Qualcomm head proves his mettle fending off Apple
Steve Mollenkopf emerges as clear winner in epic legal battle against Tim Cook
There cannot be many chief executives who have faced as many crises as Steve Mollenkopf in his five years as chief executive of US mobile communications technology company Qualcomm.
There was the campaign from an activist investor (Jana Partners) to break up the company, and the antitrust challenge that threatened to dry up revenue from Qualcomm’s largest market (China).
Then there was the $121bn hostile takeover bid from Broadcom that might have succeeded if the White House had not intervened — not to mention the $44bn acquisition (of NXP) that was scrapped when China failed to approve it.
It is almost an understatement when Tom Horton, who has just stepped down from Qualcomm’s board after 10 years as the company’s lead independent director, calls it “a pretty tumultuous time”.
But none of that compares with what is set to be one of Mr Mollenkopf’s career-defining moments: facing down his counterpart at Apple, Tim Cook, in an epic global legal battle fought in courts on three continents. The dispute ended in face-to-face negotiations between the two that left Mr Mollenkopf the clear winner this week.
Apple has spent the last two years condemning Qualcomm’s fundamental business model. While the company sells mobile communications chips, it relies for most of its profits on charging a royalty on every handset that is sold, regardless of whether it has one of Qualcomm’s chips in it. Now, the iPhone maker has fallen back into line. Qualcomm’s shares jumped nearly 40 per cent, adding $28bn to its stock market value.
By any standards it was a stunning victory, and a mark of a steely determination. It is easy to underestimate the Qualcomm chief. With a quiet, affable exterior, he is not given to the sort of messianic bursts that some other tech industry bosses favour.
People who have worked with him all point to the same qualities: a calm, highly analytical style, and the self-confidence to stick to a position when he believes he is right. “He is an engineer in the best sense of the word: He is disciplined, analytical, smart,” said Mr Horton.
At Qualcomm, he heads a company that has built a unique position in the mobile communications world through a combination of engineering vision and legal resolve. The creation 34 years ago of Irwin Jacobs, an inventor in San Diego who promoted a radical idea for packing more communications traffic into less bandwidth, Qualcomm’s technology has played a key role in the mobile industry since 3G, the industry’s first high-speed data standard.
“It’s always been a place that values the science, that values the IP, that values the engineering,” said Scott Barshay, a mergers and acquisitions lawyer who has worked on Mr Mollenkopf’s biggest deals.
Mr Mollenkopf arrived at Qualcomm 25 years ago, fresh from getting a masters degree in electrical engineering from the University of Michigan. His company biography credits him with being listed as an inventor on 38 patents. He rose to head the company’s chip division in 2008, putting him in line to succeed Mr Jacobs’ son, Paul, to become the first non-family member to run the company.
On his rise to the top, Mr Mollenkopf was a driving force behind some of the company’s key technology decisions of recent years. He is credited with steering Qualcomm towards LTE, a wireless standard that did not have its roots inside the company, after it had earlier backed a rival technology.
And he pushed the company to add computing capabilities alongside the core communications functions on its chips, said Mr Barshay — something that set Qualcomm up to be the leading supplier of the chipsets now used in high-end smartphones.
The Qualcomm engineers would not have prospered without the lawyers, though. Its insistence on getting a royalty from all mobile handset makers has brought a series of legal attacks and regulatory challenges, including a bitter fight with Nokia that ended more than a decade ago
The Apple assault, launched in early 2017, rattled Qualcomm’s shareholders and became the ultimate test of Mr Mollenkopf’s ability to stay the course. “He analysed it correctly, he had the courage of his convictions, and he stuck to it,” said Mr Barshay.
Neutralising the Apple threat will not end Mr Mollenkopf’s legal and regulatory headaches. The company is appealing against a €1bn antitrust fine last year from the European Union. In the US, a judge is considering an argument from the Federal Trade Commission that would hit at the company’s ability to charge royalties.
And even if he succeeds in defending Qualcomm’s way of doing business, he still faces an overriding business question: whether he can use the coming wave of 5G technology to take Qualcomm beyond the maturing handset business into new markets. At the age of 50, and after the battle scars of his first half-decade, it may be just the start.