News that Qualcomm has bought Digital Fountain was kept extremely quiet with just a few journalists being told privately by the secretive chip giant. The reason it can get away with this is because not all of the Digital Fountain’s staff were taken on, and the transaction is likely to be trivial in terms of the effect on Qualcomm’s overall profitability going forwards, but that’s not so for the IP that it has managed to take in with this deal.
Qualcomm’s fortune was initially built on academic achievements turned into reality, a legendary error correction algorithm from one founder Andrew Viterbi, and of course the Irwin Jacob’s contribution to CDMA.
Similarly Digital Fountain has created the modern day equivalent in the Tornado codes, Luby Transforms and Raptor Codes all designed by Digital Fountain creator Michael Luby. When we talked to Luby at last year’s NAB we asked if he understood the impact that FEC could have on modern networks and whether or not he quite understood what it was that he had. He nodded knowingly and we discussed the rise and rise of Qualcomm, and it seemed that it was only a matter of time before the Digital Fountain successes were translated into similar cash flow. In his own words IP networks ‘lose packets and always will lose packets,’ which seemed to assure his future.
The Raptor codes and their predecessors are used by NTT and Tele2 in the Netherlands, built into its ToughStream delivery software with their IPTV systems, as well as into a number of radio technologies such as DVB-H, and recently the company was talking about retrofitting DVB-T systems with Raptor codes in order to give them the kind of in-building penetration that might mean they could be picked up on handsets ‘ a trend that began in Europe last year.
Raptor codes have the benefit of increasing the correction protection in a network linearly ‘ so that to fix a 10% packet or data loss you would need an additional 10% of capacity for FEC, and the systems can be tuned so that different parts of a network use different levels of FEC protection. Most FEC systems are far more bandwidth hugging than this.
But we always had problems with the Digital Fountain business model and encouraged them not to reach out directly to IPTV and Mobile TV operators, but to try to license the technology to chip makers and be a IPR company first and foremost, which is perhaps why Qualcomm with its immense stack of patents and licensees, may prove to be the perfect home for these technologies.
The manner of the sale, with details sneaking out and not all employees taken on, implies that this was a fire sale by VC backers and that most of the payment may well be in future performance by these technologies.
Michael Luby and his immediate team of scientists have been taken on, but we get the impression that this was all – around 8 people.
Meanwhile, Irwin Jacobs, the founder of Qualcomm has stepped down from being chairman of the business in favor of his son Paul Jacobs who has been elected chairman of the board.
Irwin Jacobs, was the co-founder of the company and CEO from 1985 through 2005. He will remain on the board of directors and the handover is immediate.