Here's an article discussing the competitive landscape for CDMA2000 relative to WCDMA:Hedging the biggest of all bets
By Dan Briody
Red Herring, February 20, 2001
Qualcomm faces the China syndrome
The middle kingdom delays and conquers
Hedging the biggest of all bets
This article appears in the February 13, 2001, issue of Red Herring magazine.
Though Qualcomm (Nasdaq: QCOM) officials would argue the point vehemently, it is widely believed that the company needs its deal with China Unicom (NYSE: CHU) if it wants CDMA2000, its next-generation (3G) wireless technology, to have any chance of becoming a network standard in China and worldwide. But current-generation CDMA -- with less than 1 percent of the Chinese market, limited mostly to aging military networks -- hardly even has a toehold in the burgeoning market. Currently, 99 percent of China's wireless subscribers' phones use GSM, the network standard in Europe and other parts of Asia. Countries like Japan are migrating their networks to 3G already, but they are using WCDMA (the natural upgrade path for GSM).
Even in the face of these obstacles, Qualcomm CEO Irwin Jacobs insists that when 3G becomes the norm, Qualcomm will earn the same amount in royalties regardless of whether WCDMA or CDMA2000 prevails. However, given that Qualcomm owns all the patents, and hence all the royalties, on CDMA2000, and only a portion of the patents behind WCDMA, Mr. Jacobs's logic is not persuasive.
Qualcomm is using cleverly worded royalty agreements to plead its case when it is obvious that CDMA2000 would be vastly more profitable for the company, suggests Wit Soundview Group analyst Matt Hoffman. He estimates that the difference in royalty revenue could be as great as three percentage points, due to the other parties, like Ericsson (Nasdaq: ERICY), that stand to cash in on WCDMA patents.
Mr. Jacobs's argument is even less convincing given that AT&T Wireless (NYSE: AWE)'s recent agreement with Japan's NTT DoCoMo calls for a GSM network in the United States (traditionally a CDMA stronghold), gradually transitioning to WCDMA. Qualcomm applauded the deal, even issuing a press release expressing its endorsement of the forthcoming WCDMA network. "The casual investor may have been fooled by Qualcomm's press release, but the AT&T Wireless move was a defeat," says Mr. Hoffman.
With no hope of establishing CDMA or CDMA2000 in Europe, and its U.S. market share threatened, Qualcomm's interest in China is understandable. But given the tentative nature of the China Unicom CDMA buildout, not to mention that many countries have already begun building their own 3G networks, Qualcomm may have missed the starter's gun. |
