2 Wireless Firms Settle Lengthy Technology Dispute
Rival wireless phone makers Ericsson and Qualcomm Inc. on Thursday announced an end to their long-running technology feud, which had divided the industry and threatened to stall its move to a worldwide system capable of carrying data at high speeds.
The wide-ranging settlement brings relative peace to a business that has suffered through a dispute over digital technology so intense that it has often been described as a wireless “holy war.”
There will be no immediate impact on consumers, but the companies’ cease-fire will speed the introduction of wireless devices capable of sending voice, electronic mail and even video at speeds comparable to--or even faster than--those typical of wired networks today.
In addition, the Ericsson-Qualcomm pact will help smooth the way for a unified wireless technology. In several years, that standard will allow customers to use the same phone while traveling from country to country and while roaming within the U.S.
Under a series of agreements, Sweden’s Ericsson--one of the world’s largest mobile-phone makers--and San Diego-based Qualcomm settled their patent litigation and pledged to cross-license their digital technologies. They also will back a single digital wireless standard that will be compatible with current leading technologies in Europe and the U.S.
In addition, Ericsson will buy Qualcomm’s struggling wireless network business, which had been too small to compete with the likes of Nortel, Motorola, Lucent and others. That unit, with more than 1,000 workers in San Diego and Boulder, Colo., has been losing money since its inception.
Terms of the sale were not disclosed, but analysts believe Ericsson will pay between $500 million and $800 million for the business. With the acquisition, Ericsson would gain an immediate foothold in the U.S. market for wireless equipment using a technology the company has spurned--and even denigrated--until now.
On Wall Street, investors reacted to the news by sending Qualcomm’s stock soaring to a record high $98.44--up $11.06. Ericsson’s stock rose $2.25 to close at $23.31. Both trade on Nasdaq.
The technology at the heart of the dispute, called code division multiple access, or CDMA, is a creation of the military that was transformed by Qualcomm for commercial use.
Over the years, it has grown to be a solid competitor to rival technologies, including Europe’s global system for mobile communications (GSM) and time division multiple access (TDMA).
In the U.S. all three technologies--plus a fourth--are in use. The patchwork of incompatible wireless formulas has slowed the growth of digital phone use and made it nearly impossible for customers to switch carriers without buying a new phone.
GSM remains the most widely used technology worldwide, but CDMA now has more than 60 million subscribers around the globe and is one of the biggest players in the U.S. Ericsson, the only major phone maker that does not sell phones based on CDMA, was falling further behind rivals Nokia and Motorola as a result.
The Ericsson-Qualcomm dispute grew in importance as the wireless industry began to fashion a third-generation technology--often called simply “3G"--that would bring the world’s networks together under a common standard.
Most companies had agreed to move to a CDMA-based approach. But Ericsson and European nations were pushing a competing standard that would be incompatible with existing CDMA networks.
Until Ericsson and Qualcomm shook hands, many in the industry feared the impasse would force companies worldwide to accept multiple technologies.
“There are still a lot of technical agreements that have to get done,” said Keith Paglusch, a senior vice president of Sprint PCS, “but this is an important milestone.”