"I think Nokia has demonstrated a weakness in CDMA expertise," said Mark A. Roberts, managing director of wireless equipment for First Union Securities’ telecommunications infrastructure practice. "We continue to believe it would be a successful move for them to align themselves more closely with Qualcomm…. Qualcomm understands the secret sauce."
internettelephony.com comes around
November 6, 2000
Nokia gains inroads in CDMA
LYNNETTE LUNA
Nokia is poised to sign a large handset deal with Verizon Wireless, giving the world’s No. 1 handset maker a potential foothold in the CDMA market.
Verizon already sells the 5185i handset with its service but has yet to announce a handset deal. Both companies declined to comment on any pending deal, but people familiar with the matter say Verizon has agreed to offer the phone on a trial basis before it commits to any large volumes.
Reaching a contract with Verizon would be significant for Nokia. Though Nokia holds the largest share of the handset market worldwide, its CDMA market sales have been dismal. The company holds about a 3% share of the U.S. CDMA market today, according to research firm Dataquest. Technical problems have prevented Nokia from gaining any business with Verizon, the largest U.S. operator. Another large CDMA operator, Sprint PCS, is not buying handsets from Nokia for the rest of the year, said a Nokia spokeswoman.
"The journey of 1000 steps begins with the 5185i, as far as Nokia goes in CDMA," said Bryan Prohm, senior analyst with Dataquest. "If it can move 1 million phones in the fourth quarter, that kind of momentum could propel it to the low 10% [market share] by the middle of next year."
Early indications are that Nokia handsets are strong sellers. The phone is selling for about $40 in most markets—an attractive price point for entry-level consumers—and analysts suspect Verizon is buying the phones at an extremely low wholesale price. The Nokia 5185i is the fourth-best selling phone on its Web site, said Lance Frey, chief operating officer of LetsTalk.com, a wireless e-tailer.
"We tried the 5180 in Verizon markets, and we had big problems," Frey said. "We were leery with the 5185i, but there have been no technical problems."
Nokia’s main strategy in the CDMA handset market is to target Verizon with two handset models and focus the rest of its R&D efforts on next generation CDMA handsets, or 1XRTT handsets. The company has taken hits for developing its own chipset rather than buying from CDMA chipset maker and patent holder Qualcomm. Nokia has maintained its independence from Qualcomm, though it is purchasing some Qualcomm chipsets through a joint venture with Telson Electronics for the Korean CDMA handset market. Developing its own chipsets, Nokia believes it will save costs in the long run.
"Nokia found Qualcomm’s royalty structure prohibitive," said Dataquest handset analyst Paul Dittner. "After false starts, it looks like they’ll have an IS-95 phone. Their strategy to be the top manufacturer of handsets means you have to play in CDMA."
Still, many Wall Street analysts would like Nokia to buy its chipsets from Qualcomm.
"I think Nokia has demonstrated a weakness in CDMA expertise," said Mark A. Roberts, managing director of wireless equipment for First Union Securities’ telecommunications infrastructure practice. "We continue to believe it would be a successful move for them to align themselves more closely with Qualcomm…. Qualcomm understands the secret sauce."
While Nokia has debated whether to enter the CDMA infrastructure market, it may find a need to buy chipsets from Qualcomm if it does. Roberts noted that every cdma2000 infrastructure player is buying chipsets from Qualcomm.
Nokia would not comment about whether it plans to enter the infrastructure market. It remains the last major vendor to stay out of it. Ericsson couldn’t ignore the CDMA market anymore, striking a deal last year with Qualcomm to license CDMA and buy the company’s CDMA infrastructure business. The CDMA market was too big to ignore, said Ericsson officials.
Nokia may be persuaded to enter the infrastructure arena if international standards bodies accept the 3G technology it advocates for CDMA. Nokia and Motorola have jointly submitted a technology called 1xtreme, a high-speed data enhancement to CDMA 1XRTT networks that promises data speeds of up to 5 Mb/s on a combined voice and data channel. The technology is touted as another phase of CDMA 1X and Qualcomm’s HDR technology, which offers maximum data speeds of 2 Mb/s within data-only channels. International standards bodies will evaluate the Motorola and Nokia proposal and subsequently want to merge the standard with two other standards—proposed by LinkAir and Lucent Technologies by May of next year. Motorola and Nokia plan a trial of 1xtreme by December.
"We’ve continued to work on the 1xtreme proposal," said Neal Campbell, director of CDMA product operations with Motorola. "We’ll have a full-blown trial that is more than we initially anticipated. It will show backward compatibility. We’re working with various customers now to execute on a trial." |
