Text of that TheStreet.com piece on QCOM / NOK news.
thestreet.com
Nokia License Agreement Makes Qualcomm Legit
By Tish Williams
Senior Writer
7/3/01 1:54 PM ET
Mr. Stomach, meet Mr. Throat. Yes, Qualcomm (QCOM:Nasdaq - news -
commentary) investors, Nokia (NOK:NYSE ADR - news - commentary) signed
up to license those patents.
Qualcomm investors have stocked the fridge with
champagne, ready for the day when market leader
Nokia would bow to the CDMA master and agree
to pay Qualcomm royalties on its handsets. Before
the market opened, Nokia and Qualcomm set them
toasting, announcing Nokia would pay licensing
fees for Qualcomm's code division multiple access
technology for third-generation (3G) handsets as
well as infrastructure equipment. Qualcomm was
up more than $5 on the news, almost a 10% gain.
Cue the angels. Sing! Sing!
"This takes a lot of uncertainty out of the Qualcomm story," says Peter Friedland
with WR Hambrecht. "There were a number of overhangs, and now they're
moot."
Specifically, Qualcomm investors were worried about the possibility that Nokia
would try to use its own intellectual property to build 3G phones and work
around Qualcomm's CDMA patents. CDMA licensing is Qualcomm's bread and
butter, and the absence of the leading mobile-phone maker has left a
doubt-inspiring gap in its lineup. Another question was whether Nokia would
agree to license Qualcomm's technology, but would try to throw its weight
around to get a better price.
Tuesday's release put all those fears to rest as Nokia signed on to expand its
Qualcomm relationship to the next generation 1X, CDMA 2000 and W-CDMA
flavors of Qualcomm's CDMA technologies at the same full royalty rates it
licensed older second-generation handset technology back in 1992. "As we go
forward on third generation and concentrate on wideband CDMA," explained
Nokia spokesperson Megan Matthews, "this ensures that we have access on
any relevant patents Qualcomm may hold."
"Qualcomm never capitulated and Nokia signed on at the same rate, even
though Nokia had fairly compelling arguments," says Merrill Lynch analyst Bill
Choi of the possibility Nokia wouldn't be forced to pay full royalty prices on the
millions of phones it will sell in the future. "They said 'we're the largest handset
manufacturer, with close to 40% market share. The world is going to go
W-CDMA. You should give us a volume discount.' They did not get that." Choi
upped his intermediate rating on Qualcomm from neutral to accumulate. Merrill
Lynch hasn't done banking for the wireless technology firm.
Additionally, the new agreement includes network infrastructure, which wasn't
part of the 1992 licensing deal, as Nokia tries to increase its market share in
that Ericsson (ERICY:Nasdaq ADR - news - commentary)-dominated part of the
wireless equipment business. You'll remember that when China Unicom was
handing out CDMA contracts on May 1, Nokia wasn't included. It wasn't so
much a slight as a reminder that Nokia is still an up-and-coming infrastructure
player and CDMA is not one of its strengths at the moment. CDMA equipment
is Ericsson's, Lucent's (LU:NYSE - news - commentary), Nortel's (NT:NYSE -
news - commentary) and Motorola's (MOT:NYSE - news - commentary) strong
suit.
Qualcomm also will be able to use Nokia-patented technology in its
mobile-phone chipsets. Happiness, all around. Especially for Qualcomm
investors. Raise those glasses.
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