Qualcomm Shares Fall on Report of Delay in Chinese Wireless Plan
Qualcomm Inc.’s mobile phone partner in China has reportedly delayed introduction of the company’s technology in that country, which spooked investors Thursday and triggered as much as a 14% drop in Qualcomm’s stock, which later recovered much of the loss.
Shares of the San Diego communications company closed down $7.19 to $139.69 on Nasdaq. About 25.7 million shares changed hands in active trading.
The market’s anxiety about Qualcomm stemmed mostly from a report in the Asian Wall Street Journal that the company’s entry into the massive Chinese mobile phone market was being postponed.
Although a Qualcomm spokeswoman said the company had no word from Chinese officials about a delay in construction of the network, analysts said a slower start into China could result in lower-than-expected revenue for the company in the short term.
Earlier this month, Qualcomm announced the long-awaited completion of a deal with China Unicom to roll out wireless phone systems that use technology from Qualcomm.
China Unicom, the country’s second-largest state-owned telecommunications firm, plans to build a nationwide mobile network using Qualcomm’s code division multiple access, or CDMA, technology. The licensing deal between the two companies was designed to smooth the way for Chinese equipment builders to strike license agreements with Qualcomm.
The agreement came after lengthy negotiations and repeated delays and was considered significant because it would give Qualcomm a foothold in a growing market dominated by competing technology systems.
When the agreement was announced Feb. 1, Qualcomm said it expected installation of CDMA-based wireless equipment to “begin promptly.” But reports swirled Thursday that China Unicom had postponed key meetings with equipment maker Ericsson and that a Qualcomm official had canceled a trip because of the snag.
China watchers pointed out that Qualcomm’s entry into that country is a complicated process and that bureaucratic and other slowdowns are to be expected.
“There are probably multiple issues that come into this . . . and I’m not sure that this isn’t just business as usual in China,” said Douglas MacLellan, whose Los Angeles-based investment firm, WelCom, has $25 million in various ventures with China Unicom. “I think it’s a fait accompli that China Unicom will in fact roll this out because it’s critical to their strategy . . . but China runs at its own pace.”
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Bloomberg News was used in compiling this report.
