Qualcomm Falls as Motorola Looks to Compete in Chips
Take notice of the bold from the company.
San Diego, Aug. 3 (Bloomberg) -- Shares of Qualcomm Inc., which developed the world's second-most popular wireless phone technology, dropped 8.2 percent after Motorola Inc. said it will make semiconductors for phones to compete with Qualcomm.
Qualcomm fell 12 1/2 to 140, its biggest percentage drop since April 19. Even with the decline, Qualcomm is the best- performing stock on the Standard & Poor's 500 Index this year.
Motorola, the world's No. 2 cellular-phone maker, told analysts and investors it plans to start selling computer chips next year that compete with Qualcomm's. That could hurt San Diego- based Qualcomm, whose shares have risen more than fivefold this year on expectations that profit will surge with sales of chips and royalties from companies that use its technology.
''Motorola is a competitive threat to Qualcomm,'' said Brian Modoff, an analyst at Deutsche Banc Alex. Brown, who rates both Qualcomm and Motorola ''strong buy.''
Motorola, of Schaumburg, Illinois, said it will begin shipping the chips in large volumes in the first half of next year. Qualcomm sold 11 million of the chips, which use the company's code-division multiple access technology, in the quarter that ended June 27, helping it post record sales of $1 billion.
CDMA offers more capacity on cellular networks than competing standards and is considered more efficient for data services like e-mail and Internet surfing.
Qualcomm 'Not Concerned'
Qualcomm, which developed CDMA, licenses the technology to other manufacturers and also makes chips for network equipment and phones that use the standard. Motorola, which makes both CDMA phones and network equipment, already makes the chips for its own gear.
Today, the company said it will also sell the chips to other manufacturers. Motorola shares fell 2 1/8 to 90 3/4.
Qualcomm, which still will receive royalties on all CDMA phones -- even those with Motorola chips -- downplayed Motorola's announcement.
''Financially, we're not concerned about the effects of this,'' said Richard Grannis, the company's vice president and treasurer. ''If it boosts the overall CDMA market, then that's good for Qualcomm.''
One thing helping Qualcomm is the time it will take cell- phone makers to adjust their models for chips from a different manufacturer.
''There's a significant lead time required for the phone manufacturer to adopt the changes,'' Grannis said. ''You might not see a phone with the chips until late next year, even if Motorola had a product ready today.''
Qualcomm's customers include Samsung Electronics, Sony Corp., LG Electronics and Toshiba Corp. The company said four other chip producers are licensed to provide CDMA chips to cell- phone makers.
''We've always expected others to introduce viable chips,'' Grannis said.<b/>
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