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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Ruffian who wrote (25080)	3/25/1999 6:26:00 PM
From: djane	Read Replies (2) \| Respond to of 152472

Bloomberg article (more details, i.e., Lehman advised Q* and ML advised E*) Ericsson & Qualcomm Settle Differences and Back Single 3G Standard By Linda Andersson at Bloomberg News 25 March 1999 Ericsson AB, the world's No. 3 mobile phone maker, and U.S. rival Qualcomm Inc. agreed to share access to each other's technology in a market that is set to add 700 million cellular phone users in the next five years. Ending a two-year patent dispute, Ericsson will buy a Qualcomm unit that makes cellular equipment based on code- division multiple access, or CDMA, technology. CDMA will be the basis for future broadband mobile technology that lets users get real-time news and hold video conferences on the go. Qualcomm gets royalties and access to some of Ericsson's rival patents. This means that "a great element of insecurity disappears when it comes to introducing the third generation of wireless communications," said Christian Hall, chief analyst at Den norske Bank in Stockholm. "The deal creates possibilities for Ericsson to enter all the different technologies." Today's narrowband technology, used by 300 million cellular phone subscribers, was made to mainly transmit voice. Ericsson doesn't make products for CDMA narrowband technology, partly due to the patent dispute. The standard is used in the U.S. and may soon be used in China, while the technology Ericsson sells is used in Europe, Asia and the U.S. Both companies' shares surged. Ericsson shares rose 12.5 kronor, or 7.1%, to 188 in Stockholm. They dropped 7.6% yesterday after the company said first-quarter profit will fall. Qualcomm shares jumped 8.3 percent to $94 11/16 in New York. Qualcomm will take an unspecified charge related to the sale. The companies wouldn't give details on the unit Ericsson is buying, which covers about a tenth of Qualcomm's employees. Stockholm-based Ericsson forecasts 15% of the 1 billion mobile phone users expected in five years will be hooked up to networks based on narrowband CDMA technology or the future broadband CDMA2000. It'll start selling CDMA phones next year. "This is a positive move," for Ericsson, said Nigel Cobby, head of research at Morgan Stanley, Dean Witter & Co. in London. "Their access to CDMA technology was non-existing." Ericsson, its biggest rival Nokia Oyj of Finland and independent forecasting companies expect the numbers of mobile phone subscribers will more than triple to 1 billion users by the end of 2005. By then, there will be as many mobile phone users as fixed-line phone users or Internet users, Ericsson says. The rise in cellular phones subscriptions won't be matched in user numbers, though, as some people are already opting to have two mobile phones and no fixed-line phones. That's the case in countries like Finland where more phone service income is being generated from wireless services than fixed-line services. While Europe is currently unified by one standard based on global system for mobile communication, the U.S. has three. GSM is based on time division multiple access, or TDMA, technology - - a rival technology to CDMA on the narrowband market. That's made it harder for the U.S. to back one single standard for the next technology due 2001, while the European Union and Japan have already chosen wideband CDMA, or WCDMA, that is backed by Ericsson and its Finnish rival Nokia Oyj. Now, Ericsson will have both its WCDMA and Qualcomm's CDMA2000 for the new broadband technology. By 2002, about a quarter of traffic on cellular networks is expected to be data rather than voice, up from 2% today. "We will aggressively pursue the CDMA handset market," said Sven-Christer Nilsson, CEO of Ericsson. San Diego, California-based Qualcomm will get access to Ericsson's patents on GSM technology and could start selling phones based on that standard. It will also gain royalties for its CDMA technology. Owning a patent means "you can sit back and watch everyone else build technology based on it," said Matthew Lewis, an analyst at Daiwa Europe in London. Qualcomm plans to announce details of its charge and the agreement when it releases its next quarterly report. It recently cut staff at the unit it is selling to Ericsson in a bid to make it profitable. Last month it said it expected the unit to break even in the fiscal fourth quarter that ends Sept. 30 on annual sales of $600 million to 700 million. Lehman Brothers advised Qualcomm on the agreement, which was first reported by the Wall Street Journal earlier today, while Merrill Lynch & Co. advised Ericsson. Copyright 1999, Bloomberg L.P. All Rights Reserved. Related Stories ITU Gives Up on Single 3G Standard