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To: 100cfm who wrote (56153)	12/22/1999 8:52:00 PM
From: Jenne	Respond to of 152472

Kyocera to Buy Qualcomm's Phone Business, Providing Step Into U.S. Market By Erik Schatzker Kyocera to Buy Qualcomm's Phone Business, Use Chips (Update1) (Adds details starting in 5th paragraph, comment from Qualcomm CEO in 12th. Updates shares.) Kyoto, Japan, Dec. 22 (Bloomberg) -- Kyocera Corp. agreed to buy Qualcomm Inc.'s phone-making unit in exchange for a five-year commitment to use Qualcomm chips, giving the Japanese company a foothold in the North American cell-phone market. Financial terms weren't disclosed. Kyocera is taking over a business that makes cell phones based on the code-division multiple access, or CDMA, standard that Qualcomm developed. It agreed to buy most of its CDMA semiconductors and software from Qualcomm for the next five years. Qualcomm, whose shares have surged more than 18-fold this year, is selling the handset business to focus on making chips and collecting royalties from companies that use its CDMA technology. In return, Kyocera gets a share of the CDMA handset market, now dominated by Motorola Inc. and Nokia Oyj. ''It gives them a good foothold in the U.S. market, where CDMA has a relatively high market share,'' said David Powers, an analyst at Edward Jones & Co. The purchase includes any Qualcomm phone inventory, its manufacturing equipment and existing commitments to customers. Qualcomm will form a subsidiary to employ workers from its handset unit and contract them out to Kyocera for as long as three years. Employees of Qualcomm Personal Electronics, a joint venture with Sony Corp., will be transferred to Kyocera. Between them, Qualcomm's handset unit and QPE employ about 4,000 people. Qualcomm shares dropped 11 7/16 to 485 7/16. They fell as low as 462 7/16 after the announcement. Kyocera's American depositary receipts rose 15 3/16 to a record 166 3/8. CDMA Target Kyocera said it expects to make 16 million CDMA handsets in the fiscal year ending March 31, 2001. That compares with about 40 million CDMA users worldwide at the end of the third quarter, according to Qualcomm. Jeff Schlesinger, an analyst at Warburg Dillon Read LLC, forecasts about 50 million users by year-end. Qualcomm, which expects the sale to close by the end of February, will take a pretax charge of $30 million in its fiscal first quarter ending this month. Kyocera, based in Kyoto, said the handset business will become a unit of its U.S. subsidiary, Kyocera International Inc., and remain in San Diego. The Kyocera unit will lease some facilities from Qualcomm. Qualcomm has been negotiating the sale of the handset business for the past three months. The business has had operating margins of about 2 percent. Nokia Oyj, the No. 1 cell- phone maker, has operating margins of almost 20 percent. ''For a company to be profitable, it's essential to have a worldwide base and a large manufacturing base,'' Qualcomm Chief Executive Irwin Jacobs said on a conference call. Jacobs said he chose Kyocera over rival bidders partly because it agreed to keep the handset business in San Diego, where Qualcomm is based, and committed to using Qualcomm chips. Nokia and Matsushita Electric Industrial Co., maker of the Panasonic brand, had been mentioned by analysts as being among the likely suitors. Kyocera said its royalty agreements with Qualcomm will remain in place under existing terms. The sale is subject to regulatory approval.