ERICSSON EXITS CDMA IN U.S.

Faced with lackluster sales, Ericsson is shuttering its CDMA division in the U.S., eliminating 250 of its 300-person staff in San Diego and dispersing the rest throughout the company's global network division.

While Ericsson insists that it's not jettisoning its CDMA business entirely, the vendor said it is acknowledging market realities. Since it bought Qualcomm's infrastructure business in 1999, the vendor has landed only one U.S. CDMA customer, regional carrier Leap Wireless, and further consolidation in the U.S. wireless market makes it very unlikely it will penetrate a space dominated by Lucent Technologies and Nortel Networks.

“This is about efficiency,” said Pia Gideon, vice president of external and marketing communications in Ericsson's corporate headquarters in Stockholm, Sweden. “We've had success in Asia, but we don't have a market position in the U.S.”

Gideon said Ericsson would continue to support its existing CDMA customers and to develop CDMA2000 equipment concurrently with its far-more successful GSM and wideband CDMA lines, but it will no longer run its CDMA operations as a separate business unit. But Adventis analyst Patrick Zerbib said there is little likelihood that Ericsson can push ahead with its CDMA business in such a state. The vendor has had limited success in Asia where its biggest customer is China Unicom, but it has failed to penetrate other emerging markets. The decision to let go of CDMA is a very smart one, Zerbib said.

“Ericsson is being very practical here,” he said. “Ericsson was too far behind the other guys, and it decided to use its resources in other places like its managed networks business, which has been far more lucrative. I definitely wouldn't term this a negative for Ericsson.”

ERICSSON'S CDMA HISTORY

MARCH 1999: Ericsson agrees to purchase Qualcomm's CDMA infrastructure business as the latter decides to focus on core technology.

SEPTEMBER 1999: Ericsson announces its first U.S. CDMA customer, Leap Wireless. The initial deal totals $330 million.

DECEMBER 1999: Ericsson completes Qualcomm's infrastructure business purchase.

MAY 2001: Ericsson signs its first deal with China Unicom worth $200 million for CDMAOne Infrastructure in seven of China's provinces.

OCTOBER 2002: Unicom picks Ericsson to upgrade its CDMAOne networks to CDMA 1X.

OCTOBER 2003: Ericsson wins CDMA 1X deal with Indian telecom giant TATA Teleservices.

FEBRUARY 2004: After five years in operation, Ericsson has CDMA infrastructure deals with 25 carriers in 15 countries. Only one of them is in North America.

MAY: Ericsson decides to shut down the U.S. CDMA business unit.