As Qualcomm (NASDAQ: [[ticker:QCOM]]) prepares for its annual shareholders meeting Tuesday, March 6, its takeover battle with Broadcom (NASDAQ: [[ticker:BRCM]]), has much of San Diego pondering a question reminiscent of a Joni Mitchell song:
“Oh, don’t it always seem to go, that you don’t know what you’ve got ’til it’s gone?”
If Qualcomm accepts Broadcom’s proposal, estimated at somewhere around $120 billion, San Diego community leaders say the effects would be far-reaching—even if Broadcom elects to keep some part of Qualcomm’s operations local. For one thing, a successful Qualcomm buyout would be the technology industry’s biggest-ever takeover, creating a tech giant whose products would be used in nearly all of the world’s smartphones.
On the other hand, “The CEO of Broadcom doesn’t spend money on R&D,” said Greg McKee, who heads Connect, a San Diego nonprofit organization that promotes innovation and entrepreneurship. “So I think it’s a huge negative in the short run.”
Referring to a Wall Street Journal profile of Broadcom CEO Hoc Tan, McKee added, “His M.O. is to merge, strip out the R&D, and grow the top line [revenue.] The Street loves that guy.”
Qualcomm, in contrast, has a different corporate culture. It has grown into a global juggernaut in the wireless communications industry largely through its innovation prowess. If a Qualcomm employee’s name is on a patent filing, he or she can add the title “inventor” to their business card. Founded in San Diego in 1985, the company secured its rank as the world’s biggest maker of smartphone chips with the global adoption of its proprietary CDMA telecommunication standard in the 1990s. Since then, Qualcomm has remained an industry leader in its development of wireless processors, mobile computing, Wi-Fi, and related technologies. The company spent $5.48 billion on R&D in fiscal 2017, amounting to 24.5 percent of its $22.3 billion in annual revenue.
As The New York Times’ Conor Dougherty recently observed, Qualcomm founding CEO Irwin Jacobs also has emerged in recent decades as one of San Diego’s biggest benefactors, beginning perhaps most notably with a $100 million gift that rescued the financially troubled San Diego Symphony in 2002. Jacobs has made equally sizable gifts to UC San Diego’s engineering school and medical center, and provided crucial support to local community centers, the food bank, museums, theaters, and other charitable causes.
The UC San Diego Jacobs School of Engineering, where Jacobs served as a professor in the 1960s, has benefited in particular from the company’s presence. In addition to donations for buildings, endowed faculty chairs, and R&D programs, engineering dean Albert Pisano said, “There are other high-profile things like the fact that Qualcomm mentors and hires our students, and partners with our faculty and graduate students on research.”
But however much Qualcomm means to San Diego, community leaders say there isn’t much they can do to thwart the deal. “We hear from a civic leader about once a day on this, asking if there isn’t something we can do,” said Mark Cafferty, president of the nonprofit San Diego Regional Economic Development Corp (also known as the EDC). “But this isn’t an economic development issue,” Cafferty added. “This is a company that has had many challenges in their business. This is a shareholder and regulatory battle.”
“The situation here is that we couldn’t go to Qualcomm now with an incentive package that could help them stay,” Cafferty said. McKee agreed, saying in
