Ending a two-year patent dispute, Ericsson will buy a Qualcomm unit that makes cellular equipment based on code-division multiple access, or CDMA, technology. Qualcomm gets royalties and access to some of Ericsson's rival patents.
Today's narrowband technology, used by 300 million cellular phone subscribers, was made to mainly transmit voice. Ericsson doesn't make products for CDMA narrowband technology, partly due to the patent dispute. CDMA is used in the United States and may soon be introduced in China, while the technology Ericsson sells is used in Europe, Asia, as well as in the United States.
Qualcomm will take an unspecified charge related to the sale. The companies wouldn't give details on the unit Ericsson is buying, which covers about a tenth of Qualcomm's employees.
Qualcomm plans to announce details of its charge and the agreement when it releases its next quarterly report. Ericsson may release information on the purchase before its first-quarter earnings report, according to local media.
Stockholm-based Ericsson forecasts 15 percent of the 1 billion mobile phone users expected in five years will be hooked up to networks based on narrowband CDMA technology or the future broadband CDMA2000. It'll start selling CDMA phones next year.
While Europe is currently unified by one standard based on global system for mobile communication (GSM), the United States has three. GSM is based on time division multiple access, or TDMA, technology--a rival technology to CDMA on the narrowband market.
That's made it harder for the United States to back one single standard for the next technology due 2001, while the European Union and Japan have already chosen wideband CDMA, or WCDMA, that is backed by Ericsson and its Finnish rival Nokia.
Now, Ericsson will have both its WCDMA and Qualcomm's CDMA2000 for the new broadband technology. By 2002, about a quarter of traffic on cellular networks is expected to be data rather than voice, up from 2 percent today.
San Diego, California-based Qualcomm will get access to Ericsson's patents on GSM technology and could start selling phones based on that standard. It will also gain royalties for its CDMA technology.
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