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Qualcomm’s Dr. Sanjay Jha , COO and president of its CDMA technologies division, is betting on mobile devices that are going to fill the gap between laptops and smart phones. Some call them cloud clients, some call them handhelds, while for others they’re ultra-portables.

Whatever the name, they are part of a new class of devices that represents technology’s next pot of gold. Intel is hoping to move into the ultra-mobile PC market with its Atom processor. Qualcomm isn’t going to make it easy for Intel, or so I gathered from a conversation with Dr. Jha at the CTIA show in Las Vegas. Here are the excerpts:

Me: What is the state of the 3G handset business? What are some of the trends you see right now?

Jha: This [3G] is a fairly robust business for us. Last year we shipped 176 million-odd handsets and devices and this year we’re projecting north of 270 million devices. So that’s very healthy growth in 3G for us. We see the growth in smart phones and we’re seeing a growth in services — messaging services — that the handset is not just about voice anymore, but also about email. That email is not just an enterprise play anymore; we’re seeing a lot of consumers who feel they need to be in email contact. We are in a space where computing and wireless mobility are converging.

Me: Beyond handsets, it seems Qualcomm is pretty high on Snapdragon. Can you tell us where you stand with Snapdragon?

Jha: We have a 1 GHz processor that runs at 500 mW. It is designed into 15 devices. Those devices are pocket-sized portable computers with 4-inch to 5-inch screens that will have a long battery life, broadband access and a fast processor that can surf the web and download attachments.

Me: When will these devices come out, and how does this compete with Intel’s Atom processors for ultra-mobile PCs?

Jha: Devices using Snapdragon will come out in the second half of this year, before or after Christmas. And I wouldn’t say we’re competing with Intel because we want to focus on a pocket-sized device that you can carry with you. Intel’s specifications for Atom are focused on a device with a 7-inch to 9-inch display.

Me: Isn’t this area similar to the Foleo product launched by Palm? Is the market ready for these devices?

Jha: I loved the Foleo. It had great software and was always connected, but it had a full keyboard. Our vision is similar, but our device is smaller. We think it still needs to be carried in your pocket. I think that device was closer to something like the Mac Air.

Me: What kind of software would run on the Snapdragon devices? BREW?

Jha: BREW is really for handsets. We see Windows Mobile or Linux as the software for this type of device. There are already so many types of programs already available on those platforms built for this category of products.

Me: Does this increased focus on the consumer and computing markets mean that Qualcomm could get back into being a device maker?

Jha: Well, never is strong word, but I don’t think we’d go down that path again.

Me: How do you know that Qualcomm is heading down the right path with regard to these ultra-mobile devices? What will be the signposts of success or failure that you will be looking for?

Jha: It’s easier to see when you’re successful, and I guess the trick is knowing when things aren’t going well. It may be easy to see after five years of things not going well, but I guess I will realize we’re not doing well if I’m doing the same thing I am doing now in five years.

Me: You’ve also mentioned the growth in wireless revenue coming from services. What role will Qualcomm play in the services side of the business?

Jha: We see mCommerce, where you can pay for things using your mobile phone; location-based services; and downloading content as being up-and-coming services. In the developed world, mCommerce may not be as big, but in the developing world, where everyone has a handset (and few credit cards), mCommerce is huge.

We will partner with providers, but want to provide an integrated platform on which to deliver those services. For example, with sending money over a mobile phone, security is huge. We want to make it possible to do that across carriers and across banks.

Long before the options backdating scandals brought the arcana of stock option accounting to light, companies have struggled with how to appropriately value and price the handy derivatives they give to their employees as inducements for peak performance and loyalty.

Pricing stock options is difficult because estimating an option’s future value depends on the assumptions you make about when the bearer of the security is likely to sell it. This is hard to predict. Markets are fickle because people are fickle. This is why, for decades, companies have had to value their employee stock option grants (ESOs) using complex theoretical models like Black-Scholes or the (even weirder-sounding) Lattice Binomial method — algorithms so fraught with variables that the concluding valuations are little more than arbitrary.

(Backdating, where the option grant date is altered to give the derivative instant value — without triggering an accounting charge — was just one way of getting around the uncertainty of ESO “valuation.” It was then end-run around the accounting rules that caused the resulting SEC and DOJ investigations.)

But it could be that tech companies no longer need to anguish over how to value their employee stock options.

Last week, the Securities and Exchange Commission gave final approval to an auction method for valuing ESOs proposed by Zions Bancorp (ZION) of Salt Lake City.

Zions will create a new security to mirror the ESOs, then sell these derivatives (they’re calling them “employee stock-option appreciation rights securities”) to public investors in an open-market auction. The price investors are willing to pay for the Zions ESO-derivatives will be used to determine the fair value of the ESOs themselves. This value is what a company will then use to properly account for the ESO grants on its income statement.

“For the first time, companies have a market-based alternative to employee stock-option valuation models,” the company said in a statement last Monday.

The financial services firm is expected to market its new service heavily to technology companies, where equity compensation remains important. They may have some takers. Tech companies have tried to win SEC approval for alternative ESO-pricing methods in the past. Cisco (CSCO) spent years on such an effort, only to have its proposal — which was similar to the Zions’ system — turned down. This explains why some folks, familiar with both the Cisco and Zions methods, have been expressing surprise.

The Financial Accounting Standards Board’s revised rule FAS 123R allows the creation of a derivative security to determine to price of an option, provided that:

The fair value of an equity share option or similar instrument shall be measured based on the observable market price of an option with the same or similar terms and conditions. (emphasis ours)

The problem with the Zions method, according to one critic, is that it will create a derivative “instrument” that is dissimilar to the underlying ESO, in three important ways:

1) Zions’ derivatives will be transferable, meaning they can be traded between parties (stock options are non-transferable).

2) Zions’ derivative can be hedged, meaning they can be sold short to mitigate risk (a stock option cannot be hedged).

3) The bearer of a Zions derivative will not get to decide when, or even if, the contract is exercised — that will be determined by the owner of the underlying option. When the employee exercises, the derivative investor will have to exercise, too.

This last characteristic is really strange. It is highly unusual for the “exercise decision” of any derivative to be out of the hands of the owner of said derivative. It also recreates the very problem that alternative ESO-pricing proposals purport to solve in the first place: If you don’t know if you can ever sell a security, how do you value it — much less account for it?

“With the Zions proposal, the employee and the [derivative] investor aren’t getting the same thing, so it’s not easy to tell if what the [investor] is getting is worth more, or less, than what the employee is getting. I don’t know that the value of the derivative is particularly relevant for pricing the option. Frankly, I don’t know what the SEC sees in this proposal,” one derivatives expert told me. (The expert asked not be identified because he’s not authorized to speak on the topic on behalf of his employer, a large investment bank.)

Since its own proposal failed, we wondered if Cisco would consider employing Zions’ new pricing mechanism. It doesn’t sound like it (but maybe it is just sour grapes):

“We are pleased that the SEC is open to market-based approaches,” spokesperson Heather Dickinson told Financial Week last Thursday, without addressing whether Cisco would try Zions’ newly-approved approach. (Cisco has been using the Lattice Binomial method since its own proposal failed.)

Intel (INTC) spokesman Tom Beermann said: “We’re monitoring developments in this area but haven’t made any decisions at this point.”

“The scuttlebutt that I’m hearing,” added our derivatives expert (he also consults to companies on their ESO policies), “is that Zions thinks this is the greatest thing since sliced bread. Everyone else thinks it’s just too obscure to use. I’d be surprised if it takes off.”

They are fast becoming the Grumpy Old Men of Silicon Valley: Santa Clara, Calif.-based Intel Corp. (INTC) and Advanced Micro Devices (AMD), long-time rivals who bicker in public and spar over everything from clock speeds to BUS technologies, are at it again — this time over quad core processors.

Essentially, quad core processors put four x86 cores into a single die - though for now AMD and Intel are using different technologies.

(Most of us common people are only getting our heads around dual-core chips, or two x86 cores). Both companies are targeting the server market with these chips, as evidenced by AMD’s newest addition, code-named Barcelona, unveiled today.

With it, the Santa ClaraSunnyvale, Calif.-based Company is clearly hoping that the lightning is going to strike twice. Strategic miscues, delays and other problems have put AMD on a slippery slope recently – not unlike the situation it found itself at the turn of the century, a situation that was rectified only when the high-end Opteron chip, which was also aimed at the server boxes, rode to its rescue. Now all chips (no pun intended) are on Barcelona (which is going to be renamed Quad Core Opteron.)

The problem is that its new offering is slower than expected (2 GHz). What’s worse is that Intel has already announced its own quad core offering, Caneland (aka Intel 7300). While Barcelona has four cores inside a single die, Intel is hawking a solution that packages two dual core processors together.

EETimes says that the difference between the two might be not that much, especially with Intel promising newer chips built using a 45 nanometer manufacturing process next year. Customers such as Sun Microsystems (JAVA) are happy to try out both solutions.

Having lost its edge in the dual-core business, AMD is also looking to use aggressive pricing to regain some of its momentum. Even though the server market is small compared with that of desktop and laptop computers, the price for processors used in the servers is pretty high. The new Barcelona chip is going to cost over $1,000. With 30 million or so new servers sold every year, decent market share can add up to billions in revenues.

Now all AMD has to do is figure out a way to sell the new quad cores. And get back to playing the part of Walter Matthau.

Coming tomorrow: Do MultiCore Processors Matter?