Qualcomm CEO Paul Jacobs made news March 4 by telling attendees at an investor conference that he foresees a smaller pool of wireless chip providers. The number of players, he said, will shrink due to consolidation or companies simply disappearing.
He stopped short, however, of saying that Qualcomm would be a consolidator. Instead, he said Qualcomm would essentially pressure competitors out of the market with aggressive pricing and technological innovation.
Qualcomm certainly has the technical prowess and the leading market position to accomplish that, but it also has the cash to buy competitors, and should consider doing so where it makes sense. While its stock price has taken a hit – down more than 15% this year – Qualcomm has nearly $19 billion in cash and equivalents on hand. (However, that’s before the company increased its quarterly dividend by 12% and announced a $3 billion stock repurchase program).
Jacobs’ consolidation comments reminded me of similar, yet more stark statements by Oracle’s Larry Ellison in the early part of the last decade. Frustrated that too many companies were chasing after too few dollars in enterprise software, he predicted a drastic consolidation. And he put his money where his mouth was, spending tens of billions buying more than 60 software companies.
There are not nearly as many players in wireless semiconductors as there are (or, were) in enterprise software and the market for wireless technology, at hundreds of billions globally, is as big or bigger than that for business software.
The wireless chip market will coalesce around a handful of leaders, mostly because semiconductor innovation is expensive and very challenging, and because device makers are loathe to trust their own product cycles to smaller, unproven companies.
Qualcomm is already in an enviable position as the leader in 3G chips, and it’s making inroads with Snapdragon in phones and, eventually, smartbooks. The company could accelerate its market share growth and carve out an even bigger position by giving the market a nudge and open its wallet.
Lisa
