The Acquisition Season
Posted: 08.15.05 - By Teresa von Fuchs


Qualcomm is full of positive words about Flarion’s addition. Dr. Paul Jacobs, CEO of Qualcomm, says, “The combination of Flarion and Qualcomm's engineering resources strengthens our position as a continued technology innovator and leader in the wireless industry. We believe CDMA will provide the most advanced wide area wireless networks for the foreseeable future, but with Flarion we can now more effectively support operators who prefer an OFDMA or hybrid OFDM/CDMA track for differentiating their services.”

However, some in the industry are curious why Qualcomm would choose to support the development of what could be considered a CDMA competitor. According to New York–based ABI Research, this acquisition is a clear signal that Qualcomm, despite its stated faith in the future evolution of its CDMA technology, wants to stake out some other territory in wireless broadband.

While Qualcomm has been working on CDMA-based wireless broadband such as EV-DO and UMTS/HSDPA, some questions remain about these developments’ peak speeds and quality of service capabilities. But, the industry seems pretty confident that OFDM with multiple input multiple output (MIMO) technology could be the wireless broadband technology of the future, possibly even the technology of cellular’s future. ABI Research’s Philip Solis, senior analyst of wireless connectivity, explains, “We believe that Qualcomm’s move is a longer-term step to equip itself with the right technologies to offer operators a wider range of choices when 4G finally arrives.”

ABI Research also sorts out why Qualcomm would buy another proprietary technology, rather than get involved with WiMAX. According to Alan Varghese, ABI Research’s principal analyst of semiconductor research, “Just as [Qualcomm] forged its own trail for cellular with CDMA technology, it may want to avoid the industry standard path of WiMAX where competition will be high, control limited and price erosion rapid, and instead build their own path.”

Of the acquisition Rajiv Laroia, founder and CTO of Flarion, says, “The name Qualcomm is synonymous with excellence. Both companies value the importance of innovation in solving technical challenges to bring the right solutions to our customers. The two companies have very similar cultures and the combination of the two will be positioned very well with respect to both CDMA and OFDMA wireless technologies.”

Qualcomm will pay approximately $600 million in stock and cash for Flarion. And may possibly in the future pay an additional $205 million in the form of cash and Qualcomm stock. Completion of the acquisition, which is subject to regulatory approval and other customary closing conditions, is expected later this year.

 


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