Qualcomm in Talks on China Wireless Deal
By Michael Fitzpatrick
Monday January 31 4:31 PM ET
LOS ANGELES (Reuters) - Qualcomm Inc. (NasdaqNM:QCOM - news) said on Monday that it was in talks to supply wireless technology to China, a move that would give the high-flying mobile telephone technology company access to a potentially huge market.
Qualcomm stock jumped nearly 15 percent in heavy trading on Monday after a sharp sell-off last week that saw the stock lose about a third of its value. The stock jumped 16-7/16 to 127 on Monday on Nasdaq, where it was the most active issue, with more than 39 million shares changing hands.
San Diego-based Qualcomm, which is the leader in code division multiple access (CDMA) technology that is the foundation of new mobile phone networks, said it was in talks with China's second largest telephone company, China United Telecommunications Corp.
``We are in negotiations, and good progress has been made,' Qualcomm spokeswoman Christine Trimble said. Qualcomm would not comment further on the talks.
The stock rose more than twentyfold last year as one of the best-performing issues on Nasdaq and split four-for-one at the end of 1999. Analysts also said the rise also was due to buying after a sell-off. Qualcomm closed at a record 179-5/16 on Jan. 3, then slid the rest of the month.
The Wall Street Journal reported Monday that meetings between Qualcomm executives and officials of China United began on Thursday and stretched into the weekend.
The talks pitted Qualcomm's CDMA technology, widely used in the United States, against the European global system for mobile communications (GSM) wireless technology that is the nearly exclusive technology in China.
Last year, Chinese negotiators agreed to launch a CDMA mobile network, which would create more business opportunities for U.S. companies in the world's most populous country.
CDMA is a ``spread spectrum' technology that takes information contained in a particular signal and spreads it over a much greater bandwidth, allowing telecommunications firms in China to carry more phone traffic than the GSM standard.
A Qualcomm deal with China United was only a matter of time, said Brian Modoff, an analyst with Deutsche Banc Alex. Brown.
``We've known that it's been on the radar screen for some time now,' Modoff said. ``The issue is when it's going to happen.'
The deal would be an advantage for China United since it would give them fast-growing technology, said Mark Roberts, an analyst with First Union Securities.
The talks ``are more to do with China getting nervous that they are getting technologically behind the Japanese and Koreans,' Roberts said.
``It's strategically important for the Chinese government -- for China in general -- because CDMA is rapidly becoming the dominant technology in Asia, and we believe that the Chinese fear that they will be falling behind technologically if they don't move forward,' Roberts said.
Such a deal had the potential to sharply increase earnings expectations for Qualcomm, Roberts said, adding that Qualcomm had been in negotiations with various parties in China for several years.
``The nationwide buildout of CDMA in China is not included in anybody's (earnings) estimates,' he said.
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