Q may get 500MM from China deals--speculation
Published on Tuesday, June 22, 1999
TELECOMS
Qualcomm looks good as
CDMA picks up speed
YVONNE CHAN
San Diego's Qualcomm should be sitting pretty. It recently
ended a standards war with Ericsson by selling its
infrastructure business to the Swedish company in a deal
Qualcomm chief executive Irwin Jacobs said was worth
"several hundreds of millions of dollars".
In March, mainland officials announced operator China
Unicom would adopt the CDMA standard for its new
networks, leading industry pundits to speculate Qualcomm
would reap about US$500 million from equipment sales
More money would stream in through royalties from
manufacturers using Qualcomm patented technology,
analysts said.
Qualcomm vice-president of marketing Jeffrey Belk
declined to confirm the $500 million sales figure, but put to
rest rumours of its supposed treasure chest of royalties.
"The royalties are important to Qualcomm, but it is only 6
per cent of our revenues," he said.
A more important - and far bigger - revenue base were
products and services such as its CDMA mobile phones,
which last year brought in 94 per cent of its $3.3 billion
revenue.
By selling its infrastructure unit, the company can now
focus on its integrated-circuit and handset business.
"It became difficult for Qualcomm to reach profitability in
the infrastructure business," Mr Belk said.
"It was not an important part of our revenue stream."
Qualcomm is looking to secure a manufacturing deal that
would see mainland companies produce its CDMA
handsets. This would help equip the 10 million CDMA
subscribers Unicom expects to have by the end of next
year.
Qualcomm claims to have a 40 per cent share of mobile
handsets in the US, but its phones are thin on the ground in
Hong Kong.
This is largely because there is only one local CDMA
network, Hutchison Telecom's Xin Xian Gan, and it has
only a small portion of Hong Kong mobile users.
Another factor is that Qualcomm's early line of handsets
was rather ugly, a major handicap in fashion-conscious
Hong Kong.
Mr Belk is quick to laud Qualcomm phones for their light
weight, good sound quality and economical price. But the
black, elongated handsets so popular in the US are ugly
ducklings next to Motorola's slickly styled StarTacs and the
rainbow range of colours offered by Nokia and Ericsson.
Hutchison is more keen to promote the stylish,
metallic-finish CDMA handsets by Motorola and Samsung,
and the pocket calculator-sized Sony CM-Z200.
To its credit, Qualcomm recently has made its handsets
available in a variety of colours and has a new line of
compact, foldable phones resembling the StarTac.
It also will release later this year the pdQ 1900, which
combines a handset and a 3Com Palm digital organiser in a
phone with a large LCD display.
It can be used to send and receive e-mails, store addresses
and appointments, and exchange data with a computer.
As well, Qualcomm is to start making phones for the
Goldstar satellite network which will launch later this year.
"It's like Iridium, but it's not, thank goodness," joked Mr
Belk, referring to the financially troubled satellite phone
company spearheaded by Motorola.
Qualcomm's move to make satellite phones is not a signal
the company will move away from the CDMA platform,
originally a military mobile technology it adapted for civilian
networks in the 1980s.
The company initially had endured industry attacks for
advocating CDMA, but it was vindicated when the standard
became widely adopted throughout North America.
However, it needed to defend itself again in 1996 when it
became embroiled in a standards war with Swedish rival
Ericsson.
Qualcomm had developed a next-generation technology for
high-speed mobile data transmission called CDMA 2000,
while Ericsson had built an incompatible, competing
technology called wideband CDMA (W-CDMA).
To top it off, Ericsson sued Qualcomm for making
systems that used Ericsson's patented technology.
A two-year row between the companies ended when
Ericsson bought Qualcomm's infrastructure business and
agreed to make their standards compatible.
Hong Kong's frequency spectrum has limited the number
of CDMA networks that could be built, according to
CDMA advocates, but the standard is headed for the
spotlight as SmarTone Communications is undergoing trials
of an Ericsson W-CDMA network.
Mr Belke said one of Qualcomm's objectives would be to
help promote CDMA technology, which it claims has the
easiest upgrade path to next-generation mobile networks
that will bring high-speed data applications such as the
Internet to handsets.
"Our business is growing CDMA," Mr Belk said.
"We're going to continue to do that." |
