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Summary:

Few years from now, we will all agree, on the road to wireless domination, Qualcomm spending $600 million to buy Flarion was money well spent. With CDMA coming to what Charlie describes as “end of life” and world transitioning to 3G and eventually 4G, Sultans of […]

Few years from now, we will all agree, on the road to wireless domination, Qualcomm spending $600 million to buy Flarion was money well spent. With CDMA coming to what Charlie describes as “end of life” and world transitioning to 3G and eventually 4G, Sultans of San Diego needed to make a big play to be part of the carrier’s networks. With Flash-OFDM, they now have the technology, which can be sold to carriers as a likely 4G solution. A little while ago I penned a feature for Business 2.0 on Qualcomm, (sub-required) and argued that these guys were scary smart and know how to position themselves in every part of the wireless ecosystem.

But that’s not all. The Qualcomm grip on OFDM patents gets tighter with this acqusition. (Having tracked Qualcomm for a while, one thing I know, no-patents, no deal.) Qualcomm spokesperson was pretty clear in saying that the real reason they have done the deal is – intellectual property and engineering talent. “That’s the real driver of the deal,” he says, and insisted that they are not buying into a market. “Operators are starting to talk about hybrid CDMA-OFDM networks,” he says.

ABI Research’s Philip Solis, senior analyst of wireless connectivity, says, “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 services finally arrive.

In addition, FLO technology, one of the leading contenders for mobile TV multicasting, is based on OFDM.” Max Weise, analyst with consulting firm of Adventis points out that, “That this keeps Qualcomm relevant going forward as carriers’ evolve their wireless plans. It also broadens their portfolio of services. Nextel, for example had been quite happy with the Flarion technology. As part of the new Sprint (which has been an old Qualcomm partner-in-arms) we could expect some renewed interest in the company.

“A lot of carriers are thinking about WiMAX, and this slows down that, and gives Qualcomm a play,” says Weise of Adventis. Qualcomm insiders tell me that with this deal, and Qualcomm’s previous efforts, the company has a lot of intellectual property in the WiMAX space as well. There is industry consensus that OFDM with MIMO could be the technology of the future even for cellular, writes ABI Research. Alan Varghese, ABI Research’s principal analyst of semiconductor research, says, “Even if productization of Flarion’s technology slows down with the advent of WiMAX, QUALCOMM can still realize revenue from royalties and licensing of Flarion’s considerable IP in OFDM and all-IP traffic.”

The technology is also going to help Qualcomm wrest a bigger share of the fast growing, though mostly under the radar 450 MHz-based networks. In Europe, Asia and Latin America, 450 MHz is being used for wireless local loop access. Flarion, can easily bring high speed data, and Voice-over-IP to the table. But most of all, this deal is in line with Qualcomm’s stand (or lack there of) on WiMAX. Qualcomm can now simply tell the carriers – Flash-OFDM works, its easy, and well, it has mobility and best of all you can buy gear from Nortel, Motorola, Lucent or Siemens.
Whichever way you look at it, I think this is an interesting move, whose ramifications are going to come to light in years to come.

Previously…

  1. I was wondering if the Finland appeal case from the EV-DO contenders had any impact in the adquisiton?

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  2. Charlie Sierra Thursday, August 11, 2005

    Media industry is over populated with its share of morons, but those people better wake up and smell what the Q has cooking!!!

    My crystal balls says the Qualcomm is going to have a future date with the fun folks in the “Anti-Trust” section of the DOJ.

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  3. you mean sell ‘em don’t you?
    :)

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  4. Jesse Kopelman Thursday, August 11, 2005

    This is great news for Flarion, but I’m having trouble guessing what Qualcomm could be thinking. Flarion’s products so far have been FDD and as such are poised only to compete against existing Qualcomm products, not the WiMax stuff that Qualcomm needs to worry about. I could see the logic in Qualcomm acquiring Navini or Airspan, as they are TDD WiMax players. The differentiator for Flarion may be their unique (Flash) take on OFDM and its suitability as money making IP (a la Qualcomm’s take on CDMA), but how can Qualcomm leverage both at the same time when they (CDMA and OFDM) are two competing approaches to solving the same problem? If this was just a move to get a brain transfusion, isn’t $600M way too much? The only other thing I can think of is that Qualcomm wants to use Flarion’s stuff to get into the 802.20 game the way Intel got into the 802.16 game and use that as their counter stroke in case this whole bypassing the cariers and selling to munis thing takes off.

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  5. This is pure genius for QCom. If this were a game of chess, I would say “chess mate”!

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  6. Charlie Sierra Thursday, August 11, 2005

    Jesse, WiMax is junk, pure BS put out by a rudderless Intel to seem relevant. Its nowhere’s ville. (Btw, AMD’s 64bit servers blow Intel away)

    Om, you nailed it. QCOM is expert at positioning itself as a gatekeeper for the wireless ecosystem.

    I think we’ll see more analyst comments in the future about W-CDMA and HSPDA, ie. do they make sense anymore? Remember QCOM gets the same royalties off W-CDMA as CDMA.

    My first post on this thread may have been too obtuse, but the people that should be paying attention here are the media guys.

    QCOM owns MediaFLO, lock stock and barrel. Starting with the spectrum, the network, the production workflow, and the DRM. (Microsoft can only dream of this kinda control)

    Whats bad for VZW and Sextel, is that now QCOM will own the relationship with the content players, and turn the carriers into bitpipes for the reverse link. Suckers.

    Wanna release a Music Video? Got a new DVD coming out next Tuesday? Who ya gonna call? QCOM’s MediaFLO, baby!!!

    QCOM has done very well capturing loads of the carrier CAPEX spend, and now they’re prepared to tap the ARPU stream.

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  7. Jesse Kopelman Friday, August 12, 2005

    Charlie, from where I sit (close to the ground) WiMax is doing very well. I don’t buy the argument that Flarion’s stuff is so good that all it needed was QCOM’s stamp to make it the defacto standard for 3G+. The problem is that the alternatives are all too viable. If I’m an Ericsson or Nokia and I want to play in the OFDM world, why would I pay royalties to Qualcomm when I could go with WiMax for free? QCOM is a smart company and I’m sure they have a good reason for buying Flarion, but I don’t see it and I haven’t heard it from anyone here.

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  8. jesse, you might want to see qualcomm’s remarks about their “IP” in the WiMAX as well. I believe they have many bases covered. just pointing that out.

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  9. Obviously, this is all a bit confusing to me as to how Flarion patents suddenly become precious gold and how QCom suddenly becomes interested in Wimax and standards. But one thing for certain – I have never seen such a momentous shift in power in a technology in just one simple move. I mean, if this were a game, (which you could argue it is), why did someone not block this maneuver of QCom by taking Flarion off the market. This beats a suicide bunt in the final inning of the World Series and finding the pitcher AND catcher sleeping. I’ve followed Alvarion and Wimax in unbeknownst ignorance that this sort of thing could happen. And Intel of all the losers, still come up short in the communications area. Wow, what a game!

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  10. Echoing Rick, I would not be happy now if I was running a major handset vendor, either. The balance of power in the value chain has just shifted — dramatically. The carriers are also much weaker. A lot of people are going to be kicking themselves 3-4 years down the road on this one.

    I’m not sure what this spells for J2ME, but it doesn’t look pretty. If you’re a mobile app developer, now might be a really good time to read up on BREW.

    This is probably a win for MS, as it bring the commodity bit pipe closer, and it makes it easier to find desperate carriers who’ll sell their souls for tuppence.

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