Deal Between Ericsson, Qualcomm
Could Speed Technology Advances
By QUENTIN HARDY
Staff Reporter of THE WALL STREET JOURNAL
Sweden's Telefon AB L.M. Ericsson made peace with
Qualcomm Inc., in a wide-ranging deal that could speed
development of advanced wireless technologies.
Ericsson, as part of a settlement of
a long-running patent-infringement
dispute, agreed to support
Qualcomm's wireless-phone
technology and buy Qualcomm's
wireless-infrastructure business.
Financial terms weren't disclosed,
but analysts estimated that Ericsson is paying slightly
less than $1 billion for the Qualcomm operations.
For consumers, short-run benefits of the pact include
more "multimode" phones that can work in more cities.
Over the longer term, agreement on a next-generation
standard could accelerate the development of products
such as phone-based Internet browsers and laptop
computers capable of video-conferencing from a remote
location.
A Clearer View
Shares of both companies rose on the news, which
analysts said improved their respective competitive
positions. Ericsson gained access to a big part of the
U.S. wireless market where it was absent, these analysts
noted, while Qualcomm sold a money-losing venture that
had distracted it from technology-development efforts.
"All the investors are breathing a sigh of relief," said
Matt Robison, senior technology analyst at Ferris, Baker
Watts in Baltimore. "It's conceptually clearer for both of
them."
In trading on the Nasdaq Stock Market Thursday, shares
of Qualcomm rose 13%, or $11.0625, to $98.4375.
Ericsson's American depositary receipts were also
higher, at $6.3125, up 43.75 cents, in over-the-counter
trading.
Technology Backer
Qualcomm, based in San Diego, is a key backer of a
digital wireless technology called CDMA, or
code-division multiple access, that is the fastest-growing
standard and is widely used in the U.S. Ericsson is a
huge maker of phones that use a rival standard called
GSM, or global system for mobile communications, that
is the most widely used standard around the world.
Ericsson had long criticized the promises of CDMA
proponents, and sued Qualcomm in 1996 for patent
infringement.
The standards battle contributed to a proliferation of
incompatible wireless systems, as well as phones that
work in some cities but not others. CDMA elements also
were slated to be used in a next-generation technology,
dubbed 3G, that supports high-speed data and video as
well as voice. The squabbles slowed progress on 3G,
and led phone companies to worry that their existing
equipment wouldn't work with future 3G phones.
Under the deal, announced Thursday, the two companies
agreed to pay unspecified royalties for sharing patented
technologies. They also will jointly support international
regulatory approval of a single 3G standard. Equipment
based on the new standard should be able to interoperate
with GSM, CDMA and a third popular technology,
TDMA, or time-division multiple access, the companies
said.
Sven-Christer Nilsson, Ericsson's president and chief
executive, said he hopes to see approval of an
international standard for 3G by November. He added
that Ericsson will market a handset for current CDMA
technology sometime in 2000, broadening its business.
Qualcomm's infrastructure business, which Ericsson is
buying, manages traffic from wireless handsets to
regular phones and other wireless devices. Ericsson
will employ more than 1,000 people now working for
Qualcomm, which had 10,500 employees before the
deal.
"Ericsson will have a presence in San Diego, and we'll
have a lot of common interests," said Irwin Jacobs,
chairman and chief executive of Qualcomm.
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