Gregg:
What are your thoughts on this? It seems as though QCOM is looking to become a pure IPR company, plus ASICs and OMNItracs.
rcrnews.com
January 18, 1999
Qualcomm could sell handset business
By Lynnette Luna
Qualcomm Inc. may be ready to sell off its handset division as competition
in the cdmaOne handset business intensifies and costs increase.
Sources say Qualcomm is in discussions with Siemens Wireless Terminals
concerning the sale of Qualcomm's cdmaOne handset division.
Qualcomm and Siemens declined to comment.
Qualcomm initially entered into the Code Division Multiple Access
handset and infrastructure business to promote the technology. Qualcomm
was successful in developing and securing a number of patents to
cdmaOne technology for use in mobile systems and pushing its acceptance
into the market, but other vendors that signed royalty-bearing agreements
with Qualcomm were behind in the technology's development. Qualcomm
had the expertise and the chipsets to enter the handset market first, and
through its partnership with Sony Corp., was the sole provider of
cdmaOne handsets for more than a year.
Today, the cdmaOne handset market is becoming crowded as major
vendors like Nokia Mobile Phones and Motorola Inc. are beginning to sell
volumes of cdmaOne handsets. In addition, Asian vendors are flooding
into the market and driving prices down.
Analysts say the digital handset business is becoming more scale-driven,
requiring shorter product cycles and increased marketing costs, and other
vendors have a greater market presence and deeper pockets than
Qualcomm. Handset vendors like Oki Telecom Inc. and Siemens already
have bowed out of the cdmaOne market, unable to keep their cost
structures intact as handset prices fall.
Qualcomm's other divisions, like the infrastructure business, may be on
the sale block as well, speculate analysts. Many of the company's
divisions will come under intense competition going forward. The San
Diego-based company already has reorganized its infrastructure division
and OmniTracs division and spun off operating interests to Leap Wireless
International Inc.
‘‘The operating model doesn't make sense,'' said one analyst who
declined to be named. ‘‘They could make more money as an ASICs and
royalty company.''
Jane Zweig, vice president with Herschel Shosteck Associates Ltd. in
Wheaton, Md., agrees. Her firm has predicted for nearly a year a sell-off
would occur.
‘‘The ASICs division is successful,'' said Zweig. ‘‘Qualcomm is about
R&D, CDMA developments and chips ... Chips are a revenue-generating
unit. Almost everyone licenses their chips.''
Indeed, Qualcomm indicated in a recent Securities and Exchange
Commission filing that it believes it has a significant advantage over other
existing and potential manufacturers of CDMA ASICs. The company
recently introduced its fifth-generation ASIC chipset for cdmaOne
handsets, featuring data rates greater than 64 kilobits per second. DSP
Communications Inc., LSI Logic Corp., VSLI Technology and
PrairieComm Inc. have license arrangements with Qualcomm to sell
ASICs, yet none have come to market with a commercial cdmaOne
chipset.
Through September, Qualcomm shipped about 25 million ASICs to
cdmaOne handset manufacturers worldwide. A substantial portion of the
sales have been made to international customers, primarily South Korean
vendors. Analysts say Qualcomm should enjoy significant headway in the
ASICs business for many years.
Industry experts also say selling off the handset division would remove any
barriers for Qualcomm in selling ASICs chipsets to other handset vendors.
‘‘Because Qualcomm sells ASICs to its own handset competitors, any
competitive move the company makes in the handset business is viewed
cynically,'' said Matt Hoffman, handset analyst with Dataquest in San
Jose, Calif. ‘‘As Qualcomm faces more competition in the ASICs
segment, they may need to remove any barriers to being a supplier in that
space.''
For Siemens, purchasing Qualcomm's handset business would bring it
back into the North American market it desperately wants a piece of on
the infrastructure and handset side. The company is pulling its Global
System for Mobile communications handset product line out of North
America after the first quarter, citing cost factors. Earlier this year, the
company decided to scale back its efforts in cdmaOne technology after
announcing it planned to introduce a cdmaOne handset in the first quarter
of 1998. It moved its R&D project back to Germany.
‘‘North America is critical to Siemens, and we are not exiting the
business,'' Kristine Ryan, public relations manager for Siemens, said in
December. ‘‘We only have one GSM phone, and GSM is a small piece
of the (domestic) wireless market.'' Key executives remain in Richardson,
Texas. |
