More on Qualcomm/Ericsson dispute....and more speculation on the handset division
wirelessweek.com
Ericsson Tangles With Qualcomm
By Monica Alleven
Like two little siblings riding in a compact car on a cross-country journey, some rivals just can't stop finding things to fight about.
Ericsson and Qualcomm Inc. for years fought over whose technology was best, with Ericsson leading the Qualcomm-bashers with claims that CDMA was "vaporware" or simply wouldn't work.
Qualcomm fought back, powering up a savvy public relations campaign and lobbying effort, ultimately proving that yes, CDMA does work, and it works very well, thank you.
Ericsson sued, claiming it actually had certain CDMA patents first. In March of this year, the two rivals reached a historic agreement to set aside their disputes. Qualcomm would sell its infrastructure division to Ericsson, and Ericsson would drop its patent litigation.
That serenity wouldn't last, and the two are back at it.
In a filing with the Securities and Exchange Commission, Qualcomm revealed this month that Ericsson was disputing the purchase price of the infrastructure division, which some estimate sold for $200 million or $300 million. A spokeswoman at Ericsson says the two companies are holding discussions and hope to come up with a resolution quickly.
Indeed, the two companies might settle their differences sooner rather than later. One analyst estimates the value of assets under contention is in the ballpark of $50 millionwhich, in the big scheme of things, isn't a whole lot. "What would matter is if what Ericsson was trying to dispute was other things, such as the dropping of the patent litigation, or the acquisition of the CDMA license," says analyst Mark Roberts of First Union Securities. "If those things were issues, then it matters."
But it's one more sticking point in a deal wrought from the start with some difficult issues. Some Qualcomm employees in the infrastructure division last spring were incensed by the company's decision to sell the unit to its archrival, and some sought legal advice regarding their stock option plans. Qualcomm and Ericsson were forced to come up with a generous employee retention plan to keep employees from fleeing en masse once the sale was completed.
Ironically, the deal also marked the beginning of Qualcomm's ascent into stock la-la-land. Some investors and analysts viewed the infrastructure division as a drag on Qualcomm's bottom line, and selling it helped boost its stock price, which has hit a high of more than $400 per share. Plus, settling the patent litigation put those concerns to rest.
Now Qualcomm plans to find a buyer for its handset division by year's endanother plus to the balance sheet in some analysts' eyes. Speculation has Siemens or Philips as potential buyers, but if Motorola or Nokia were to buy it, Qualcomm's stock would no doubt rise further.
As for Ericsson, if Qualcomm and the Swedish vendor are unable to negotiate a resolution, the two companies will enter into a dispute resolution process as set forth in their original agreement.
Apparently the sibling rivalry produced some forethought that the long-running bickering wouldn't be easy to end. |
