With W-CDMA, "We're talking about something very much in the future -- three years down the pike," he said. "Most of us believe at the end of the day it won't make sense to implement W-CDMA."
By Mike Freeman
UNION-TRIBUNE STAFF WRITER
July 8, 2000
Shares of San Diego-based Qualcomm Inc. fell more than 8 percent yesterday on disputed reports that South Korea's three largest mobile phone companies would use an alternative standard for the next generation of wireless phones.
The plunge caught some analysts off guard. They noted that the competing standard is years away from deployment. Also, Qualcomm owns the core technology at the heart of the standard, so it stands to make money from royalty fees.
"I was surprised the stock was hit like it was," said Steven Aldridge, a research analyst with J.J.B. Hilliard, W.L. Lyons. "A lot of that news, I thought, was already built into the stock price."
On a day when the Nasdaq gained 62.6 points, Qualcomm's stock closed down $5.06 at $56.63.
Analysts said investors were spooked because the news could mean other Asian countries, such as China and Japan, would adopt the competing standard, championed by Qualcomm's rivals.
South Korea is one of Qualcomm's largest markets, with all of its 26 million wireless phone subscribers using phones with "code division multiple access" or CDMA, technology.
Qualcomm pioneered CDMA, and as a result its stock price soared nearly 2,700 percent last year. About 60 million mobile phone subscribers use Qualcomm's technology. But the company's stock has plunged 67 percent this year, mainly because of reduced demand for Qualcomm's products in Korea, where the company sells one-fourth of its cellular-phone chips.
This battleground, however, is not about existing phones. It's about future wireless devices -- the phones and palm computers that will bring the Internet to your hands without wires.
SK Telecom, Korea Telecom and LG Telecom hope to be granted licenses for new spectrums -- or frequencies -- for these new, third-generation wireless devices.
And press reports say they're leaning toward an alternative standard -- called "wideband code division multiple access," or W-CDMA -- if they're granted licenses.
Qualcomm is pushing another standard, called CDMA-2000. It's an evolution of its core, first-generation technology.
W-CDMA stems from European phone makers Nokia and Ericsson. It is now being tested by Japan's NTT DoCoMo. The system is derived from the European global standard for mobile telecommunications, which is used by more than 60 percent of the world market.
Though decisions are expected soon, Nokia and Ericsson officials said they have received no announcements other than unconfirmed press accounts regarding the Korean companies' adoption of W-CDMA.
Both W-CDMA and CDMA 2000 use core technology pioneered by Qualcomm. The company plans to enforce its patents and stands to get royalty revenue from both systems, said Christine Trimble, a Qualcomm spokeswoman.
"We don't believe any official decisions have been made," she said. "Korea is a strong CDMA market. We would expect that market would support both W-CDMA and CDMA 2000. We believe both will be supported worldwide."
But Perry LaForge, executive director of CDMA Development Group, a consortium of companies promoting the technology, isn't so sure. He said W-CDMA is perhaps three years away from being ready for use.
CDMA-2000, LaForge said, will be implemented by Korea's SK Telecom by year-end.
The company, with about 10 million subscribers, announced in June that it will roll out a CDMA-2000 system using an existing licensed spectrum.
Qualcomm is making CDMA-2000 chips now for delivery this year. It also will make W-CDMA chips, competing with Nokia and Ericsson. Those chips will be ready in late 2001.
LaForge thinks by the time W-CDMA is operational, CDMA 2000 will be pervasive in the marketplace.
With W-CDMA, "We're talking about something very much in the future -- three years down the pike," he said. "Most of us believe at the end of the day it won't make sense to implement W-CDMA."
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