"Qualcomm maneuvering toward GSM "
By Bruce Gain
Electronic Buyers' News
(07/28/00, 05:52:06 PM EST)
ebnews.com
Qualcomm Inc.'s spinoff last week of its chipset and software
business-temporarily dubbed 'Spinco'-sets the stage for the
CDMA chipset leader to scale the wall of GSM.
Previously, Qualcomm's customers-handset producers such as
Ericsson and Nokia-had impeded its entry into the mainly
European GSM market because they were only willing to license
their technology to Qualcomm in exchange for its CDMA licenses.
Such cross-licensing agreements, however, would have hampered
Qualcomm's CDMA royalty business, its core revenue stream.
"The spinoff will allow both Qualcomm and Spinco to more fully realize their potential by eliminating possible conflicts between chip sales and royalties," said Irwin M. Jacobs, chief executive of Qualcomm, San Diego. "By divesting our [chipset] business, we no
longer require the same cross-licenses to make and sell wireless products."
comment: I still fail to see the conflict that IJ refers to. Why does the spin off change the cross licenses required to enter the GSM/WCDMA patent pool?
Ericsson and Nokia were reluctant to license their GSM
technologies directly to Qualcomm because the company was
supplying CMDA chipset technology to their competitors.
comment: This is bogus. Philips; CNXT; et al supply both technologies
"Qualcomm allows the Samsungs of the world to compete against
Nokia and Ericsson. GSM license holders were saying 'why don't
we just cross-license the [CDMA and GSM] technologies?' But
Qualcomm didn't want to give up that royalty stream, and Spinco
will be able to get into GSM without damaging Qualcomm's royalty
business," said Greg Teets, an analyst at A.G. Edwards & Sons
Inc., St. Louis.
Under the terms of the spinoff, slated for completion next year,
Qualcomm will offer Spinco patented technologies to provide the
company with leverage to negotiate cross-licenses for
technologies incorporating GSM, which in addition to being the
predominant wireless standard in Europe, is gaining ground in other
regions.
Entering the GSM market through the back door will enable
Qualcomm to expand its offerings beyond CDMA, which, while
considered the third-generation wireless standard, is currently a
niche business compared with the GSM standard, analysts said.
"During this transition to third-generation networks, you're going to
have to roam between a CDMA and a GSM network, so
Qualcomm needed to build chipsets that give both," Teets said.
While Nokia and Ericsson have already developed their GSM
technologies in-house, Spinco will find many other potential
customers for its GSM offerings, said Will Strauss, an analyst at
Forward Concepts Co., Tempe, Ariz.
Spinco will be looking to offer GSM to second-tier handset players
such as NEC, Panasonic, Philips, Samsung, and Siemens, he said.
Instead of cross-licensing CDMA for GSM technologies,
however, Spinco will likely seek to buy into GSM, Strauss said.
comment: This is the first article I've seen that indicates that SpinCo will also seek to supply GSM. This is unlikely, unless, as the author suggests, SpinCo buys an existing supplier. Three suppliers to second tier OEM's are: VLSI (now part of Philips); CNXT; LU (going through type approval now); ADI; TXN.
Which one will SpinCo buy?
"The first thing I would do if I were Spinco would be to find
somebody who is an expert in GSM and go out and buy them," he
said.
Texas Instruments Inc., the clear leader in chipsets for the
cell-phone market with more than a 60% share, recently agreed to
pay about $475 million for Dot Wireless Inc., a San Diego-based
supplier of software and transceiver technologies for CDMA that
Strauss said Qualcomm "should have bought."
comment: This statement makes me question the analysts knowledge of the business. Dot is a small (70 head) outfit staffed by ex QCOM; Nextwave and MOT employees. TXN, IMO, bought a pup. Dot have absolutely nothing to offer QCOM/SpinCo
The spinoff is Qualcomm's latest, boldest step to become a pure-IP
player, observers said.
Its remaining non-IP holding is OmniExpress, which delivers
two-way mobile communications and tracking systems to the
transportation industry. Analysts say Qualcomm is likely to spin off
OmniExpress.
"With the public offering of our chipset business, we will complete
the transformation of our original businesses into a horizontal
model," Jacobs said. "This will increase Qualcomm's ability [to
expand on] and support third-generation CDMA-based standards
by collaborating with manufacturing carriers in their development,
deployment, and implementation of the latest CDMA technologies.
"There are deployments of 3G systems in markets we do not
address," he said. "The convergence of wireless data and Internet
access and related applications will also present new sources for
licenses and royalties. After the spinoff, we will have the
engineering expertise and resources dedicated to developing new
technologies and enhancing our patent portfolio."
Qualcomm's most recent sell-off was the sale of its CDMA
module business to Sierra Wireless Inc.
Last year, Qualcomm sold its troubled infrastructure-equipment
operations to Swedish cell-phone company Ericsson Inc. and
exited the CDMA handset business by selling the operations to
Japan's Kyocera Corp.
Although Qualcomm is largely associated with CDMA-for which it
holds an 85% market share-the company also has an ample
treasure chest of other technologies.
Qualcomm recently entered the power-amplifier market as part of
a major deal with RF Micro Devices Inc., and separately rolled out
a CDMA chipset.
Qualcomm penetrated the RF-chip market last year, and in
January expanded its global positioning system efforts by acquiring
GPS software maker SnapTrack Inc. for $1 billion.
More recently, Qualcomm jumped into the Bluetooth arena in a
co-development deal with Ericsson. |
