Qualcomm Ventures will invest in start-ups that promote CDMA technology and wireless connections to the Internet. Funded companies will have access to Qualcomm's research and development and engineering resources as well as to its business and strategic relationships, according to the company.
Handspring, Phone.com, PayPal and PacketVideo are some of the companies that have received funding from the company.
"It basically is a means of reinvesting the cash that the company is generating, which is a pretty substantial amount," said David Heger, an analyst with A.G. Edwards. "Certainly a venture fund focused on wireless technology makes a good use of this mounting pile of cash that they have."
The new investment unit underscores Qualcomm's shifting strategy for nurturing growth of CDMA. When the company was first formed, Qualcomm developed and manufactured the wireless network infrastructure equipment and handsets, thus ensuring its CDMA technology could flourish.
But now that CDMA is a widespread wireless technology, Qualcomm has exited many of those businesses and is predominately a non-manufacturing, royalty-based company. The new venture capital arm will serve as a way for Qualcomm to fuel the expansion of CDMA by seeding related start-ups.
Qualcomm's CDMA technology has quickly become a significant portion of the market, representing the No. 2 wireless transmission protocol worldwide with a 14 percent share, according to The Strategis Group, a research firm. But, rather than expanding, The Strategis Group expects CDMA to hold steady at about 14 percent in 2005.
The expected adoption of several new technologies, known as third generation or "3G"--which are capable of handling voice and high-speed Internet access--will impact the market dramatically and could limit Qualcomm's ability to expand its market share and thus its largely royalty-based revenues, some say.
Analysts believe Qualcomm's venture capital efforts to fund new CDMA-based technologies could show dividends when wireless carriers begin to consider which of several new protocols to use when upgrading their networks in the future.
"As carriers upgrade, are they still going to go the CDMA migration route?" asked Elliott Hamilton, a wireless analyst at The Strategis Group. "Qualcomm wants to show that CDMA has some of the best technologies out there and that it has lots of vendors supporting it."
Qualcomm Ventures will be managed by Jeff Jacobs, the company's senior vice president of business development. Jacobs will be responsible for the company's investments, strategic partnerships and new business opportunities.
"The convergence of wireless technology and the Internet has created opportunities for new products, applications and services, and we look forward to helping drive these innovations," Jacobs said in a statement. "Qualcomm Ventures will focus on strategic investments in promising, young start-up companies that can deliver these new capabilities and accelerate CDMA usage worldwide."
On Nov. 2, the San Diego-based company reported fourth-quarter earnings of $200.8 million, or 25 cents per share, beating analyst expectations by a penny.