Ericsson/Qualcomm bitter feud ends

The announcement last week that Ericsson will buy Qualcomm's infrastructure division may have struck some people as unlikely as if Bill Clinton and Ken Starr were to suddenly shake hands and declare a budding friendship. Few imagined that Irwin Jacobs, chairman and CEO of Qualcomm, could possibly utter, "It's a pleasure to join with Sven-Christer Nilsson and Ericsson." But he did last week.

The new friendship between these often bitter rivals is heralded as a concession by one of the staunchest supporters of GSM-Ericsson-that code division multiple access (CDMA) will play an important role in the wireless world.

"It's a good testament to the progress we've made and the growth we'll see in the marketplace," said Perry LaForge, executive director of the CDMA Development Group.

Nilsson, Ericsson's president and CEO, didn't mince words about how his company will benefit by entering the CDMA market. Ericsson can profit from joining the CDMA infrastructure market, which grew to $9 billion this year alone, he said. "Let me assure you we will also aggressively attempt to pursue the cdmaOne handset market," he said. "We want a piece of the 16 million unit market," referring to itsestimated growth through 2001, he said.

Perhaps the most significant part of the announcement, however, revolves around the agreement between the two companies to support a single CDMA third generation world standard. Lawsuits and virtually constant bickering between the two has surely slowed down the standard definition process begun by the International Telecommunication Union, some say.

"The agreement today actually removes any remaining uncertainties that may have clouded the future prospects of third generation mobiles," Nilsson said. The companies agreed to drop all current litigation regarding patent rights and to cross-license all rights for cdmaOne, cdma2000 and wideband-CDMA.

"There will be royalty payments going both ways proportionate to our patent portfolios," Jacobs said.

The single 3G standard will include three modes: cdma2000, W-CDMA and TDD, a separate mode designed for in-building use. "It means that for regions that adopt [the 3G standard], operators can make the decision of which mode to offer," Jacobs said. Roaming between different modes will be made possible through multimode and multiband handsets.

So what happened to all the arguments about different chipsets that would decrease performance in either technology? "Those things were proposed, honestly, about 2G product positioning," LaForge said. The chipset battle may have been waged solely in an attempt to establish a technology dominance.

In one fell swoop, Ericsson has opened doors to two new opportunities-current generation CDMA networks and 3G cdma2000 networks. "Something that is true for companies like Ericsson and Nortel is they have been buying time-to-market advantage with new technology," said Ira Brodsky, president of Datacomm Research.

The deal marks a trend among companies to buy expertise rather then develop it internally. "It allows us to develop and supply cdma2000 without substantial resources," Nilsson said.

Ericsson will also likely be able to transform Qualcomm's infrastructure business, which has faltered, into a success. "I would think that Ericsson is in a much better position to turn it into something profitable," Brodsky said.

Despite speculation throughout the industry about the need for 3G networks, this deal emphasizes that "3G is not just some musings about future applications," Brodsky said. "These guys are convinced it's key to the future."

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