It's like Cristiano puts it this way. It's really funny. He said, you know, there's a chat room set up for all the AI data center people are in the AI cool club, right? The mag seven, whatever. And then you have to get admitted into the chat room. And so there's people waiting to get in, right? And we were one of those companies waiting to get in and we weren't in. And then all of a sudden after this earnings call, we were let in and now we're in the chat room.
So this week, it's my pleasure to introduce a Vox Media studio first, my co-host for the day, my dog Oscar. I only allowed Oscar to join after he promised to keep his questions strictly on brief, which he more or less accommodated. Sitting across from Oscar and me today is one of the tech world's leading CMOs, Don McGuire, who's EVP and global CMO of Qualcomm. Today, Don's both a B2B marketer and a B2C marketer as in addition to the Qualcomm brand and portfolio, he also stewards marketing for the company's Snapdragon brand. Over his career, Don has seen waves of value creation and destruction, having held senior leadership positions at Intel, Kiasera, Leap Wireless, and Sprint PCS. Don tells me that from his point of view, the most significant destructive force in tech is complacency. Companies who are wary of disrupting short-term profits who wind up completely missing critical technological inflection points. And he points to former industry leaders like BlackBerry and Nokia to make his point. And for case studies in how market dominance and value can be destroyed when you don't adapt. So how does a company avoid this fate and continue to drive growth and create value? For Don and Qualcomm, it starts with a culture of innovation, R&D of course, and continuing to iterate on products and the way you bring them to market. But it also requires keeping the commercialization cycle top of mind and understanding what to do with all the things you've created so that they create value in turn.
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So, Don, before I get into my first question in particular for those who are watching us, not just listening to us, let me introduce everybody to our special co-host, my dog Oscar, who is here on an emergency pet sitting basis. Oscar has agreed to only ask questions your comms team has approved. We'll see how it goes. And I've been told that this is a Vox Media first and the first time that an animal has been in studio and I corrected and said it's probably the first time a K-9 has been there. But with that, let us get into it.
You've been in the tech industry a long time. Not to age you, my friend, but a long time. Arguably, there's no industry that has created more value certainly in the last couple of decades than the tech industry has. And as it continues, I'm wondering what you've witnessed, what you've learned, what you've experienced about what threatens and destroys value creation. I want to start with the negative side because there's so much upside, but what leads to value destruction in this business?
I think it's a combination of things. There's really two main vectors. I'm sure there's a lot of noise around each of these, but for the first vector, I'll talk about the inability or the lack of understanding of technology that leads to regulation that probably is not appropriate or productive with regards to the advancement and innovation of technology.
So if I understand what you're saying, it's kind of regulation as a threat to value creation?
As a yeah, as a because I think a lot of politicians and governments, legislators tend to jump to regulation as an answer to keep control over technology versus understanding technology and innovation cycles and trying to encourage cooperation and collaboration and standardization to achieve whatever outcome they want to achieve through regulation. But to only understand regulate at the expense of innovate, I think can be a blockade to value creation and also could be destructive.
I want to bring the question kind of back inside the companies. What's really interesting to me about your answer and about your point about regulation is the way it ties to the show's thesis, which is there are those things within and without your control. And one of the things we say in the show's description is that every decision a company makes either contributes to value creation or destruction. And that includes its lobbying decisions, that includes its corporate affairs decisions. Now some of those go beyond the company's ability to control them for better or worse I suppose. But if I ask you that question again, which is what have you witnessed across tech companies that exploded, went up and to the right, and maybe we don't even know their names anymore. What led to some downfalls?
There's a couple examples especially in our space or where we have historically been. If you go back through decades, you think about who was on top of the tech world 10 years ago, 20 years ago, 30 years ago, and to your point, some of those names have changed. If you look at mobile as an example, the mobile industry, when the cellular phone was first invented and became a tool, there were the titans of the initial cellular boom and the mobile revolution. And some of those titans are not even spoken about anymore.
I mean, Motorola was my client back in 2004 when I was at CA. Motorola, Nokia, Ericsson, BlackBerry.
So, is the value destruction that we saw or that we see as we look at those companies, is that a function of not keeping up with consumer interest, demand, technological ability? What if you had to tie a red thread through those four examples?
I would say complacency and literally missing inflection points where technology trends shift or behavior shifts or the technology itself is able to do something different, and because you're happy with where you are, you don't see the forest through the trees. That's a little bit of the complacency. Hey, this is never going to change. It's as good as it's going to get. So we're just going to keep doing what we're doing.
I'm sorry to interrupt, but do you think that we're really saying this is never going to change? This is as good as it gets? Like complacency inside businesses built on innovation is such an oxymoron.
It's an oxymoron. I think it's sort of like clinging to your guns and religion sort of thing, right? Where we don't want to change because we created this thing. And so if we change this, then we risk short-term profitability disruption or we have to invest more in something that we don't either know how to do or we're afraid of or whatever the reason might be. There's several examples of companies just missing key pivotal points in technology or the evolution of technology that then sent them down a path of maybe stabilization for a while but then eventually erosion.
And you know we mentioned Nokia, we mentioned BlackBerry, even Intel. They completely missed the pivot from the PC not being the center of people's digital life anymore and the phone becoming that center. And they had opportunities, all these companies had opportunities. Xerox owned the personal computer right before they sort of just gave it up.
Yes. I'm old enough to remember when they asked somebody to Xerox something.
Right, and so there's you know, Motorola had the television set.
Oh yes, if you go to their museum and I used to work for Motorola back in the day. If you go to their museum in Schaumburg, they were the first literal incarnation of a television set, but they just didn't see what that would be doing or could do in the future, and they just passed on it.
So, it's interesting. I think about it a lot. Going back to about that same period 20 years ago, I'm pretty sure I have the distinction of being the first person to lose money on Yahoo's stock because I bought it at what was a high and like 14 minutes later it was down after nothing but growth. And I remember thinking at the time Flickr, which was this amazing acquisition, I think it was an acquisition. I think it was Stewart Butterfield if I remember correctly who went on to do Slack and other things. Flickr should have been, could have been YouTube, but they had a bit of a myopic lens on what it was that they were interested in having and allowing facilitating the sharing of. And I'm wondering, as CMO at Qualcomm, how do you all ensure, what can you share with the audience about how you all ensure that you're not being complacent because that's a cultural attitude, but that you're not missing inflection points because it's easy to miss them. It's harder to capture them.
Yes, you're right. It is. Well, first of all, I think cultural, you mentioned cultural DNA. I think that's really important. If you have a culture of innovation, that gets you so far, right? It doesn't get you all the way. But at least it gives you that mindset of, hey, we like to tinker. We like to play with things. And if things tend to go in a different direction, we're okay with that. That is a culture of innovation. You have to iterate to innovate, right?
Do you create gates around an innovation practice, which is to say everybody's responsible for innovation, but for true innovation? It's hard to be involved in the day-to-day and be truly innovative at the same time. Are there skunk works teams that you guys deploy to look at the future and invent the future?
Yeah, we have a worldwide R&D group of course as part of our engineering organization.
Sorry, that was a dumb question. Audience, you can mock me. I'm fine with it.
I mean, it's part of the history. We're the biggest IP patent holder and application filer in the US. We have over 200,000 plus patents. If you come to our headquarters in San Diego, there's a patent wall in building N, which doesn't have all of them. So we are historically this patent machine where we encourage our people and we have so many super smart people at Qualcomm that I can't even have a conversation with because they'll, it won't go very far. But they just create things, they invent things. In fact, during COVID, because people were at home by themselves or in their basement or home offices, our patent filings actually went up and accelerated by like 35%.
That's a really interesting insight, isn't it? As to what it takes to create a culture of innovation, which is, I'm going to mock myself, R&D obviously, but R&D requires even the R&D of folks who are in the day-to-day, all of whom want to be inventing, many of whom want to be inventing the future, it requires distance and perspective and negative space. And then you have to understand how you take something from an innovation cycle into a commercialization cycle.
So, and not everything makes it, right?
It has to be okay. And as you get older as a company, I think keeping that spirit becomes very difficult because the pressures of short-term profitability, quarterly earnings, causes or could cause shifts in behavior, especially at the leadership level to stifle some of that.
That creativity, that innovation, often causes that.
Often causes that. And we've been, I think we're guilty of it as well. I think that we are not the freewheeling, laid-back San Diego surf mentality, just go with the flow company we were 20 years ago. We're 40 years old now as a company, which in company terms is like we're a teenager. But we are obviously more disciplined. We've had to mature and grow up. It's just part of getting big, right? And going public and having to answer to shareholders and stakeholders and board members and not having total control of what you can and cannot do. Balancing that with but we still need these smart people to tinker with things and come up with ideas so that we can create that next inflection point. We've done a really good job when it comes to the generations of wireless, the G's. We're in the 5G era right now. And in about four or five years, the 6G era will begin. We invest in each generation of wireless inflection 10 years before it happens.
Right. And so we started researching 6G at the beginning of 5G. And you have to do that. And that's billions of dollars of investment. It's something that is not going to manifest itself or materialize possibly for 10 to 12 years.
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Has 5G become what those who invested in it thought it would be?
I think it depends on who you talk to.
I think the mobile operators struggle with the fact that they invested a lot of money in building the infrastructure.
Yeah. And there's a narrative out there that the killer app never came for 5G because when you look at 4G, which really enabled the shared economy, it really enabled apps to exist and for people to get access to those on a pretty consistent basis. We like to say where 4G created the ability for you to stream music everywhere no matter how crappy the coverage was, right? You could listen to Spotify and it'd be okay. It wouldn't buffer. 5G really created that for video.
But the killer app for 5G is not a single application or an Uber or something you can point to and say, "Wow, look at that innovation." The killer app for 5G is the ability to handle the massive amount of data going through the pipe on a daily basis. So it succeeds technologically but hasn't necessarily succeeded in the mind of the market, right?
Which is it's done what infrastructure is supposed to do, right?
Provide the capacity and the bandwidth for people and for businesses and for the world to do what it needs to do. It's not sexy, right? But if we didn't have it, we would not be able to do things we do with these devices today. We would not be on the verge of AI like we are today if the 5G transition did not happen. So it's not like I said, it's not sexy and you'll see a lot of skeptics still write about it, and a lot of mobile operators still a little bit bitter about the fact that monetization of 5G they feel has not realized or materialized in the way that they thought it would. But I think again, they're looking at it the wrong way. If they hadn't transitioned to 5G, if they made the decision, well, we're just going to hang back and wait, they'd be dead.
They wouldn't exist anymore.
So, if their premise is, hey, great for infrastructure, but we haven't created or seen as much value creation from it as we anticipated, value creation here being monetization of it. Why? Is that a function of actions taken that were the wrong ones or actions not taken or just expectations that weren't reasonable?
I think a little bit of both. I think what they might say, I don't want to speak for them. I used to work for mobile operators in the beginning of my career, so I have that experience. But I would say that there's a feeling that the hyperscalers and the OTT, the Netflix of the world, have extracted the value out of the infrastructure because of 5G. Netflix exists. The ability to Netflix and chill wherever you are exists and they're capturing that value.
Just a brief digression. I remember I was at CA probably 2005, 2006, and Netflix is still distributing DVDs by mail, right? And that was the great innovation at that time.
Ted comes into CA for some reason. I get into this meeting or I'm invited to this meeting and it's really not quite an introductory meeting, but they hadn't done original content yet, right? Like this is how nascent they are. And I remember at one point somebody asked a question and he looks at them he's like we didn't call it Netflix by accident, which is to say they saw the innovation cycle, the 4G innovation cycle that was going to allow them to build this. I've never forgotten that. Like we didn't call it Netflix by accident, right?
Yeah. Well, it's true. I mean, so I think there is a perspective from some of the mobile operator community that they missed the value creation opportunity or it was stolen from them so to speak because they have been commoditized in this process. Which it's hard to argue with that to a certain degree. How do they extract value out of the fact that they're providing a pipe for others to then build on top of?
And it used to be where they had all the control and all the profitability. They were extracting all the monetization out of their networks when they were just providing signal, right? And all you could do with that signal was make a phone call or even send a text message. The mobile operator was extracting because they were the ones providing the messaging platform as well as the voice platform. But when they're not providing the solution platform anymore for what you can do on this network, that's where they started to lose the value.
So if before we move on, I'm wondering if you were one of them or maybe all of them, in retrospect, is there something you think they wish they'd done or organized for differently to be able to have created more value?
I think you could in retrospect obviously look at maybe the speed at which some operators have diversified themselves and become hyperscalers in their own right.
And some operators, there's examples from around the world, unfortunately not really in the US with the exception of T-Mobile. I think T-Mobile's sort of on their way to achieving a more diversified play as a company and you can see it in where they sit in the hierarchy of mobile operators today. But if you look at operators like Etisalat in the Middle East and others, they actually, and all the Chinese operators, they became hyperscalers.
And for our audience, when you talk about being a hyperscaler, what do you mean?
So they're a combination of mobile operator and AWS.
Right. Or Microsoft Azure, right? So they built the data centers, they built the infrastructure as part of the services that they offer both for consumer and for enterprise. And so they diversified themselves and it's already happened. All the mobile operators in China are also hyperscalers in their own right. And you see other examples of mobile operators who saw that and started to go down that diversification path, which is going to set them up really well for 6G because 6G is really going to be the first AI native network where AI is actually built into the network architecture.
It's a chance to take value back.
That's a really interesting and I think important framing, one that hasn't come up on the show so far, which is value creation isn't a straight line.
Right, as is my R&D comment, like okay thanks Seth you're a genius. But sometimes those decisions to take it back require going back to one of the first things you said, require putting certainty aside.
And planning for a future that you've got to invest in to accrue and monetize that value later.
That'll be the title of my book, Master of the Obvious.
So, and it's not easy, right? I sit, luckily enough, on Cristiano's staff.
Yeah. And every Friday he has a staff meeting and we debate a lot of things and it's always this constant battle and this constant tension between we have to do this. Oh, but we've got this OPEX pressure this quarter or we have this this quarter and it's this constant balancing act of how much can we do and how much can we play whack-a-mole, right? And often times there's lots of spirited and healthy debate. The good news is at the end of the day, leadership really has to stand for something. And when there's competing forces, what side of that is leadership going to stand on? If they're going to stand on the safety conservative short-term focus side of it, the risk is going to be greater that you will miss an inflection point, that you will start destroying value over the long run. If you're on the other side, chances are you're going to free yourself and be able to whether it's reinvention or keep up or innovate or iterate, you're going to err on that side, which is in my opinion a positive. Cristiano squarely sits on that side of the fence, which is super helpful in guiding the rest of us in how we avoid those pitfalls of value destruction.
While the capital markets obviously create a lot of value for institutional and individual investors, do they also threaten value creation because of their myopic focus on the next three months?
Yes. I mean, I think not too long ago there was this idea that maybe companies should only report annually.
Yeah. I mean there was a fair amount of positivity around that. I think a lot of companies would say yes, thank you. It would shift the narrative to your point, right? The short-term focus, what have you done for me yesterday and what are you doing for me tomorrow? It is crazy and it really messes with the minds of organizations. I'll give you a perfect example. Even with Qualcomm, we had I think seven or eight maybe over 10 straight quarters of record earnings. Maybe it's not 10, maybe it's something less than that. Where we had announced record earnings and we guided above consensus and our stock dropped 10%.
Yeah, I mean we've seen a lot of that over the last few months in particular at least in my portfolio. Why is there...
Well, you know, like what's the say the market runs on emotion? Yes, there's lots of noise, ghosts in the machine, so to speak. But I don't, I mean it's hard to figure out and I'm not a finance person but it is interesting. To me as a marketer and as someone who's looking for what is in the mind of these people that's driving their behavior, to me it's all about belief in where value is created. And I think for us, just our situation, even though we were succeeding at what we do today, we were being viewed as a certain type of company and even with our success that we were not part of the value creation group because of our heavy, not dependency, but our heavy sort of mobile focus and mobile bent to what we've done historically and what currently drives our business today. And I don't think we were doing a very good job of signaling to the market. What we do today is important and it drives that short-term financial results that everybody wants, but our eye is really towards the future. And we weren't signaling forward. We weren't signaling where we're headed. We were focused on today and what we just did and what we're going to do next quarter. And that's on us to a certain degree that we weren't signaling where we were headed. The IR narrative and the narrative is super important.
It's fucking marketing, right? The oversimplistic Seth take on it is it's like why every coffee company wasn't we're not a coffee company, we're a tech company that sells coffee. They just wanted tech multiples. That's right. And those multiples are...
Yeah. Albert's such a good example. Like we're no longer a jew company. We're an AI company. We're a data center. Stock just pops, you know, like whatever. It's crazy, but that's narrative. That's narrative. And what narrative can do for you, and we'll take it. We did a horrible job up until this last earnings call.
And what shifted internally? A new head of IR, right?
His name is Brett Simpson. He's amazing. And we looked at how we communicated to that audience not only what was important of what happened in that quarter but where we were headed.
And for the first time talked about sort of the new new, the next new.
And that signaled to the people who get on those calls every quarter and listen to what we have to say something different, something's changing at Qualcomm. And we were, it's like Cristiano puts it this way. It's really funny. He said, you know, there's a chat room set up for all the AI data center people are in the AI cool club, right? The mag seven, whatever. And then you have to get admitted into the chat room. And so there's people waiting to get in, right? And we were one of those companies waiting to get in and we weren't in. And then all of a sudden after this earnings call, we were let in. And now we're in the chat room. And now we can interact with this group of companies and people.
You got the pass. But it's too right. So we were granted permission to enter.
Right, the secret password was granted and then you've seen what's happened over the last several weeks. I mean our stock is up 89%. In what period of time? Like two weeks. 89% in two, at like 238 today. We were like 137 just about a month ago or whatever.
Well, this explains the Tom Brown check.
No, no, no. I got a good deal on this. But it is interesting the shift now. We have to deliver, right? It can't just be about narratives. We have to deliver and we are very confident we can.
A promise made undelivered against is the fastest way to value destruction. But the fact that we've been working on all this stuff and we are doing it, but we weren't talking about it. Right.
At least signaling the right things at the right time is a little bit of a miss. But that struggle, that constant struggle I mentioned in the Friday staff meetings, how much do we say, how much do we not say, are we being too conservative, are we being not conservative enough, that's the constant tension. And I think what was happening is we were leaning a little bit more towards conservatism because we like to be sure of ourselves when signaling things especially to the financial community.
Yeah. Because they don't like anything less than, they like a failure to manage expectation.
Absolutely. And we're the new sort of maybe not by actions, but by perceptions, we're the new kid on the AI data center block. And so we've got to act accordingly. So we don't believe we have maybe that credibility to just stand on a stage and say unlimited TAM and everyone goes, "Oh my gosh, it's amazing." Right? Some companies have that ability today.
Yeah. I mean, if you look at speaking of sociopaths, Elon and all the promises he's made about robots and Tesla and whatnot, the stock has typically and over time been rewarded while he's delivered against none of that because he's given the permission to promise and often times not deliver or just set a very broad narrative that doesn't necessarily attach itself to his business. And it's not just him, right? It's others.
No, no, no. And when you're dealing in quarter over quarter exponential profits, right? Nvidia is a perfect example of this, you're going to get the credibility. Right. Because you're talking about up and to the right. And so you can stand on a stage and say unlimited TAM and everyone just goes, "Oh my gosh, this is amazing." Right. And they're going to give you that automatic credibility. We have to earn that. And that's also part of our DNA, right? Because we've been this sort of great enabler, open ecosystems, open platforms type of company because democratization of technology for us is really the great equalizer as well as the great enabler. And some companies don't operate like that, right? They like vertical organizations and vertical value chains. And so it's a philosophy thing which is its own form of value creation which I tend to, and I talk about this on the show a bit, think leads to less value creation over time because if there's no horizontal in your vertical, then going back to what we were saying about the capital markets myopia sets in and you're optimizing for what you do rather than what the market needs, wants, and what the company's actually capable of. But you've brought something up a couple of times that I want to use as a segue to this next question, which is you've talked about the choices that senior leadership, that Cristiano has to make and the conversations that take place in those Friday meetings.
Sure.
In your role at Qualcomm where you're both CMO of Qualcomm and CMO of Snapdragon, right, which is a B2C play, you oversee and operate across both B2B markets and B2C markets simultaneously. And as we were saying about IR, your job is to tell similar stories, different products and services, but similar stories to multiple stakeholders, whether it's OEMs, investors, policy makers on the one side, consumers, maybe creators on the other. And I'm wondering, in a world where you have to make choices, are there times when you found that the value you're creating for one audience is actually in tension with what another audience needs? And if so, how do you reconcile that?
I would say yes, but I would also add to that and say another challenge, I don't know if it's equally as big or maybe smaller, is how do I bring the two or all of them together so that they're accretive to each other.
Yes. Back to what we were just saying about the vertically oriented, right?
So that's one of the areas where we are really starting to take a deeper look because Snapdragon has sort of taken off and we've built this momentum towards a brand and a product that lives inside of something else. Yeah. And we'll talk about that in a sec.
Sure. It's taken sort of the Intel Inside playbook which I ran for six years when I was at Intel and turned it on its head a little bit. And so because the opportunity with Snapdragon is much broader, but that's kind of been on its own track and we made a conscious decision to separate the two in 2020. The brands were the Qualcomm master brand company name and Snapdragon were locked up together prior to 2020.
Oh, is that right? But which was a strategic decision or kind of a default.
It was a strategic decision based on data and issues that were preventing us from telling the Snapdragon story and really achieving that growth with consumers and building sort of a hopefully iconic consumer brand, culture brand. The problem was, or there were several problems, but one of the problems was it was a very long brand to articulate visually, verbally. The number of characters, the size of the logo lock up, Qualcomm Snapdragon and a fireball. Oh, by the way, for those listening, not watching, I'm pointing to the backdrop which has the show name Create or Destroy: Reimagining Marketing. And we had a lot of conversations even for an enterprise not quite as big as Qualcomm, although the wisdom company is on its way. Just you watch, my friend. The number of characters in the title for something that's going to show up in a thumbnail in a podcast queue, right? Like it's real. And we had massive issues with the size of the footprint that it took up in co-marketing for example with our partners. They're like too much space.
Right. Your logo's too big.
