This is a classic strategy case study. Let me provide a thorough analysis of each question based on the case materials and exhibits you've shared.

1. Why is Intellectual Property So Important to Qualcomm's Business Model?

Qualcomm's business model is fundamentally an IP-centric flywheel, as shown in the business model diagram. IP is the linchpin for several reasons:

• Revenue without manufacturing risk. Qualcomm's model generates income through licensing fees and royalties on its CDMA patents. Every manufacturer that builds CDMA-compliant devices or infrastructure must pay Qualcomm, creating a recurring, high-margin revenue stream that doesn't require Qualcomm to bear the capital-intensive costs of manufacturing at scale.
• Control over the value chain. By holding foundational patents on CDMA, Qualcomm inserts itself into every transaction in the wireless ecosystem — between chipmakers, device manufacturers (Motorola, AT&T, Nokia, Sony), network equipment suppliers, operators (Ameritech, NYNEX, PacTel), and ultimately subscribers. IP is the toll booth on the entire highway.
• Funding the R&D flywheel. As the diagram shows, licensing revenue and chip sales fund increased R&D, which produces more patents, which drives more licensing. Without IP protection, competitors could simply copy CDMA without compensating Qualcomm, and the flywheel collapses.
• Barrier to entry & competitive moat. Patents prevent competitors from replicating CDMA technology without Qualcomm's permission. This is especially critical because Qualcomm is a small company ($90M revenue in 1991) competing against giants like Motorola and AT&T. IP is its primary source of leverage.
• Cross-licensing as ecosystem enablement. As the case notes, Qualcomm obtained cross-licenses from major patent holders, reducing IP disputes industrywide. This makes it easier for manufacturers to adopt CDMA (lower legal risk), which accelerates adoption — but always with Qualcomm at the center.

In short: Qualcomm is not primarily a product company — it is an ideas company. Without IP protection, it has no business model. The patents are the product.

2. Where is the Product-Market Fit for Qualcomm, if Any?

Qualcomm has demonstrated product-market fit in one segment and has strong theoretical fit in another, but the latter remains unproven at scale:

Proven fit — OmniTRACS (transportation/logistics):

• The Omnitracs satellite-based trucking communication system was growing quickly and generating real revenue. This was a niche vertical where CDMA's ability to handle multiple signals over shared spectrum provided clear, tangible value. Customers were buying and using it.

Theoretical fit — Cellular wireless telecommunications:

• CDMA offered 10-20x capacity improvement over the existing AMPS analog standard and significant advantages over the competing TDMA digital standard (IS-54). For wireless carriers facing exploding demand and limited spectrum, this was a compelling value proposition.
• However, as of 1991, no major carrier had committed to full-scale CDMA deployment. The technology had been demonstrated but not commercially validated at scale. TDMA and GSM were gaining global traction.
• The need existed (carriers desperately needed more capacity), and the solution worked in tests, but the adoption chain was broken — carriers wouldn't commit without proven equipment, and manufacturers wouldn't build equipment without carrier commitments.

Product-market fit verdict: Qualcomm had a classic "chicken-and-egg" problem. The product-market fit was latent and real in cellular, but it was blocked by ecosystem coordination failures, not by any deficiency in the technology itself.

3. Does It Make Sense to Invest Heavily in CDMA R&D While Losing Money?

Yes — and the financials actually support this, despite the surface-level losses.

Looking at Exhibit 5:

• Revenue grew from $6.5M (1987) to $90.3M (1991) — a 14x increase in four years.
• R&D spending grew from $53K to $22.7M — scaling with revenue growth.
• Net losses were significant ($8.4M in 1991, $17M in 1990), and the accumulated deficit reached $(48.5M).

Why this investment is rational:

1. Winner-take-all dynamics. Wireless standards are natural monopolies — once a standard is adopted, it locks in for decades. If CDMA becomes the standard, Qualcomm collects royalties on every device and every piece of infrastructure worldwide. The payoff is enormous relative to the R&D cost.
2. IP is a time-sensitive asset. Patents filed now create the portfolio that generates future licensing revenue. If Qualcomm slows R&D, competitors (Motorola, Ericsson) will develop alternative approaches or design around Qualcomm's patents, reducing its leverage.
3. The company is pre-revenue on its core bet. The losses are not from a failing business — they are from a business that hasn't yet realized its primary revenue source (CDMA licensing at scale). This is classic venture-stage economics. The government contracts and OmniTRACS are bridge revenue.
4. The alternative is worse. If Qualcomm stops investing in CDMA, it becomes a niche trucking communications company. The entire strategic vision — and the reason investors are backing the IPO — depends on CDMA becoming a global cellular standard.
5. Capital was available. Per Exhibit 4, the company financed operations through equity placements, bank credit ($6.5M line), and the upcoming IPO. Management believed they could fund 12+ months of operations. The burn rate was sustainable given the capital raise.

The risk is real — if CDMA fails to achieve standardization, the R&D investment is largely wasted. But the expected value calculation (small probability-adjusted cost vs. massive payoff) strongly favors continued investment.

4. As Irwin Jacobs: How to Get Motorola and AT&T to Manufacture for CDMA?

This is the most critical strategic challenge. Motorola and AT&T are simultaneously potential partners and competitors — they dominate both the network equipment and subscriber equipment markets (Exhibit 2). Here's what I would do:

A. Reduce Their Risk

• Fund joint development programs. Offer to share chipset designs, software, and engineering support at low or no cost. Qualcomm's chips (mentioned in the business model) make it easy for manufacturers to build CDMA products without massive internal R&D investment.
• Provide performance guarantees. Offer contractual commitments on CDMA performance (capacity, call quality) backed by the test data already generated. Reduce the technical uncertainty.

B. Create Competitive Pressure

• Bring in alternative manufacturers. Exhibit 2 shows other subscriber equipment suppliers: OKI Electric, Alps Electric, Nokia, Sony. Aggressively court these companies — especially Japanese and European firms eager to enter the US market. If Motorola and AT&T see competitors moving on CDMA, fear of being left behind will motivate action.
• Sign one major carrier first. A binding commitment from even one major service provider (e.g., PacTel Cellular or NYNEX, which already provided $2.25M in advances) would create demand-side pull that manufacturers cannot ignore.

C. Align Economic Incentives

• Offer favorable early-adopter licensing terms. Give Motorola and AT&T reduced royalty rates or preferred licensing terms if they commit to manufacturing CDMA equipment within a defined timeline. Make the economics of being first significantly better than being second.
• Structure agreements so Qualcomm doesn't compete. Motorola and AT&T may fear that Qualcomm will become a competing manufacturer. Jacobs should consider credible commitments that Qualcomm will focus on chipsets, IP, and infrastructure — not end devices — to reduce channel conflict.

D. Accelerate Standardization

• Lobby the TIA (Telecommunications Industry Association) aggressively for CDMA to receive its own standard (which became IS-95). A formal standard eliminates the "will it be adopted?" uncertainty and gives manufacturers a clear signal to invest in production.
• Publicize test results widely. Make the November 1989 San Diego demonstration results and subsequent carrier tests as public and credible as possible, using independent third-party validation.

E. Create Urgency

• Emphasize the capacity crisis. Carriers were running out of analog spectrum capacity. Frame CDMA not as "new and risky" but as "the only solution to a crisis that is already here." Manufacturers who don't build CDMA equipment will lose sales to those who do.

The core insight: Jacobs cannot force Motorola and AT&T to act. He must make CDMA adoption feel inevitable — through a combination of alternative partners, carrier commitments, favorable economics, and standardization progress — so that not manufacturing CDMA equipment becomes the riskier bet.

Here are my thoughts on each question:

Intellectual Property as the Core of Qualcomm's Model

What makes Qualcomm's business model distinctive — and precarious — is that IP isn't just important to the plan, it is the plan. Looking at the business model diagram, every arrow in that flywheel passes through either "Intellectual Property Rights" or "Chip Sales" — both of which are downstream of R&D. Qualcomm doesn't own spectrum, doesn't operate networks, and (critically) doesn't manufacture handsets at scale. Its only durable source of leverage is its patent portfolio.

This is a bold bet because it means Qualcomm's entire valuation depends on two things being simultaneously true: (1) CDMA must become a widely adopted standard, and (2) Qualcomm's patents must be recognized as essential and enforceable. If either condition fails, the company has very little fallback. The cross-licensing strategy mentioned in the case is shrewd — by clearing IP disputes across the industry, Qualcomm removes a key objection manufacturers might have ("we'll get sued by everyone") while reinforcing the legitimacy of its own patent claims. It's a move that benefits the ecosystem while quietly cementing Qualcomm's position at the center of it.

Product-Market Fit

I'd argue Qualcomm had problem-market fit but not yet product-market fit in cellular as of the end of the case. The distinction matters. The problem was real and urgent — wireless carriers were hitting capacity walls with analog AMPS, and demand for mobile service was growing rapidly. CDMA demonstrably solved this problem in tests. But product-market fit requires paying customers actually adopting the product at scale, and that hadn't happened yet.

The OmniTRACS business is the one area where genuine product-market fit existed — real customers, real revenue, real growth. But that was a niche logistics application, not the massive cellular opportunity Qualcomm was targeting.

The deeper issue is that Qualcomm's "product" in cellular wasn't really a product at all — it was a platform that required coordinated adoption by carriers, infrastructure manufacturers, and handset makers simultaneously. Platform businesses almost always face this coordination problem early on. Product-market fit for platforms looks different than for standalone products: it emerges suddenly once the ecosystem tips past a critical threshold, rather than growing linearly. As of 1991, Qualcomm was below that threshold.

R&D Investment While Losing Money

The losses look alarming on the surface — an accumulated deficit of nearly $49 million by 1991 (Exhibit 5). But I think the investment is not only rational, it's essentially mandatory given the strategic logic.

Consider the counterfactual: if Qualcomm cuts R&D spending, what happens? The patent portfolio stagnates, CDMA development slows, and competitors like Motorola (who have vastly more resources) either develop workarounds or simply wait Qualcomm out. The company's only competitive advantage is being further ahead in CDMA than anyone else. The moment that lead erodes, Qualcomm becomes irrelevant.

The financial data actually tells an encouraging story beneath the losses. Revenue grew from $6.5M to $90.3M in four years — roughly doubling each year. The losses are not because the business is shrinking; they're because Qualcomm is deliberately spending ahead of revenue to build a patent portfolio and technology base that will generate returns for decades if CDMA succeeds. This is the classic venture-backed "invest for future returns" pattern, and the upcoming IPO (referenced in Exhibit 4's S-1 registration) suggests investors understood and accepted this logic.

The real question isn't whether R&D spending is too high — it's whether Qualcomm can survive long enough for CDMA to reach commercial adoption. The working capital deficit of $2.1M and the NYNEX repayment obligation show genuine liquidity pressure. The IPO proceeds are essential to bridging this gap. If the IPO fails or CDMA standardization is delayed significantly, the company faces existential risk regardless of how good the technology is.

What I Would Do as Irwin Jacobs

This is the most interesting question because Jacobs faces a classic innovator's dilemma: his technology is superior, but his company is small, and the incumbents who need to manufacture CDMA equipment (Motorola and AT&T) have every incentive to drag their feet. They profit from the existing AMPS/TDMA ecosystem. CDMA disrupts their installed base.

Here is how I'd approach it, in order of priority:

First, I would secure one binding carrier commitment. Everything else follows from demand-side pull. NYNEX had already provided $2.25M in advances — I would work to convert that financial interest into a public, binding commitment to deploy a CDMA network in a specific market by a specific date. A single credible carrier commitment changes the manufacturer calculus from "should we invest in this unproven technology?" to "can we afford to let our competitor be the one who supplies this network?"

Second, I would recruit at least one alternative manufacturer outside the Motorola/AT&T duopoly. Exhibit 2 shows Nokia, Sony, and OKI Electric in the subscriber equipment market. Japanese and Korean manufacturers in particular were aggressively seeking entry into the US wireless market. I would offer them deeply favorable early-adopter licensing terms — lower royalty rates, engineering support, chipset access — to get at least one committed manufacturing partner. The point isn't to replace Motorola and AT&T; it's to create competitive anxiety. Once Motorola sees a Japanese firm tooling up for CDMA production, the fear of losing market share becomes a far more powerful motivator than any contractual obligation.

Third, I would make Qualcomm indispensable rather than threatening. Motorola and AT&T's reluctance likely stems partly from a fear that Qualcomm will eventually compete with them in equipment manufacturing. I would make clear, credible commitments that Qualcomm's role is as a technology supplier — chipsets, software, IP licensing — not as a competing manufacturer. The more Qualcomm looks like an enabling platform and less like a future competitor, the more willing the incumbents will be to invest in CDMA production. This means resisting the temptation to manufacture handsets or infrastructure, even if Qualcomm technically could.

Fourth, I would push hard on formal standardization. A TIA-recognized standard (which CDMA eventually received as IS-95) removes the single biggest source of manufacturer uncertainty. No executive at Motorola wants to commit factory capacity to a technology that might not become the standard. Formal standardization converts CDMA from "Qualcomm's proprietary technology" to "an industry standard" — a psychologically and commercially significant shift.

The one thing I would not do is wait. The TDMA/GSM camp is organizing globally, and every month of delay increases the risk that CDMA gets locked out of the standards process. Jacobs needs to create a sense of inevitability around CDMA, even before the ecosystem is fully in place. That means aggressive public demonstrations, published test results, carrier letters of intent, and visible manufacturing partnerships — all designed to make the industry believe that CDMA adoption is a matter of when, not if.

The fundamental insight is that Jacobs' problem is not technological — it's a coordination game. His job is less about building better technology and more about orchestrating an ecosystem of actors with misaligned incentives to converge on a shared commitment. That's ultimately a leadership and negotiation challenge, not an engineering one.