Crazy Story: Qualcomm Had to Sell Half Their Company to Their First Customer!

1. BGBen Gilbert0:00

   So Qualcomm founded 1985, patent issued 1986, or applied for in 1986.

2. DRDavid Rosenthal0:07

   Which is worth remembering, so it'll expire in 2006.

3. BGBen Gilbert0:10

   Uh, that's right. That's right. Looking ahead, foreshadowing. Uh, Qualcomm doesn't enter the wireless industry until 1989. What happens in the interim? [chuckles] This is, this is the next Walmart. Oh, it's so good. You literally just can't make this stuff up. Uh, so they get approached to bid on another contract, the fledgling Qualcomm does, from a company called OmniNET, [lips smack] which has this idea that they think the Qualcomm folks are gonna be perfect to implement. They want to make a mobile satellite network specifically to connect commercial semi-trucks on the roads in America, and, uh, network them up to the distribution centers for retailers [chuckles] and other, uh, people who, uh... companies who ship a lot of things in the US. This is right in their wheelhouse. Qualcomm and, and Irwin are like: "Great, we're gonna bid on this contract." They win it, they start working with OmniNET, [lips smack] and they make it work, and one of the very first customers is, of course, Walmart-

4. DRDavid Rosenthal1:19

   Great idea

5. BGBen Gilbert1:20

   ... which implements it on their own proprietary fleet of trucks-

6. DRDavid Rosenthal1:22

   Ah.

7. BGBen Gilbert1:23

   - building further their technical advantage over just about every other retailer in America.

8. DRDavid Rosenthal1:28

   And at this point, they've walked away from the satellite contract, right? They, they sort of like-

9. BGBen Gilbert1:32

   Yeah, they wa-- The, the, the Hughes satellite thing, that, that actually just never happened.

10. DRDavid Rosenthal1:36

    So they developed this technology, they patent it. They were like: "Oh, but there's no money here 'cause the g- the contract got, uh-

11. BGBen Gilbert1:41

    Yeah, the FCC was like: "Yeah, satellite, Jurassic Park phone's not gonna be a thing."

12. DRDavid Rosenthal1:45

    Right. So instead, they're focused on this OmniNET-

13. BGBen Gilbert1:48

    So they focus-

14. DRDavid Rosenthal1:49

    - deal

15. BGBen Gilbert1:49

    ... on this, and they also have, like, a lot of the business, you know, relationships already from the previous iteration of what they were doing at Linkabit, including with Walmart and many of the other large companies and retailers. Um, uh, I believe it's Schneider, uh, Trucking-

16. DRDavid Rosenthal2:05

    Yep

17. BGBen Gilbert2:05

    ... um, becomes one of the-- actually, the first customer, I think, for that. Um, so, uh, they work on building that. It becomes pretty clear, like, this is gonna be the interim main product. Uh, Qualcomm and OmniNET merge in 1988. They raise $3.5 million in funding as part of that. They bring the product to market at the end of 1988 as OmniTRACS. People might have heard of it. [chuckles] Uh, it was part of Qualcomm for a long time before I believe it ended up getting spun out to private equity.

18. DRDavid Rosenthal2:34

    Mm.

19. BGBen Gilbert2:34

    Um, and in 1989, in the first year of business for OmniTRACS, they do $32 million in revenue. [chuckles] In 1989. [chuckles]

20. DRDavid Rosenthal2:43

    Which is w- something like- it's like inflation-adjusted $100 million.

21. BGBen Gilbert2:47

    It's a lot of money, and there's a lot of demand for this product.

22. DRDavid Rosenthal2:49

    In the first year of the product launch.

23. BGBen Gilbert2:51

    Year one. Um-

24. DRDavid Rosenthal2:52

    [lips smack] Now, there's a lot of cogs, like, this isn't SaaS revenue-

25. BGBen Gilbert2:55

    No. Yeah, yeah

26. DRDavid Rosenthal2:55

    ... we're talking about.

27. BGBen Gilbert2:56

    Um, and w- there's particularly a lot of cogs because one of the things they learn from doing this, and one of the reasons the companies merge, they first, kind of like the Linkabit days, you know, they... Remember, Walmart was their customer for the Linkabit satellite, you know, thing. Walmart is very happy to integrate and implement technology themselves. Most other customers are not. So they go around and they're like, you know, pitching this to trucking companies and retailers and the like, and, and most of them are being like: "Well, this is, like, cool, but, um, we're not gonna operate our own dispatch centers and messaging, like-

28. DRDavid Rosenthal3:28

    We try to have as small an IT department as possible.

29. BGBen Gilbert3:30

    Yeah, we use this technology, so-

30. DRDavid Rosenthal3:31

    Why on earth are you asking us to do all this work and just handing us this pile of technology?

Episode duration: 8:09