Maurice Winn
Dept of Wild Expectations
Report from the San Diego Union Tribune; no wild expectations here.
Qualcomm to sell phone
manufacturing unit to Japanese
company
By Ben Fox
ASSOCIATED PRESS
December 22, 1999
SAN DIEGO -- Communications company Qualcomm Inc.
ended months of speculation Wednesday by announcing it
will sell its mobile phone manufacturing unit to Japan's
Kyocera Corp.
Qualcomm is best known for its cellular phone
semiconductor chips that are the industry standard for
mobile phone manufacturers worldwide. The sale rids
Qualcomm of its least profitable division and lets Kyocera
enter the general U.S. consumer cellular phone market,
company officials said.
The sale, which Qualcomm said it was considering months
ago, also allows Qualcomm to focus on its chips and
licensing the technology to other companies.
As part of the deal, Kyocera agreed to purchase a majority
of its code division multiple access chip sets from
Qualcomm for five years.
"This relationship between our companies establishes a
powerful new force in the wireless industry," said Irwin
Jacobs, Qualcomm chairman and chief executive officer.
Financial terms of the sale were not disclosed. The deal is
expected to close by the end of February pending
regulatory approval.
There are 4,000 workers in the consumer products
division, and Kyocera officials said they have not decided
how many will keep their jobs. Qualcomm officials said
some of those employees will stay on to design phones, but
the exact number was unknown.
Qualcomm's shares were at $485.43ó, down $11.43ó at 4
p.m. in trading on the Nasdaq Stock Market, though
investors had pushed shares up more than $70 in the
previous four trading days.
Wall Street analysts had speculated for months about who
would be the suitor, suggesting such possibilities as
Kyocera or Finland's Nokia, both of which have
manufacturing operations in the San Diego area, where
Qualcomm is based.
The production of mobile phone handsets had become a
barely profitable business in recent years because of parts
shortages and intense competition from industry leaders
such as Nokia and U.S.-based Motorola. Qualcomm's
margin of profit in the division had shrunk to 2 percent.
Qualcomm's consumer products division has produced
more than 14 million phones since it began operations in
1995. Its customers include AirTouch, Bell Atlantic
Mobile, Spring PCS and U S West, said spokeswoman
Christine Trimble.
The unit had fiscal 1999 revenues of $1.4 billion, more
than one-third of the company's overall $3.9 billion in
revenue.
Wednesday's announcement caps an eventful year for
Qualcomm, which has seen its stock price surge since early
spring when it settled a patent dispute with rival
communications company Ericsson and sold its wireless
equipment operations unit to the Swedish company. So far
this year, investors have pushed Qualcomm shares up more
than 800 percent.
Kyocera, which had sales in fiscal year 1999 of $6.1
billion, produces Yashica cameras and laser printers. It is
one of two manufacturers of Iridium satellite phones.
The company's president Yasuo Nishiguchi said Kyocera
hopes to become one of the world's leaders in mobile
phone manufacturing. |
