DaveMG:
All sabre rattling aside, business is business. There is a wonderful book by Clayton Christensen entitled "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail" that I would strongly encourage you to read as it describes Ericsson's problem perfectly. Simply put, by the time it became apparent that Qualcomm would be able to successfully commercialize direct sequence spread spectrum, Ericsson's TDMA-based GSM franchise seemed too big, too pervasive and too entrenched for the company's management (then Lars Ramqvist) to perceive CDMA as a bona fide threat. I think that Ramqvist absolutely believed that CDMA would either not work, or would be too late or would offer an insufficient competitive advantage to displace GSM.
Back in the early 1990's, who among us would have correctly predicted the magnitude of the Internet revolution? When Ramqvist cemented his bet on TDMA-based GSM (by refusing to license IS-95) wireless data was an abstraction at best, nobody (and I mean nobody) was talking about high-data rate 3G and CDMA was little than a science project. Dealt these cards, Ericsson has played a fierce game, attempting to leverage its strengths at all turns. I do not begrudge Ericsson's attempts to protect itself...after all, its management is responsible to its shareholders just as Qualcomm's management is responsible to us. My quarrel with Ericsson management derives from their pattern of ethical abuses...read lies. This company repeatedly told its customers (and analysts and investors) that CDMA would not work; that CDMA's capacity gains versus TDMA-based GSM would prove illusory; that CDMA systems would collapse under load; that plague and pestilence would befall any carrier stupid enough to believe Qualcomm and its IS-95 licensees. I bitterly recall the September 1996 Wall Street Journal article ("Jacob's Patter") that attempted to paint Irwin as a snake oil salesman. Then, when empirically proven to be full of bull poo-poo, outrage of outrage, Ericsson had the audacity to tell the world that it invented CDMA and that its damn version is better than anybody elses. The sequence of events does tend to raise one's blood pressure.
But, as I said before, business is business. Qualcomm management has repeatedly characterized Sven-Christer Nilsson as "reasonable" and "a good businessman." Irwin and Company are realistic enough to recognize that Ericsson was playing for keeps and that all is fair in love and war. While business deals CAN be thwarted by emotion, I have always perceived Irwin to be a thoughtful pragmatist. Remember how many of us begged and pleaded for Qualcomm to "strike back" at Ericsson and some of its hencemen (particularly those prone, shall we say, to deliberate "mistatements"...anybody for a ham and Suisse?)? Remember our angst when Qualcomm resolutely "turned the other cheek"? Well, I think Irwin has long believed that necessity makes for strange bedfellows.
Let me be clear. I do NOT have inside information. This conclusion is based on my assessment of various puzzle pieces gleaned from many many sources. I DO NOT think that Ericsson will acquire Qualcomm and I DO NOT think that Qualcomm, taken as a whole, is for sale. I DO believe that Ericsson needs to have direct sequence spread spectrum equipment sooner as opposed to later AND I think that Qualcomm would like to materially improve its infrastructure volumes, its EPS and its shareholder value. If Ericsson could deliver a CDMA-based 3G solution immediately to its customers, the threat of convergence would be dramatically reduced AND its growth rate could accelerate materially. This is a victory for Ericsson and a victory for Qualcomm. As I said before, necessity makes for strange bedfellows and I detect a "softening" of the Ericsson position on many fronts. Even our "dear friend" at Credit "Swiss" seemed a little more benign than usual in his First Call hit piece.
Just my two cents....
Best regards,
Gregg |
