[Chapter 690: Won't Give Up]
When Eric's question was posed, Irwin Jacobs found himself momentarily at a loss for words.
Qualcomm had always been generous with licensing its CDMA technology, but to date, there had yet to be a single large-scale CDMA device manufacturer globally. Against the backdrop where GSM device manufacturers flourished everywhere, even Nokia, which had a strong technical foundation, nearly faced a supply chain collapse due to the rapidly expanding market demand. Qualcomm, on the other hand, had almost no experience in device production.
In reality, Qualcomm did have its own telecommunications equipment and mobile phone factory, but most of the equipment produced was only intended to meet testing requirements for CDMA technology. While Nokia had its own supply chain to "collapse," Qualcomm's factory didn't even have a complete components supply chain. Typically, it only conducted limited procurement of components based on demand. This state of affairs couldn't support large-scale production of CDMA devices.
It was easy to foresee that if the situation persisted, even if major telecommunications operators intended to select CDMA as their mobile communication technology standard, they would definitely shift back to the GSM camp due to the lack of sufficient CDMA equipment to build mobile communication networks.
Seeing that Irwin Jacobs remained silent, Andrew Viterbi, who sat nearby, eagerly stepped in to explain, "Eric, the main difficulty in manufacturing communications equipment lies in the design and development of core chips. Qualcomm already had very mature products in this area. As long as CDMA technology can be promoted, Qualcomm can quickly establish factories for equipment production and also outsource manufacturing to other telecommunications equipment manufacturers."
Eric merely smiled and nodded without voicing any objections. The primary reason for his earlier remark was to prompt Andrew Viterbi's response now.
It was true that technical R&D consumed a massive amount of funds, but the construction and operation of manufacturing facilities consumed even more. Nokia had initially acquired $420 million from Firefly for this purpose, and its profits over the past two years had been funneled into the expansion of its factories.
Over a decade later, Qualcomm's main business did not include manufacturing telecommunications equipment and mobile phones; it primarily focused on patent licensing and chip R&D. Eric was well aware of this, but guiding Qualcomm toward this route did not align with Firefly's interests because if Qualcomm did not engage in product manufacturing, it would not require large-scale equity and debt financing, making it difficult for Firefly to leverage its capital advantage to acquire a significant stake in Qualcomm.
Through their discussion at the table, both parties roughly clarified their intentions.
...
After lunch, Eric, Chris, and Kelly took Irwin Jacobs and Andrew Viterbi to the study, where they formally laid everything on the table.
Eric handed over a stock document to Irwin Jacobs and Andrew Viterbi, stating, "I have been keeping an eye on Qualcomm since last year and believe strongly in CDMA technology. Recently, Firefly has gradually accumulated 2.1 million shares of Qualcomm stock. We will report this to the SEC and the Qualcomm board soon, and I wanted to inform you both as a gesture of cooperation from Firefly."
Irwin Jacobs and Andrew Viterbi only glanced at the document symbolically before exchanging looks of disappointment that they both could sense in one another's eyes.
Qualcomm had long recognized the unusual fluctuations in its stock price recently, realizing that someone had been buying shares in bulk. The board and management initially speculated that someone had insider information that CDMA technology was about to be confirmed as a standard by major telecommunications operators, which encouraged this person to make a move for potential large profits once the related facts were publicly announced. Qualcomm had only issued 30% of its shares to the public, so the board wasn't concerned about losing control over the company and was instead quite excited about these speculations, preparing for what was to come.
They never imagined that the reality would soon unveil itself, showing that these speculations had nothing to do with the situation -- CDMA had not been "internally appointed" by any telecommunications operators, and the disappointment felt by the two was palpable.
However, after a brief moment of disappointment, Irwin Jacobs and Andrew Viterbi recalled Eric's identity and their moods lifted. At the very least, the one covertly buying Qualcomm stock was not a speculative trader but a billionaire like Eric, who was genuinely interested in Qualcomm. As long as he utilized his capital and influence to promote CDMA technology, Qualcomm had a significant chance of overcoming its current plight.
Of course, although he had focused solely on technological development, Irwin Jacobs wouldn't naively believe that Firefly's 2.1 million shares would suffice for their appetite. This equity only accounted for 10.5% of Qualcomm's total shares. He stated, "Eric, since Firefly has already made so many preparations, I assume you must have a detailed plan in mind?"
Eric nodded and said, "Up to now, no major telecommunications operator is willing to adopt CDMA technology as the standard for their mobile communication network, which is Qualcomm's primary dilemma. Firefly can leverage its connections, media channels, and capital advantages to assist Qualcomm in promoting CDMA technology.
However, at the same time, Qualcomm needs to immediately resolve its inability to mass-produce CDMA equipment issues. I don't want to see Firefly bending over backwards to get operators to accept CDMA technology only for them to switch back to GSM due to a lack of timely supply of CDMA equipment. Therefore, I suggest Qualcomm start setting up telecommunications equipment and mobile phone factories right now."
In contrast to Irwin Jacobs, who focused on R&D, Andrew Viterbi poured more of his energy into the management of Qualcomm. Upon hearing Eric's first half of the statement, he felt a surge of excitement, but became troubled thereafter and interjected, "Eric, we have indeed considered this and conducted thorough research. According to our initial findings, just building a factory capable of producing 1 million CDMA phones a year requires an investment of $80 million, which we simply cannot... um..."
Upon reaching this point, Andrew Viterbi noticed Eric was smiling at him and instantly understood something, stopping his speech and offering an awkward smile.
Eric didn't mind the interruption and continued with his unwavering smile, "I know Qualcomm surely cannot raise the funds to build the manufacturing plant, but Firefly can cover this expense. Frankly speaking, Firefly's assistance in promoting CDMA technology is also aimed at obtaining sufficient returns; therefore, I hope to increase Firefly's stake in Qualcomm through an investment."
Irwin Jacobs had already suspected as much and asked, "Eric, how much does Firefly plan to inject into Qualcomm?"
Eric replied casually, "Following what Andrew just said, with an investment of $80 million for a phone factory, Qualcomm will surely also need to build a CDMA base station equipment factory. Let's count that as another $80 million, totaling $160 million. Solely these two factories' investments are likely insufficient, as Qualcomm also needs to establish components procurement and product marketing systems. So let's just round that expenditure to $200 million, and at current stock prices, Qualcomm would typically need to issue about 10 million shares of stock to Firefly."
Irwin Jacobs estimated that with the issuance of 10 million new shares, Qualcomm's total shares would expand to 30 million. Firefly's existing 2.1 million shares would then amplify its ownership to 40%. While this wouldn't secure controlling interest, Firefly would leap to become Qualcomm's largest and most significant shareholder.
In the beginning, when launching Qualcomm, Irwin Jacobs had invested almost his entire fortune, but after several rounds of financing and the IPO in 1992, his stake in Qualcomm had dwindled to less than 1%. As long as he could ensure Qualcomm's survival, he didn't particularly care about the shifts in personal equity. He understood that for Firefly to assist Qualcomm wholeheartedly in promoting CDMA technology, they needed sufficient equity. After contemplating for a moment, he nodded, "Eric, I don't oppose your proposal, but stock issuance must be decided by the Qualcomm board."
AT&T's announcement to join the GSM camp had already cost Qualcomm more than half of its potential North American market. If Verizon and Sprint also chose GSM next, bankruptcy would be the only path left for Qualcomm. Firefly betting $200 million at such a time was a risky venture; if it failed, that money would be down the drain.
Eric believed that Qualcomm's board should understand that Firefly's actions were equivalent to a signal that the entire Firefly system would wholeheartedly promote Qualcomm's CDMA technology. While the final injection scheme would likely undergo adjustments, the possibility of Qualcomm's board rejecting Firefly's investment was incredibly low.
After glancing at his watch, Eric stated, "So, Irwin, Chris and Kelly will take charge of the specific affairs moving forward. I hope to hear good news from Qualcomm soon."
Just as Irwin Jacobs was about to say something, he felt a light kick on his shoe from Andrew Viterbi, reminding him of the proposal they discussed the day before. He said, "Eric, Andrew and I have another proposal we'd like you to take a look at."
Eric nodded and accepted the document Irwin Jacobs pulled from his briefcase, reading it carefully before passing it to Chris and Kelly beside him.
Irwin Jacobs and Andrew Viterbi watched anxiously, concerned Eric would outright reject their proposal.
After a moment, both Chris and Kelly finished reviewing the materials and simply looked to Eric without offering any suggestions. With a $4 billion plan on the line, the final decision ultimately rested on Eric.
After mulling it over, Eric remarked, "I think this proposal leans a bit too idealistic."
Hearing Eric's words, Irwin Jacobs and Andrew Viterbi both felt a wave of relief; at least Eric hadn't categorically rejected the proposal.
Eric didn't know what the two were thinking and continued, "You are surely aware of the lawsuit regarding the C-band licenses. The grounds for the lawsuit are utterly absurd, yet it can still prolong the auction of C-band licenses for a long time. This alone shows that the legacy telecommunications operators would never allow those small and medium telecom companies to thrive. Even if we acquired all the C-band licenses, the ultimate leasing users would still likely be AT&T and a couple of other telecom giants. Perhaps before the C-band licenses are auctioned, these mainstream telecom operators might already finalize the technical standards. Therefore, this proposal holds little significance for promoting CDMA."
Irwin Jacobs and Andrew Viterbi realized that Eric hadn't entirely dismissed the idea, patiently waiting for him to continue.
Eric also didn't tease them further: "However, this proposal could serve as our last resort. If major telecom operators fail to choose CDMA technology, Firefly can activate this plan, acquire all the C-band licenses, and then acquire a telecommunications operator to independently build a CDMA communication network." At this point, Eric looked at the two with a smile, adding, "Of course, all of this hinges on our collaboration's smooth progress; otherwise, Firefly won't waste funds on promoting CDMA technology."
Andrew Viterbi, suppressing his emotions, asked, "Eric, are you saying that as long as Qualcomm accepts Firefly's investment, you'll agree to execute this plan?"
Eric shook his head and said with a smile, "I just mentioned that this would be Firefly's last resort. If Firefly becomes Qualcomm's major shareholder, it will first choose to promote CDMA technology to old-school telecom operators like Verizon. Only if these mainstream operators reject CDMA will Firefly activate this proposal."
Upon hearing Eric's words, Irwin Jacobs felt far more excitement than Andrew Viterbi. CDMA was the culmination of his decade-long efforts; he strongly hoped for its survival instead of fading into oblivion against technologies like GSM. "Eric, can I interpret this as you absolutely will not give up on CDMA technology as long as Firefly becomes Qualcomm's major shareholder?"
Without hesitation, Eric nodded. Even if GSM truly dominated the market, technology would eventually see upgrades; the world of WCDMA, TD-CDMA, and other 3G communication technologies couldn't bypass the CDMA standard. Hence, even if CDMA temporarily faltered during this industry upgrade, acquiring Qualcomm with its extensive CDMA patents would still be advantageous.
Yet Irwin Jacobs remained slightly concerned and asked, "Eric, could Qualcomm obtain a written endorsement from Firefly regarding this commitment?"
"Absolutely," Eric affirmed once more.
"Well then," Irwin Jacobs stood up, extending his hand toward Eric, who similarly rose, and said, "I will get back to you with good news soon."
...
After saying goodbye to Irwin Jacobs and the others, evening had set in.
Eric and the rest returned to the villa, seated near the glass curtain wall, taking in the magnificent sunset view over the ocean. Chris inquired, "Eric, are you really planning to spend $4 billion to acquire all the C-band licenses?"
Eric accepted the freshly brewed coffee from Kelly and smiled, "I've already said this is a plan of last resort. Rather than buying the C-band licenses, I would prefer to invest that $4 billion in shares of either Verizon or Sprint."
Hearing Eric bring up the topic they were discussing earlier, Chris replied, "About that, it may not be so easy. Legacy telecom operators prefer debt financing over high-cost equity financing. However, these two companies currently have massive capital needs, so your idea is not entirely impossible. If you are determined to move forward, I will expedite this process."
Eric decisively nodded, "Let's negotiate on an investment cap of $4 billion. As long as I can acquire shares of both companies, I wouldn't mind taking a bit of a loss on the price."
Chris chuckled, "$4 billion is going to be tough; it would be great if they accepted Firefly's investment of $2 billion."
$4 billion would equate to a 40% stake in Sprint, and even for Verizon, which was double the size of Sprint, $4 billion could secure a 20% stake. Eric was well aware of the difficulty in this, saying, "Just do your best."
...
While they were talking, Drew and Emily walked in bearing a plethora of shopping bags, with the twins behind them also carrying a bunch of items, clearly having gone shopping in the afternoon.
As they breezed in, Emily noticed the astonished look on her boyfriend's face and set down the convenience bag in her hands, explaining, "All of these are Drew's things! I only bought a few items, and they're all in the car."
The little girl grinned, instantly exposing her friend's lie, "Yeah, just a few items, but they might be a bit large -- they filled up the trunk and the back seat!"
After teasing each other a bit, Chris, along with Emily, planned to take their leave.
Eric didn't hold them back but escorted them to the door, and when they reached the car, he asked, "When do you plan to head back to New York?"
Chris didn't answer and simply looked at Emily.
Emily explained, "Victoria's Secret has been filming ads in Los Angeles lately, and also, Cindy will be attending the Golden Globe Awards. We're probably going to wait until after the Golden Globes to leave."
Eric said, "How could the Golden Globes invite only Cindy Crawford?"
"The Golden Globes initially hoped that all five of them would present the Best Original Score award together. But then we received an invitation from the Oscar committee for all five of them to take the stage together. Between the Golden Globes and the Oscars, we would obviously choose the latter. The Golden Globes had to settle for just inviting Cindy after that."
As Emily spoke, she climbed into the car, then popped her head out to add, "Oh, Eric, if you have free time over the next few days, could you help me check out the effect of the Victoria's Secret advertisement we're doing post-production on at Firefly Studios?"
"No problem, I'll be over there most of the time for the next few days. You can contact me anytime."
...
After sending Chris and Emily off, Kelly also took her leave, returning to the villa. The little girl rushed into her room to inspect her purchases from the day. Eric settled onto the sofa beside the curtain wall, meticulously sorting through everything that had transpired today in his mind.
The sun completely set below the horizon, leaving the light gradually dimming.
After an unknown amount of time, Eric felt a tall, slender figure quietly walk over. He looked up at Natasha's delicate face and signaled her to turn on the nearby lights.
Natasha walked quietly to the wall and switched on the lights, softly saying, "Dinner is ready, Master."
Eric nodded, and just as he stood up, he suddenly recalled something and asked, "What about the package Chris brought me this morning?"
Natasha replied, "I placed it in the living room's cabinet."
"Send it to the study after dinner."
"Understood."
*****
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