All: Two items from Phillips Telcom. One for 3G harmonization of chip rates and the
other on the troubles in the infrastructure division.
Just my two cents worth: It will go down as a black day for Qualcom, if they do not
extend the same benefits to the infrastructure employees as were given to previous
'divestitures'.
From Philips Telecom:
Two Minutes To Midnight
Is there still a faint trace of life in efforts to hammer out a harmonized third-generation
(3G) wireless standard? Wireless operators, in an 11th-hour meeting in Tokyo two
weeks ago, apparently reached consensus on the arcane but pivotal issue of chip rates
-- the speed at which microprocessors operate -- for proposed 3G interfaces, reports
AirTouch [ATI] Chairman and CEO Sam Ginn.
The proposal would narrow the difference in chip rates for the cdma2000 and
wideband CDMA interfaces, Ginn said in Washington yesterday. This would clear the
way for development of chipsets able to accommodate both interfaces, giving rise in
turn to 3G-enabled subscriber devices that could be used the world over.
With the International Telecommunication Union ready to draw up 3G specifi-cations
in June, Ginn said it would be "very disappointing" if Ericsson [ERICY] in particular
doesn't back the new chip rate proposal. John Giere, Ericsson's Washington-based
vice president of government relations, was on hand for Ginn's luncheon remarks and
sought to reassure the AirTouch executive on this point.
DISCONTENT IN THE TRENCHES COULD SPELL
MORE TROUBLE FOR QUALCOMM-ERICSSON
DEAL
The deal between longtime rivals Qualcomm Inc. [QCOM] and L.M. Ericsson AB
[ERICY] was supposed to take care of their troubles and let the industry move
forward. To some extent it's done that, but-not unlike the end of the cold war-it's also
revealed a few thorny Balkans-style problems that refuse to go away. Some of the
toughest have to do with how Ericsson will integrate the infrastructure division it
purchased from Qualcomm into its own operations, and especially how it can win the
hearts and minds of the highly skilled and experienced CDMA engineers it presumably
needs to jumpstart its move into the
CDMA market.
Infrastructure division employees have already had reason for concern over the
mechanics of the transfer (see PCS WEEK, April 14). Now, the Los Angeles Times
reports they are on the verge of rioting over the company's decision that they would
forfeit unvested Qualcomm stock options in the transfer. Especially with Qualcomm's
stock going into orbit, the potential losses to employees generously rewarded with
options over the years would be staggering. Qualcomm's stock ended 1998 in the $50
range before shooting up above $200, and the Times reported that many of the options
are priced in the $30 to $60 range.
Notably, Ericsson's share price has seen little or no gain from the settlement. Since the
companies announced their deal on March 25, Ericsson's stock has gained some 4
points, compared to more than 100 for Qualcomm, which had already shot well into
record territory on rumors of the upcoming truce.
The newspaper said that some 70 percent of infrastructure division workers hold
options for an average of 1,000 shares or more. One engineer estimated his potential
losses from the transfer at $300,000.
...Distrust From Workers And From The Feds
The companies have jointly funded a compromise deal that would let transferred
employees exercise a portion of their unvested options if they remain at Ericsson for
two years. However, while the roughly 1,700 division employees are reportedly
attending legal briefings being held by area attorneys to explore suing Qualcomm,
they're also trying to get out of Dodge. With their skills in high demand and the labor
market very tight, Qualcomm workers are apparently looking into other opportunities.
The revelation of the stock option debacle puts an interesting light on the word from
the floor at the recent TDMA World Congress
in Miami that resumes are flying out of Qualcomm as fast as they can be printed up.
Part of the cause may be cultural. These are workers who have long seen Ericsson as
the bitter enemy of a technology they've devoted much of their professional lives to.
More to the point, the flood of resumes suggests that experience is creating distrust
about Ericsson's plans for the division.
Apparently, Qualcomm employees aren't the only ones worried about that. Late last
week, Ericsson CEO Sven-Christer Nilsson himself was in Washington to discuss the
acquisition with a group of senior governmental officials who have been watching the
whole standards battle from an international trade perspective.
In a very carefully worded statement, Ericsson said Nilsson re-emphasized the
company's "commitment to the market-driven standardization and harmonization
activities which support the co-existence of two high level groupings of technologies."
Speaking with PCS WEEK later, Ericsson spokesman John Giere spun the meeting as
aimed at reassuring trade and policy types with less familiarity with industry trends that
Ericsson is strongly motivated to get into the CDMA business, and didn't buy
Qualcomm's infrastructure unit simply to bury it.
"The key word is business and sometimes the government people don't have as clear
an understanding of that," said Giere. "Often times they might supply alternative motives
that are not true."
Giere added, "It was important from the top level down that the message be clearly
enunciated that the assets we're taking over from Qualcomm are very much a part of
our core competency, that we will continue to develop IS-95 and cdma2000, that our
commitment doesn't waver, and we will have an active research facility out there to
enhance the development of CDMA."
That makes sense as far as it goes, but is it enough? The deal gives Ericsson the
uncontested patent access it needs. Qualcomm's talent would help it get up to speed,
and avoid the need to build that core competency from scratch. However, if Ericsson
can't convince that talent to stay, it's not clear what else it stands to gain from owning
the Qualcomm operation.
Who stands to benefit from all this? According to the buzz in Miami, a lot of
Qualcomm workers are sniffing around for openings at Nokia Corp. [NOK/A] and
Lucent Technologies Inc. [LU]. Nokia offers refugees the advantage of already being
in San Diego, making the transition relatively painless for spouses and children. Lucent,
on the other hand, is seen by some observers as being in the best position to benefit
from the software expertise coming on the market and building itself into an even
stronger CDMA powerhouse.
The message for human resources types who need to fill highly esoteric engineering
slots: try Qualcomm, assuming you can't get what you need from Nortel Networks
[NT]. |
