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Analysts Applaud Mollenkopf Move at Qualcomm

Qualcomm Inc. ended speculation that Steve Mollenkopf, its president and chief operating officer, might leave to become CEO of Microsoft Corp. by naming him to be Qualcomm’s next CEO in 2014.

The move was welcomed by analysts who follow the San Diego-based technology company and who see it as a logical step.

While Bloomberg LP and other business news outlets circulated reports about Mollenkopf’s potential new relationship with Microsoft (Nasdaq: MSFT), the board of San Diego’s biggest company huddled and made a unanimous decision. Qualcomm (Nasdaq: QCOM) followed the splashy reports with its own news: Mollenkopf would become CEO, effective March 4, with a seat on the corporate board.

Current CEO Paul Jacobs, 51, will take the title of executive chairman and continue as board chairman. As such, he will remain an employee of the company and help guide its future strategies and direction, the company said.

Mollenkopf, a 19-year veteran of Qualcomm, has been the Mira Mesa company’s president and COO since November 2011. He will keep the title of president.

Neither Mollenkopf nor Jacobs were available for comment, although Jacobs, in a statement, offered Mollenkopf his congratulations.

The Microsoft Effect

Microsoft — with revenue of $77.8 billion in fiscal 2013, making it roughly three times the size of Qualcomm — is reportedly having trouble finding a successor to CEO Steve Ballmer.

Microsoft’s reported interest in Mollenkopf might have spurred Qualcomm to implement a previously decided succession plan earlier than planned, two analysts suggested.

“Steve has taken on increased responsibilities [over] the past several years, and I think this was [the] plan for quite some time,” wrote Mike Walkley of Canaccord Genuity Corp.

“While this may or may not have been accelerated by Microsoft’s search for a CEO, we are encouraged by Qualcomm’s decision to tap Mollenkopf,” wrote Brian Modoff of Deutsche Bank.

A third analyst was less speculative.

“Who knows what actually went down,” said Mark McKechnie with Evercore Partners in San Francisco.

Regardless of the process, McKechnie thinks the result is good for Qualcomm and Mollenkopf, who he said “will be a more effective CEO at Qualcomm than [he would have been at] Microsoft. The right thing happened.”

Modoff said Mollenkopf’s time as COO and as head of Qualcomm’s chip making division “during a time of significant growth” make him “well-equipped as the company continues to drive forward with LTE and other technologies around the ‘Internet of everything.’”

The Internet of everything refers to next-generation wireless technologies.

Mollenkopf understands the direction Qualcomm’s wireless technology is taking perhaps better than anyone, Modoff said, adding that the new CEO will likely maintain Qualcomm’s current strategy and help “leverage the growth and navigate the challenges in emerging markets, especially China.”

Qualcomm made $24.87 billion in revenue in fiscal 2013 as smartphone and tablet makers have shown their propensity for using Qualcomm microchips. Those manufacturers also want to license Qualcomm’s intellectual property portfolio.

A Break From Tradition

While Mollenkopf’s ascension to CEO is in keeping with Qualcomm’s affinity for stability, it marks a departure from a family tradition. Two generations of the Jacobs family have run the company since Irwin Jacobs co-founded it in 1985.

McKechnie — who noted that Motorola was run by co-founder Paul Galvin’s family for more than half a century — called the change at Qualcomm “a great sign of corporate discipline.” At the same time, he was complimentary of the Jacobs family’s stewardship.

“I think Paul was great,” he said.

Paul Jacobs has been CEO of Qualcomm since 2005, when he took over from his father. Paul Jacobs, like his father, has a doctorate in electrical engineering.

Mollenkopf’s style is “a lot more operational” than Paul Jacobs’ style, which is “more strategic,” McKechnie said.

A securities filing from early 2013 showed Mollenkopf had total direct compensation of $9.2 million during fiscal 2012, excluding special promotion equity awards. Among Qualcomm’s five top executives, Mollenkopf was second to Paul Jacobs, who had $19.2 million in total direct compensation.

Mollenkopf, who earned a bachelor’s degree in electrical engineering from Virginia Tech and a master’s degree in the same field from the University of Michigan, will assume his new job after Qualcomm’s annual stockholders’ meeting.

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