Technology News
Mon, 27 Dec 1999, 7:50am EST
Kyocera Surges 2nd Day on Boost From Purchase of Qualcomm Handset Business
By Peter Poole-Wilson
Kyocera Gains 2nd Day on Qualcomm Phone Unit Purchase (Update1)
(Adds closing share price and trading details in paragraphs
1 and 2.)
Tokyo, Dec. 27 (Bloomberg) -- Kyocera Corp. shares climbed
5.9 percent to a record closing high, capping a second day of
gains after the Japanese maker of mobile phones said it agreed to
buy Qualcomm Inc.'s phone-making unit, giving it a foothold in
the North American cell-phone market.
The maker of personal digital cellular and cdmaOne mobile
phone handsets and components advanced 1,150 yen to 20,500.
Trading volume was 2.759 million shares, more than twice the
daily average the past three months, making Kyocera the second
most active stock on Japanese exchanges by value.
Kyocera's shares have more than tripled this year on
expectations the company will gain from its exposure to Japan's
cell phone industry, a market expected to grow fivefold in the
next 10 years. Buying a business that makes cell phones based on
the code-division multiple access, or CDMA, standard that
Qualcomm developed strengthens Kyocera's hand in the U.S. market
too, analysts said.
The agreement ``will establish Kyocera as a presence to be
reckoned with in the world market for mobile phones,' said
Masaru Koshita, an analyst at Deutsche Securities Ltd. in Tokyo.
Kyocera ``increases its share of the U.S. CDMA terminal market
from zero to 20 percent.'
The new business ``has the potential to vastly lift
Kyocera's handset business,' said Hitoshi Kuriyama, an analyst
at Merrill Lynch Japan Inc. Kuriyama reiterated his `buy' rating
on the stock and raised his long-term target price for Kyocera to
22,300 yen from 18,500 last week.
Financial terms of the agreement, announced last week,
weren't disclosed. Qualcomm, whose shares have surged more than
18-fold this year, is selling the handset business to focus on
making chips and collecting royalties from companies that use its
CDMA technology.
In return, Kyocera gets a share of the CDMA handset market,
now dominated by Motorola Inc. and Nokia Oyj. The Kyoto-based
company will buy most of its CDMA semiconductors and software
from Qualcomm for the next five years.
CDMA Expansion
Kyocera, which said last month first-half earnings in the
six months ended Sept. 30 rose 29 percent thanks to healthy
demand for phones, said it expects to make 16 million CDMA
handsets in the fiscal year ending March 31, 2001.
That compares with likely sales of 3.8 million units for the
current fiscal year ending March 31, said Merrill Lynch's
Kuriyama. There are about 40 million CDMA users worldwide as of
the end of the third quarter, according to Qualcomm.
Jeff Schlesinger, an analyst at Warburg Dillon Read LLC,
forecasts about 50 million users by year-end.
Kyocera, also a maker of software to give wireless devices
access to the Internet, said the handset business will become a
unit of its U.S. subsidiary, Kyocera International Inc., and
remain in San Diego. The Kyocera unit will lease some facilities
from Qualcomm.
The agreement with Qualcomm comes a week after Kyocera's
expansion of its role in Japan's telecommunication industry
through the purchase by DDI Corp., Japan's second-largest long-
distance telephone company, of two domestic telecom rivals.
Kyocera will be the largest shareholder of the new company,
with a 15.8 percent stake. DDI will be Japan's biggest provider
of international services and will have a nationwide cellular
phone network once the takeover is complete.
The purchase includes any Qualcomm phone inventory, its
manufacturing equipment and existing commitments to customers.
Qualcomm will form a subsidiary to employ workers from its
handset unit and contract them out to Kyocera for as long as
three years.
Employees of Qualcomm Personal Electronics, a joint venture
with Sony Corp., will be transferred to Kyocera. Between them,
Qualcomm's handset unit and QPE employ about 4,000 people.
Shares in Qualcomm, the leading stock in the Standard &
Poor's 500 Index this year, fell 18 15/16, or 3.9 percent, to 466
1/2 in Nasdaq trading Thursday. The shares rose to a 52-week high
of 522 1/8 Wednesday.
San Diego, California-based Qualcomm, which expects the sale
to close by the end of February, will take a pretax charge of $30
million in its fiscal first quarter ending this month.
bloomberg.com |
