Bartiromo talks tech with Qualcomm CEO Mollenkopf

As the Nasdaq marched past 5000 this week, one of the technology industry's highest flyers was in Barcelona, Spain, at the Mobile World Congress conference. Qualcomm, which soared back in the 1999 heyday for tech stocks with a cult following of day traders and dot.com enthusiasts, this week unveiled next-generation products designed to change the health care, automotive and mobile industries globally. The company is a prime example of the changes that have powered the tech-heavy Nasdaq's recovery. Back in the dot.com bubble of the '90s, investors aggressively bought stocks without caring about basics such as earnings, focusing instead on all sorts of 'dot.com clicks' type metrics to justify high valuations. Today, the backdrop for the rally is much different because it's based on real earnings and a fundamental change in mobility and technology. So I caught up with a veteran of the business: Qualcomm CEO Steven Mollenkopf, the first non-family member to take the reins after founder Irwin and later Paul Jacobs stepped down. A 20-year veteran of the company, he was there during the boom and bust and says the backdrop is a changed trajectory. The company recently took out a credit line even though it has more than $30 billion in cash, a move that likely signals an increased stock buyback or dividend payment to be announced at the upcoming shareholders meeting on March 9. Our interview follows, edited for clarity and length.

Q: How would you characterize business today?

A: It's still a very vibrant industry. A lot of people are seeing that it's changed from growing 30% a year to now more in the single digit, low double digit a year range. But it's a tremendous business global-wide. People tend to not forgo purchasing a cellphone. In many places in the world, the first time they get on the Internet is through a cellphone. Pretty significant economic push, particularly in the emerging market.

Q: What is a bigger growth story for Qualcomm, upgrades in developed countries for smartphones or people getting their first phone?

A: It's both. if you look in the developed world, a lot of it is a replacement driven by innovation. A higher screen size, for example, stimulates a tremendous upgrade cycle for the developed market. In the emerging market, a lot of it is still the penetration rate. If you look at the developed world, people have multiple devices now. And a phone works with a watch, with a car, with a tablet, with a number of other type of devices. So the fan out is also something that we're seeing. Eight billion new smartphones in the next five years and 5 billion new devices. So it's tremendous unit growth continually.

Q: Good news that the China settlement is behind you because some investors were worried about this hanging over you. But now some are asking if the terms you agreed to set up a bad precedent for other governments that are investigating the company and the industry, such as South Korea.

A: I don't think so. There's greater stability and more confidence in the outlook as a result of China versus less. Over the years, we've had a number of investigations. I think I would characterize them as successful companies tend to grab the attention of people. And we've been able to work through there.

Q: How will new technology change the automotive and health care businesses? Is there anything as big an opportunity of what we have seen in the mobile phone business? There are 6 billion smart phones in the world compared to 75 million to 100 million vehicles sold a year.

A: There's not that much as large as the entire population on the earth, which is really what you have in cellphones. The great thing about automotive is it's very leveraged from our existing business, meaning that we can we can go after that market with very little incremental investment. And it leverages this massive scale of mobile. What you're going to see in cars is several generations bringing more technology content from the phone into the automotive. First stage, which is what we're in now, is all about infotainment and getting the car connected. The second phase is that the car tends to take on more features, like the camera or computer vision, things that are developed on a phone but enable the car to do something that it couldn't do before, so semi-autonomous cars or the ability to park -- interesting technology primarily from the phone. The third phase is to have the cars talk to each other and there's a number of benefits for that. One is safety. So the fact that cars can talk to each other means that we optimize the flow of traffic, which hasn't happened.

Q: I can't imagine putting my family in a driverless car.

A: You will, however, probably participate in some form of the cars talking to each other and to the network and having that be a method by which traffic flow and safety is enhanced. I think you'll see some blend of technology that's not in there now and a network which is really trying to optimize the automobile. The industry is still in the early days about who's going to monetize the relationship between things. The relationship between websites, including relationships between people is all pretty well known. But when something happens between the relationship between things and how things move around, there'll be new players in the ecosystem. We want to be at a minimum, a partner.

Q: How does health care change?

A: The most complex system is humans. When you go in to get your car serviced, they plug it in and tell you everything that happened for the last six months. I walk in and get a stress test from my doctor, and they make a conclusion based off of that. That doesn't make sense to me. I would much prefer to have all of the data about myself and less about my car. It's the only major industry in the world that hasn't benefited yet on a daily basis from technology. Also if you look at the percentage of dollars allocated to health care in these huge economies, a small percentage change there is enormous. And if you look at places with aging economies and spend a lot on health care, we see a tremendous opportunity we're trying to make it easy for the existing players to leverage the scale of mobile. So you'd have chip sets. But then we also have a very small business which is trying to figure out how can you solve some of the data management problems that apply to health. A heart monitor is only useful if it's being remotely monitored if there's security. That is a massive issue that you need to solve. The difference between having the Internet in your phone and having the Internet understand your pulse and the motion of all of your limbs. There's just a different level of security and robustness that's required.

Q: Your company has more than $30 billion in cash on the balance sheet, much of that money is overseas. What would it take for you to bring more of that back to the U.S.?

A: It's a strange incentive system where a U.S.-based company has an easier time to invest outside the U.S., both in people and in companies. It's actually easier for us to buy a company offshore versus onshore. That ultimately creates a disincentive for people to go into certain industries here in the U.S., which is probably not what people wanted. We would love to see corporate tax reform that would liberate that investment, enable us to invest more here in the U.S. It would make it easier for us to return some of that money to shareholders, and we're not alone. There are a number of other tech companies that have the same issue.

Q: You promised to pay out 75% of your free cash flow including international cash flow to shareholders. Is that why you recently took out the credit line even though you have so much cash?

A: We made a commitment to return 75% of free cash flow. In order to enable that because of our mix of businesses, we've actually had to take on some debt. This highlights one of the issues that happens. We have money offshore. It's not a good use of that money to bring it onshore in order to meet those commitments, yet we need to meet those commitments.

Q: You've been a partner with Samsung, now Samsung has designed their own processor. How big of a blow was this?

A: It's not a new strategy for our customers. Sometimes you see our customers build their own chips. Long-term we think we have the right business model and essentially what it enables us to do is leverage all of our investments across the industry versus just one original equipment manufacturer. Look at our most recent device. It's virtually in every high-end handset from Android to China to Windows Mobile. So we're pretty pleased with it. We'd love to have one more but I think if we keep working on it, we'll be OK. I don't see that as a big change in the landscape or strategy for our business.

Q: You've been with the company 20 years but you are not a "Jacobs." Irwin Jacobs started the company, Paul Jacobs, his son was the next CEO. And you are now completing your first year. What kind of dynamic does that bring to the job?

A: Yes, it's about the one year anniversary. I look at it in the context of being there 20 years. Before I was CEO, I was president and chief operating officer and before that ran the chip business. So we look at it as, wow, we were able to keep the band together for a long time. Now it's an interesting time because we're growing into all these different areas. And the focus of the company and the ability to structure it and attract talent that can allow it to drive multiple businesses at the same time is something that will be a huge determinant in whether we're gonna be successful or not. And that's a different type of challenge than what we've had in the past. Technology's still very, very important. We think the ability to deal with complexity is something that's really important. But I've been very fortunate to have a lot of continuity in the management team in part because the culture of the company. So I feel like it's a pretty comfortable place to be.

Maria Bartiromo is the anchor and global markets editor at The Fox Business Network. Her 'Opening Bell' morning program is live on FBN weekdays from 9-11 a.m. ET. Reach her @mariabartiromo and @sundayfutures