XCOM in the Wall Street Journal

Paul Jacobs Retreats From Qualcomm Takeover Quest

Chip maker’s former CEO to focus instead on networking startup Xcom, which made its first acquisition.

By Asa Fitch and Tripp Mickle | April 1, 2019 3:35 p.m. ET

Paul Jacobs, who was ousted a year ago as a Qualcomm Inc. QCOM 1.37% director, has dropped his effort to take the chip giant private, instead choosing to focus on his networking startup just an eight-minute drive from his old employer.

The long-shot takeover plan had threatened to pit the former chairman against the company he once led as chief executive and that his father helped found more than three decades ago. He said he is throwing his energy into the wireless-technology startup Xcom Labs Inc., where he is CEO and which recently made its first acquisition.

The decision marks a reversal for Mr. Jacobs, who had begun gathering financing but decided late last year Qualcomm’s valuation—the company’s market capitalization is currently $68 billion—relative to its earnings had become less attractive. If successful, it likely would have been the largest tech acquisition ever, eclipsing Dell Technologies Inc.’s DELL 2.97% $67 billion deal for EMC Corp in 2016.

“As Qualcomm’s position changed, the conditions weren’t right to take it private,” Mr. Jacobs said. “However, industry dynamics have created an opportunity for our new company Xcom to drive the development of advanced wireless technologies and we have exciting new ideas to bring to market.”

Mr. Jacobs had first pursued the takeover idea while still a Qualcomm director, in the aftermath of rival chip maker Broadcom Inc.’s own hostile offer. The failure of that bid last year, after President Trump decided it ran contrary to U.S. national-security interests, had left Qualcomm with an uncertain future. The board ousted Mr. Jacobs, who had been stripped of his chairman title a week earlier, when he refused to drop his takeover idea.

Qualcomm declined to comment.

With a Qualcomm deal off the table, Mr. Jacobs is now ensconced in the San Diego offices of his new venture, about a mile away from Qualcomm’s headquarters across Route 805. From there, he and a cadre of other former Qualcomm executives are working on what they see as the next big advance in wireless: giving everyone’s phones the ability to route traffic like a cell tower.

Xcom has assembled a staff of about 30 people that is set to grow by a further 20 after the company closed a deal in March to buy M87, a Seattle-based startup that builds technology that seeks to improve wireless-network performance by connecting people’s phones to each other. Xcom raised additional funds to complete that transaction and finance future operations, on top of what Mr. Jacobs and other investors provided at startup.

M87 uses software to extend the range of phones that have trouble connecting to cell towers by routing calls and data usage from one person’s device to another’s, as far as 100 meters—or roughly 325 feet—away. That way, a person deep inside a building who has no reception could seamlessly piggyback off someone closer to the signal who might have a connection.

Xcom executives said such a transfer improves connectivity while using only as much as 1% of the borrowed device’s battery life in an hour. And the system can make use of other devices, giving people faster service than they might have otherwise, executives said.

“It turns phones into millions of small cell towers,” said Matt Grob, Xcom’s chief technology officer and a former Qualcomm executive.

Other companies have explored connecting mobile phones to each other and even deployed peer-to-peer networks in areas where cell-tower connectivity is spotty. But unlike setting up a mobile hotspot, the type of network Xcom and M87 are pursuing makes such connections seamless and manages the network to avoid overloading any single phone. That idea hasn’t been deployed on a large scale.

Xcom plans to earn money by charging wireless carriers to put its technology into their apps. Carriers benefit from lower infrastructure costs and better network capacity, the executives said. M87 demonstrated the technology with Vodafone Group PLC at the Mobile World Congress in Barcelona in February, showing it allowed 4G phones to operate at 5G speeds.

Mr. Jacobs said Xcom’s service will be most beneficial in emerging markets where operators are capped in what they can charge users, making it more difficult for them to invest in additional infrastructure.

The plan is to begin with software tweaks before moving to more significant work on network infrastructure. “This puts a product in the market right away while the team is working on the longer-term road map,” Mr. Jacobs said.

Tamar Elkeles