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Verizon Communications Inc
Qualcomm (QCOM) is best known for designing the radio chips inside many Android smartphones, Apple’s (AAPL) iPhone, and Amazon.com’s (AMZN) Kindle—which has helped the chipmaker reach $15 billion in annual sales. Pet owners may come to know Qualcomm as the company that helps find their lost cats and dogs. Its new Tagg device, an attachment for pet collars, retails for $200 and uses a GPS chip to track an animal’s whereabouts. If Fido leaves a designated area, the service alerts owners with an e-mail or text message.
San Diego-based Qualcomm doesn’t expect Tagg to be the next billion-dollar sensation or consumer products to displace its lucrative business as a chip supplier. Rather, Tagg is part of a broader effort to build demand for mobile radios and processors outside traditional telecom gadgets. If pet owners see the value of a radio chip inside a collar, the thinking goes, companies might start creating networked dishwashers and light bulbs, too. Qualcomm hopes to “catalyze the industry” to think of new uses for its chips, says Senior Vice-President Bill Davidson.
There are 77 million dogs in America, and more than 10 million go missing each year, according to the American Society for the Prevention of Cruelty to Animals. The current practice of “chipping” dogs, or implanting a microchip under the skin, is imperfect. The chips contain basic contact information, but a vet or animal shelter has to use a special scanner to gain access to it. Owners often forget to update their contacts when they move or change phone numbers.
With Tagg, which went on sale in mid-August, pet owners can use a computer or mobile device to track their pets’ whereabouts at any time. The GPS chip sits inside a small plastic case that clips to the collar and includes a rechargeable battery that lasts up to 30 days. When power is low, Tagg sends an e-mail or text message warning the owner. The device uses the same technology as the Kindle to minimize data usage, and cellular service from Verizon Wireless (VZ) is free for the first year and $60 annually after that. “Nobody was addressing the pet market directly with a purpose-built device,” says David L. Vigil, president of Snaptracs, the wholly owned subsidiary of Qualcomm that manufactures and sells Tagg. “We decided to go direct to consumer with it.”
Qualcomm says products as diverse as electricity meters, cars, and medical devices could all benefit from a cellular connection. The company partnered with Hughes Telematics and American Medical Alert (AMAC) in a joint venture called LifeComm, which is developing a mobile personal emergency response system for the elderly. The device, which is expected to go on sale early next year, will let users monitor elderly family members. It will include a motion-sensing accelerometer, so it can automatically send out an alert if the wearer falls.
Qualcomm has tried selling directly to consumers before. It sold its handset business to Kyocera (KYO) in 2000 after finding it was better at designing chips than phones. Earlier this year the company shuttered Flo TV, a service for watching television on the go, because of low demand. But savviness in the consumer device market isn’t necessary for Tagg or Lifecomm to be successful. Says Cody Acree, an analyst at Williams Financial Group in Dallas: “It makes sense for them to get a proof of concept out there.”
The bottom line: Qualcomm is entering the consumer market again, though the goal is to encourage new uses of its radio chips, not to make a hit product.