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Qualcomm, Ericsson to Combine Technologies

The Cutting Edge

Joint efforts would widen use of radio links in mobile phones and wireless devices. Announcement sparks gains in both companies' stocks.

February 03, 2000|From Reuters

Qualcomm Inc. said Wednesday it agreed to jointly develop with Swedish telecom firm Ericsson a technology that makes cell phones more versatile.

The announcement, seen by analysts as a step to help Qualcomm hold on to a commanding market share for so-called CDMA wireless chips, sparked solid gains in both companies' stocks.

San Diego-based Qualcomm said it will combine its wireless code division multiple access technology, which forms the base of a new generation of high-capacity wireless networks, with the Bluetooth short-range radio technology to widen its use in mobile phones and wireless devices around the world.

Bluetooth technology uses radio links instead of wires or cables to let electronic devices such as phones, computers and printers communicate with each other and the Internet.

Qualcomm stock rose $6 to $142.06 on Nasdaq, where it was among the most active stocks.

"It's strategically significant," said Brian Modoff, an analyst at Deutsche Banc Alex. Brown. "Bluetooth is one of the key forward technologies. Ericsson is going to share their Bluetooth design expertise with Qualcomm, which has the chip expertise."

Ericsson's American depositary receipts rose 50 cents to close at $80.44 on Nasdaq.

Qualcomm stock has risen by more than 25% this week--after a January slump--in gains fueled by news of a deal with China's second-largest state-owned telephone company to use Qualcomm's CDMA technology and on the Bluetooth move.

The deal means Ericsson will be able to add the Bluetooth technology to Qualcomm's wireless CDMA technology and fit it into CDMA phones, not just the competing global system for mobile communications (GSM) standard that dominates in Europe.

The Bluetooth technology was developed by a group founded by Ericsson, IBM Corp., Intel Corp., Finland's Nokia and Toshiba.

Qualcomm developed CDMA technology, which takes information contained in a signal and spreads it over a wide bandwidth, and holds many patents on the technology.

CDMA is widely used in the United States and is growing quickly in South America and Canada. GSM dominates in Europe and is driven by Ericsson and Finnish rival Nokia.

Qualcomm holds an 85% to 90% share of the market for CDMA chipsets, analysts said, and the Bluetooth move will help give it key technology to defend its market share.

"For them to maintain that market share will be difficult unless they can add more functionalities to their chipsets," said Mark Cavallone, an analyst with S&P Equity Group. "This is a step in the right direction."

The deal is a further step in Ericsson and Qualcomm's cooperation after they agreed last year to settle a patent dispute over CDMA and promote it as the global standard for the next generation of mobile phones and systems.

Ericsson, the leader in making mobile phone systems like GSM networks, has moved fast to ensure that it can make mobile systems and phones that fit all standards.

Ericsson, the world No. 3 in mobile phones, will launch its first mobile phone based on the CDMA standard in the fast-growing U.S. market this year.

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