qualcomm's latest Snapdragon S4 Pro processor promises a superior user experience for Web browsing, games, user interfaces and other graphics applications. The technology is now shipping in the anticipated Nexus 4 phone from Google and LG.

On Thursday, Qualcomm showed two demonstrations that highlight Snapdragon's audio and graphic capabilities, including an action scene from "X-Men" with movie-quality sound and a highly detailed depiction of a dragon surrounded by flames and moving flags reflected into the water.

Steve Mollenkopf, Qualcomm's chief operating officer and president, teased what's next for Snapdragon by showing off the teeny chip between his fingers.

"We are happy about how it’s been received,” he said.

The next-generation CPU micro-architecture, currently in labs, will have a third-generation LTE modem.

“We have a strong outlook for fiscal year 2013. It’s even more the case where mobile will set the pace of semiconductors in the industry,” said Mollenkopf. “We are happy to be in a leadership position on that.”

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Qualcomm Inc.

Company Website

5775 Morehouse Dr.
San Diego, CA 92121

Qualcomm Inc. Executive(s):

Irwin Mark Jacobs

  • Founding Chairman, CEO Emeritus

Paul Jacobs

  • Executive Chairman

Tamar Elkeles

  • Vice President

Don Jones

  • Vice President

Don Rosenberg

  • General Counsel

Mark Leslie

  • Vice President, External Affairs

Steven Altman

  • Vice Chairman

Steve Mollenkopf

  • Chief Executive Officer

Derek Aberle

  • President

Navrina Singh

  • Director of Product Management

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