Nokia, the world’s largest mobile phone maker, said it would stop making phones using the CDMA standard and had scrapped plans to produce them with Japan’s Sanyo Electric Co. (OTC:SANYY).
The Finnish company said on Thursday it would pull out of CDMA (Code Division Multiple Access) phone manufacturing, which it sees as a shrinking market in the longer term, though it will continue to offer to sell Nokia rebranded CDMA phones produced by contract manufacturers in the North American market, where the standard is popular.
CDMA is the less popular wireless telephony technology, used by around 25 to 30 percent of all mobile phone subscribers, and competes with the GSM standard used by around 70 percent of the world’s 2 billion wireless subscribers.
Though Nokia holds the number one spot in global handset sales, built on its strength in GSM which it helped to invent, the Finnish company has trailed in CDMA. It has tried to avoid using chips by Qualcomm (NASDAQ:QCOM) Inc., but could not avoid paying significant technology licencing fees to Qualcomm which holds most patents to the CDMA technology.
The two have a bitter history over technology licensing and patent infringement cases.
You can tell by the tone of the article that plenty of Nokia’s point of view came through. CDMA is the “less popular” technology and “is declining anyway.” However, another Yahoo! article on the topic, also from Thursday, paints a different picture.
CDMA has been successful in Japan, the U.S., Brazil, India and China, but Europe has been dominated by a different technology called GSM, or “global system for mobile communication.”
So the technology that is more popular in two of the largest economies and thefast-growing economies often-referred to as the BRICs is something they just won’t bother with? That won’t hurt Motorola’s (MOT) or Samsung’s feelings, we’re sure.
By the way, if you wonder what technology is really gaining share, you need look no farther than the respective share prices for Nokia and Qualcomm.
QCOM-NOK 1-yr comparison chart:
So far though, the market appears to be taking the opposite viewpoint to what we expressed regarding the Qualcomm/Nokia license disputes. For balance, we give a quick rundown of the opposing case, along with our rebuttals.
The site IT Business seems to be on Nokia’s side.
Maybe Qualcomm is ready to give up the US$250 million it gets in royalties from Nokia every year, but as it withdraws from the CDMA market Nokia is also diverting considerable marketing resources that help boost the standard. Just a few days ago for example, Nokia released a pair of CDMA camera phones, which were greeted with the usual enthusiasm by various media.
Sure, but wouldn’t you think that if Nokia was paying $250 million in royalties, they may be earning a little bit on the handset sales themselves? Are they ready to give that up? As we said above, we’re sure Motorola and Samsung won’t mind if they do.
Another of those who hold a different point of view than ourselves is JP Morgan, who, it was reported Friday, cut their rating on Qualcomm to "neutral."
The broker cited its belief that contract negotiations with Nokia over the Finnish handset maker’s WCDMA license agreement could very likely end in a stalemate with the companies failing to agree to new terms without the third-party intervention the joint venture with Sanyo Electric would have provided.
The broker told clients it believes there is little-to-no chance of Nokia’s WCDMA royalty rate increasing and a non-trivial chance it could decrease.
That’s what they said the last time the royalty was up for renewal, too.
Qualcomm has their own response, quoted by WirelessWeek:
“In view of Nokia’s existing small presence in CDMA2000, we do not believe that Nokia’s decision to ramp down will have any impact on the continued growth of CDMA2000 or any adverse effect on Qualcomm,” said Qualcomm’s Steve Altman in a prepared statement. Altman added that Qualcomm plans to “continue to allocate substantial resources in expanding the CDMA2000 market and we will continue to work in close partnership with our many other licensees.”
Finally, with the war over 3G ended (Qualcomm won), the battle is now turning toward who will get to dominate the 4G standards. Here the battle is between Qualcomm and Intel (NASDAQ:INTC), as reported Friday by Reed-Electronics:
A squabble between Intel and Qualcomm seems to have at least temporarily derailed an IEEE work group.
The move to suspend the committee’s activity was prompted partly by a complaint by two Intel engineers, according to a Wall Street Journal report. Reportedly, Intel alleged that the group showed an unfair “bias” toward Qualcomm as a result of MBWA Working Group chairman Jerry Upton’s “relationship” with Qualcomm.
For its part, Qualcomm, a San Diego wireless technology company, argued that Intel and allied companies are using IEEE procedures to stall development of 802.20 technology because it is a potential competitor to WiMax, a wireless technology backed by Intel.
“It is very clear that Intel’s sudden interest and the sudden influx of its allies is designed not to contribute to 802.20, but to disrupt and to try to stop its development — because they see it as a threat,” Ronny Haraldsvik, a VP of marketing in Qualcomm’s mobile broadband business, told the WSJ.