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Qualcomm is talking to Nokia,
Kyocera
A three-way sales deal could boost telecom
stock
By Mike Drummond
STAFF WRITER
December 14, 1999
Insiders and analysts say Qualcomm is negotiating to sell its phone-making
business to Nokia of Finland and Kyocera of Japan, in a three-way deal that
could propel the local telecom's stock to new heights -- and also ignite
smoldering worker unrest.
Nokia and Kyocera officials have been regularly sighted at the Qualcomm
Personal Electronics plant in La Jolla, employees say.
Several potential buyers -- including Siemens and Motorola -- have surfaced
in the rumor pool since Qualcomm officials announced in September that the
handset division was up for sale.
But Nokia, the world's largest phone maker, and Kyocera, a lesser player in
the international phone market, are today's front-runners. Sources inside
Qualcomm told the San Diego Union-Tribune that Nokia would purchase
the research-and-development portion of Qualcomm's phone division, while
Kyocera would own the manufacturing side.
Nokia recently built a 188,000 square foot building near Interstate 15. The
"product creation center," which employs about 500, is a
research-and-development facility. Nokia started construction of another
building nearby, but officials have yet to disclose details.
Kyocera, meanwhile, has made San Diego its North American headquarters.
The company employs more than 800 here and operates a
semiconductor-manufacturing facility off Balboa Avenue.
"Nokia is very interested in Qualcomm's chip technology," said J.P. Morgan
Securities analyst Gregory Geiling. "Nokia doesn't need another
manufacturing plant. Kyocera is looking to get a stronger presence in the
North American handset market."
Many analysts said the Nokia/Kyocera deal only makes sense if Nokia
agrees to buy ASICs -- the semiconductor chips inside phones -- from
Qualcomm. Industry giants Nokia and Motorola make their own chips for
phones using Qualcomm's code division multiple access or CDMA wireless
technology.
"If Nokia signs an agreement that they will buy ASICs from Qualcomm, that's
a significant positive," said Wojtek Uzdelewicz, analyst with SG Cowen &
Co. "Qualcomm could hold on to 90 percent market share for CDMA."
Officials at Qualcomm, Nokia and Kyocera cited company policies against
commenting on market rumors.
Whoever buys the handset division likely will inherit a restless work force.
About 1,400 of the estimated 2,500 employees at the facility are Qualcomm
Personal Electronics employees who are not eligible for Qualcomm's stock
option plan. QPE was a joint venture with Sony of Japan, but became a
Qualcomm operation when Sony announced in July it was retreating from the
domestic handset market.
Pay differences have long been a sore spot among QPE, Qualcomm and the
1,000 or so temporary workers at the phone-making plant. Some QPE
workers receive a "performance unit plan," which operates somewhat like
stock options, but those employees say it pays less than 1 percent as much as
the options received by their counterparts, based on the company's current
stock price.
The rub has grown increasingly raw as Qualcomm's stock value has
skyrocketed, fueled in large part by the announcement to sell the handset
division.
Stock options have been a dual-bladed sword for Qualcomm management.
While options have made millions for many, the stock's value triggered an
ongoing class-action lawsuit after rival Ericsson bought Qualcomm's
infrastructure or network equipment division earlier this year.
Qualcomm and Ericsson provided a bonus plan that awarded transferred
employees a percentage of their unvested stock options. But some argued
they should have been allowed to keep their entire unvested portion.
Last week, Qualcomm accelerated the vesting dates of 401(k) plans for QPE
employees, in a move many viewed as a way to defang another potential
class-action proceeding. Instead of five years, employees will be considered
fully vested in two years from the date of hire.
"We find the timing of this to be quite peculiar," said one QPE employee who
requested anonymity. "But it's not even a penny on the dollar compared to the
Qualcomm stock option (plan)."
Several inside QPE note that Qualcomm executives have credited the phone
division for helping seed the global CDMA market.
"If we weren't part of that success, I don't know who is," the source added.
Moreover, sources inside QPE bristled at the thought of working for
Kyocera.
"Kyocera is notoriously cheap," said one. "It's a bare-bones operation."
A Kyocera spokesman chuckled and declined comment.
Meanwhile, Qualcomm's stock, traded as QCOM, surged more than $26
yesterday to close at a record high of $417.561/4 on news that China was
preparing to open its mobile phone sector to companies that use CDMA
digital wireless technology. |
